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Contents
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AGAD v. MABATO ........................................................................................................................................
18

TORRES v. CA
TUASON v. BOLANOS ............................................................................................................................. .

2
18

ARBES v. POLISTICO
HEIRS OF TANG ENG KEE v. CA ................................................................................................. .........

4
19

TOCAO v. CA
AURBACH v. SANITARY WARES .........................................................................................................

6
23

HEIRS OF JOSE LIM, represented by Elenito Lim v. JULIET VILLA LIM
LITONJUA v. LITONJUA ..........................................................................................................................

7
23

AGUILA v. CA
BOURNS v. CARMAN ............................................................................................................................. ...

9
24

TAN v. DEL ROSARIO
SEVILLA v. CA .............................................................................................................................................

9
26

MENDIOLA v. CA
PHILEX v. MINING CORP. ......................................................................................................................

10
27

ANGELES v. SECRETARY OF JUSTICE
ORTEGA v. CA ................................................................................................................ .............................

13

GATCHALIAN v. CIR ................................................................................................................................. 15

PASCUAL v. CIR .......................................................................................................................................... 15

OBILLOS v. CIR ........................................................................................................................................... 16

RIVERA v. PEOPLES BANK ................................................................................................................... 17




THE LAW ON PARTNERSHIP
I. NATURE; CREATION

A. DEFINITION; ESSENTIAL FEATURES
B. CREATION

AGAD v. MABATO
(June 28, 1968)

DOCTRINE: A partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary. A contract of partnership is void, whenever
immovable property is contributed thereto, if inventory of said property is not
made, signed by the parties, and attached to the public instrument.
NATURE: Appeal, taken by plaintiff Mauricio Agad, from an order of dismissal of the
Court of First Instance of Davao, we are called upon to determine the applicability
of Article 1773 of our Civil Code to the contract of partnership on which the
complaint herein is based.
PONENTE: Concepcion, C.J.
FACTS:
- Plaintiff alleges that he and defendant Severino Mabato are
pursuant to a public instrument dated August 29, 1952 " partners
in a fishpond business, to the capital of which Agad contributed P1,000,
with the right to receive 50% of the profits.
- That from 1952 up to and including 1956, Mabato who handled the
partnership funds, had yearly rendered accounts of the operations
of the partnership; and that, despite repeated demands, Mabato had
failed and refused to render accounts for the years 1957 to 1963.
- Agad prayed in his complaint against Mabato and Mabato & Agad Company,
filed on June 9, 1964, that judgment be rendered sentencing Mabato to pay
him (Agad) the sum of P14,000, as his share in the profits of the
partnership for the period from 1957 to 1963, in addition to P1,000 as
attorney's fees, and ordering the dissolution of the partnership, as well as the
winding up of its affairs by a receiver to be appointed.
- In his answer, Mabato admitted the formal allegations of the complaint
and denied the existence of said partnership, upon the ground that
the contract therefor had not been perfected, despite the execution of
Annex "A", because Agad had allegedly failed to give his P1,000
contribution to the partnership capital. Mabato prayed, therefore, that the
complaint be dismissed; that Annex "A" be declared void ab initio; and that
Agad be sentenced to pay actual, moral and exemplary damages, as well as
attorney's fees.
- Mabato filed a motion to dismiss, upon the ground that the complaint
states no cause of action and that the lower court had no jurisdiction
over the subject matter of the case, because it involves principally the

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determination of rights over public lands. After due hearing, the court
issued the order appealed from, granting the motion to dismiss the
complaint for failure to state a cause of action. This conclusion was
predicated upon the theory that the contract of partnership is null and
void, pursuant to Art. 1773 of our Civil Code, because an inventory of the
fishpond referred in said instrument had not been attached thereto.

ISSUES:
The issue hinges on whether or not "immovable property or real rights" have
been contributed to the partnership under consideration.
HELD:
NO. (Mabato alleged and the lower court held that the answer should be in the
affirmative, because "it is really inconceivable how a partnership engaged in the
fishpond business could exist without said fishpond property (being) contributed
to the partnership." But...)
RATIO/RULING:
- The Court said that it should be noted, however, that, as stated in

Annex "A" the partnership was established "to operate a fishpond",
not to "engage in a fishpond business". Moreover, none of the partners
contributed either a fishpond or a real right to any fishpond. Their
contributions were limited to the sum of P1,000 each.
- The operation of the fishpond mentioned in Annex "A" was the purpose of
the partnership. Neither said fishpond nor a real right thereto was
contributed to the partnership or became part of the capital thereof, even
if a fishpond or a real right thereto could become part of its assets.
-
DISPOSITION:
WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that,
the order appealed from should be, as it is hereby set aside and the case remanded
to the lower court for further proceedings, with the costs of this instance against
defendant-appellee, Severino Mabato. It is so ordered.
VOTE: Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ., concur.
CONCURRING/DISSENTING OPINION:
None. ADDITIONAL NOTES:

TORRES v. CA
(December 9, 1999)

DOCTRINE: Courts may not extricate parties from the necessary consequences of
their acts. That the terms of a contract turn out to be financially disadvantageous to
them will not relieve them of their obligations therein. The lack of an inventory of
real property will not ipso facto release the contracting partners from their
respective obligations to each other arising from acts executed in accordance with
their agreement.
NATURE: Petition for review on certiorari a CA decision denying MR
PONENTE: Panganiban, J.
FACTS:
-Sisters Antonia Torres and Emeteria Baring, petitioners, entered into a "joint
venture agreement" with Respondent Manuel Torres for the development of a parcel
of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale
covering the said parcel of land in favor of respondent, who then had it registered in
his name. By mortgaging the property, respondent obtained from Equitable Bank a
loan of P 40,000 which, under the Joint Venture Agreement, was to be used for the
development of the subdivision. All three of them also agreed to share the proceeds
from the sale of the subdivided lots.
-The project did not push through, and the land was subsequently foreclosed by the
bank.
Petitioners: the project failed because of respondents lack of funds or means and
skills. They add that respondent used the loan not for the development of the
subdivision, but in furtherance of his own company, Universal Umbrella Company.
Respondent: alleged that he used the loan to implement the Agreement. With the said
amount, he was able to effect the survey and the subdivision of the lots. He secured
the Lapu Lapu City Councils approval of the subdivision project which he advertised
in a local newspaper. He also caused the construction of roads, curbs and gutters.
Likewise, he entered into a contract with an engineering firm for the building of sixty
low-cost housing units and actually even set up a model house on one of the
subdivision lots. He did all of these for a total expense of P85,000. Respondent
claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the
land, which eventually scared away prospective buyers. Despite his requests,
petitioners refused to cause the clearing of the claims, thereby forcing him to give up
on the project.
-petitioners filed a criminal case for estafa against respondent and his wife, who
were however acquitted.
-Thereafter, they filed the present civil case which, upon respondent's motion, was
later dismissed by the trial court in an Order dated September 6, 1982.
-On appeal, however, the appellate court remanded the case for further proceedings.
Thereafter, the RTC issued its assailed Decision, which, as earlier stated, was affirmed
by the CA.
CA ruling: petitioners and respondents formed a partnership for the development of
the subdivision. Thus, they must bear the loss suffered by the partnership in the same
proportion as their share in the profits stipulated in the contract. CA cited Article
1979 which said The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been agreed upon, the
share of each in the losses shall be in the same proportion.

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CA also said: In the absence of stipulation, the share of each partner in the profits
and losses shall be in proportion to what he may have contributed, but the industrial
partner shall not be liable for the losses. As for the profits, the industrial partner shall
receive such share as may be just and equitable under the circumstances. If besides
his services he has contributed capital, he shall also receive a share in the profits in
proportion to his capital.
Petitioners claim CA erred in concluding that the transaction between the parties
was a joint venture/partnership.
ISSUES:
WON a partnership relationship existed between the parties?
HELD: Yes.
RATIO/RULING:
Existence of Partnership:
Petitioners deny having formed a partnership with respondent. They contend that
the Joint Venture Agreement and the earlier Deed of Sale were void.
In the same breath, however, they assert that under those very same contracts,
respondent is liable for his failure to implement the project. Because the agreement
entitled them to receive 60 percent of the proceeds from the sale of the subdivision
lots, they pray that respondent pay them damages equivalent to 60 percent of the
value of the property.
The pertinent portions of the Joint Venture Agreement read as follows:
That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this
property located at Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering
TCT No. T-0184 with a total area of 17,009 square meters, to be sub -divided by the
FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY
THOUSAND (P20,000.00) Pesos, Philippine Currency, upon the execution of this
contract for the property entrusted by the SECOND PARTY, for sub-division projects
and development purposes;
NOW THEREFORE, for and in consideration of the above covenants and promises
herein contained the respective parties hereto do hereby stipulate and agree as
follows:
ONE: That the SECOND PARTY signed an absolute Deed of Sale x x x dated March 5,
1969, in the amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN &
FIFTY CTVS. (P25,513.50) Philippine Currency, for 1,700 square meters at ONE
[PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in favor of the FIRST PARTY, but
the SECOND PARTY did not actually receive the payment.
xxx
FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM
60% for the SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and
additional profits or whatever income deriving from the sales will be divided equally
according to the x x x percentage [agreed upon] by both parties. xxx

A reading of the terms embodied in the Agreement indubitably shows the existence
of a partnership pursuant to Article 1767 of the Civil Code, which provides:
ART. 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.


Under the above-quoted Agreement, petitioners would contribute property to the
partnership in the form of land which was to be developed into a subdivision; while
respondent would give, in addition to his industry, the amount needed for general
expenses and other costs. Furthermore, the income from the said project would be
divided according to the stipulated percentage. Clearly, the contract manifested the
intention of the parties to form a partnership.
It should be stressed that the parties implemented the contract. Thus, petitioners
transferred the title to the land in the name of the respondent. On the other hand,
respondent caused the subject land to be mortgaged, the proceeds of which were
used for the survey and the subdivision of the land. As noted earlier, he developed
the roads, the curbs and the gutters of the subdivision and entered into a contract to
construct low-cost housing units on the property.
Respondents actions clearly belie petitioners contention that he made no
contribution to the partnership. Under Article 1767 of the Civil Code, a partner may
contribute not only money or property, but also industry.
Petitioners Bound by Terms of Contract
Courts are not authorized to extricate parties from the necessary consequences of
their acts, and the fact that the contractual stipulations may turn out to be financially
disadvantageous will not relieve parties thereto of their obligations. They cannot
now disavow the relationship formed from such agreement due to their supposed
misunderstanding of its terms.
Alleged Nullity of the Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the
Civil Code, which provides:
ART. 1773. A contract of partnership is void, whenever immovable property is
contributed thereto, if an inventory of said property is not made, signed by the
parties, and attached to the public instrument.
They contend that since the parties did not make, sign or attach to the public
instrument an inventory of the real property contributed, the partnership is void. We
clarify. First, Article 1773 was intended primarily to protect third persons. Second,
petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property. They cannot in
one breath deny the contract and in another recognize it, depending on what
momentarily suits their purpose. Parties cannot adopt inconsistent positions in
regard to a contract and courts will not tolerate, much less approve, such practice.

Partnership Agreement Not the Result of an Earlier Illegal Contract
Petitioners also contend that the Joint Venture Agreement is void under Article 1422
of the Civil Code, because it is the direct result of an earlier illegal contract, which was
for the sale of the land without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the
consideration for the sale was the expectation of profits from the subdivision project.
Its first stipulation states that petitioners did not actually receive payment for the
parcel of land sold to respondent. Consideration, more properly denominated as
cause, can take different forms, such as the prestation or promise of a thing or service
by another.
In this case, the cause of the contract of sale consisted not in the stated peso
value of the land, but in the expectation of profits from the subdivision project, for

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which the land was intended to be used. As explained by the trial court, the land was
in effect given to the partnership as [petitioners] participation therein. x x x There
was therefore a consideration for the sale, the [petitioners] acting in the expectation
that, should the venture come into fruition, they [would] get sixty percent of the net
profits.
DISPOSITION: Petition denied. CA affirmed.
VOTE: 3
rd
Division. Melo, Vitug, Purisima, and Gonzaga-Reyes concur
CONCURRING/DISSENTING OPINION: none


ARBES v. POLISTICO
(September 7, 1929)
ADRIANO ARBES, ET AL., plaintiffs-appellees, vs. VICENTE POLISTICO, ET
AL., defendants-appellants.

DOCTRINE:
Hence the distinction made in the second paragraph of this article [in the present
case 1666 but under the NCC 1770] of this Code, providing that the profits obtained
by unlawful means shall not enrich the partners, but shall upon the dissolution of
the partnership, be given to the charitable institutions of the domicile of the
partnership, or, in default of such, to those of the province.
This is a new rule, unprecedented by our law, introduced to supply an obvious
deficiency of the former law, which did not describe the purpose to which those
profits denied the partners were to be applied, nor state what to be done with
them.The profits are so applied, and not the contributions, because this would be an
excessive and unjust sanction for, as we have seen, there is no reason, in such a
case, for depriving the partner of the portion of the capital that he contributed, the
circumstances of the two cases being entirely different.
NATURE: Appeal from a judgment of CFI
PONENTE: VILLAMOR, J.:

FACTS:
This is an action to bring about liquidation of the funds and property of
the association called "Turnuhan Polistico & Co." The plaintiffs were
members or shareholders, and the defendants were designated as
president-treasurer, directors and secretary of said association.
It is well to remember that this case is now brought before the
consideration of this court for the second time. The first one was when
the same plaintiffs appeared from the order of the court below sustaining
the defendant's demurrer, and requiring the former to amend their
complaint within a period, so as to include all the members of "Turnuhan
Polistico & Co.," either as plaintiffs or as a defendants.

This court held then that in an action against the officers of a voluntary
association to wind up its affairs and enforce an accounting for money and
property in their possessions, it is not necessary that all members of the
association be made parties to the action.The case having been remanded
to the court of origin, both parties amend, respectively, their complaint and
their answer, and by agreement of the parties, the court appointed Amadeo
R. Quintos, of the Insular Auditor's Office, commissioner to examine all the
books, documents, and accounts of "Turnuhan Polistico & Co.," and to
receive whatever evidence the parties might desire to present.
The commissioner rendered his report.
The defendants objected to the commissioner's report, but the trial court,
having examined the reasons for the objection, found the same sufficiently
explained in the report and the evidence, and accepting it, rendered
judgment, holding that the association "Turnuhan Polistico & Co." is
unlawful, and sentencing the defendants jointly and severally to
return the amount of P24,607.80 to the plaintiffs in this case, and to
the rest of the members of the said association
ISSUES:
Whether the lower court erred in ordering the return of the the amount of
P24,607.80 to the plaintiffs in this case, and to the rest of the members of the said
association rather than order it to be given to charitable institutions.
HELD: No. The amount should be returned to the members of the said
association because they pertain to their contributions and not to profits derived
from such unlawful partnership.
RATIO/RULING:
Petitioner's contention:
because the partnership is an unlawful partnership, some charitable
institution to whom the partnership funds may be ordered to be turned
over, should be included, as a party defendant
If the partnership has no valid existence, if it is considered juridically non-
existent, the contract entered into can have no legal effect; and in that case,
how can it give rise to an action in favor of the partners to judicially
demand from the manager or the administrator of the partnership capital,
each one's contribution?
COURT:
The appellants allege that the necessary party, i.e. Charitable institution,
was not impleaded. The appellants refer to article 1666 of the Civil
Code, which provides:
"A partnership must have a lawful object, and must be established
for the common benefit of the partners.

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When the dissolution of an unlawful partnership is decreed, the
profits shall be given to charitable institutions of the domicile of
the partnership, or, in default of such, to those of the province.
Appellant's contention on this point is untenable.
o According to said article, no charitable institution is a
necessary party in the present case of determination of the
rights of the parties.
o The action which may arise from said article, in the case of
unlawful partnership, is that for the recovery of the amounts paid
by the member from those in charge of the administration of said
partnership, and it is not necessary for the said parties to base
their action to the existence of the partnership, but on the fact
that of having contributed some money to the partnership capital.
And hence, the charitable institution of the domicile of the
partnership, and in the default thereof, those of the province are
not necessary parties in this case.
The article cited above permits no action for the purpose of obtaining the
earnings made by the unlawful partnership, during its existence as result
of the business in which it was engaged, because for the purpose, as
Manresa remarks, the partner will have to base his action upon the
partnership contract, which is to annul and without legal existence by
reason of its unlawful object; and it is self evident that what does not exist
cannot be a cause of action.
o Hence, paragraph 2 of the same article provides that when the
dissolution of the unlawful partnership is decreed, the profits
cannot inure to the benefit of the partners, but must be given
to some charitable institution.
Petitioner's contention:
If the partnership has no valid existence, if it is considered juridically non-
existent, the contract entered into can have no legal effect; and in that case,
how can it give rise to an action in favor of the partners to judicially
demand from the manager or the administrator of the partnership capital,
each one's contribution?
COURT:
Ricci: The partner who limits himself to demanding only the amount
contributed by him need not resort to the partnership contract on which
to base his action.
o that the partner makes his contribution, which passes to the
managing partner for the purpose of carrying on the business or
industry which is the object of the partnership; or in other
words, to breathe the breath of life into a partnership contract
with an objection forbidden by law.
o And as said contrast does not exist in the eyes of the law, the
purpose from which the contribution was made has not come
into existence, and the administrator of the partnership holding
said contribution retains what belongs to others, without any

consideration; for which reason he is not bound to return it and
he who has paid in his share is entitled to recover it.

But this is not the case with regard to profits earned in the course of the
partnership, because they do not constitute or represent the partner's
contribution but are the result of the industry, business or speculation
which is the object of the partnership
o therefor, in order to demand the proportional part of the said
profits, the partner would have to base his action on the
contract which is null and void, since this partition or
distribution of the profits is one of the juridical effects thereof.
o Wherefore considering this contract as non-existent, by reason of
its illicit object, it cannot give rise to the necessary action, which
must be the basis of the judicial complaint. Furthermore, it
would be immoral and unjust for the law to permit a profit from
an industry prohibited by it.
Hence the distinction made in the second paragraph of this article of this
Code, providing that the profits obtained by unlawful means shall not
enrich the partners, but shall upon the dissolution of the partnership, be
given to the charitable institutions of the domicile of the partnership, or,
in default of such, to those of the province.
This is a new rule, unprecedented by our law, introduced to supply an
obvious deficiency of the former law, which did not describe the purpose to
which those profits denied the partners were to be applied, nor state what
to be done with them.
o The profits are so applied, and not the contributions, because this
would be an excessive and unjust sanction for, as we have seen,
there is no reason, in such a case, for depriving the partner of the
portion of the capital that he contributed, the circumstances of the
two cases being entirely different.
Our Code does not state whether, upon the dissolution of the unlawful
partnership, the amounts contributed are to be returned by the partners,
because it only deals with the disposition of the profits; but the fact that
said contributions are not included in the disposal prescribed profits,
shows that in consequences of said exclusion, the general law must be
followed, and hence the partners should reimburse the amount of their
respective contributions.
DISPOSITION: The judgment appealed from, being in accordance with law, should
be, as it is hereby, affirmed with costs against the appellants; provided, however, the
defendants shall pay the legal interest on the sum of P24,607.80 from the date of the
decision of the court, and provided, further, that the defendants shall deposit this
sum of money and other documents evidencing uncollected credits in the office of
the clerk of the trial court, in order that said court may distribute them among the
members of said association, upon being duly identified in the manner that it may
deem proper. So ordered.
VOTE: EN BANC; Avancea, C.J., Johnson, Street, Johns, Romualdez, and Villa-Real,
JJ., concur . .

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TOCAO v. CA
(October 4, 2000)

DOCTRINE: It may be constituted in any form; a publicinstrument is necessary
only where immovable property or real rights are contributed thereto.
This implies that since a contract of partnership is consensual, an oral contract of
partnership is as good as a written one. Where no immovable property or real
rights areinvolved, what matters is that the parties have complied with the
requisites of a partnership.
NATURE: Petition for review on certiorari
PONENTE: YNARES-SANTIAGO, J.
FACTS:
Petitioner William Belo introduced respondent NenitaAnay to petitioner
Marjorie Tocao, who conveyed her desire to enter into a jointventure with her for
the importation and local distribution of kitchen cookwares. Under the joint venture,
Belo acted as capitalist, Tocao aspresident and general manager, and Anay as head of
the marketing department and later, vice-president for sales. The parties agreed to
useAnay's name in securing distributorship of cookware from West Bend Company,
a manufacturer of kitchen cookwares in Wisconsin, U.S.A. Theparties agreed further
that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the
business; (2) overridingcommission of six percent (6%) of the overall weekly
production; (3) thirty percent (30%) of the sales she would make; and (4) two
percent(2%) for her demonstration services. The agreement was not reduced to
writing on the strength of Belo's assurances that he was sincere,dependable and
honest when it came to financial commitments. Anay having secured the
distributorship of cookware products from the WestBend Company and organized
the administrative staff and the sales force, the cookware business took off
successfully. They operated underthe name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocao's name, with office at 712 Rufino
Building, Ayala Avenue,Makati City. Belo made good his monetary commitments to
Anay. On October 9, 1987, Anay learned that Marjorie Tocao had signed a
letteraddressed to the Cubao sales office to the effect that she was no longer the vice-
president of GeminesseEnterprise. The following day,October 10, she received a note
from Lina T. Cruz, marketing manager, that Marjorie Tocao had barred her from
holding office and conductingdemonstrations in both Makati and Cubao offices.
Anay attempted to contact Belo. She wrote him twice to demand her overriding
commissionfor the period of January 8, 1988 to February 5, 1988 and the audit of the
company to determine her share in the net profits. When her letterswere not answered,
Anay consulted her lawyer, who, in turn, wrote Belo a letter. Still, that letter was not
answered. Anay still received her fivepercent (5%) overriding commission up to
December 1987. The following year, 1988, she did not receive the same commission
although thecompany netted a gross sales of P13,300,360.00. On April 5, 1988, Nenita A.
Anay filed Civil Case No. 88-509, a complaint for sum of

moneywith damagesagainst Marjorie D. Tocao and William Belo before the Regional
Trial Court of Makati, Branch 140. The trial court held that therewas indeed an oral
partnership agreement between the plaintiff and the defendants, based on the
following: (a) there was an intention tocreate a partnership; (b) a common fund was
established through contributions consisting of money and industry, and (c) there
was a jointinterest in the profits. Petitioners appeal to the Court of Appealswas
dismissed. Their Motion for Reconsideration was denied by the Court of Appeals for
lack of merit.
ISSUES:Whether or not a partnership exists


HELD &RATIO/RULING:
Yes. The issue of whether or not a partnership exists is a factual matter
which is within the exclusive domain of both the trial andappellate courts. This Court
cannot set aside factual findings of such courts absent any showing that there is no
evidence to support theconclusion drawn by the courta quo.
In this case, both the trial court and the Court of Appeals are one in ruling
that petitioners and privaterespondent established a business partnership. This
Court finds no reason to rule otherwise. To be considered a juridical personality,
apartnership must fulfill these requisites: (1) two or more persons bind themselves
to contribute money, property or industry to a commonfund; and (2) intention on the
part of the partners to divide the profits among themselves.
It may be constituted in any form; a publicinstrument is necessary
only where immovable property or real rights are contributed thereto.
This implies that since a contract of partnership is consensual, an oral contract
of partnership is as good as a written one. Where no immovable property or real
rights areinvolved, what matters is that the parties have complied with the
requisites of a partnership. The fact that there appears to be no record in
theSecurities and Exchange Commission of a public instrument embodying the
partnership agreement pursuant to Article 1772 of the Civil Code did not cause the
nullification of the partnership. The pertinent provision of the Civil Code on the
matter states:Art. 1768. The partnership has a juridical personality separate and
distinct from that of each of the partners, even in case of failure to complywith the
requirements of article 1772, first paragraph.
DISPOSITION:
WHEREFORE , the instant petition for review on certiorari is DENIED. The
partnership among petitioners and private respondent is ordered dissolved, and the
parties are ordered to effect the winding up and liquidation of the partnership
pursuant to the pertinent provisions of the Civil Code. This case is remanded to the
Regional Trial Court for proper proceedings relative to said dissolution. The appealed
decisions of the Regional Trial Court and the Court of Appeals are AFFIRMED with
MODIFICATIONS, as follows ---

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1. Petitioners are ordered to submit to the Regional Trial Court a formal account of
the partnership affairs for the years 1987 and 1988, pursuant to Article 1809 of the
Civil Code, in order to determine private respondents ten percent (10%) share in
the net profits of the partnership;
2. Petitioners are ordered, jointly and severally, to pay private respondent five
percent (5%) overriding commission for the one hundred and fifty (150)
cookware sets available for disposition since the time private respondent was
wrongfully excluded from the partnership by petitioners;
3. Petitioners are ordered, jointly and severally, to pay private respondent
overriding commission on the total production which, for the period covering
January 8, 1988 to February 5, 1988, amounted to P32,000.00;
4. Petitioners are ordered, jointly and severally, to pay private respondent
moral damages in the amount of P50,000.00, exemplary damages in the amount
of P50,000.00 and attorneys fees in the amount of P25,000.00.
VOTE: 1
st
division. Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

HEIRS OF JOSE LIM, represented by Elenito Lim v. JULIET VILLA LIM
(March 3, 2010)

DOCTRINE: A demand for periodic accounting is evidence of a partnership.
NATURE: Petition for Review on Certiorari under Rule 45 of the Rules of Civil
Procedure, assailing the Court of Appeals (CA) Decision dated June 29, 2005, which
reversed and set aside the decision of the Regional Trial Court (RTC) of Lucena City,
dated April 12, 2004.
PONENTE: Nachura, J.
FACTS:
1. Petitioners are the heirs of the late Jose Lim. represented by Elenito Lim.
They filed a Complaint for Partition, Accounting and Damages against
respondent Juliet Villa Lim (respondent), widow of the late Elfledo Lim,
who was the eldest son of Jose and Cresencia.
2. Petitioners alleged that Jose was the liaison officer of Interwood Sawmill.
Jose, together with his friends Jimmy Yu and Norberto Uy formed a
partnership to engage in the trucking business. Jose managed the
operations of this trucking business until his death. Thereafter, Jose's heirs,
including Elfledo, and partners agreed to continue the business under the
management of Elfledo. The shares in the partnership profits and income
that formed part of the estate of Jose were held in trust by Elfledo, with
petitioners' authority for Elfledo to use, purchase or acquire properties
using said funds.

3. Petitioners alleged that Elfledo was never a partner or an investor in the
business and merely supervised the purchase of additional trucks using the
income from the trucking business of the partners. By the time the
partnership ceased, it had nine trucks, which were all registered in Elfledo's
name.

4. Elfledo died, leaving respondent as his sole surviving heir. Petitioners
claimed that respondent took over the administration of the properties,
which belonged to the estate of Jose, without their consent and approval.
Claiming that they are co-owners of the properties, petitioners required
respondent to submit an accounting of all income, profits and rentals
received from the estate of Elfledo, and to surrender the administration
thereof. Respondent refused; thus, the filing of this case.
5. Respondent traversed petitioners' allegations and claimed that Elfledo
was himself a partner of Norberto and Jimmy. Respondent also claimed
that per testimony of Cresencia, Jose gave Elfledo capital in an informal
partnership with Jimmy and Norberto. When Elfledo and respondent got
married, the partnership only had one truck; but through the efforts of
Elfledo, the business flourished.
6. When Norberto was ambushed and killed, the trucking business started to
falter. When Elfledo died due to a heart attack, respondent talked to Jimmy
and to the heirs of Norberto, as she could no longer run the business. Jimmy
suggested that three out of the nine trucks be given to him as his share,
while the other three trucks be given to the heirs of Norberto. However,
Norberto's wife, Paquita Uy, was not interested in the vehicles. Thus, she
sold the same to respondent, who paid for them in installments.
7. Respondent also alleged that when Jose died, he left no known assets,
and the partnership with Jimmy and Norberto ceased upon his demise.
Respondent also stressed that Jose left no properties that Elfledo could
have held in trust. Respondent maintained that all the properties
involved in this case were purchased and acquired through her and
her husbands joint efforts and hard work, and without any
participation or contribution from petitioners or from Jose.
Respondent submitted that these are conjugal partnership properties;
and thus, she had the right to refuse to render an accounting for the income
or profits of their own business.
8. TC: favoured petitioners
9. CA: reversed the decision of TC

ISSUES: WON Elfledo Lim was a partner in the
business HELD:

1. Yes
RATIO/RULING:
1. A partnership exists when two or more persons agree to place their
money, effects, labor, and skill in lawful commerce or business, with
the understanding that there shall be a proportionate sharing of the
profits and losses among them.

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2. The best evidence would have been the contract of partnership or the
articles of partnership. Unfortunately, there is none in this case, because the
alleged partnership was never formally organized.

3. SC affirms the CA decision. The evidence presented by petitioners falls
short of the quantum of proof required to establish that: (1) Jose was
the partner and not Elfledo; and (2) all the properties acquired by
Elfledo and respondent form part of the estate of Jose, having been
derived from the alleged partnership.
4. Petitioners heavily rely on Jimmy's testimony. But that testimony is just one
piece of evidence against respondent. It must be considered and weighed
along with petitioners' other evidence vis--vis respondent's contrary
evidence.
5. At this juncture, the SCs ruling in Heirs of Tan Eng Kee v. Court of Appeals
is enlightening. Therein, we cited Article 1769 of the Civil Code.
6. Applying the legal provision to the facts of this case, the following
circumstances tend to prove that Elfledo was himself the partner of
Jimmy and Norberto:
a. Cresencia testified that Jose gave Elfledo P50,000.00, as share in
the partnership, on a date that coincided with the payment of the
initial capital in the partnership;
b. Elfledo ran the affairs of the partnership, wielding absolute
control, power and authority, without any intervention or
opposition whatsoever from any of petitioners herein;
c. All of the properties, particularly the nine trucks of the
partnership, were registered in the name of Elfledo;
d. Jimmy testified that Elfledo did not receive wages or salaries from
the partnership, indicating that what he actually received were
shares of the profits of the business;
e. None of the petitioners, as heirs of Jose, the alleged partner,
demanded periodic accounting from Elfledo during his lifetime. As
repeatedly stressed in Heirs of Tan Eng Kee, a demand for
periodic accounting is evidence of a partnership.
7. Furthermore, petitioners failed to adduce any evidence to show that the
real and personal properties acquired and registered in the names of
Elfledo and respondent formed part of the estate of Jose, having been
derived from Jose's alleged partnership with Jimmy and Norberto.
8. SC agrees with CAs findings that the testimonities prove that Elfledo was
not just a hired help but one of the partners in the trucking business, active
and visible in the running of its affairs from day one until this ceased
operations upon his demise. The extent of his control, administration
and management of the partnership and its business, the fact that its
properties were placed in his name, and that he was not paid salary or
other compensation by the partners, are indicative of the fact that
Elfledo was a partner and a controlling one at that.
9. Notable too that Jose Lim died when the partnership was barely a year old,
and the partnership and its business not only continued but also flourished.
If it were true that it was Jose Lim and not Elfledo who was the partner,
then upon his death the partnership should have


DISPOSITION: WHEREFORE, the instant Petition is DENIED. The assailed Court of
Appeals Decision dated June 29, 2005 is AFFIRMED. Costs against petitioners.

VOTE: All concur



C. SEPARATE JURIDICAL PERSONALITY
AGUILA v. CA
FACTS:
Petitioner is the manager of A.C. Aguila & Sons, Co, a partnership engaged in
lending activities.
Private respondent Felicidad Abrogar entered into a MOA w/ A.C. Aquila &
Sons involving a pacto de retro sale of a house & lot.

As private respondent failed to redeem the property within the prescribed
period, petitioner caused the cancellation of TCT and the issuance of the
new certificate of title in the name of the partnership.

Private respondent filed a petition for a declaration of the nullity of the
deed of sale and a criminal complaint for forgery against petitioner alleging
that the signature of her husband was a forgery because he was already
dead when the deed was supposed to have been executed.
Petitioner now contends that he is not the real party in interest but A.C.
Aguila & Co., against which this case should have been brought.

ISSUE:

WON the petitioner is the real party in interest.

HELD:

No.

Rule 3, Section 2 of the Rules of Court of 1964, under which the complaint in
this case was filed, provided that "every action must be prosecuted and
defended in the name of the real party in interest." A real party in interest is
one who would be benefited or injured by the judgment, or who is entitled
to the avails of the suit. This ruling is now embodied in Rule 3, Section 2 of
the 1997 Revised Rules of Civil Procedure. Any decision rendered against a

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person who is not a real party in interest in the case cannot be executed.
Hence, a complaint filed against such a person should be dismissed for
failure to state a cause of action.

Art. 1768 of the Civil Code, a partnership has a juridical personality
separate and distinct from that of each partner. The partners cannot be
held liable for the obligations of the partnership unless it is shown that the
legal fiction of a different juridical personality is being used for fraudulent,
unfair, or illegal purposes.
In this case, private respondent has not shown that A.C. Aguila & Sons, Co.,
as a separate juridical entity, is being used for fraudulent, unfair, or illegal
purposes. Moreover, the title to the subject property is in the name of A.C.
Aguila & Sons, Co. and the Memorandum of Agreement was executed
between private respondent, with the consent of her late husband, and A.C.
Aguila & Sons, Co., represented by petitioner. Hence, it is the partnership,
not its officers or agents, which should be impleaded in any litigation
involving property registered in its name. A violation of this rule will result
in the dismissal of the complaint.

TAN v. DEL ROSARIO
(October 3, 1994)

DOCTRINE: (see notes below)
NATURE: Consolidated case. Two special civil actions for prohibition
PONENTE: Vitug, J.
FACTS:
This is a consolidated case involving the constitutionality of RA 7496 or the
Simplified Net Income Taxation (SNIT) scheme.
Petitioners claim to be taxpayers adversely affected by the
continued implementation of the SNIT.
In the 1st case, they contended that the House Bill which eventually
became RA 7496 is a misnomer or deficient because it was named as
Simplified Net Income Taxation Scheme for the Self-Employed and
Professionals Engaged in the Practice of their Profession while the
actual title contains the said words with the additional phrase,
Amending Section 21 and 29 of the National Internal Revenue Code.
They alleged that this title was in direct violation of Section 26 (1) and 28
(1) in Article VI of the 1987 Constitution. The petitioner also stressed that it
violates the equal protection clause as it only imposed taxes upon one who

practice his profession alone and not to those who are engaged to single
proprietorship.

In the 2nd case, they argued that respondents have exceeded their
rule-making authority in applying SNIT to general professional
partnerships by issuing Revenue Regulation 2-93 to carry out the RA. This
is anchored on the administrative interpretation of public respondents that
would apply SNIT topartners in general professional partnerships.-
Petitioners cited the deliberations in the HOR regarding the implementation of
the said rule in which it was shown that framers did not intend for the bill to be
applicable to business corporations or partnerships

ISSUE:
1. WON RA 7496 is unconstitutional (G.R. No. 109289). NO

2. WON in RA 7496, the SNIT applies to partners in general
professional partnerships. (G.R. No. 109446). YES

HELD:
1. Constitutionality of RA 7496

o The SC ruled in the negative. The said law is not arbitrary; it is
germane to the purpose of the law and; applies to all things of
equal conditions and of same class.
o It is neither violative of equal protection clause due to the
existence of substantial difference between one who practice his
profession alone and one who is engaged to proprietorship.
o Further, the SC said that RA 7496 is just an amendatory provision
of the code of taxpayers where it classifies taxpayers in to four
main groups: Individuals, Corporations, Estate under Judicial
Settlement and Irrevocable Trust.
o The court would have appreciated the contention of the
petitioner if RA 7496 was an independent law. But since it is
attached to a law that has already classified taxpayers, there is no
violation of equal protection clause.
2. Application of SNIT to partners in general professional partnerships
o There is no distinction in income tax liability between a person
who practices his profession alone or individually and one who

does it through a partnership (whether registered or not) with
others in the exercise of a common profession.
o Under the present income tax system, all individuals deriving
income from any source whatsoever are treated in almost
invariably the same manner and under a common set of rules.
o Although the general professional partnership is exempt from the
payment of taxes (but it still has an obligation to file an income tax

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10


return mainly for administration and data), the partners
themselves are liable for the payment of income tax in their
individual capacity computed on their respective and
distributive shares of profits.



NOTES:
Differences between general professional partnerships and ordinary business
partnerships:
a. A general professional partnership
1
, unlike an ordinary business
partnership (which is treated as a corporation for income tax
purposes and so subject to the corporate income tax), is not itself an
income taxpayer. The income tax is imposed not on the professional
partnership, which is tax exempt, but on the partners themselves
in their individual capacity computed on their distributive shares of
partnership profits.
b. Ordinary business partnerships, no matter how created or organized, are
taxable partnerships. General professional partnerships are exempt
partnerships. Under the Tax Code on income taxation, the general
professional partnership is deemed to be no more than a mere mechanism or a
flow-through entity in the generation of income by, and the ultimate
distribution of such income to, respectively, each of the individual partners.
DISPOSITIVE: WHEREFORE, the petitions are DISMISSED. No
special pronouncement on costs.
VOTING: Narvasa, C.J., Cruz, Feliciano, Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Quiason, Puno, Kapunan and Mendoza, JJ., concur.
Padilla and Bidin, JJ., are on leave.


MENDIOLA v. CA




1
A general professional partnership, in this context, must be formed for the sole
purpose of exercising a common profession, no part of the income of which is
derived from its engaging in any trade business; otherwise, it is subject to tax as
an ordinary business partnership or, which is to say, as a corporation and
thereby subject to the corporate income tax. The only other exempt partnership
is a joint venture for undertaking construction projects or engaging in petroleum
operations pursuant to an operating agreement under a service contract with the
government (see Sections 20, 23 and 24, National Internal Revenue Code).

ARSENIO T. MENDIOLA vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. and/or CELLMARK AB

(July 31, 2006)

DOCTRINE: In a partnership, the members become co-owners of what is contributed
to the firm capital and of all property that may be acquired thereby and through the
efforts of the members. The property or stock of the partnership forms a community
of goods, a common fund, in which each party has a proprietary interest. In fact, the
New Civil Code regards a partner as a co - owner of specific partnership property.
Each partner possesses a joint interest in the whole of partnership property. If the
relation does not have this feature, it is not one of partnership. This essential
element, the community of interest, or co -ownership of, or joint interest in
partnership property is absent in the relations between petitioner and private
respondent Pacfor. xxx the parties in this case, merely shared profits. This alone does
not make a partnership.
Besides, a corporation cannot become a member of a partnership in the absence of
express authorization by statute or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the partners, whereby the
corporation would be bound by the acts of persons who are not its duly appointed
and authorized agents and officers, would be inconsistent with the policy of the law
that the corporation shall manage its own affairs separately and exclusively; and, (2)
that such an arrangement would improperly allow corporate property to become
subject to risks not contemplated by the stockholders when they originally invested
in the corporation.
PONENTE: Puno, J.

FACTS:
Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a
corporation organized and existing under the laws of California, USA. It is a
subsidiary of Cellulose Marketing International (organized in Sweden)

Private respondent Pacfor entered into a "Side Agreement on Representative Office
known as Pacific Forest Resources (Phils.), Inc." with petitioner Arsenio T. Mendiola
(ATM) . The Side Agreement outlines the business relationship of the parties with
regard to the Philippine operations of Pacfor. Private respondent will establish a
Pacfor representative office in the Philippines, to be known as Pacfor Phils, and
petitioner ATM will be its President. Petitioner's base salary and the overhead
expenditures of the company shall be borne by the representative office and funded
by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50- 50 equity by ATM and
Pacfor-usa.

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In its application (to the SEC), private respondent Pacfor proposed to establish its
representative office in the Philippines. It also designated petitioner as its
resident agent in the Philippines, authorized to accept summons and processes in
all legal proceedings, and all notices affecting the corporation.
The Side Agreement was amended through a "Revised Operating and Profit
Sharing Agreement for the Representative Office Known as Pacific Forest
Resources (Philippines)," where the salary of petitioner was increased to $78,000
per annum. Both agreements show that the operational expenses will be borne by
the representative office and funded by all parties "as equal partners," while the
profits and commissions will be shared among them.
In July 2000, petitioner wrote the Vice President for Asia of Pacfor, seeking
confirmation of his 50% equity of Pacfor Phils. Private respondent Pacfor, through
its President, replied that petitioner is not a part-owner of Pacfor Phils. because the
latter is merely Pacfor-USA's representative office and not an entity separate and
distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose
of dividing the income 50-50."
11
Petitioner presumably knew of this
arrangement from the start, having been the one to propose to private respondent
Pacfor the setting up of a representative office, and "not a branch office" in the
Philippines to save on taxes.
Petitioner claimed that he was all along made to believe that he was in a joint
venture with them; that he would have been better off remaining as an independent
agent or representative of Pacfor-USA as ATM Marketing Corp. Petitioner raised
other issues, such as the rentals of office furniture, salary of the employees, company
car, as well as commissions allegedly due him. The issues were not resolved, hence,
in October 2000, petitioner wrote Pacfor -USA demanding payment of unpaid
commissions and office furniture and equipment rentals.
Privatre respondent Pacfor through counsel ordered petitioner to turn over to it all
papers, documents, files, records, and other materials in his or ATM Marketing
Corporation's possession that belong to Pacfor or Pacfor Phils then to remit more
than 300k xmas giveaway fund for clients of Pacfor Phil and finally Pacfor
withdraw all its offers of settlement and ordered petitioner to transfer title and
turn over to it possession of the service car.
18

Private respondent Pacfor likewise sent letters to its clients in the Philippines,
advising them not to deal with Pacfor Phils.

Petitioner construed these directives as a severance of the "unregistered
partnership" between him and Pacfor, and the termination of his employment
as resident manager of Pacfor Phils.
On the basis of the "Side Agreement," petitioner insisted that he and Pacfor
equally own Pacfor Phils. Thus, it follows that he and Pacfor likewise own, on a

50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also
reiterated his demand for unpaid commissions, and proposed to offset these with the
remaining Christmas giveaway fund in his possession. Furthermore, he did not
renew the lease contract with Pulp and Paper, Inc., the lessor of the office premises of
Pacfor Phils., wherein he was the signatory to the lease agreement.

Private respondent Pacfor placed petitioner on preventive suspension and ordered
him to show cause why no disciplinary action should be taken against him. Private
respondent Pacfor charged petitioner with willful disobedience and serious
misconduct for his refusal to turn over the service car and the Christmas giveaway
fund which he applied to his alleged unpaid commissions. Private respondent also
alleged loss of confidence and gross neglect of duty on the part of petitioner for
allegedly allowing another corporation owned by petitioner's relatives, High End
Products, Inc. (HEPI), to use the same telephone and facsimile numbers of Pacfor, to
possibly steal and divert the sales and business of private respondent.
Petitioner denied the charges. He reiterated that he considered the import of Pacfor
Presidents letters as a "cessation of his position and of the existence of Pacfor Phils."
He likewise informed private respondent Pacfor that ATM Marketing Corp. now
occupies Pacfor Phils.' office premises, and demanded payment of his separation
pay.
Petitioner filed his complaint for illegal dismissal, recovery of separation pay,
and payment of attorney's fees with the NLRC.
Private respondent directed petitioner to explain why he should not be disciplined
for serious misconduct and conflict of interest; charged petitioner anew with
serious misconduct for the latter's alleged act of fraud and misrepresentation in
authorizing the release of an additional peso salary for himself, besides the dollar
salary agreed upon by the parties. Private respondent also accused petitioner of
disloyalty and representation of conflicting interests for having continued using the
Pacfor Phils.' office for operations of HEPI
LA: ruled in favor of petitioner, finding there was constructive dismissal. By
directing petitioner to turn over all office records and materials, regardless of
whether he may have retained copies, private respondent Pacfor virtually deprived
petitioner of his job by the gradual diminution of his authority as resident manager.
Petitioner's position as resident manager whose duty, among others, was to
maintain the security of its business transactions and communications was rendered
meaningless.
NLRC: in favor of Private respondent Pacfor. He set aside the July 30, 2001
decision of the labor arbiter, for lack of jurisdiction and lack of merit. It held there
was no employer-employee relationship between the parties. Based on the
two agreements between the parties, it concluded that petitioner is not an
employee of private respondent Pacfor, but a full co-owner (50/50 equity).

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MR denied.


CA: Affirmed holding that "the legal basis of the complaint is not employment
but perhaps partnership, co-ownership, or independent contractorship." Hence,
the Labor Code cannot apply.
MR denied

Issues: Was there an employer-employee relationship or a partnership? Can
both exist at the same time? There was an employer employee relationship but
no partnership
Was he constructively dismissed? (Not important so omitted) YES.

Ratio:
Petitioner argues that he is an industrial partner of the partnership he formed with
private respondent Pacfor, and also an employee of the partnership. Petitioner
insists that an industrial partner may at the same time be an employee of the
partnership, provided there is such an agreement, which, in this case, is the "Side
Agreement" and the "Revised Operating and Profit Sharing Agreement." We hold that
petitioner is an employee of private respondent Pacfor and that no partnership or co-
ownership exists between the parties.
In a partnership, the members become co-owners of what is contributed to the firm
capital and of all property that may be acquired thereby and through the efforts of
the members. The property or stock of the partnership forms a community of goods,
a common fund, in which each party has a proprietary interest. In fact, the New Civil
Code regards a partner as a co-owner of specific partnership property. Each partner
possesses a joint interest in the whole of partnership property. If the relation does
not have this feature, it is not one of partnership. This essential element, the
community of interest, or co-ownership of, or joint interest in partnership property
is absent in the relations between petitioner and private respondent Pacfor.
Petitioner is not a part -owner of Pacfor Phils. William Gleason, private respondent
Pacfor's President established this fact when he said that Pacfor Phils. is simply a
"theoretical company" for the purpose of dividing the income 50-50. He stressed
that petitioner knew of this arrangement from the very start, having been the one to
propose to private respondent Pacfor the setting up of a representative office, and
"not a branch office" in the Philippines to save on taxes. Thus, the parties in this case,
merely shared profits. This alone does not make a partnership.
Besides, a corporation cannot become a member of a partnership in the absence of
express authorization by statute or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the partners, whereby the
corporation would be bound by the acts of persons who are not its duly appointed

and authorized agents and officers, would be inconsistent with the policy of the law
that the corporation shall manage its own affairs separately and exclusively; and, (2)
that such an arrangement would improperly allow corporate property to become
subject to risks not contemplated by the stockholders when they originally invested
in the corporation. No such authorization has been proved in the case at bar.

(This part goes into the employer -employee relationship bit, I dont think its
important but I included it na din if ever magtanong re: paano nagging employee)

Be that as it may, we hold that on the basis of the evidence, an employer -employee
relationship is present in the case at bar. The elements to determine the existence of an
employment relationship are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power
to control the employee's conduct. The most important element is the employer's
control of the employee's conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it.
43

In the instant case, all the foregoing elements are present. First, it was private
respondent Pacfor which selected and engaged the services of petitioner as its
resident agent in the Philippines. Second, as stipulated in their Side Agreement,
private respondent Pacfor pays petitioner his salary amounting to $65,000 per
annum which was later increased to $78,000. Third, private respondent Pacfor holds
the power of dismissal, as may be gleaned through the various memoranda it issued
against petitioner, placing the latter on preventive suspension while charging him
with various offenses, including willful disobedience, serious misconduct, and gross
neglect of duty, and ordering him to show cause why no disciplinary action should
be taken against him.
Lastly and most important, private respondent Pacfor has the power of control
over the means and method of petitioner in accomplishing his work.
The power of control refers merely to the existence of the power, and not to the
actual exercise thereof. The principal consideration is whether the employer has the
right to control the manner of doing the work, and it is not the actual exercise of the
right by interfering with the work, but the right to control, which constitutes the test
of the existence of an employer-employee relationship.
44
In the case at bar, private
respondent Pacfor, as employer, clearly possesses such right of control. Petitioner,
as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only
an agent of the corporation, a representative of Pacfor, who transacts business, and
accepts service on its behalf.
This right of control was exercised by private respondent Pacfor during the period
of November to December 2000, when it directed petitioner to turn over to it all
records of Pacfor Phils.; when it ordered petitioner to remit the Christmas giveaway
fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of
settlement and ordered petitioner to transfer title and turn over to it the possession

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of the service car. It was also during this period when private respondent Pacfor sent
letters to its clients in the Philippines, particularly Intercontinental Paper Industries,
Inc. and DAVCOR, advising them not to deal with petitioner and/or Pacfor Phils. In
its letter to DAVCOR, private respondent Pacfor replied to the client's request for an
invoice payment extension, and formulated a revised payment program for DAVCOR.
This is one unmistakable proof that private respondent Pacfor exercises control over
the petitioner.
DISPOSITIVE: IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals'
January 30, 2003 Decision in CA-G.R. SP No. 71028 and July 30, 2003 Resolution,
affirming the December 20, 2001 Decision of the National Labor Relations
Commission, are ANNULED and SET ASIDE . The July 30, 2001 Decision of the
Labor Arbiter isREINSTATED with the MODIFICATION that the amount of
P250,000.00 representing an alleged increase in petitioner's salary shall be
deducted from the grant of separation pay for lack of evidence.
SO ORDERED.

VOTE: Sandoval-Gutierrez, Corona, Azcuna, Garcia, J.J., concur


ANGELES v. SECRETARY OF JUSTICE
(July 29, 2005)

Oscar Angeles and Emerita Angeles, petitioners, v. The Hon. Secretary of Justice
and Felino Mercado, respondents

DOCTRINE:The purpose of registration of the contract of partnership with the SEC
is to give notice to third parties. Failure to register the contract of partnership does
not affect the liability of the partnership and of the partners to third persons, nor
does it affect the partnerships juridical personality. A partnership may exist even if
the partners do not use the words partner or partnership.
NATURE: Special civil action. Certiorari.

PONENTE: Carpio, J.

FACTS:
Angeles spouses filed a criminal complaint for estafa against Mercado,
their brother-in-law
o Claimed that Mercado convinced them to enter into a contract of antichresis,
to last for 5 years, covering 8 parcels of land planted with fruit-bearing
lanzones trees in Nagcarlan, Laguna and owned by Juan Sanzo
o The parties agreed that Mercado would administer the ands and complete the
necessary paperwork

o After 3 years, the Angeles spouses asked for an accounting from Mercado, and
they claim that only after this demand for an accounting did thy discover that
Mercado had put the contract of antichresis over the subject land under
Mercado and his spouses names

Mercado denied the Angeles spouses allegations
o Claimed that there exists an industrial partnership, colloquially known as
sosyo industrial, between him and his spouse as industrial partners and the
Angeles spouses as financiers, and that this had existed since 1991, before the
contract of antichresis over the subject land
o Mercado used his and his spouses earnings as part of the capital in the
business transactions which he entered into in behalf of the Angeles spouses.
It was their practice to enter into business transactions with other people
under the name of Mercado because the Angeles spouses did not want to be
identified as the financiers
o Attached bank receipts showing deposits in behalf of Emerita Angeles and
contracts under his name for the Angeles spouses
During the barangay conciliation proceedings, Oscar Angeles stated that there
was a written sosyo industrial agreement: capital would come from the
Angeles spouses while the profit would be divided evenly between Mercado
and the Angeles spouses
Provincial Prosecution Office: first recommended the filing of a criminal
information for estafa, but after Mercado filed his counter-affidavit and moved
for reconsideration, issued an amended resolution dismissing the complaint
Angeles spouses appealed to Sec. of Justice, saying that the document
evidencing the contract of antichresis executed in the name of the Mercado
spouses, instead of the Angeles spouses, and that such document alone proves
Mercados misappropriation of their P210, 000
Sec. of Justice: dismissed the appeal
o Angeles spouses failed to show sufficient proof that Mercado deliberately
deceived them in the transaction
o Mercado satisfactorily explained that the Angeles spouses do not want to be
revealed as the financiers
o Under the circumstances, it was more likely that the Angeles spouses knew
from the very start that the questioned document was not really in their
names
o A partnership truly existed between the Angeles spouses and Mercado, which
was clear from the fact that they contributed money to a common fund and
divided the profits among themselves.
o Angeles spouses acknowledged their joint business venture in the barangay
conciliation proceedings although they assailed the manner the business was
conducted
o Although the legal formalities for the formation were not adhered to, the
partnership relationship was evident.
o There is no estafa where money is delivered by a partner to his co-partner
on the latters representation that the amount shall be applied to the
business of their partnership. In case of the money received, the co-partners
liability is civil in nature

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ISSUES/HELD:
1. W/N the Sec. of Justice committed grave abuse of discretion in
dismissing the appeal - No

2. W/N a partnership existed between Mercado and the Angeles spouses - Yes
3. W/N there was misappropriation by Mercado No

RATIO/RULING:
1. Angeles spouses fail to convince that the Secretary of Justice committed grave
abuse of discretion when he dismissed their appeal. Moreover, they committed a
procedural error when they failed to file a motion for reconsideration of the Sec.
of Justices resolution, which is already enough reason to dismiss the case.
2. Angeles spouses allege that they had no partnership with Mercado, relying on
Arts. 1771 to 1773 of the Civil Code.
The Angeles spouses position that there is no partnership because of the lack of a
public instrument indicating the same and a lack of registration with the SEC
holds no water
o The Angeles spouses contributed money to the partnership and
not immovable property
o Mere failure to register the contract of partnership with the SEC does not
invalidate a contract that has the essential requisites of a partnership. The
purpose of registration is to give notice to third parties.
Failure to register does not affect the liability of the partnership and of the partners to
third persons, nor does it affect the partnerships juridical personality
The Angeles spouses admit to facts that prove the existence of a partnership
o A contract showing a sosyo industrial or industrial partnership
o Contribution of money & industry to a common fund
o Division of profits between the Angeles spouses and Mercado

3. Mercado satisfactorily explained that the Angeles spouses do not want to be
revealed as the financiers, thus the document which was in the name of Mercado
and his spouse fail to convince that there was deceit or false representation that
induced the Angeles spouses to part with their money
Even the RTC of Sta. Cruz, Laguna, which handled the civil case filed by the
Angeles spouses against Mercado and Leo Cerayban stated that it was the
practice to have the contracts secured in Mercados name as the Angeles spouses
fear being kidnapped by the NPA or being questioned by the BIR as Oscar Angeles
was working with the government.
Accounting of the proceeds is not a proper subject for the present case.

DISPOSITION: Petition for certiorari dismissed. Decision of Sec. of Justice affirmed.

VOTE: 1
st
Division, all concur.






D. MUTUAL AGENCY

E. DISTINGUISH FROM

1. Co-ownership; Co-possession

2. Tenancy in common; joint tenancy

3. Joint Ventures

4. Joint Adventures

5. Joint accounts

6. Cuentas en Participacion

7. Agency

GATCHALIAN v. CIR
April 29, 1939
PONENTE: Imperial, J.


FACTS:
The 15plaintiff are all residents of the municipality of Pulilan, Bulacan,
purchased one sweepstakes ticket valued at two pesos (P2), divided in various
amounts among themselves.
o the said ticket was registered in the name of Jose Gatchalian and
Company;
o The ticket won 50,000 pesos.
Plaintiff submitted 15 income tax returns for exemption from the 1,499 tax on
the lottery winnings, asking that the tax be divided according to the amount paid
by each plaintiff;
o CIR denied the plaintiffs request for exemption, stating that the
plaintiffs are a partnership;

ISSUE:
1. Whether the plaintiffs formed a partnership, or merely a community of
property without a personality of its own; Formed a partnership of a civil
nature.
2. Whether they should pay the tax collectively or whether the latter
should be prorated among them and paid individually; Collectively.

HELD:
1. According to the stipulation facts the plaintiffs organized a partnership of a
civil nature because each of them put up money to buy a sweepstakes ticket
for the sole purpose of dividing equally the prize which they may win,
as they did in fact in the amount of P50,000;

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The partnership was not only formed, but upon the organization
thereof and the winning of the prize, Jose Gatchalian personally
appeared in the office of the Philippines Charity Sweepstakes, in
his capacity as co-partner, as such collection the prize, the office
issued the check for P50,000 in favor of Jose Gatchalian and
company, and the said partner, in the same capacity, collected
the said check.
All these circumstances repel the idea that the plaintiffs
organized and formed a community of property only.
2. Having organized and constituted a partnership of a civil nature, the said
entity is the one bound to pay the income tax which the defendant
collected under the aforesaid section 10 (a) of Act No. 2833, as amended by
section 2 of Act No. 3761.
PASCUAL v. CIR
(October 18, 1988)

DOCTRINE: There must be a clear intent to form a partnership, the existence of a
juridical personality different from the individual partners, and the freedom of
each party to transfer or assign the whole property.
NATURE: Petition for review on certiorari of the decision of the Court of Tax
Appeals (CTA) affirming the decision of the Commissioner of Internal Revenue.
PONENTE: Gancayo, J.
FACTS:
Petitioners Mariano Pascual and Renato P. Dragon are
siblings. 1965 Bought 2 Parcels of Land

1966 Bought another 3 Parcels of Land
1968 Sold the first to Parcels of Land
1970 Sold the remaining 3 Parcels.
They realized a total of P 60,000.00 profit, and paid the corresponding capital
gains by availing of the tax amnesty in the years 1973 74.
BIR Commissioner assessed that the siblings owed P107,101.70 for corporate
income tax being an unregistered partnership.
Petitioners assert that they are not a partnership, but are co-owners who have
paid their corresponding capital gains in 73 and 74.
ISSUES:
W/N the Siblings were an unregistered partnership which was liable to
pay corporate tax?



HELD:
No, they were co-owners.

RATIO/RULING:
The CTA anchored their ruling on an earlier case of Evangelista. Which held that the
requisite for a partnership is a) an agreement to contribute money, property or
industry in a common fund, and b) intent to divide the profits among the
contracting parties.
In the present case, there is no evidence that petitioners entered into an agreement
to contribute money, property or industry to a common fund and that they intended
to divide the profits among themselves. Commissioner merely assumed the
presence of these elements.
Also, the earlier ruling in Evangelista showed that there were several transactions,
which showed the character of habitually peculiar to business transactions
engaged in for the purpose of gain was present.
The common ownership of property does not in itself create a partnership between
the owners, though they may use it for purpose of making gains; and they may,
without becoming partners, agree among themselves as to the management, and
use of such property and applications of the proceeds therefrom.
The sharing of returns does not in itself establish a partnership whether or not the
persons sharing therein have a joint or common right or interest in the property.
There must be a clear intent to form a partnership, the existence of a juridical
personality different from the individual partners, and the freedom of each party
to transfer or assign the whole property.
There must be intent to create a PARTNERSHIP with a distinct juridical
personality to that of the partners.

DISPOSITION: Petition is GRANTED decision of the CTA is REVERSED and SET
ASIDE
VOTE: 3rd Division. Cruz, Grino-Aquino, Medialdea, JJ. Concur
Narvasa, J. Took no part

OBILLOS v. CIR
(October 29, 1985)

DOCTRINE: The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived. There must be an
unmistakable intention to form a partnership or joint venture.

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NATURE: Petition to review the decision of the Court of Tax Appeals

PONENTE: Aquino, J.
FACTS:
For at least one year after their receipt of two parcels of land from their
father, petitioners resold said lots to the Walled City Securities Corporation and Olga
Cruz Canda, for which they earned a profit of P134,341.88 or P33,584 for each of
them. They treated the profit as a capital gain and paid an income tax on one-half
thereof or of P16,792.
One day before the expiration of the five-year prescriptive period, the
Commissioner of Internal Revenue, Commissioner acting on the theory that the four
petitioners had formed an unregistered partnership or joint venture, required the
four petitioners to pay corporate income tax on the total profit of P134,336 in
addition to individual income tax on their shares thereof, a 50% fraud surcharge and
a 42% accumulated interest. Further, the Commissioner considered the share of the
profits of each petitioner in the sum of P33,584 as a " taxable in full (not a mere
capital gain of which is taxable) and required them to pay deficiency income taxes
aggregating P56,707.20 including the 50% fraud surcharge and the accumulated
interest.
The petitioners contested the assessments. Two Judges of the Tax Court
sustained the same. Judge Roaquin dissented. Hence, the instant appeal.

ISSUES: Whether or not petitioners have indeed formed a partnership or joint
venture and thus, liable for corporate income tax.

HELD &RATIO/RULING:We hold that it is error to consider the petitioners
as having formed a partnership under article 1767 of the Civil Code simply because
they allegedly contributed P178,708.12 to buy the two lots, resold the same and
divided the profit among themselves.
To regard the petitioners as having formed a taxable unregistered
partnership would result in oppressive taxation and confirm the dictum that the
power to tax involves the power to destroy. That eventuality should be obviated.
As testified by Jose Obillos, Jr., they had no such intention. They were co-
owners pure and simple. To consider them as partners would obliterate the
distinction between a co-ownership and a partnership. The petitioners were not
engaged in any joint venture by reason of that isolated transaction.
Article 1769(3) of the Civil Code provides that "the sharing of gross returns
does not of itself establish a partnership, whether or not the persons sharing them
have a joint or common right or interest in any property from which the returns are
derived". There must be an unmistakable intention to form a partnership or joint
venture.
DISPOSITION:WHEREFORE, the judgment of the Tax Court is reversed and set aside.
The assessments are cancelled. No costs.

VOTE: 2nd Division. Abad Santos, Escolin, Cuevas, Alampayconcur. Concepcion Jr.
on leave.

RIVERA v. PEOPLES BANK
(April 7, 1942)

DOCTRINE: In the absence of clear proof of the contrary, the SC gives full faith and
credit to the certificate of deposit, which recites in effect that the funds in question
belonged to persons A and B; that they were joint owners and that either of them
could withdraw any part or the whole of said account during the lifetime of both, and
the balance, if any, upon the death of either, belonged to the survivor.
NATURE: The question raised in this appeal is the validity of the survivorship
agreement made by and between Edgar Stephenson, now deceased, and Ana Rivera,
appellant herein
PONENTE: Ozaeta, J.
FACTS:
Ana Rivera was employed by Edgar Stephenson as housekeeper. Stephenson opened
an account in his name with the defendant Peoples Bank.
When there was a balance of P2,072 in said account, the survivorship agreement in
question was executed and the said account was transferred to the name of "Edgar
Stephenson and/or Ana Rivera." At the time of Stephenson's death Ana Rivera held
the deposit book, and there was a balance in said account of P701.43, which Ana
Rivera claimed but which the bank refused to pay to her upon advice of its attorneys
who gave the opinion that the survivorship agreement was of doubtful validity.
Ana Rivera instituted the present action against the bank, and Minnie Stephenson,
administratix of the estate of the deceased, intervened and claimed the amount for
the estate, alleging that the money deposited in said account was and is the exclusive
property of the deceased.
TC: held that the agreement in question, viewed from its effect during the lives of the
parties, was a mere power of attorney authorizing Ana Rivera to withdraw the
deposit, which power terminated upon the death of the principal, Edgar Stephenson;
but that, viewed from its effect after the death of either of the parties, the agreement
was a donation mortis causa with reference to the balance remaining at the death of
one of them, which, not having been executed with the formalities of a testamentary
disposition as required by the Civil Code, was of no legal effect.
ISSUES:
1.WON the survivorship agreement was a mere power of attorney from Stephenson
to Ana Rivera, or that it is a gift mortis causa of the bank account in question from
him to her.
2. WON the survivorship agreement is valid
HELD:

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2. No
3. Yes

RATIO/RULING:


First Issue
1. The TCs conclusion is predicated on the assumption that Stephenson was
the exclusive owner of the funds deposited in the bank, which assumption
was in turn based on the facts (1) that the account was originally opened in
the name of Stephenson alone and (2) that Ana Rivera "served only as
housemaid of the deceased."
2. But it not infrequently happens that a person deposits money in the
bank in the name of another; and in the instant case it also appears
that Ana Rivera served her master for about nineteen years without
actually receiving her salary from him. The fact that subsequently
Stephenson transferred the account to the name of himself and/or
Ana Rivera and executed with the latter the survivorship agreement in
question although there was no relation of kinship between them but
only that of master and servant, nullifies the assumption that
Stephenson was the exclusive owner of the bank account.
3. In the absence of clear proof of the contrary, the SC gives full faith and
credit to the certificate of deposit, which recites in effect that the
funds in question belonged to Edgar Stephenson and Ana Rivera; that
they were joint owners and that either of them could withdraw any
part or the whole of said account during the lifetime of both, and the
balance, if any, upon the death of either, belonged to the survivor.


Second issue:
1. Prima facie, SC thinks it is valid. It is an aleatory contract supported by
law a lawful consideration the mutual agreement of the joint
depositors permitting either of them to withdraw the whole deposit during
their lifetime, and transferring the balance to the survivor upon the death of
one of them. The trial court said that the Civil Code "contains no provisions
sanctioning such an agreement" SC thinks it is covered by article 1790 of
the Civil Code.
2. Furthermore, "it is well established that a bank account may be so
created that two persons shall be joint owners thereof during their
mutual lives, and the survivor take the whole on the death of the
other. The right to make such joint deposits has generally been held not to
be done with by statutes abolishing joint tenancy and survivorship
generally as they existed at common law."
3. Although the survivorship agreement is per se not contrary to law, its
operation or effect may be violative of the law. For instance, if it be
shown in a given case that such agreement is a mere cloak to hide an

inofficious donation, to transfer property in fraud of creditors, or to defeat
the legitime of a forced heir, it may be assailed and annulled upon such
grounds. No such vice has been imputed and established against the
agreement involved in the case.

DISPOSITION: The agreement appealed from is reversed and another judgment will
be entered in favor of the plaintiff ordering the defendant bank to pay to her the sum
of P701.43, with legal interest thereon from the date of the complaint, and the costs
in both instances. So ordered.
VOTE: All concur

TUASON v. BOLANOS
FACTS:

This was an action to recover possesion of registered land situated in barrio Tatalon,
Quezon City.

The plaintiff was represented by a corporation, the law firm Araneta & Araneta.

ISSUE:

WON the case should be dismissed on the ground that the case was not brought by
the real property in interest

HELD:

No.

There is nothing to the contention that the present action is not
brought by the real party in interest, that is, by J. M. Tuason and Co.,
Inc. What the Rules of Court require is that an action be brought in the
name of, but not necessarily by, the real party in interest. (Section 2,
Rule 2.)
The complaint is signed by the law firm of Araneta and Araneta,
"counsel for plaintiff" and commences with the statement "comes now
plaintiff, through its undersigned counsel." It is true that the complaint
also states that the plaintiff is "represented herein by its Managing
Partner Gregorio Araneta, Inc.", another corporation.
There is nothing against one corporation being represented by
another person, natural or juridical, in a suit in court.
The contention that Gregorio Araneta Inc. cannot act as managing
partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership is without merit, for the
true rule is that though a corporation has no power into a

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partnership, it may nevertheless enter into a joint venture with
another where the nature of that venture is in line with the
business authorized by its charter (Wyoming- Indiana Oil Gas Co. vs.
Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of Corp., 1082.)
There is nothing in the record to indicate that the venture in which
plaintiff is represented by Gregorio Araneta, Inc. as "its managing
partner" is not in line with the corporate business of either of them.
HEIRS OF TANG ENG KEE v. CA
October 3, 2000
FACTS:
The common-law spouse and children of TAN ENG KEE (the plaintiffs) filed suit
against the decedent's brother TAN ENG LAY for accounting, liquidation and
winding up of the alleged partnership formed after World War II between
Tan Eng Kee and Tan Eng Lay;
o After the second World War, Tan Eng Kee and Tan Eng Lay, pooling
their resources and industry together, entered into a partnership
engaged in the business of selling lumber and hardware and
construction supplies named "Benguet Lumber" which they jointly
managed until Tan Eng Kee's death.
o Petitioners claim that in 1981, Tan Eng Lay and his children caused the
conversion of the partnership "Benguet Lumber" into a corporation
called "Benguet Lumber Company." The incorporation was
purportedly a ruse to deprive Tan Eng Kee and his heirs of their
rightful participation in the profits of the business.
RTC granted the petitioner for accouting and determined that Tan Eng Kee and Tan
Eng Lay had entered into a joint venture, but the CA reversed such decision,
hence the present petition.
ISSUE: Was there a partnership between Tan Eng Kee and Tan Eng Lay? No.
HELD:
PLAINTIFFS CLAIM THAT because of the pooling of resources, the post-war
Benguet Lumber was eventually established. That the father of the plaintiffs and
Lay were partners, is obvious from the fact that: (1) they conducted the affairs of
the business during Kee's lifetime, jointly, (2) they were the ones giving orders
to the employees, (3) they were the ones preparing orders from the suppliers,
(4) their families stayed together at the Benguet Lumber compound, and (5)
all their children were employed in the business in different capacities.
o HOWEVER: These are not evidences supporting the existence of a
partnership. There was no partnership whatsoever. Except for a firm
name, there was no firm account, no firm letterheads submitted as
evidence, no certificate of partnership, no agreement as to profits and

losses, and no time fixed for the duration of the partnership. There was
even no attempt to submit an accounting corresponding to the period
after the war until Kee's death in 1984. It had no business book, no
written account nor any memorandum for that matter and no license
mentioning the existence of a partnership.

On profits earned: Tan Eng Kee was only an employee, not a partner. Even if the
payrolls as evidence were discarded, petitioners would still be back to square one, so
to speak, since they did not present and offer evidence that would show that Tan Eng
Kee received amounts of money allegedly representing his share in the profits of the
enterprise. Petitioners failed to show how much their father, Tan Eng Kee, received,
if any, as his share in the profits of Benguet Lumber Company for any particular
period. Hence, they failed to prove that Tan Eng Kee and Tan Eng Lay intended to
divide the profits of the business between themselves, which is one of the essential
features of a partnership.
On power to give orders: even a mere supervisor in a company, factory or store
gives orders and directions to his subordinates. So long, therefore, that an
employee's position is higher in rank, it is not unusual that he orders around those
lower in rank.
On preparing supply orders: even a messenger or other trusted employee, over
whom confidence is reposed by the owner, can order materials from suppliers for
and in behalf of Benguet Lumber. Furthermore, even a partner does not necessarily
have to perform this particular task. It is, thus, not an indication that Tan Eng Kee
was a partner.
On staying in the premises of Benguet Lumber: although Tan Eng Kee, together
with his family, lived in the lumber compound and this privilege was not accorded
to other employees, the undisputed fact remains that Tan Eng Kee is the brother of
Tan Eng Lay. Naturally, close personal relations existed between them. Whatever
privileges Tan Eng Lay gave his brother, and which were not given the other
employees, only proves the kindness and generosity of Tan Eng Lay towards a blood
relative.
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners
as to each other are not partners as to third persons;
(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;
(3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint
or common right or interest in any property which the returns are
derived;
(4) The receipt by a person of a share of the profits of a business is a
prima facie evidence that he is a partner in the business, but no

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such inference shall be drawn if such profits were received
in payment:

(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a
deceased partner;
(d) As interest on a loan, though the amount of
payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise.

DISPOSITIVE: There being no partnership, it follows that there is no
dissolution, winding up or liquidation to speak of. Hence, the petition must fail.

AURBACH v. SANITARY WARES
(December 15, 1989)

DOCTRINE: The rule is that whether the parties to a particular contract have thereby
established among themselves a joint venture or some other relation depends upon
their actual intention which is determined in accordance with the rules governing
the interpretation and construction of contracts.
NATURE: Consolidated petitions seek the review of the amended decision of
the Court of Appeals in CA-G.R. SP Nos. 05604 and 05617 which set aside the
earlier decision dated June 5, 1986, of the then Intermediate Appellate Court
PONENTE: Gutierrez, Jr., J.
FACTS:
- In 1961, Saniwares, a domestic corporation was incorporated for the
primary purpose of manufacturing and marketing sanitary wares.
One of the incorporators, Mr. Baldwin Young went abroad to look for
foreign partners, European or American who could help in its expansion
plans. On August 15, 1962, ASI, a foreign corporation domiciled in
Delaware, United States entered into an Agreement with Saniwares and
some Filipino investors whereby ASI and the Filipino investors agreed to
participate in the ownership of an enterprise which would engage
primarily in the business of manufacturing in the Philippines and selling
here and abroad vitreous china and sanitary wares. The parties agreed
that the business operations in the Philippines shall be carried on by
an incorporated enterprise and that the name of the corporation shall
initially be "Sanitary Wares Manufacturing Corporation."
- 3. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation shall be substantially in
the form annexed hereto as Exhibit A and, insofar as permitted
under Philippine law, shall specifically provide for
(1) Cumulative voting for
directors: xxx xxx xxx

5. Management

(a) The management of the Corporation shall be vested in a Board of
Directors, which shall consist of nine individuals. As long as American-
Standard shall own at least 30% of the outstanding stock of the
Corporation, three of the nine directors shall be designated by American-
Standard, and the other six shall be designated by the other stockholders
of the Corporation.
- The agreement contained provisions designed to protect it as a
minority group, including the grant of veto powers over a number of
corporate acts and the right to designate certain officers, such as a member
of the Executive Committee whose vote was required for important
corporate transactions.
- The joint enterprise thus entered into by the Filipino investors and the
American corporation prospered. Unfortunately, with the business
successes, there came a deterioration of the initially harmonious
relations between the two groups. According to the Filipino group, a
basic disagreement was due to their desire to expand the export
operations of the company to which ASI objected as it apparently had
other subsidiaries of joint joint venture groups in the countries where
Philippine exports were contemplated. On March 8, 1983, the annual
stockholders' meeting was held.
- The ASI group nominated three persons namely; Wolfgang Aurbach, John
Griffin and David P. Whittingham. The Philippine investors nominated six,
namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto R. Lagdameo, Jr.,
George F. Lee, and Baldwin Young. Mr. Eduardo R, Ceniza then nominated
Mr. Luciano E. Salazar, who in turn nominated Mr. Charles Chamsay. The
chairman, Baldwin Young ruled the last two nominations out of order on
the basis of section 5 (a) of the Agreement, the consistent practice of the
parties during the past annual stockholders' meetings to nominate only
nine persons as nominees for the nine-member board of directors, and
the legal advice of Saniwares' legal counsel.
- There were protests against the action of the Chairman and heated
arguments ensued. An appeal was made by the ASI representative to the
body of stockholders present that a vote be taken on the ruling of the
Chairman. A series of events then ensued that culminated in the eventual
adjournment of the meeting and where the ASI Group, Luciano E. Salazar
and other stockholders, allegedly representing 53 or 54% of the shares of
Saniwares, decided to continue the meeting at the elevator lobby of the
American Standard Building. The continued meeting was presided by
Luciano E. Salazar, while Andres Gatmaitan acted as Secretary. On the
basis of the cumulative votes cast earlier in the meeting, the ASI Group
nominated its four nominees; Wolfgang Aurbach, John Griffin, David
Whittingham and Charles Chamsay. Luciano E. Salazar voted for himself,
thus the said five directors were certified as elected directors by the Acting
Secretary, Andres Gatmaitan, with the explanation that there was a tie

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among the other six (6) nominees for the four (4) remaining positions
of directors and that the body decided not to break the tie.
- These incidents triggered off the filing of separate petitions by the
parties with the Securities and Exchange Commission (SEC). The two
petitions were consolidated and tried jointly by a hearing officer who
rendered a decision upholding the election of the Lagdameo Group
and dismissing the quo warranto petition of Salazar and Chamsay.
The ASI Group and Salazar appealed the decision to the SEC en banc
which affirmed the hearing officer's decision.
- The SEC decision led to the filing of two separate appeals with the
Intermediate Appellate Court by Wolfgang Aurbach, John Griffin, David
Whittingham and Charles Chamsay (docketed as AC-G.R. SP No. 05604)
and by Luciano E. Salazar (docketed as AC-G.R. SP No. 05617). The
petitions were consolidated and the appellate court in its decision ordered
the remand of the case to the Securities and Exchange Commission with
the directive that a new stockholders' meeting of Saniwares be ordered
convoked as soon as possible, under the supervision of the Commission.
- Upon a motion for reconsideration filed by the appellees (Lagdameo
Group) the appellate court (Court of Appeals) rendered the
questioned amended decision. Petitioners Wolfgang Aurbach, John
Griffin, David P. Whittingham and Charles Chamsay in G.R. No. 75875
assign the following errors:
- I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE ALLEGED ELECTION OF
PRIVATE RESPONDENTS AS MEMBERS OF THE BOARD OF DIRECTORS OF
SANIWARES WHEN IN FACT THERE WAS NO ELECTION AT ALL.
- II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS FROM
EXERCISING THEIR FULL VOTING RIGHTS REPRESENTED BY THE
NUMBER OF SHARES IN SANIWARES, THUS DEPRIVING PETITIONERS
AND THE CORPORATION THEY REPRESENT OF THEIR PROPERTY RIGHTS
WITHOUT DUE PROCESS OF LAW.
- Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the
amended decision on the following grounds:
- 11.1. That Amended Decision would sanction the CA's disregard of binding
contractual agreements entered into by stockholders and the replacement
of the conditions of such agreements with terms never contemplated by
the stockholders but merely dictated by the CA .
- 11.2. The Amended decision would likewise sanction the deprivation of
the property rights of stockholders without due process of law in order
that a favored group of stockholders may be illegally benefitted and
guaranteed a continuing monopoly of the control of a corporation. (pp. 14-
15, Rollo-75975-76)
- On the other hand, the petitioners in G.R. No. 75951 contend that:
- THE AMENDED DECISION OF THE RESPONDENT COURT, WHILE
RECOGNIZING THAT THE STOCKHOLDERS OF SANIWARES ARE DIVIDED
INTO TWO BLOCKS, FAILS TO FULLY ENFORCE THE BASIC INTENT OF
THE AGREEMENT AND THE LAW.


- THE AMENDED DECISION DOES NOT CATEGORICALLY RULE THAT
PRIVATE PETITIONERS HEREIN WERE THE DULY ELECTED DIRECTORS
DURING THE 8 MARCH 1983 ANNUAL STOCKHOLDERS MEETING OF
SANTWARES. (P. 24, Rollo-75951)

-
ISSUES:
The main issue hinges on who were the duly elected directors of Saniwares for the
year 1983 during its annual stockholders' meeting held on March 8, 1983. To
answer this question the following factors should be determined: (1) the nature of
the business established by the parties whether it was a joint venture or a
corporation and (2) whether or not the ASI Group may vote their additional 10%
equity during elections of Saniwares' board of directors.
HELD:
In the instant cases, our examination of important provisions of the
Agreement as well as the testimonial evidence presented by the Lagdameo and
Young Group shows that the parties agreed to establish a joint venture and not
a corporation.


RATIO/RULING:
- There are two groups in this case, the Lagdameo group composed of
Filipino investors and the American Standard Inc. composed of foreign
investors. The ASI Group and petitioner Salazar contend that the actual
intention of the parties should be viewed strictly on the Agreement
dated August 15, 1962 wherein it stated the parties intention was to form
a corporation and not a joint venture.
- The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that
the actual intention of the parties should be viewed strictly on the
"Agreement" dated August 15,1962 wherein it is clearly stated that the
parties' intention was to form a corporation and not a joint venture.
- They specifically mention number 16 under Miscellaneous Provisions which
states:
xxx xxx xxx
c) nothing herein contained shall be construed to constitute any of the
parties hereto partners or joint venturers in respect of any
transaction hereunder. (At P. 66, Rollo -GR No. 75875)
- They object to the admission of other evidence which tends to show that the
parties' agreement was to establish a joint venture presented by the
Lagdameo and Young Group on the ground that it contravenes the parol
evidence rule under section 7, Rule 130 of the Revised Rules of Court.
- In the instant cases, our examination of important provisions of the
Agreement as well as the testimonial evidence presented by the
Lagdameo and Young Group shows that the parties agreed to establish
a joint venture and not a corporation. The history of the organization of
Saniwares and the unusual arrangements which govern its policy making

(DIONNE) || D2014
21


body are all consistent with a joint venture and not with an
ordinary corporation. As stated by the SEC:
- According to the unrebutted testimony of Mr. Baldwin Young, he
negotiated the Agreement with ASI in behalf of the Philippine nationals. He
testified that ASI agreed to accept the role of minority vis-a-vis the
Philippine National group of investors, on the condition that the
Agreement should contain provisions to protect ASI as the minority.
- An examination of the Agreement shows that certain provisions were
included to protect the interests of ASI as the minority. For example,
the vote of 7 out of 9 directors is required in certain enumerated corporate
acts. ASI is contractually entitled to designate a member of the Executive
Committee and the vote of this member is required for certain transactions.
The Agreement also requires a 75% super-majority vote for the
amendment of the articles and by-laws of Saniwares. ASI is also given the
right to designate the president and plant manager. The Agreement further
provides that the sales policy of Saniwares shall be that which is normally
followed by ASI and that Saniwares should not export "Standard" products
otherwise than through ASI's Export Marketing Services. Under the
Agreement, ASI agreed to provide technology and know-how to Saniwares
and the latter paid royalties for the same.
- It is pertinent to note that the provisions of the Agreement requiring a 7 out
of 9 votes of the board of directors for certain actions, in effect gave ASI
(which designates 3 directors under the Agreement) an effective veto
power. Furthermore, the grant to ASI of the right to designate certain
officers of the corporation; the super-majority voting requirements for
amendments of the articles and by-laws; and most significantly to the
issues of tms case, the provision that ASI shall designate 3 out of the 9
directors and the other stockholders shall designate the other 6, clearly
indicate that there are two distinct groups in Saniwares, namely ASI, which
owns 40% of the capital stock and the Philippine National stockholders
who own the balance of 60%, and that 2) ASI is given certain protections as
the minority stockholder.
- Premises considered, we believe that under the Agreement there are two
groups of stockholders who established a corporation with provisions for
a special contractual relationship between the parties, i.e., ASI and the
other stockholders. (pp. 4-5)
- Section 5 (a) of the agreement uses the word "designated" and not
"nominated" or "elected" in the selection of the nine directors on a
six to three ratio. Each group is assured of a fixed number of
directors in the board.
- Moreover, ASI in its communications referred to the enterprise as joint
venture. Baldwin Young also testified that Section 16(c) of the Agreement that
"Nothing herein contained shall be construed to constitute any of the parties
hereto partners or joint venturers in respect of any transaction hereunder" was
merely to obviate the possibility of the enterprise being treated as partnership
for tax purposes and liabilities to third parties.
- Quite often, Filipino entrepreneurs in their desire to develop the
industrial and manufacturing capacities of a local firm are constrained


to seek the technology and marketing assistance of huge multinational
corporations of the developed world. Arrangements are formalized
where a foreign group becomes a minority owner of a firm in exchange for
its manufacturing expertise, use of its brand names, and other such
assistance. However, there is always a danger from such arrangements. The
foreign group may, from the start, intend to establish its own sole or
monopolistic operations and merely uses the joint venture arrangement to
gain a foothold or test the Philippine waters, so to speak. Or the
covetousness may come later. As the Philippine firm enlarges its operations
and becomes profitable, the foreign group undermines the local majority
ownership and actively tries to completely or predominantly take over the
entire company. This undermining of joint ventures is not consistent
with fair dealing to say the least. To the extent that such subversive
actions can be lawfully prevented, the courts should extend protection
especially in industries where constitutional and legal requirements
reserve controlling ownership to Filipino citizens.
- The Lagdameo Group stated in their appellees' brief in the Court of Appeal:
- In fact, the Philippine Corporation Code itself recognizes the right of
stockholders to enter into agreements regarding the exercise of
their voting rights.
Sec. 100. Agreements by stockholders.-

xxx xxx xxx

2. An agreement between two or more stockholders, if in writing and
signed by the parties thereto, may provide that in exercising any voting
rights, the shares held by them shall be voted as therein provided, or as
they may agree, or as determined in accordance with a procedure agreed
upon by them.
Appellants contend that the above provision is included in the Corporation
Code's chapter on close corporations and Saniwares cannot be a close
corporation because it has 95 stockholders. Firstly, although Saniwares
had 95 stockholders at the time of the disputed stockholders meeting,
these 95 stockholders are not separate from each other but are divisible
into groups representing a single Identifiable interest. For example, ASI, its
nominees and lawyers count for 13 of the 95 stockholders. The
YoungYutivo family count for another 13 stockholders, the Chamsay family
for 8 stockholders, the Santos family for 9 stockholders, the Dy family for 7
stockholders, etc. If the members of one family and/or business or interest
group are considered as one (which, it is respectfully submitted, they
should be for purposes of determining how closely held Saniwares is there
were as of 8 March 1983, practically only 17 stockholders of Saniwares.
(Please refer to discussion in pp. 5 to 6 of appellees' Rejoinder
Memorandum dated 11 December 1984 and Annex "A" thereof).

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22


Secondly, even assuming that Saniwares is technically not a close
corporation because it has more than 20 stockholders, the undeniable fact
is that it is a close -held corporation. Surely, appellants cannot honestly
claim that Saniwares is a public issue or a widely held corporation.
As correctly held by the SEC Hearing Officer:
- It is said that participants in a joint venture, in organizing the joint
venture deviate from the traditional pattern of corporation
management. A noted authority has pointed out that just as in close
corporations, shareholders' agreements in joint venture
corporations often contain provisions which do one or more of the
following: (1) require greater than majority vote for shareholder and
director action; (2) give certain shareholders or groups of shareholders
power to select a specified number of directors; (3) give to the
shareholders control over the selection and retention of employees; and
(4) set up a procedure for the settlement of disputes by arbitration.
- Thirdly paragraph 2 of Sec. 100 of the Corporation Code does not
necessarily imply that agreements regarding the exercise of voting
rights are allowed only in close corporations. As Campos and Lopez-
Campos explain:
- Paragraph 2 refers to pooling and voting agreements in particular. It is
submitted that there is no reason for denying stockholders of
corporations other than close ones the right to enter into not voting or
pooling agreements to protect their interests, as long as they do not
intend to commit any wrong, or fraud on the other stockholders not
parties to the agreement. Of course, voting or pooling agreements are
perhaps more useful and more often resorted to in close corporations. But
they may also be found necessary even in widely held corporations.
Moreover, since the Code limits the legal meaning of close corporations to
those which comply with the requisites laid down by section 96, it is
entirely possible that a corporation which is in fact a close corporation will
not come within the definition. In such case, its stockholders should not be
precluded from entering into contracts like voting agreements if these are
otherwise valid. In short, even assuming that sec. 5(a) of the Agreement
relating to the designation or nomination of directors restricts the
right of the Agreement's signatories to vote for directors, such
contractual provision, as correctly held by the SEC, is valid and
binding upon the signatories thereto, which include appellants.


DISPOSITION:
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are DISMISSED and
the petition in G.R. No. 75951 is partly GRANTED. The amended decision of the Court of
Appeals is MODIFIED in that Messrs. Wolfgang Aurbach John Griffin, David Whittingham
Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique
Lagdameo, and George F. Lee are declared as the duly elected directors of Saniwares at
the March 8,1983 annual stockholders' meeting. In all other

respects, the questioned decision is AFFIRMED. Costs against the petitioners in G.R.
Nos. 75975-76 and G.R. No. 75875. SO ORDERED.

VOTE: 3
rd
Division. Fernan, C.J., (Chairman), Bidin and Cortes, JJ., concur. Feliciano,
J., took no part.
CONCURRING/DISSENTING OPINION: None.
ADDITIONAL NOTES: Sorry mahaba at magulo. Essentially just read the doctrine
and the underlined portions sa ratio. Yung doctrine lang naman ang importante,
the rest of the discussions show the HOW and WHY of the doctrine na joint venture
nga yung intent.
LITONJUA v. LITONJUA
(Dec 13, 2005)

DOCTRINE:
A Partnership must be in a public document if:

1) Immoveable Property and Real Rights contributed to it.
a. If it involves immoveable property, inventory of such is needed
signed by the partners. (else VOID)
2) It involves capital P 3,000 (must be filed in the SEC)

NATURE: Petition for review on certiorari
PONENTE: Garcia, J.
FACTS:
Aurelio (Petitioner) and Eduardo Litonjua are brothers.

Aurelio alleges that he had a partnership with his brother Eduardo evidenced by
a private memorandum (unsigned) executed by Eduardo which said he was
giving 10% of the equity or 1 million pesos, and that they would work together in
maintaining the family business.
A third person Yang was also alleged to be a member in the joint venture and
partnership.
Here Aurelio files for an action of Specific Performance against his partners, to
render an accounting and give him his share of the profits.
ISSUES: W/N there is a Valid Partnership?
HELD: No, the contract was void or at most unenforceable.
RATIO/RULING:
The supposed contract of partnership was evidenced by a private
memorandum (unsigned), in which Eduardo expressed his desire to train his
brother, and promising him a 10% share or 1 million pesos.

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The supposed contract is void, for being contrary to Articles 1771, 1772, and 1773
of the Civil Code.

The memorandum, on its face, contains typewritten entries, personal in tone, but
is unsigned and undated. As an unsigned document, there can be no quibbling that
1) The memorandum does not meet the public instrumentation
requirements exacted under Article 1771 of the Civil Code.

2) Moreover, being unsigned and doubtless referring to a partnership
involving more than P3,000.00 in money or property, The Memorandum
cannot be presented for notarization, let alone registered
with the Securities and Exchange Commission (SEC), as called for under the
Article 1772 of the Code.

3) And inasmuch as the inventory requirement under the succeeding
Article 1773 goes into the matter of validity when immovable property is
contributed to the partnership, the next logical point of inquiry turns on
the nature of petitioners contribution, if any, to the supposed partnership.
Petitioner, then goes on to allege that, assuming arguendo, that the contract was
not one of partnership that the same actually established an innominate contract
and was a source of actionable rights.
Court ruled even as a innominate contract, it would be void as in violation of the
statute of frauds. (Being its performance was to be done 1 year after perfection
of the contract.)
DISPOSITION: Petition is DENIED ruling of the CA AFFIRMED
VOTE: 1
st
Division. Panganiban, Sandoval-Gutierrez, Corona, Carpio-Morales concur

BOURNS v. CARMAN
(December 4, 1906)
FRANK S. BOURNS, Plaintiff-Appellee , vs. D. M. CARMAN, ET AL.,
Defendants-Appellants.

DOCTRINE:
A partnership, the existence of which was only known to those who had an interest
in the same, being no mutual agreements between the partners and without a
corporate name indicating to the public in some way that there were other people
besides the one who ostensibly managed and conducted the business, is exactly the
accidental partnership of cuentas en participacion defined in article 239 of the Code
of Commerce.
Those who contract with the person under whose name the business of such
partnership of cuentas en participacion is conducted, shall have only a

right of action against such person and not against the other persons
interested, and the latter, on the other hand, shall have no right of action
against the third person who contracted with the manager unless such
manager formally transfers his right to them. (Art 242 of the code Of
Commerce.) It follows, therefore that the plaintiff has no right to demand
from the appellants the payment of the amount claimed in the complaint, as
Lo-Chim-Lim was the only one who contracted with him.
NATURE: Appeal from a judgment of the CFI
PONENTE: MAPA, J.:

FACTS:
The plaintiff in this action seeks to recover the sum of $437.50, balance due on
a contract for the sawing of lumber for the lumber yard of Lo-Chim-Lim.
The contract relating to the said work was entered into by the said Lo-
Chim-Lim, acting as in his own name with the plaintiff, and it appears
that the said Lo-Chim-Lim personally agreed to pay for the work himself.
The plaintiff, however, has brought this action against Lo-Chim-Lim and
his codefendants jointly, alleging that,
o at the time the contract was made, they were the joint proprietors
and operators of the said lumber yard engaged in the purchase
and sale of lumber under the name and style of Lo-Chim-Lim.
o that the other defendants were the partners of Lo-Chim-Lim in
the said lumber-yard business.
The court below dismissed the action as to the defendants D. M. Carman
and Fulgencio Tan-Tongco on the ground that they were not the partners
of Lo-Chim-Lim, Vicente Palanca and Go-Tauco only excepted to the said
judgment, moved for a new trial, and have brought the case to this court by
bill of exceptions.
The evidence of record shows, according to the judgment of the court,
"That Lo-Chim-Lim had a certain lumber yard in Calle Lemery of the city of
Manila, and that he was the manager of the same, having ordered the
plaintiff to do some work for him at his sawmill in the city of Manila; and
that Vicente Palanca was his partner, and had an interest in the said
business as well as in the profits and losses thereof . . .," and that Go-Tuaco
received part of the earnings of the lumber yard in the management of
which he was interested.
CFI: "Lo-Chim-Lim, Vicente Palanca, Go-Tuaco had a lumber yard in Calle
Lemmery of the city of Manila in the year 1904, and participated in the
profits and losses of business and that Lo-Chim-Lim was managing
partner of the said lumber yard." In other words, coparticipants with the
said Lo-Chim-Lim in the business in question.
ISSUES: What is the real legal nature of the participation which the appellants had
in Lo-Chim -Lim's lumber yard and consequently their liability toward the plaintiff?

HELD:
The partnership is a partnership of cuentas en participacion.

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Those who contract with the person under whose name the business of
such partnership of cuentas en participacion is conducted, shall have only a
right of action against such person and not against the other persons
interested, and the latter, on the other hand, shall have no right of action
against the third person who contracted with the manager unless such
manager formally transfers his right to them. (Art 242 of the code Of
Commerce.) It follows, therefore that the plaintiff has no right to demand
from the appellants the payment of the amount claimed in the complaint,
as Lo-Chim-Lim was the only one who contracted with him.
RATIO/RULING:
It seems that the alleged partnership between Lo-Chim-Lim and the
appellants was formed by verbal agreement only. At least there is no
evidence tending to show that the said agreement was reduced to
writing, or that it was ever recorded in a public instrument.
Moreover, that partnership had no corporate name. The plaintiff himself
alleges in his complaint that the partnership was engaged in business
under the name and style of Lo-Chim-Lim only, which according to the
evidence was the name of one of the defendants.
On the other hand, it does not appear that there was any mutual agreement,
between the parties, and if there were any, it has not been shown what the
agreement was. As far as the evidence shows it seems that the business was
conducted by Lo-Chim-Lim in his own name, although he gave to the
appellants a share was has been shown with certainty.
o The contracts made with the plaintiff were made by Lo-Chim-Lim
individually in his own name, and there is no evidence that the
partnership over contracted in any other form.
Under such circumstances we find nothing upon which to consider this
partnership other than as a partnership of cuentas en participacion. It may
be that, as a matter of fact, it is something different, but a simple business
conducted by Lo-Chim-Lim exclusively, in his own name, the names of
other persons interested in the profits and losses of the business nowhere
appearing.
A partnership constituted in such a manner, the existence of which was
only known to those who had an interest in the same, being no mutual
agreements between the partners and without a corporate name indicating
to the public in some way that there were other people besides the one who
ostensibly managed and conducted the business, is exactly the accidental
partnership of cuentas en participacion defined in article 239 of the Code of
Commerce.
DISPOSITION: The judgment appealed from this hereby reversed and the
appellants are absolved of the complaint without express provisions as to the costs
of both instances.
VOTE: EN BANC; Arellano, C.J., Torres, Johnson, Carson, Willard and Tracey,
JJ., concur

SEVILLA v. CA

(April 16, 1988)



DOCTRINE: A joint venture, including a partnership, presupposes generally a of
standing between the joint co -venturers or partners, in which each party has
an equal proprietary interest in the capital or property contributed and where
each party exercises equal rights in the conduct of the business.
NATURE: Appeal by certiorari
PONENTE: Sarmiento, J.
FACTS:
1. On the strength of a contract entered into by and between Mrs. Segundina
Noguera and the Tourist World Service, Inc., represented by Mr. Eliseo
Canilao, the Tourist World Service, Inc. leased the premises belonging to
Noguera at Mabini St., Manila for the formers use as a branch office. When
the branch office was opened, the same was run by the herein appellant
Lina Sevilla.
2. The Tourist World Service, Inc. appears to have been informed that Lina
Sevilla was connected with a rival firm, the Philippine Travel Bureau, and,
since the branch office was anyhow losing, the Tourist World Service
considered closing down its office. This was firmed up by two resolutions of
the board of directors of Tourist World Service, Inc. the first abolishing the
office of the manager and vice-president of the Tourist World Service, Inc.,
Ermita Branch, and the second, authorizing the corporate secretary to
receive the properties of the Tourist World Service then located at the said
branch office. To comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office, and,
finding the premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the interests of the
Tourist World Service.
3. When neither the appellant Lina Sevilla nor any of her employees could
enter the locked premises, a complaint was filed by the herein
appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties therein, the
trial court ordered the dismissal of the case without prejudice.
4. The appellee Segundina Noguera sought reconsideration of the order
dismissing her counterclaim which the court a quo, in an order dated June
8, 1963, granted permitting her to present evidence in support of her
counterclaim.
5. Appellant Lina Sevilla refiled her case against the herein appellees and after
the issues were joined, the reinstated counterclaim of Segundina Noguera
and the new complaint of appellant Lina Sevilla were jointly heard following
which the court a quo ordered both cases dismiss for lack of merit

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ISSUES: WON there was a partnership between Tourist World Service and Lina
Sevilla
HELD: NO
RATIO/RULING:
1. The Court is asked to declare the true nature of the relation between Lina
Sevilla and Tourist World Service, Inc. The respondent Court of see fit to
rule on the question, the crucial issue, in its opinion being "whether or not
the padlocking of the premises by the Tourist World Service, Inc. without
the knowledge and consent of the appellant Lina Sevilla entitled the latter
to the relief of damages prayed for and whether or not the evidence for
the said appellant supports the contention that the appellee Tourist
World Service, Inc. unilaterally and without the consent of the
appellant disconnected the telephone lines of the Ermita branch office
of the appellee Tourist World Service, Inc.
2. Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere employee, being "branch manager" of its Ermita
"branch" office and that inferentially, she had no say on the lease
executed with the private respondent, Segundina Noguera.
3. The petitioners contend, however, that relation between the between
parties was one of joint venture, but concede that "whatever might have
been the true relationship between Sevilla and Tourist World Service," the
Rule of Law enjoined Tourist World Service and Canilao from taking the law
into their own hands, in reference to the padlocking now questioned.
4. The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation
between the parties was in the character of employer and employee, the
courts would have been without jurisdiction to try the case, labor disputes
being the exclusive domain of the Court of Industrial Relations, later, the
Bureau Of Labor Relations, pursuant to statutes then in force.
5. The records will show that the petitioner, Lina Sevilla, was not subject
to control by the private respondent Tourist World Service, Inc., either
as to the result of the enterprise or as to the means used in connection
therewith.
a. In the first place, under the contract of lease covering the Tourist
Worlds Ermita office, she had bound herself in solidum as and for
rental payments, an arrangement that would be like claims of a
master-servant relationship. True the respondent Court would
later minimize her participation in the lease as one of mere
guaranty, that does not make her an employee of Tourist World,
since in any case, a true employee cannot be made to part with his
own money in pursuance of his employer's business, or otherwise,
assume any liability thereof. In that event, the parties must be
bound by some other relation, but certainly not employment.
b. In the second place, and as found by the Appellate Court, '[w]hen
the branch office was opened, the same was run by the herein

appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina Sevilla.
Under these circumstances, it cannot be said that Sevilla was
under the control of Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business, obviously relied on her
own gifts and capabilities.
6. It is further admitted that Sevilla was not in the company's payroll. For
her efforts, she retained 4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an employee then, who
earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.
7. The fact that Sevilla had been designated 'branch manager" does not make
her Tourist World's employee. As we said, employment is determined by
the right-of-control test and certain economic parameters.
8. In rejecting Tourist World Service, Inc.'s arguments however, we are
not, as a consequence, accepting Lina Sevilla's own, that is, that the
parties had embarked on a joint venture or otherwise, a partnership.
And apparently, Sevilla herself did not recognize the existence of such
a relation. In her letter of November 28, 1961, she expressly 'concedes
your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office in effect, accepting Tourist World Service, Inc.'s control over
the manner in which the business was run. A joint venture, including a
partnership, presupposes generally a of standing between the joint co-
venturers or partners, in which each party has an equal proprietary
interest in the capital or property contributed and where each party
exercises equal rights in the conduct of the business.
9. Furthermore, the parties did not hold themselves out as partners, and
the building itself was embellished with the electric sign "Tourist
World Service, Inc. in lieu of a distinct partnership name.
10. It is the Court's considered opinion, when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service,
Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services "in
representation or on behalf of another. In the case at bar, Sevilla solicited
airline fares, but she did so for and on behalf of her principal, Tourist World
Service, Inc. As compensation, she received 4% of the proceeds in the
concept of commissions. And as we said, Sevilla herself based on her letter
of November 28, 1961, pre-assumed her principal's authority as owner of
the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that
the ties had contemplated a principal agent relationship, rather than a
joint managament or a partnership.
11. But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked at
will. The reason is that it is one coupled with an interest, the agency having
been created for mutual interest, of the agent and the principal. It appears
that Lina Sevilla is a bona fide travel agent herself, and as such, she had
acquired an interest in the business entrusted to her. Moreover, she had

(DIONNE) || D2014
26


assumed a personal obligation for the operation thereof, holding herself
solidarily liable for the payment of rentals. She continued the business,
using her own name, after Tourist World had stopped further operations.
Her interest, obviously, is not to the commissions she earned as a result of
her business transactions, but one that extends to the very subject matter of
the power of management delegated to her. It is an agency that, as we said,
cannot be revoked at the pleasure of the principal. Accordingly, the
revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
DISPOSITION: WHEREFORE, the Decision promulgated on January 23, 1975 as well
as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is
hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service,
Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the
petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of
P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for
nominal and/or temperate damages.
VOTE: All concur

PHILEX v. MINING CORP.
FACTS:

Petitioner Philex Mining Corp. entered into an agreement with Baguio Gold, where
the former agreed to manage the mining operations of the latter.

The agreement was evidenced by a Power of Attorney.

It was indicated in the said document, that Baguio Gold would
contribute P11M under its owner's account plus any of its income
that is left in the project, in addition to its actual mining claim.

Meanwhile, petitioner's contribution would consist of its
expertise in the management and operation of mines, and of the
manager's account which is comprised of P11M in funds.

The compensation of the MANAGER shall be fifty per cent (50%)
of the net profit of the project before income tax.

The mining suffered serious loses which ended business of both parties evidenced by
their execution of a compromise agreement.

The CIR assessed Philex Mining for tax deficiencies. It stressed that Philex entered
into a partnership with Baguio Gold.

Petitioner denied the allegations of the CIR and maintained that its advances of
money and property to Baguio Gold were in a nature of a loan as evidenced by the
compromise agreement.

ISSUE:
WON the parties entered into a contract of agency coupled with an interest which is
not revocable at will

HELD:
No. An examination of the Power of Attorney reveals that a partnership or joint
venture was indeed intended by the parties.

In an agency coupled with interest, it is the agency that cannot be revoked
or withdrawn by the principal due to an interest of a third party that
depends upon it, or the mutual interest of both principal and agent. In this
case, the non-revocation or non-withdrawal under paragraph 5(c) applies
to the advances made by petitioner who is supposedly the agent and not the
principal under the contract. Thus, it cannot be inferred from the stipulation
that the parties relation under the agreement is one of agency coupled with
an interest and not a partnership.
Neither can paragraph 16 of the agreement be taken as an indication that
the relationship of the parties was one of agency and not a partnership.
Although the said provision states that this Agency shall be irrevocable
while any obligation of the PRINCIPAL in favor of the MANAGERS is
outstanding, inclusive of the MANAGERS account, it does not necessarily
follow that the parties entered into an agency contract coupled with an
interest that cannot be withdrawn by Baguio Gold.
The main object of the Power of Attorney was not to confer a power in
favor of petitioner to contract with third persons on behalf of Baguio Gold
but to create a business relationship between petitioner and Baguio Gold, in
which the former was to manage and operate the latters mine through the
parties mutual contribution of material resources and industry. The
essence of an agency, even one that is coupled with interest, is the agents
ability to represent his principal and bring about business relations
between the latter and third persons.
The strongest indication that petitioner was a partner in the Sto. Nino Mine
is the fact that it would receive 50% of the net profits as compensation
under paragraph 12 of the agreement. The entirety of the parties
contractual stipulations simply leads to no other conclusion than that
petitioners compensation is actually its share in the income of the joint
venture. Article 1769 (4) of the Civil Code explicitly provides that the
receipt by a person of a share in the profits of a business is prima facie
evidence that he is a partner in the business.
While a corporation, like the petitioner, cannot generally enter into a
contract of partnership unless authorized by law or its charter, it has been

(DIONNE) || D2014
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held that it may enter into a joint venture which is akin to a particular
partnership:
o under Philippine law, a joint venture is a form of partnership and
should be governed by the law of partnerships
II. KINDS OF PARTNERSHIP

A. UNIVERSAL

B. PARTICULAR

C. GENERAL

D. LIMITED

E. AT WILL

F. FOR A TERM OR UNDERTAKING

G. COMMERCIAL

H. PROFESSIONAL

I. BY ESTOPPEL APPARENT

ORTEGA v. CA
(err walang nakaassign ditto?)

III. KINDS OF PARTNER
A. INDUSTRIAL

B. CAPITALIST

C. MANAGING

D. BY ESTOPPEL