ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA

BARING, petitioners,
vs.

COURT OF APPEALS and MANUEL TORRES, respondents.

Facts:
Petitioners Torres and Baring entered into a “joint venture agreement” with Respondent
Torres for the development of a parcel of land into a subdivision. They executed a Deed
of Sale covering the said parcel of land in favor of respondent Manual Torres, who then
had it registered in his name. By mortgaging the property, respondent Manuel Torres
obtained from Equitable Bank a loan of P40,000, which was supposed to be used for the
development of subdivision as per the JVA. However, the project did not push through
and the land was subsequently foreclosed by the bank.

Petitioners Antonia Torres alleged that it was due to respondent’s lack of funds/skills
that caused the project to fail, and that respondent use the loan in the furtherance of his
own company. On the otherhand, respondent Manuel Torres alleged that he used the
loan to implement the JVA – surveying and subdivision of lots, approval of the project,
advertisement, and construction of roads and the likes, and that he did all of these for a
total of P85,000.
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Petitioners filed a case for estafa against respondent but failed. They then instituted a
civil case. CA held that the two parties formed a partnership for the development of
subdivision and as such, they must bear the loss suffered by the partnership in the same
proportion as their share in profits. Hence, the petition.

Issue #1:
Whether or not the transaction between petitioner and respondent was that of joint
venture/partnership.

Held:
Yes. There formed a partnership between the two on the basis of joint-venture
agreement and deed of sale. A reading of the terms of agreement shows the existence of
partnership pursuant to Art 1767 of Civil Code, which states “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.”
In the 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.

Issue #2:
Whether or not the deed of sale between the two was valid.

Held:
No. Petitioners were wrong in contending that the JVA is void under Article 1422[14] 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.

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 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. 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.
LIM TONG LIM, petitioner,vs.PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent

G.R. No. 136448 November 3, 1999

DOCTRINE: an Unincorporated association has no personality and would be incompetent to act and
appropriate for itself the power and attributes of a corporation as provided by law; it cannot create
agents or confer authority on another to act in its behalf; thus, those who act or purport to act as its
representatives or agents do so without authority and at their own risk. And as it is an elementary
principle of law that a person who acts as an agent without authority or without a principal is himself
regarded as the principal, possessed of all the right and subject to all the liabilities of a principal, a
person acting or purporting to act on behalf of a corporation which has no valid existence assumes such
privileges and obligations and becomes personally liable for contracts entered into or for other acts
performed as such agent.

FACTS: On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a
Contract dated February 7, 1990, for the purchase of fishing nets of various sizes from
the Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that they were engaged in
a business venture with Petitioner Lim Tong Lim, who however was not a signatory to
the agreement. The total price of the nets amounted to P532,045. Four hundred pieces of floats
worthP68,000 were also sold to the Corporation.

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a
collection suit against Chua, Yao and Petitioner Lim Tong Lim.

instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a
reasonable time within which to pay. He also turned over to respondent some of the nets which were in
his possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to cross-
examine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent
hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim.

The trial court rendered its Decision, ruling that Chua, Yao and Lim, as general partners, were jointly
liable to pay respondent. Lim appealed to the Court of Appeals (CA) which, as already stated,
affirmed the RTC.

ISSUE: Whether or not in a corporation by Estoppel liability can be imputed only to Chua and Yao,and
not to Lim Tong Lim.

RULING: Sec. 21 of the Corporation Code of the Philippines provides.

Sec. 21. Corporation by estoppel. — All persons who assume to act as a corporation knowing it to be
without authority to do so shall be liable as general partners for all debts, liabilities and damages
incurred or arising as a result thereof

. “The reason behind this doctrine is obvious — an unincorporated association has no personality and
would be incompetent to act and appropriate for itself the power and attributes of a corporation as
provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those
who act or purport to act as its representatives or agents do so without authority and at their own risk.
And as it is an elementary principle of law that a person who acts as an agent without authority

or without a principal is himself regarded as the principal, possessed of all the right and subject to all the
liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has no
valid existence assumes such privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such agent.

The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the
first instance, an unincorporated association, which represented itself to be a corporation, will be
stopped from denying its corporate capacity in a suit against it by a third person who relied in good faith
on such representation. It cannot allege lack of personality to be sued to evade its responsibility for a
contract it entered into and by virtue of which it received advantages and benefits.

It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a
corporation. Although it was never legally formed for unknown reasons, this fact alone does not
preclude the liabilities of the three as contracting parties in representation of it. Clearly, under the law
on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without
valid existence, are held liable as general partners.

Hence, the petition is denied and the decision of the RTC and CA were affirmed