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MAURICIO AGAD vs. SEVERINO MABATO and MABATO and AGAD COMPANY
G.R. No. L-24193, EN BANC, June 28, 1968, CONCEPCION, C.J.,
FACTS:
Alleging that he and defendant Severino Mabato are — pursuant to a public instrument
dated August 29, 1952, copy of which is attached to the complaint as Annex "A" — 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 therefor.
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.
ISSUE:
Whether or not "immovable property or real rights" have been contributed to the
partnership under consideration
RULING
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." 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.
Art. 1771. 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.
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.
JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. OBILLOS and REMEDIOS P.
OBILLOS, brothers and sisters, petitioners vs. COMMISSIONER OF INTERNAL
REVENUE and COURT OF TAX APPEALS, respondents.
G.R. No. L-68118, SECOND DIVISION, October 29, 1985, AQUINO, J.,
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.
FACTS:
This case is about the income tax liability of four brothers and sisters who sold two parcels
of land which they had acquired from their father.
Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two lots located at Greenhills,
San Juan, Rizal. The next day he transferred his rights to his four children, the petitioners,
to enable them to build their residences. The company sold the two lots to petitioners.
Presumably, the Torrens titles issued to them would show that they were co-owners of the
two lots.
In 1974, or after having held the two lots for more than a year, the petitioners resold them
to the Walled City Securities Corporation and Olga Cruz Canda. They treated the profit as a
capital gain and paid an income tax on one-half thereof.
In April, 1980, or one day before the expiration of the five-year prescriptive period, the
Commissioner of Internal Revenue required the four petitioners to pay corporate income tax
in addition to individual income tax on their shares thereof. He required them to pay
deficiency income taxes including fraud surcharge and the accumulated interest.
The Commissioner acted on the theory that the four petitioners had formed an unregistered
partnership or joint venture within the meaning of sections 24(a) and 84(b) of the Tax Code
(Collector of Internal Revenue vs. Batangas Trans. Co., 102 Phil. 822).
The petitioners contested the assessments. Two Judges of the Tax Court sustained the
same. Judge Roaquin dissented. Hence, the instant appeal.
ISSUE:
RULING:
No. 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.
Their original purpose was to divide the lots for residential purposes. If later on they found it
not feasible to build their residences on the lots because of the high cost of construction,
then they had no choice but to resell the same to dissolve the co-ownership. The division of
the profit was merely incidental to the dissolution of the co-ownership which was in the
nature of things a temporary state. It had to be terminated sooner or later.
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.
In the instant case, what the Commissioner should have investigated was whether the
father donated the two lots to the petitioners and whether he paid the donor's tax (See Art.
1448, Civil Code). We are not prejudging this matter. It might have already prescribed.
MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners, vs. THE
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS,
respondents.
G.R. No. 78133, FIRST DIVISION, October 18, 1988, GANCAYCO, J.
The essential elements of a partnership are two, namely: (a) an agreement to contribute
money, property or industry to 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. Respondent commissioner and/ or his representative just
assumed these conditions to be present on the basis of the fact that petitioners purchased
certain parcels of land and became co- owners thereof.
FACTS:
On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et
al. and on May 28, 1966, they bought another three (3) parcels of land from Juan Roque.
The first two parcels of land were sold by petitioners in 1968 toMarenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and
Maria Samson on March 19,1970. Petitioners realized a net profit in the sale made in 1968
in the amount of P165,224.70, while they realized a net profit of P60,000.00 in the sale
made in 1970. The corresponding capital gains taxes were paid by petitioners in 1973 and
1974 by availing of the tax amnesties granted in the said years.
However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren I. Plana,
petitioners were assessed and required to pay a total amount of P107,101.70 as alleged
deficiency corporate income taxes for the years 1968 and 1970.
Petitioners protested the said assessment in a letter of June 26, 1979 asserting that they
had availed of tax amnesties way back in 1974.
In a reply of August 22, 1979, respondent Commissioner informed petitioners that in the
years 1968 and 1970, petitioners as co-owners in the real estate transactions formed an
unregistered partnership or joint venture taxable as a corporation under Section 20(b) and
its income was subject to the taxes prescribed under Section 24, both of the National
Internal Revenue Code 1 that the unregistered partnership was subject to corporate income
tax as distinguished from profits derived from the partnership by them which is subject to
individual income tax; and that the availment of tax amnesty under P.D. No. 23, as
amended, by petitioners relieved petitioners of their individual income tax liabilities but did
not relieve them from the tax liability of the unregistered partnership. Hence, the petitioners
were required to pay the deficiency income tax assessed.
Petitioners filed a petition for review with the respondent Court of Tax Appeals docketed as
CTA Case No. 3045. In due course, the respondent court by a majority decision of March 30,
1987, 2 affirmed the decision and action taken by respondent commissioner with costs
against petitioners.
ISSUE:
Whether petitioners are subject to the tax on corporations provided for in section 24 of
Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, as
well as to the residence tax for corporations and the real estate dealers' fixed tax.
RULING:
No.
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.
Pursuant to this article, the essential elements of a partnership are two, namely: (a) an
agreement to contribute money, property or industry to 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. Respondent commissioner and/ or his representative just
assumed these conditions to be present on the basis of the fact that petitioners purchased
certain parcels of land and became co- owners thereof.
In the instant case, petitioners bought two (2) parcels of land in 1965. They did not sell the
same nor make any improvements thereon. In 1966, they bought another three (3) parcels
of land from one seller. It was only 1968 when they sold the two (2) parcels of land after
which they did not make any additional or new purchase. The remaining three (3) parcels
were sold by them in 1970. The transactions were isolated. The character of habituality
peculiar to business transactions for the purpose of gain was not present.
In Evangelista, the properties were leased out to tenants for several years. The business
was under the management of one of the partners. Such condition existed for over fifteen
(15) years. None of the circumstances are present in the case at bar. The co-ownership
started only in 1965 and ended in 1970.
Article 1769 of the new Civil Code lays down the rule for determining when a transaction
should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3,
provides;
(2) Co-ownership or co-possession does not 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 from
which the returns are derived;
From the above it appears that the fact that those who agree to form a co- ownership share
or do not share any profits made by the use of the property held in common does not
convert their venture into a
partnership. Or the sharing of the gross returns does not of itself establish a partnership
whether or not the persons sharing therein have a joint or common right or interest in the
property. This only means that, aside from the circumstance of profit, the presence of other
elements constituting partnership is necessary, such as the clear intent to form a
partnership, the existence of a juridical personality different from that of the individual
partners, and the freedom to transfer or assign any interest in the property by one with the
consent of the others (Padilla, Civil Code of the Philippines Annotated, Vol. I, 1953 ed., pp.
635-636)
It is evident that an isolated transaction whereby two or more persons contribute funds to
buy certain real estate for profit in the absence of other circumstances showing a contrary
intention cannot be considered a partnership.
In order to constitute a partnership inter sese there must be: (a) An intent to form the
same; (b) generally participating in both profits and losses; (c) and such a community of
interest, as far as third persons are concerned as enables each party to make contract,
manage the business, and dispose of the whole property
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.
In the present case, there is clear evidence of co-ownership between the petitioners. There
is no adequate basis to support the proposition that they thereby formed an unregistered
partnership. The two isolated transactions whereby they purchased properties and sold the
same a few years thereafter did not thereby make them partners. They shared in the gross
profits as co- owners and paid their capital gains taxes on their net profits and availed of the
tax amnesty thereby. Under the circumstances, they cannot be considered to have formed
an unregistered partnership which is thereby liable for corporate income tax, as the
respondent commissioner proposes.
And even assuming for the sake of argument that such unregistered partnership appears to
have been formed, since there is no such existing unregistered partnership with a distinct
personality nor with assets that can be held liable for said deficiency corporate income tax,
then petitioners can be held individually liable as partners for this unpaid obligation of the
partnership p. 7 However, as petitioners have availed of the benefits of tax amnesty as
individual taxpayers in these transactions, they are thereby relieved of any further tax
liability arising therefrom.
AURELIO K. LITONJUA, JR., Petitioner, - versus ' EDUARDO K. LITONJUA, SR.,
ROBERT T. YANG, ANGLO PHILS. MARITIME, INC., CINEPLEX, INC., DDM
GARMENTS, INC., EDDIE K. LITONJUA SHIPPING AGENCY, INC., EDDIE K.
LITONJUA SHIPPING CO., INC., LITONJUA SECURITIES, INC. (formerly E. K.
Litonjua Sec), LUNETA THEATER, INC., E & L REALTY, (formerly E & L INTL
SHIPPING CORP.), FNP CO., INC., HOME ENTERPRISES, INC., BEAUMONT DEV.
REALTY CO., INC., GLOED LAND CORP., EQUITY TRADING CO., INC., 3D CORP., 'L
DEV. CORP, LCM THEATRICAL ENTERPRISES, INC., LITONJUA SHIPPING CO. INC.,
MACOIL INC., ODEON REALTY CORP., SARATOGA REALTY, INC., ACT THEATER INC.
(formerly General Theatrical & Film Exchange, INC.), AVENUE REALTY, INC.,
AVENUE THEATER, INC. and LVF PHILIPPINES, INC., (Formerly VF PHILIPPINES),
Respondents.
G.R. NOS. 166299-300, THIRD DIVISION, December 13, 2005, GARCIA< J.
Art. 1771. 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.
FACTS:
Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo K. Litonjua, Sr.
(Eduardo) are brothers. The legal dispute between them started when, Aurelio filed a suit
against his brother Eduardo and herein respondent Robert T. Yang (Yang) and several
corporations for specific performance and accounting. In his complaint, Aurelio alleged that,
since June 1973, he and Eduardo are into a joint venture/partnership arrangement in the
Odeon Theater business which had expanded thru investment in Cineplex, Inc., LCM
Theatrical Enterprises, Odeon Realty Corporation (operator of Odeon I and II theatres),
Avenue Realty, Inc., owner of lands and buildings, among other corporations. Yang is
described in the complaint as petitioner's and Eduardo's partner in their Odeon Theater
investment.
ISSUE:
Whether petitioner and respondent Eduardo are partners in the theatre, shipping and realty
business, as one claims but which the other denies
RULING:
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 between them. A contract of partnership is
defined by the Civil Code as one where two or more persons bound themselves to contribute
money, property, or industry to a common fund with the intention of dividing the profits
among themselves. A joint venture, on the other hand, is hardly distinguishable from, and
may be likened to, a partnership since their elements are similar, i.e., community of
interests in the business and sharing of profits and losses. Being a form of partnership, a
joint venture is generally governed by the law on partnership. Foremost of these are the
following provisions of the Civil Code:
Art. 1771. 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.
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more,
in money or property, shall appear in a public instrument, which must be recorded in the
Office of the Securities and Exchange Commission.
Failure to comply with the requirement of the preceding paragraph shall not affect the
liability of the partnership and the members thereof to third persons.
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.
Annex ' A-1 ', on its face, contains typewritten entries, personal in tone, but is unsigned and
undated. As an unsigned document, there can be no quibbling that Annex ' A-1 does not
meet the public instrumentation requirements exacted under Article 1771 of the Civil Code.
Moreover, being unsigned and doubtless referring to a partnership involving more than
P3,000.00 in money or property, Annex ' A-1 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. 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 petitioner's contribution,
if any, to the supposed partnership.
Considering thus the value and nature of petitioner's alleged contribution to the purported
partnership, the Court, even if so disposed, cannot plausibly extend Annex ' A-1 the legal
effects that petitioner so desires and pleads to be given. Annex ' A-1 , in fine, cannot
support the existence of the partnership sued upon and sought to be enforced. The legal
and factual milieu of the case calls for this disposition. A partnership may be constituted in
any form, save when immovable property or real rights are contributed thereto or when the
partnership has a capital of at least P3,000.00, in which case a public instrument shall be
necessary. And if only to stress what has repeatedly been articulated, an inventory to be
signed by the parties and attached to the public instrument is also indispensable to the
validity of the partnership whenever immovable property is contributed to it.
Considering that the allegations in the complaint showed that [petitioner] contributed
immovable properties to the alleged partnership, the 'Memorandum (Annex 'A of the
complaint) which purports to establish the said 'partnership/joint venture is NOT a public
instrument and there was NO inventory of the immovable property duly signed by the
parties. As such, the said 'Memorandum ' is null and void for purposes of establishing the
existence of a valid contract of partnership. Indeed, because of the failure to comply with
the essential formalities of a valid contract, the purported 'partnership/joint venture is
legally inexistent and it produces no effect whatsoever. Necessarily, a void or legally
inexistent contract cannot be the source of any contractual or legal right. Accordingly, the
allegations in the complaint, including the actionable document attached thereto, clearly
demonstrates that [petitioner] has NO valid contractual or legal right which could be
violated by the [individual respondents] herein.As a consequence, [petitioner's ] complaint
does NOT state a valid cause of action because NOT all the essential elements of a cause of
action are present.
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO,
petitioners, vs. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION and JOAQUIN L. MISA, respondents.
G.R. No. 109248, THIRD DIVISION, July 3, 1995, VITUG, J.
A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa
& Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need
not be unduly belabored.
FACTS:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the
Mercantile Registry and reconstituted with the Securities and Exchange Commission. The
SEC records show that there were several subsequent amendments to the articles of
partnership to change the firm name.
"Petitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law
partnership. Accordingly, the petitioner and respondents are hereby enjoined to abide by the
provisions of the Agreement relative to the matter governing the liquidation of the shares of
any retiring or withdrawing partner in the partnership interest."
On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the
withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa &
Lozada." The Commission ruled that, being a partnership at will, the law firm could be
dissolved by any partner at any time, such as by his withdrawal therefrom, regardless of
good faith or bad faith, since no partner can be forced to continue in the partnership against
his will. The petitioners sought for reconsideration of said decision but the same was denied
hence, they appealed to CA.
The Court of Appeals, finding no reversible error on the part of respondent Commission,
AFFIRMED in toto the SEC decision and order appealed from.
ISSUE:
1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito,
Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will;
2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private
respondent dissolved the partnership regardless of his good or bad faith; and
3. Whether or not the Court of Appeals has erred in holding that private respondent's
demand for the dissolution of the partnership so that he can get a physical partition of
partnership was not made in bad faith;
RULING:
1. NO.
A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa
& Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need
not be unduly belabored.
The partnership agreement (amended articles of 19 August 1948) does not provide for a
specified period or undertaking.
The hearing officer however opined that the partnership is one for a specific undertaking
and hence not a partnership at will, citing paragraph 2 of the Amended Articles of
Partnership.
The "purpose" of the partnership is not the specific undertaking referred to in the law.
Otherwise, all partnerships, which necessarily must have a purpose, would all be considered
as partnerships for a definite undertaking. There would therefore be no need to provide for
articles on partnership at will as none would so exist. Apparently what the law
contemplates, is a specific undertaking or "project" which has a definite or definable period
of completion.
The birth and life of a partnership at will is predicated on the mutual desire and consent of
the partners. The right to choose with whom a person wishes to associate himself is the
very foundation and essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with each partner's capability to
give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one
of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He
must, however, act in good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership4 but that it can result in a liability for damages.
2. NO.
The dissolution of a partnership is the change in the relation of the parties caused by any
partner ceasing to be associated in the carrying on, as might be distinguished from the
winding up of, the business. Upon its dissolution, the partnership continues and its legal
personality is retained until the complete winding up of its business culminating in its
termination.
The liquidation of the assets of the partnership following its dissolution is governed by
various provisions of the Civil Code; however, an agreement of the partners, like any other
contract, is binding among them and normally takes precedence to the extent applicable
over the Code's general provisions. We here take note of paragraph 8 of the "Amendment to
Articles of Partnership" reading thusly:
In the event of the death or retirement of any partner, his interest in the partnership shall
be liquidated and paid in accordance with the existing agreements and his partnership
participation shall revert to the Senior Partners for allocation as the Senior Partners may
determine.
The term "retirement" must have been used in the articles, as we so hold, in a generic
sense to mean the dissociation by a partner, inclusive of resignation or withdrawal, from the
partnership that thereby dissolves it.
3. NO.
On the third and final issue, we accord due respect to the appellate court and respondent
Commission on their common factual finding, i.e., that Attorney Misa did not act in bad
faith. Public respondents viewed his withdrawal to have been spurred by "interpersonal
conflict" among the partners. It would not be right, we agree, to let any of the partners
remain in the partnership under such an atmosphere of animosity; certainly, not against
their will. Indeed, for as long as the reason for withdrawal of a partner is not contrary to the
dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage
upon the partnership, bad faith cannot be said to characterize the act. Bad faith, in the
context here used, is no different from its normal concept of a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity.
TEODORO DE LOS REYES, plaintiff-appellee, vs. VICENTE LUKBAN and ESPERIDION
BORJA, defendants. VICENTE LUKBAN, appellant.
G.R. No. 10695, EN BANC, December 15, 1916, TORRES, J.
The attachment, or recourse to the property, the lack of which proceeding was complained
of, is a proceeding that was resorted to when attempt was made to execute the final
judgment rendered against the partnership of Lukban & Borja, which proceeding gave
negative results; therefore, if the requirement of article 237 of the Code of Commerce must
be complied with by the creditor it is evident that it has already been done for the
defendant Lukban was unable to show that the partnership to which he belonged actually
possessed any more assets.
FACTS:
1. That on July 15, 1905, the herein plaintiff Teodoro de los Reyes brought suit against the
firm of Lukban & Borja to recover the sum of P1,086.65 owing for merchandise bought on
credit in the months of October and November, 1904, from the ship supply store known by
the name of La Industria. The said suit was heard before the Honorable John C. Sweeney,
on October 19, 1905, on which date the said judge sentenced the defendant firm to pay the
sum of P1,086.65, Philippine currency, with legal interest thereon from July 14, 1905, to the
date of the judgment, amounting to P16.30, Philippine currency, and costs amounting to
P46.24. It does not appear that this obligation was set forth in writing. All the preceding has
been taken from the record of that court in case No. 3759, De los Reyes vs, Lukban & Borja.
2. On August 19, 1913, the same plaintiff Teodoro de los Reyes brought suit against Lukban
& Borja to recover the sum of P853, alleging for this purpose that the defendant Espiridion
Borja paid P522.69 on account of the sum of P1,086.65 allowed in the judgment referred to
in the preceding paragraph, there remaining unpaid P610.21 of the principal debt, to which
is added the legal interest thereon from January 1, 1906, to the date of the commencement
of the said suit, thus forming the total sum above stated of P853. After hearing the case,
the Honorable Judge Del Rosario, on November 20, 1913, rendered judgment absolving the
firm of Lukban & Borja from the complaint without special finding as to costs. All the facts
related in this paragraph appear in case No. 10908 of this court.
3. That several years ago and seven months after its organization, or, more specifically, on
April 13, 1909, the firm of Lukban & Borja was lawfully dissolved, as stated by Borja; and
that the five years from the 13th of the same month of the year 1904, stipulated for its
duration had elapsed. (Judgment in case No. 10908.) The articles of incorporation of the
firm of Lukban & Borja are found in the attached document, which, for its identification, is
marked as Exhibit A of this agreement.
4. That the assets of the firm of Lukban & Borja had not been exhausted (by attachment)
for the reason that the plaintiff did not know what property belonged to it.
5. Vicente Lukban and Espiridion Borja, notwithstanding that they alleged themselves to be
copartners of the firm of Lukban & Borja, were not sued by the herein plaintiff in cases Nos.
3759 and 10908, but that plaintiff sued the firm of Lukban & Borja, represented by Borja.
ISSUE:
With respect to the first assignment of error, the contents of the writ and the return of the
execution of the final judgment rendered in the said case No. 3759 show that the dissolved
partnership of Lukban & Borja had absolutely no property whatever of its own. Had any
property whatever of the said partnership still remained, the defendant Lukban would have
pointed it out inorder to avoid being obliged to pay in solidum all the balance of the sum
which the firm was sentenced to pay by the said final judgment of October 19, 1905. He did
not do so because the firm of Lukban & Borja no longer had any kind of property or credits,
as shown by the document setting forth the agreement made by and between several
creditors of the said firm, a third party named Ramon Tinsay and the former partner of the
firm, Espiridion Borja, in which document it appears that the firm Lukban & Borja owed four
creditors, among them the plaintiff De los Reyes, the total sum of P10,165.01 and these
creditors with some difficulty succeeded in collecting the sum of P5,000 through a
transaction with the said Ramon Tinsay who paid this last amount for the account of the
partner Espiridion Borja. It appears that the latter paid to the creditor De los Reyes the
aforementioned sum of P522.69, on account of the firm's debt to Teodoro de los Reyes, a
debt which was recognized in the said judgment of October 19, 1905. The attachment, or
recourse to the property, the lack of which proceeding was complained of, is a proceeding
that was resorted to when attempt was made to execute the final judgment rendered
against the partnership of Lukban & Borja, which proceeding gave negative results;
therefore, if the requirement of article 237 of the Code of Commerce must be complied with
by the creditor it is evident that it has already been done for the defendant Lukban was
unable to show that the partnership to which he belonged actually possessed any more
assets.
ELMO MUÑASQUE, petitioner, vs. COURT OF APPEALS,CELESTINO GALAN
TROPICAL COMMERCIAL COMPANY and RAMON PONS, respondents.
G.R. No. L-39780, FIRST DIVISION, November 11, 1985, GUTTIERREZ, JR., J.
Under Art. 1816, partners are liable pro-rate. Furthermore, under Art. 1822 and 1823, it is
clear that the obligation of the partners are solidary.
FACTS:
Munasque, in behalf of the partnership of “Galan and Munasque” as contractor, entered into
a contract with the respondent Tropical for remodeling the latter’s Cebu Branch building.
A total amount of 25,000 would be paid to petitioner which shall be made by installment
and through giving of a check.
The first payment, in the form of check was in the name of petitioner. The latter indorsed
the same to Galan which enabled the latter to encash the same. It was allegedly used by
Galan for his personal matters.
Because of this, the second check amounting to 6,000, which was indorsed to the petitioner,
was not indorsed by the latter to Galan. Thereafter, a check was issued again by Tropical but
this time, the payee is “Galan and Associate” because Galan said that there is a
misunderstanding between him and Munasque. This enabled Galan to encash the second
check.
Because of this, the petitioner continued the construction. He borrowed from his friend
certain sum of money for the said construction.
Then, the 2 remaining checks were given to the petitioner. The latter filed a complaint for
payment of sum of money and damages against respondents (Tropical, Cebu Manager, and
Galan) RTC and Ca absolved the respondents and held petitioner jointly liable with Galan to
pay the intervenors (Cebu Southern Hardware Company and Blued Diamond Glass Palace)
for the credits extended by the latter.
Petitioner contends that he should not be liable as he is not a partner of Galan and that the
payment made by Tropical to Galan was erroneous.
ISSUES:
RULING:
1. Yes. The contract that petitioner entered into with Tropical clearly shows that he is
undertaking the renovation of the building on behalf of the partnership Galan and
Munasque. Further, the act of petitioner of indorsing the check (first payment) to Galan
clearly shows that the latter was his partner.
Further, CA was correct in holding that the payment made to Galan was a valid payment
since the parties presented themselves as partners. The misunderstanding between the two
does not make the partnership a sham or defective partnership.
2. The failure of the petitioner to raise this issue in the amendment of his complaint bars
him from seeking the relief he prayed for.
3. Yes. Under Art. 1816, partners are liable pro-rate. Furthermore, under Art. 1822 and
1823, it is clear that the obligation of the partners are solidary.
In this case, Tropical had every reason to believe that a partnership existed between the
petitioner and Galan and the payment it made to Galan is proper. The same is true with
regard to the intervenors where the petitioner and Galan shall pay solidarily.
However, Munasque must be reimbursed by Galan for the payments made by the former.
Galan is in bad faith.
JARANTILLA, JR. vs. JARANTILLA 636 SCRA 299, G.R. No. 154486, December 1,
2010,
FACTS:
The present case stems from the complaint filed by Antonieta Jarantilla against
Buenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and
Tomas Jarantilla, for the accounting of the assets and income of the co-ownership, for its
partition and the delivery of her share corresponding to eight percent (8%), and for
damages. Antonieta claimed that in 1946, she had entered into an agreement with the defe
ndants toengage in business through the execution of a document denominated as
"Acknowledgement of Participating Capital”. Antonieta also alleged that she had helped in
the management of the business they co-owned without receiving any salary. Antonieta
further claimed co-ownership of certain properties (the subject real properties) in the name
of the defendants since the only way the defendants could have purchased these properties
were through the partnership as they had no other source of income. The respondents did
not deny the existence and validity of the "Acknowledgement of Participating Capital" and in
fact used this as evidence to support their claim that Antonieta’s 8% share was limited to
the businesses enumerated therein. The respondents denied using the partnership’s income
to purchase the subject real properties. During the course of the trial at the RTC, petitioner
Federico Jarantilla, Jr., who was one of the original defendants, entered into a compromise
agreement with Antonieta Jarantilla wherein he supported Antonieta’s claims and asserted
that he too was entitled to six percent (6%) of the supposed partnership in the same
manner as Antonieta was.
ISSUE:
RULING:
Under Article 1767 of the Civil Code, there are two essential elements in a contract
of partnership:
(a) An agreement to contribute money, property or industry to a common fund; and (b)
intent to divide the profits among the contracting parties. The first element is undoubtedly
present in the case at bar, for, admittedly, all the parties in this case have agreed to, and
did, contribute money and property to a common fund.
Hence, the issue narrows down to their intent in acting as they did. It is not denied that all
the parties in this case have agreed to contribute capital to a common fund to be able to
later on share its profits. They have admitted this fact, agreed to its veracity, and even
submitted one common documentary evidence to prove such partnership - the
Acknowledgement of Participating Capital. The petitioner himself claims his share to be 6%,
as stated in the Acknowledgement of Participating Capital. However, petitioner fails to
realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading
in Cotabato City. Since there was a clear agreement that the capital the partners
contributed went to the three businesses, then there is no reason to deviate from such
agreement and go beyond the stipulations in the document. There is no evidence that the
subject real properties were assets of the partnership referred to in the Acknowledgement
of Participating Capital. Petition denied
VILLAREAL V. RAMIREZ 453 PHIL 999
FACTS:
In 1984, Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of
P750,000 for the operation of a restaurant and catering business. Respondent Ramirez
joined as a partner in the business with the capital contribution of P250, 000. In 1987,
Jesus Jose withdrew from the partnership and within the same time, Villareal and Carmelito
Jose, petitioners closed the business without prior knowledge of respondents In March 1987,
respondents wrote a letter to petitioners stating that they were no longer interested in
continuing the partnership and that they were accepting the latter’s offer to return their
capital contribution. This was left unheeded by the petitioners, and by reason of which
respondents filed a complaint in the RTC.RTC ruled that the parties had voluntarily entered
into a partnership, which could be dissolved at any time, and this dissolution was showed by
the fact that petitioners stopped operating the restaurant. On appeal, CA upheld RTC’s
decision that the partnership was dissolved and it added that respondents had no right to
demand the return of their capital contribution. However since petitioners did not give the
proper accounting for the liquidation of the partnership, the CA took it upon itself to
compute their liabilities and the amount that is proper to the respondent.
ISSUE:
WON petitioners are liable to respondents for the latter’s share in the partnership?
RULING:
No. Respondents have no right to demand from petitioner the return of their equity share.
As found by the court petitioners did not personally hold its equity or assets. “The
partnership has a juridical personality separate and distinct from that of each of the
partners.” Since the capital was contributed to the partnership, not to petitioners, it is the
partnership that must refund the equity of the retiring partners. However, before the
partners can be paid their shares, the creditors of the partnership must first be
compensated. Therefore, the exact amount of refund equivalent to respondents’ one-third
share in the partnership cannot be determined until all the partnership assets will have been
liquidated and all partnership creditors have been paid. CA’s computation of the amount to
be refunded to respondents as their share was thus erroneous.
ESTANISLAO, JR. VS. COURT OF APPEALS (1988)
FACTS:
The petitioner and private respondents are brothers and sisters who are co-owners
of certain lots at the in Quezon City which were then being leased to SHELL. They agreed to
open and operate a gas station thereat to be known
as Estanislao ShellService Station with an initial investment of PhP15, 000.00 to be taken
from the advance rentals due to them from SHELL for the occupancy of the said lots owned
in common by them. A joint affidavit was executed by them on April 11, 1966. The
respondents agreed to help their brother, petitioner therein, by allowing him to operate and
manage the gasoline service station of the family. In order not Torun counter to the
company’s policy of appointing only one dealer, it was agreed that petitioner would apply for
the dealership.
Respondent Remedios helped in co-managing the business with petitioner from May 1966
up to February 1967.On May 1966, the parties entered into an Additional Cash Pledge
Agreement with SHELL wherein it was reiterated that the P15, 000.00 advance rental shall
be deposited with SHELL to cover advances of fuel
topetitioner as dealer with a proviso that saidagreement “cancels and supersedes the Joint
Affidavit.”
For sometime, the petitioner submitted financial statement regarding the operation of the
business to the private respondents, but thereafter petitioner failed to render subsequent
accounting. Hence , the private respondents filed a complaint against the petitioner praying
among others that the latter be ordered:
(1)To execute a public document embodying all the provisions of the partnership agreement
they entered into;
(2)To render a formal accounting of the business operation veering the period from May 6,
1966 up to December 21, 1968, and from January 1, 1969 up to the time the order is
issued and that the same be subject to proper audit;
(3)To pay the plaintiffs their lawful shares and participation in the net profits of the
business; and
(4)To pay the plaintiffs attorney’s fees and costs of the suit.
ISSUE:
Can a partnership exist between members of the same family arising from their joint
ownership of certain properties?
RULING:
Furthermore, there are other evidences in the record which show that there was in fact such
partnershipagreement between parties. The petitionersubmitted to the private respondents
periodicaccounting of the business and gave a written
authority to the private respondent Remedios Estanislao to examine and audit the books of
their “common business” (aming negosyo). The respondent Remedios, on the other hand,
assisted in the running of the business. Indeed, the parties
hereto formed a partnership when they bound themselves to contribute money in a common
fund with the intention of dividing the profits among themselves.
PASCUAL v. Commissioner of Internal Revenue
G.R. No. 78133 October 18, 1988
FACTS:
On June 22, 1965, petitioners bought two (2)parcels of land from Santiago Bernardino, et
al. and on May 28, 1966, they bought another three (3) parcels of land from Juan Roque.
The first two parcels of land were sold by petitioners in 1968 to Marenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and
Maria Samsonon March 19,1970. Petitioner realized a net profit in the sale made in 1968 in
the amount of P165, 224.70, while they realized a net profit of P60,000 in the sale made in
1970. The corresponding capital gains taxes were paid by petitioners in 1973 and
1974 .Respondent Commissioner informed petitioners that in the years 1968 and 1970,
petitioners as co-owners in the real estate transactions formed an unregistered partnership
or joint venture taxable as a corporation under Section 20(b)and its income was subject to
the taxes prescribed under Section 24, both of the National Internal Revenue Code; that the
unregistered partnership was subject to corporate income tax as distinguished from profits
derived from the partnership by them which is subject to individual income tax.
ISSUE:
RULING:
Article 1769 of the new Civil Code lays down the rule for determining when a transaction
should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3,
provides:
(2) Co-ownership or co-possession does not 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 from
which the returns are derived; 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 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. In the present case, there is clear evidence of co-
ownership between the petitioners. There is no adequate basis to support the proposition
that they thereby formed an unregistered partnership. The two isolated transactions
whereby they purchased properties and sold the same a few years thereafter did not
thereby make them partners. They shared in the gross profits as co- owners and paid their
capital gains taxes on their net profits and availed of the tax amnesty thereby. Under the
circumstances, they cannot be considered to have formed an unregistered partnership which
is thereby liable for corporate income tax, as the respondent commissioner
proposes. And even assuming for the sake of argument that such unregistered partnership
appears to have been formed, since there is no such existing unregistered partnership with
a distinct personality nor with assets that can be held liable for said deficiency corporate
income tax, then petitioners can be held individually liable as partners for this unpaid
obligation of the partnership.
G.R. No. 159333 July 31, 2006
ARSENIO T. MENDIOLA, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR
RELATIONS COMMISSION, PACIFIC FORESTRESOURCES, PHILS., INC. and/or
CELLMARK AB, respondents. PUNO, J .:
FACTS:
Petitioner Mendiola (ATM) entered into a Side Agreement with Pacfor (USA) who will set up
a representative office in the Philippines. They named said office as Pacfor Phils in which
petitioner is president. In the agreement, petitioner’s base salary and the company’s
overhead expenditures shall be borne by the representative office and shall be funded by
Pacfor/ATM being equally owned on 50-50 equity by ATM and Pacfor-USA. The Side
Agreement was later amended through a Revised Operating and Profit Sharing Agreement
where petitioner’s salary was increased. However, 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.
Years later, petitioner wrote Pacfor’s VP for Asia seeking confirmation of his 50% equity of
Pacfor Phils to which Pacfor’s President replied that petitioner is not a part
owner, his office being just a representative office, a “theoretical company with the purpose
of dividing the income 50-50.” He even stressed that the petitioner knew of this
arrangement from beginning, having been the one to propose to them the setting up of a
representative office, instead of a branch office, to save on taxes.
ISSUE:
RULING:
FACTS:
Plaintiff’s complaint against defendant was to recover possession of a registered land. In the
complaint, the plaintiff is represented by its Managing Partner, Gregorio Araneta, Inc.,
another corporation. Defendant, in his answer, sets up prescription and title in himself thru
“open, continuous, exclusive and public and notorious possession under claim of ownership,
adverse to the entire world by defendant and his predecessors in interest" from "time
immemorial". After trial, the lower court rendered judgment for plaintiff, declaring defendant
to be without any right to the land in question and ordering him to restore possession
thereof to plaintiff and to pay the latter a monthly rent. Defendant appealed directly to the
Supreme Court and contended, among others, 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
ISSUE:
Whether or not a corporation may enter into a joint venture with another corporation.
RULING:
It is true that the complaint states that the plaintiff is "represented herein by
its Managing Partner Gregorio Araneta, Inc.", another corporation, but 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 to enter into a
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.
FACTS:
In 1994, Primelink Properties and the Lazatin siblings entered into a joint venture
agreement whereby the Lazatins shall contribute a huge parcel of land and Primelink shall
develop the same into a subdivision. For 4 years however, Primelink failed to develop the
said land. So in 1998, the Lazatins filed a complaint to rescind the joint venture agreement
with prayer for preliminary injunction. In said case, Primelink was declared in default or
failing to file an answer and for asking multiple motions for extension. The trial court
eventually ruled in favor of the Lazatins and it ordered Primelink to return the possession of
said land to the Lazatins as well as some improvements which Primelink had so far over the
property without the Lazatins paying for said improvements. This decision was affirmed by
the Court of Appeals. Primelink is now assailing the order; that turning over improvements
to the Lazatins without reimbursement is unjust; that the Lazatins did not ask the properties
to be placed under their possession but they merely asked for rescission.
ISSUE:
Whether or not the improvements made by Primelink should also be turned over under the
possession of the Lazatins.
RULING:
Yes. In the first place, even though the Lazatins did specifically pray for possession the
same (placing of improvements under their possession) is incidental in the relief they
prayed for. They are therefore entitled possession over the parcel of land plus the
improvements made thereon made by Primelink.
In this jurisdiction, joint ventures are governed by the laws of partnership. Under the laws
of partnership, when a partnership is dissolved, as in this case when the trial court
rescinded the joint venture agreement, the innocent party has the right to wind up the
partnership affairs.
With the rescission of the JVA on account of petitioners’ fraudulent acts, all authority of any
partner to act for the partnership is terminated except so far as may be necessary to wind
up the partnership affairs or to complete transactions begun but not yet finished. On
dissolution, the partnership is not terminated but continues until the winding up of
partnership affairs is completed. Winding up means the administration of the assets of the
partnership for the purpose of terminating the business and discharging the obligations of
the partnership.
It must be stressed, too, that although the Lazatins acquired possession of the lands and
the improvements thereon, the said lands and improvements remained partnership
property, subject to the rights and obligations of the parties, inter se, of the creditors and of
third parties and subject to the outcome of the settlement of the accounts between the
parties, absent any agreement of the parties in their JVA to the contrary (here no
agreement in the JVA as to winding up). Until the partnership accounts are determined, it
cannot be ascertained how much any of the parties is entitled to, if at all.
HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000
FACTS: After the Second World War, Tan EngKee 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. They named their enterprise
"Benguet Lumber" which they jointly managed until Tan EngKee's death. Petitioners herein
averred that the business prospered due to the hard work and thrift of the alleged partners.
However, they claimed 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 EngKee and his heirs of their
rightful participation in the profits of the business. Petitioners prayed for accounting of the
partnership assets, and the dissolution, winding up and liquidation thereof, and the equal
division of the net assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring
that Benguet Lumber is a joint venture which is akin to a particular partnership. The Court
of Appeals rendered the assailed decision reversing the judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers
and/or partners in a business venture and/or particular partnership called Benguet Lumber
and as such should share in the profits and/or losses of the business venture or particular
partnership
RULING: 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.
Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership is
distinguished from a joint adventure, to wit:
(a) A joint adventure (an American concept similar to our joint accounts) is a sort of
informal partnership, with no firm name and no legal personality. In a joint account, the
participating merchants can transact business under their own name, and can be
individually liable therefor.
(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION,
although the business of pursuing to a successful termination may continue for a number of
years; a partnership generally relates to a continuing business of various transactions of a
certain kind. A joint venture "presupposes generally a parity of standing between the joint
co-ventures 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. The evidence presented by petitioners falls short of the quantum of proof required
to establish a partnership. In the absence of evidence, we cannot accept as an established
fact that Tan EngKee allegedly contributed his resources to a common fund for the purpose
of establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the
forty years the partnership was allegedly in existence, Tan EngKee never asked for an
accounting.
The essence of a partnership is that the partners share in the profits and losses .Each has
the right to demand an accounting as long as the partnership exists. A demand for periodic
accounting is evidence of a partnership. During his lifetime, Tan EngKee appeared never to
have made any such demand for accounting from his brother, Tang Eng Lay. We conclude
that Tan EngKee was only an employee, not a partner since they did not present and offer
evidence that would show that Tan EngKee received amounts of money allegedly
representing his share in the profits of the enterprise. There being no partnership, it follows
that there is no dissolution, winding up or liquidation to speak of.
Vicente Sy vs. CA
FACTS: Sometime in 1958, private respondent Jaime Sahot[5] started working as a
truck helper for petitioners' family-owned trucking business named Vicente Sy Trucking. In
1965, he became a truck driver of the same family business, renamed T. Paulino Trucking
Service, later 6B's Trucking Corporation in 1985, and thereafter known as SBT Trucking
Corporation since 1994. Throughout all these changes in names and for 36 years, private
respondent continuously served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was
suffering from various ailments.
He inquired about his medical and retirement... benefits with the Social Security System
(SSS)... but discovered that his premium payments had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. He was medically examined and
treated for EOR, presleyopia, hypertensive retinopathy
HPM, UTI,... Osteoarthritis... and heart enlargement... and On said grounds SBT Trucking
Service management told him to file a formal request for extension of his leave.
Sahot applied for extension of his leave for the whole month of June, 1994. It was at this
time when petitioners allegedly threatened to terminate his employment should he refuse to
go back to work.
Sahot found himself in a dilemma. He was facing dismissal if he refused to work, but he
could not retire on pension because petitioners never paid his correct SSS premiums.
They carried out their threat and dismissed him from work, effective June 30, 1994. He
ended up sick, jobless and penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for
illegal dismissal,... He prayed for the recovery of separation pay and attorney’s fees...
against... herein petitioners. Or their part, petitioners admitted they had a trucking business
in the 1950s but denied employing helpers and drivers. They contend that private
respondent was not illegally dismissed as a driver because he was in fact petitioner's
industrial partner.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that
there was no illegal dismissal in Sahot's case.
On appeal, the National Labor Relations Commission modified the judgment of the Labor
Arbiter. It declared that private respondent was an employee, not an industrial partner,
since the start.
Private respondent Sahot did not abandon his job but his employment was terminated on...
account of his illness, pursuant to Article 284
Petitioners assailed the decision of the NLRC before the Court of Appeals. The appellate
court affirmed with modification the judgment of the NLRC. It held that private respondent
was indeed an employee of petitioners since 1958.
Hence, the instant petition
ISSUE:Whether or not an employer-employee relationship existed between petitioners and
respondent Sahot;
RULING: Article 1767[21] of the Civil Code states that in a 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
Not one of these circumstances is present in this case. No written agreement exists to prove
the partnership between the parties. Private respondent did not contribute money, property
or industry for the purpose of engaging in the supposed business. There is no... Proof that
he was receiving a share in the profits as a matter of course, during the period when the
trucking business was under operation. Neither is there any proof that he had actively
participated in the management, administration and adoption of policies of the business.
Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that
private respondent was an industrial partner from 1958 to 1994.
The collective effect of these circumstances is such as to leave no room for doubt on the
existence of said intent in petitioners herein.
Also, petitioners’ argument that their being mere co-owners did not create a
separate legal entity was rejected because, according to the Court, the tax in question is
one imposed upon "corporations", which, strictly speaking, are distinct and different from
"partnerships". When the NIRC includes "partnerships" among the entities subject to the tax
on "corporations", said Code must allude, therefore, to organizations which are not
necessarily "partnerships", in the technical sense of the term. The qualifying expression
found in Section 24 and 84(b) clearly indicates that a joint venture need not be undertaken
in any of the standard forms, or in conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted for purposes of the tax on
corporations. Accordingly, the lawmaker could not have regarded that personality as a
condition essential to the existence of the partnerships therein referred to. For purposes of
the tax on corporations, NIRC includes these partnerships - with the exception only of duly
registered general co partnerships - within the purview of the term "corporation." It is,
therefore, clear that petitioners herein constitute a partnership, insofar as said Code is
concerned and are subject to the income tax for corporations.
As regards the residence of tax for corporations (Section 2 of CA No. 465), it is analogous to
that of section 24 and 84 (b) of the NIRC. It is apparent that the terms "corporation" and
"partnership" are used in both statutes with substantially the same meaning. Consequently,
petitioners are subject, also, to the residence tax for corporations.
Finally, on the issues of being liable for real estate dealer’s tax, they are also liable for the
same because the records show that they have habitually engaged in leasing said properties
whose yearly gross rentals exceeds P3,000.00 a year.
FERNANDEZ vs. DE LA ROSA G.R. No. 413 February 2, 1903
FACTS: Fernandez alleges that in January, 1900, he entered into a verbal agreement
with Dela Rosa to form a partnership for the purchase of cascoes and the carrying on of the
business of letting the same for hire in Manila, and Dela Rosa is to buy the cascoes and
each partner to furnish for that purpose such amount of money as he could, the profits to
be divided proportionately; Fernandez furnished Dela Rosa sums to purchase and repair
cascoes, the latter taking the titles in his own name; that in April the parties undertook to
draw up articles of partnership for the purpose of embodying the same in an authentic
document, but that the defendant having proposed a draft of such articles which differed
materially from the terms of the earlier verbal agreement, and being unwillingly to include
the 2nd casco in the partnership, they were unable to come to any understanding and no
written agreement was executed; that the defendant having in the meantime had the
control and management of the two cascoes, the plaintiff made a demand for an accounting
upon him, which the defendant refused to render, denying the existence of the partnership
altogether.
Dela Rosa admits that the project of forming a partnership in the casco business in which he
was already engaged to some extent individually was discussed between himself and the
plaintiff in January, 1900, but he denies that any agreement was ever consummated. He
denies that the plaintiff furnished any money in January, 1900, for the purchase of the first
casco, or for repairs on the same, but claims that he borrowed 300 pesos on his individual
account in January from the bakery firm, consisting of the plaintiff, Marcos Angulo, and
Antonio Angulo. The 825 pesos, which he admits he received from the Fernandez March 5,
he claims was for the purchase of the first casco, which he alleged was bought March 12,
and he alleges that he never received anything from the defendant toward the purchase of
the 2nd casco. He claims to have paid, exclusive of repairs, 1,200 pesos for the first casco
and 2,000 pesos for the second one.
ISSUE:
(1) Did a partnership exist between the parties?
(2) If such partnership existed, was it terminated as a result of the act of the defendant in
receiving back the 1,125 pesos?
HELD:
(1) “Partnership is a contract by which 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.” (Civil Code, art. 1665.)
The essential points upon which the minds of the parties must meet in a contract of
partnership are, therefore, (1) mutual contribution to a common stock, and (2) a joint
interest in the profits. If the contract contains these two elements the partnership relation
results, and the law itself fixes the incidents of this relation if the parties fail to do so. (Civil
Code, secs. 1689, 1695.)
We have found as a fact that money was furnished by the plaintiff and received by the
defendant with the understanding that it was to be used for the purchase of the cascoes in
question. This establishes the first element of the contract, namely, mutual contribution to a
common stock. The second element, namely, the intention to share profits, appears to be an
unavoidable deduction from the fact of the purchase of the cascoes in common, in the
absence of any other explanation of the object of the parties in making the purchase in that
form, and, it may be added, in view of the admitted fact that prior to the purchase of the
first casco the formation of a partnership had been a subject of negotiation between them.
It is thus apparent that a complete and perfect contract of partnership was entered into by
the parties. This contract, it is true, might have been subject to a suspensive condition,
postponing its operation until an agreement was reached as to the respective participation
of the partners in the profits, the character of the partnership as collective or en comandita,
and other details, but although it is asserted by counsel for the defendant that such was the
case, there is little or nothing in the record to support this claim, and that fact that the
defendant did actually go on and purchase the boat, as it would seem, before any attempt
had been made to formulate partnership articles, strongly discountenances the theory.
The execution of a written agreement was not necessary in order to give efficacy to the
verbal contract of partnership as a civil contract, the contributions of the partners not
having been in the form of immovables or rights in immovables. (Civil Code, art. 1667.) the
special provision cited, requiring the execution of a public writing in the single case
mentioned and dispensing with all formal requirements in other cases, renders inapplicable
to this species of contract the general provisions of article 1280 of the Civil Code.
2) The remaining question is as to the legal effect of the acceptance by the plaintiff of the
money returned to him by the defendant after the definitive failure of the attempt to agree
upon partnership articles. The amount returned fell short, in our view of the facts, of that
which the plaintiff had contributed to the capital of the partnership, since it did not include
the sum which he had furnished for the repairs of casco No. 1515. Moreover, it is quite
possible, as claimed by the plaintiff, that a profit may have been realized from the business
during the period in which the defendant have been administering it prior to the return of
the money, and if so he still retained that sum in his hands. For these reasons the
acceptance of the money by the plaintiff did not have the effect of terminating the legal
existence of the partnership by converting it into a societas leonina, as claimed by counsel
for the defendant.
The result is that we hold and declare that a partnership was formed between the parties in
January, 1900, the existence of which the defendant is bound to recognize; that cascoes No.
1515 and 2089 constitute partnership property, and that the plaintiff is entitled to an
accounting of the defendant’s administration of such property, and of the profits derived
therefrom. This declaration does not involve an adjudication as to any disputed items of the
partnership account.
notwithstanding the demands he had repeatedly made upon the defendant to divide the
said land, the latter, after having promised him on several occasions that he would make
such partition, finally refused, without good reason, and still continued to refuse to divide
the land and, moreover,
without the knowledge and consent of the plaintiff, defendant gathered the abaca crops of
the years 1904, 1905 and1906, produced on the land in question, and extracted the hemp
therefrom in the amount of about 12 arrobas to each crop, he being the sole beneficiary of
the fiber obtained,
And, that since the year 1904, up to the time of the complaint, he alone had been paying
the taxes on the land, without the defendant's having contributed to their payment.
The court rendered judgment by absolving the defendant from the complaint.
ISSUE: was there a contract of partnership?
HELD: Considering the terms of the claim made by the plaintiff and those of the defendant's
answer, and the relation off acts contained in the judgment appealed from, it does not
appear that any contract of partnership whatever was made between them for the purposes
expressed in article 1665 of the Civil Code, for the sole transaction performed by them was
the acquisition jointly by mutual agreement of the land in question, since it was undivided,
under the condition that they each should pay one-half of the price thereof and that the
property so acquired should be divided between the two purchasers; and as, under this title,
the plaintiff and the defendant are the co-owners of the said land, the partition or division of
such property held in joint tenancy must of course be allowed, and the present possessor of
the land has no right to deny the plaintiff's claim on grounds or reasons unsupported by
proof.
G.R. No. 101847 May 27, 1993 LOURDES NAVARRO AND MENARDO NAVARRO, petitioners,
vs. COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional
Trial Court of Bacolod City, Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON
AND RICARDO B. YANSON,respondents.
FACTS: Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were
engaged in the business of Air Freight Service Agency. Pursuant to the Agreement which
they entered, they agreed to operate the said Agency; it is the Private Respondent Olivia
Yanson who supplies the necessary equipment and money used in the operation of the
agency. Her brother in the person of Atty. Rodolfo Villaflores was the manager thereof while
petitioner Lourdes Navarro was the Cashier; In compliance to her obligation as stated in
their agreement, private respondent brought into their business certain chattels or movables
or personal properties. However, those personal properties remain to be registered in her
name; Among the provisions stipulated in their agreement is the equal sharing of whatever
proceeds realized from their business; However, sometime on July 23, 1976, private
respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal
properties which she brought into their business, filed a complaint against petitioner
Lourdes Navarro for "Delivery of Personal Properties With Damages and with an application
for a writ of replevin.
Private respondents' application for a writ of replevin was later approved/granted by the
trial court. For her defense, petitioner Navarro argue that she and private respondent
Yanson actually formed a verbal partnership which was engaged in the business of Air
Freight Service Agency. She contended that the decision sustaining the writ of replevin is
void since the properties belonging to the partnership do not actually belong to any of the
parties until the final disposition and winding up of the partnership.
ISSUE:
1. Whether or not there was a partnership that existed between the parties.
2. Whether the properties that were commonly used in the operation of Allied Air Freight
belonged to the alleged partnership business.
RULING: Article 1767 of the New Civil Code defines the contract of partnership: 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 proceeds
among themselves. A cursory examination of the evidences presented no proof that a
partnership, whether oral or written had been constituted. In fact, those movables brought
by the plaintiff for the use in the operation of the business remain registered in her name.
While there may have been co-ownership or co-possession of some items and/or any
sharing of proceeds by way of advances received by both plaintiff and the defendant, these
are not indicative and supportive of the existence of any partnership between them. Art.
1769 par. 2 provides: 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” Besides, the alleged profit was a difference found after
evaluating the assets and not arising from the real operation of the business. In accounting
procedures, strictly, this could not be profit but a net worth.
HELD/RATIO:
YES, although no legal personality may have been created by the Joint Emergency
Operation, nevertheless said joint venture or joint management operated the business
affairs of the 2 companies as though they constituted a single entity, company or
partnership, thereby obtaining substantial economy and profits in the operation.
The Court ruled on this issue by citing the case of Eufemia Evangelista, et. al v. CIR
– agencycase.
This involved the 3 sisters who borrowed from their father money which they invested
inland and then improved upon and later sold. The sisters also hired their brother to oversee
the buy-and-sell of land. Contrary to their claim that said operation was merely a co-
ownership, the Court ruled that considering the facts and circumstances surrounding the
said case, the 3 sisters had purpose to engage in real estate transactions for monetary gain
and then divide the profits among themselves, making them co-partners. When the Tax
Code included “partnerships “among the entities subject to the tax on corporations, it must
refer to organizations which are not necessarily partnerships in the technical sense of the
term, and that furthermore, said law defined the term "corporation" as including
partnerships no matter how created or organized.
Further, from the standpoint of income tax law, the procedure and practice of the 2 bus
companies in determining the net income of each was arbitrary and unwarranted. After all,
the 2companies operates in 2 different lines, in different provinces or territories, with
different equipment and personnel it cannot possibly be true and correct to say that the end
of each year, the gross receipts and income in the gross expenses of two companies are
exactly the same for purposes of the payment of income tax. Thus, the Court held that the
Joint Emergency Operation or sole management or joint venture in this case falls under the
provisions of section 84 (b) of the Internal Revenue Code, and consequently, it is liable to
income tax provided for in section 24 of the same code.* But they were exempted from
paying 25% surcharge for failure to file a tax return, because of their honest belief (based
on advice of their attorneys and accountants) that they are not required to do so.
YES, pending appeal in the Court of Tax Appeals of an assessment made by the Collector of
Internal Revenue, the Collector, pending hearing before said court, may amend his appealed
assessment and include the amendment in his answer before the court, and the latter may
on the basis of the evidence presented before it, redetermine the assessment.
Aurbach vs. Sanitary Wares (Partnership; Joint Venture; Foreign and Domestic Corp)
FACTS: This consolidated petition assailed the decision of the CA directing a certain
MANNER OF ELECTION OFOFFICERS IN THE BOARD OF DIRECTORS*There are two groups
in this case, the Lagdameo group composed of Filipino investors and the American Standard
Inc. (ASI) composed of foreign investors. 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.
ISSUE: 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
HELD:
While certain provisions of the Agreement would make it appear that the parties thereto
disclaim being partners or joint venturers such disclaimer is directed at third parties and is
not inconsistent with, and does not preclude, the existence of two distinct groups of
stockholders in Saniwares one of which (the Philippine Investors) shall constitute the
majority, and the other ASI shall constitute the minority stockholder. In any event, the
evident intention of the Philippine Investors and ASI in entering into the Agreement is to
enter into a joint venture enterprise
An examination of the Agreement shows that certain provisions were incused to protect the
interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required
incertain 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.
The legal concept of a joint venture is of common law origin. It has no precise legal
definition but it has been generally understood to mean an organization formed for some
temporary purpose. It is in fact hardly distinguishable from the partnership, since their
elements are similar community of interest in the business, sharing of profits and losses,
and a mutual right of control.
The main distinction cited by most opinions in common law jurisdictions is that the
partnership contemplates a general business with some degree of continuity, while the joint
venture is formed for the execution of a single transaction, and is thus of a temporary
nature.
.
DELUAO v. CASTEEL G.R. No. L-21906; December 24, 1968
FACTS: In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of
swampy land, 178.76 hectares, in the then sitio of Malalag, municipality of Padada, Davao
for 3 consecutive times because the Bureau of Fisheries did not act upon his previous
applications.
Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon
his position by the other applicants who entered upon and spread themselves within the
area, Casteel realized the urgent necessity of expanding his occupation thereof by
constructing dikes and cultivating marketable fishes. But lacking financial resources at that
time, he sought financial aid from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were already occupied
by rival applicants, Casteel immediately filed a protest. Consequently, two administrative
cases ensued involving the area in question.
However, despite the finding made in the investigation of the above administrative cases,
the Director of Fisheries nevertheless rejected Casteel's application on October 25, 1949,
required him to remove all the improvements which he had introduced on the land, and
ordered that the land be leased through public auction
On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part,
and Nicanor Casteel as party of the second part, executed a contract — denominated a
"contract of service". On the same date the above contract was entered into, Inocencia
Deluao executed a special power of attorney in favor of Jesus Donesa
On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe
Deluao on November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over
the same area in the two administrative cases and asked for reinvestigation of the
application of Nicanor Casteel over the subject fishpond.
The Secretary of Agriculture and Natural Resources rendered a decision ordering Casteel to
be reinstated in the area and that he shall pay for the improvement made thereupon.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further
administering the fishpond, and ejected the latter's representative (encargado), Jesus
Donesa, from the premises.
ISSUE: Whether the reinstatement of Casteel over the subject land constitute a dissolution
of the partnership between him and Deluao
HELD: Yes, the reinstatement of Casteel dissolved his partnership with Deluao.
The Supreme Court ruled that the arrangement under the so-called "contract of service"
continued until the decision both dated Sept. 15, 1950 were issued by the Secretary of
Agriculture and Natural Resources in DANR Cases 353 and 353-B.
This development, by itself, brought about the dissolution of the partnership. Since the
partnership had for its object the division into two equal parts of the fishpond between the
appellees and the appellant after it shall have been awarded to the latter, and therefore it
envisaged the unauthorized transfer of one half thereof to parties other than the applicant
Casteel, it was dissolved by the approval of his application and the award to him of the
fishpond.
The approval was an event which made it unlawful for the members to carry it on in
partnership. Moreover, subsequent events likewise reveal the intent of both parties to
terminate the partnership because each refused to share the fishpond with the other.
Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin Misa
G.R. No. 109248 July 3, 1995
FACTS: On December 19, 1980, respondent Misa associated himself together, as
senior partner with petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners. On
Feb. 17, 1988, respondent Misa wrote a letter stating that he is withdrawing and retiring
from the firm and asking for a meeting with the petitioners to discuss the mechanics of the
liquidation. On June 30, 1988, petitioner filed a petition to the Commission’s Securities
Investigation and Clearing Department for the formal dissolution and liquidation of the
partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the
withdrawal of the petitioner has not dissolved the partnership. On appeal, the SEC en banc
reversed the decision and was affirmed by the Court of Appeals. Hence, this petition.
ISSUE:Whether or not the Court of Appeals has erred in holding that the partnership is a
partnership at will and whether or not the Court of Appeals has erred in holding that the
withdrawal of private respondent dissolved the partnership regardless of his good or bad
faith
HELD: No. The SC upheld the ruling of the CA regarding the nature of the partnership. The
SC further stated that a partnership that does not fix its term is a partnership at will. The
birth and life of a partnership at will is predicated on the mutual desire and consent of the
partners. The right to choose with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued existence is, in turn, dependent
on the constancy of that mutual resolve, along with each partner's capability to give it, and
the absence of a cause for dissolution provided by the law itself. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must,
however, act in good faith, not that the attendance of bad faith can prevent the dissolution
of the partnership but that it can result in a liability for damages.
Lim vs. Philippine Fishing Gear Industries Inc. [GR 136448, 3 November 1999]
FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial
fishing with him. The three agreed to purchase two fishing boats but since they do not have
the money they borrowed from one Jesus Lim the brother of Lim Tong Lim. Subsequently,
they again borrowed money for the purchase of fishing nets and other fishing equipments.
Yao and Chua represented themselves as acting in behalf of “Ocean Quest Fishing
Corporation” (OQFC) and they contracted with Philippine Fishing Gear Industries (PFGI) for
the purchase of fishing nets amounting to more than P500k. However, they were unable to
pay PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is a
non-existent corporation. Chua admitted his liability while Lim Tong Lim refused such
liability alleging that Chua and Yao acted without his knowledge and consent in representing
themselves as a corporation.
ISSUE: Whether Lim Tong Lim is liable as a partner
HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a
fishing business. Moreover, their Compromise Agreement had revealed their intention to pay
the loan with the proceeds of the sale and to divide equally among them the excess or loss.
The boats and equipment used for their business entails their common fund. The
contribution to such fund need not be cash or fixed assets; it could be an intangible like
credit or industry. That the parties agreed that any loss or profit from the sale and operation
of the boats would be divided equally among them also shows that they had indeed formed
a partnership. The principle of corporation by estoppel cannot apply in the case as Lim Tong
Lim also benefited from the use of the nets in the boat, which was an asset of the
partnership. Under the law on estoppel, those acting in behalf of a corporation and those
benefited by it, knowing it to be without valid existence are held liable as general partners.
Hence, the question as to whether such was legally formed for unknown reasons is
immaterial to the case.
Sharuff and Co. v. Baloise Fire Insurance Co.- Proceeds of the Policy 64 SCRA 258
Facts:
> Sharuff and Eskenazi were doing business under the firm name Sharuff and Co.
> They insured their merchandise with Baloise. Later on, Sharuff and Eskenazi entered
into a contract of partnership and thereby changed the firm name to Sharuff and Eskenazi.
> The merchandise insured was subsequently destroyed by fire. Sharuff and Eskenazi filed
their claim against the insurance company.
> Baloise refused to pay on the ground that the policy was issued in the name of Sharuff
and Co. and not Sharuff and Eskenazi.
Issue: Whether or not the partnership can claim the proceeds of the policy.
Held: Yes. The subsequent partnership did not alter the composition of the firm. The people
involved are actually the same. Furthermore, such change of firm name was not made to
defraud the insurance company or some other person.
Philex Mining Corp. v. Commissioner of Internal Revenue G.R. No. 148187 April
16, 2008
FACTS:
Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the former
to manage and operate the latter’s mining claim, known as the Sto. Nino Mine. The parties’
agreement was denominated as “Power of Attorney” which provides inter
alia:4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make av
ailable tothe MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in
such amounts as from time to time may be required by the MANAGERS within the said 3-
year period, for use in the MANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION
PESOS (P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s
account in the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO.
NINO MINE, which is left with the Sto. Nino PROJECT, shall be added to such owner’s
account.5. Whenever the MANAGERS shall deem it necessary and convenient in connection
with theMANAGEMENT of the STO. NINO MINE, they may transfer their own funds or
property to the Sto. Niño PROJECT, in accordance with the following arrangements:
(a) The properties shall be appraised and, together with the cash, shall be carried by
the Sto.Nino PROJECT as a special fund to be known as the MANAGERS’ account.
(b) The total of the MANAGERS’ account shall not exceed P11,000,000.00, except wit
h priorapproval of the PRINCIPAL; provided, however, that if the compensation of the
MANAGERS as herein provided cannot be paid in cash from the Sto. Nino PROJECT, the
amount not so paid in cash shall be added to the MANAGERS’ account.
(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJ
ECT until termination of this Agency.
(d) The MANAGERS’ account shall not accrue interest. Since it is the desire of the PRI
NCIPAL toextend to the MANAGERS the benefit of subsequent appreciation of property, upon
a projected termination of this Agency, the ratio which the MANAGERS’ account has to the
owner’s account will be determined, and the corresponding proportion of the entire assets
of the STO. NINO MINE, excluding the claims, shall be transferred to the MANAGERS, except
that such transferred assets shall not include mine development, roads, buildings, and
similar property which will be valueless, or of slight value, to the MANAGERS. The
MANAGERS can, on the other hand, require at their option that property originally
transferred by them to the Sto. Nino PROJECT be re-transferred to them. Until such assets
are transferred to the MANAGERS, this Agency shall remain subsisting.x x x
x12. The compensation of the MANAGER shall be fifty per cent (50%) of the net
profit of the Sto.Nino PROJECT before income tax. It is understood that the MANAGERS shall
pay income tax on their compensation, while the PRINCIPAL shall pay income tax on the net
profit of the Sto. Nino PROJECT after deduction therefrom of the MANAGERS’ compensation.
Philex Mining
made advances of cash and property in accordance with paragraph 5 of theagreement.
However, the mine suffered continuing losses over the years which resulted to Philex
Mining’s withdrawal as manager of the mine and in the eventual cessation of
mine operations.
The parties executed a “Compromise with Dation in Payment” wherein Baguio Gold
admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to
pay the same in three segments by first assigning Baguio Gold’s tangible assets to Philex
Mining, transferring to the latter Baguio Gold’s equitable title in its Philodrill assets and
finally settling the remaining liability through properties that Baguio Gold may acquire in
the future.
The parties executed an “Amendment to Compromise with Dation in Payment” where the
parties determined that Baguio Gold’s indebtedness to petitioner actually amounted
to P259,137,245.00,which sum included liabilities of Baguio Gold to other creditors
that petitioner had assumed as guarantor. These liabilities pertained to long-term loans
amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank of America
NT & SA and Citibank N.A. This time, Baguio Gold
undertook to pay petitioner in two segments by first assigning its tangible assets forP127,83
8,051.00 and then transferring its equitable title in its Philo drill assets
forP16,302,426.00. The parties then ascertained that Baguio Gold had a remaining outstand
ing indebtedness topetitioner in the amount of P114,996,768.00.
Philex Mining wrote off in its 1982 books of account the remaining outstanding indebtedness
of Baguio Gold by charging P112,136,000.00 to allowances and reserves that were set up in
1981 andP2,860,768.00 to the 1982 operations.
In its 1982 annual income tax return, Philex Mining deducted from its gross income the
amount of P112,136,000.00 as “loss on settlement of receivables from Baguio Gold against
reserves and allowances.” However, the BIR disallowed the amount as deduction for
bad debt and assessed petitioner a deficiency income tax of P62,811,161.39. Philex Mining
protested before the BIR arguing that the deduction must be allowed since all requisites for
a bad debt deduction were satisfied, to wit:
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 latter’s 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 agent’s
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. Theentirety of the parties’ contractual stipulations simply leads to no other concl
usion than thatpetitioner’s “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.”
Benjamin Yu vs. National Labor Relations Commission (NLRC)
FACTS: Petitioner Yu was hired as the Assistant General Manager of Jade Mountain
Products Company Limited primarily responsible for the overall operations of marble
quarrying and export business of said partnership. He was hired by a virtue of a Partnership
Resolution in 1985 with a monthly salary of P4,000.00. Initially he received only half of his
stipulated monthly salary and was promised by the partners that the balance would be paid
upon securing additional operating funds from abroad. However, in 1988 without his
knowledge the general partners as well as one of the limited partners sold and transferred
their interest to Willy Co and Emmanuel Zapanta. Thus the new major partners decided to
transfer the firm’s main office but opted to continue the operation of the old partnership
under its old firm name and with all its employees and workers except for the petitioner.
Upon knowing of the changes in the partnership, petitioner went to the new main office to
meet the new partners and demand the payment of his unpaid salaries, but the latter
refused to pay him and instead informed him that since he bought the business from the
original partners, it was for him to decide whether or not he was responsible for the
obligations of the old partnership including petitioners unpaid salaries. Hence, petitioner was
dismissed from said partnership.
ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General Manager had
been extinguished and replaced by a new partnership composed of Willy Co and Emmanuel
Zapanta.
2. Whether petitioner could assert his rights under his employment contract as against
the new partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired the petitioner in 1984 and the emergence
of the new firm composed of Willy Co and Emmanuel Zapanta in 1988. This is based on the
following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused
by any partner ceasing to be associated in the carrying on as a distinguished from the
winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when no definite
term or particular undertaking is specified.
2. in contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of this article, by the
express will of any partner at any time;
2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of the new
partnership which continued the business of former without liquidation of the partnership
affairs. Thus, creditor of the old Jade Mountain, such as the petitioner is entitled to enforce
his claim for unpaid salaries, as well as other claims relating to his employment with the old
partnership against the new Jade Mountain.
200,000, but his demands likewise went unheeded. Consequently, he filed a criminal case
for violation of BP 22 against the petitioner.
Petitioner then filed before the RTC a complaint for declaration of nullity of loan and
recovery of damages against Gutierrez and Marasigan. He completely denied authorizing the
loan or the check’s negotiation, and asserted that he was not privy to the parties’ loan
agreement.
The RTC and the CA ruled in favor of Marasigan. The petitioner argues that under Art. 1878
of the CC, a special power of attorney is necessary for an individual to make a loan of
borrow money in behalf of another.
ISSUE
Whether the contract of loan in the amount of 200,000 granted by respondent Marasigan to
the petitioner through respondent Gutierrez may be nullified for being void
RULING
Yes. The petitioner seeks to nullify the contract of loan on the ground that he never
authorized the borrowing of money. He points to Article 1878, paragraph 7 of the Civil Code,
which explicitly requires a written authority when the loan is contracted through an agent.
The petitioner contends that absent such authority in writing, he should not be held liable
for the face value of the check because he was not a party or privy to the agreement.
Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority
before an agent can loan or borrow money in behalf of the principal, to wit:
Art. 1878. Special powers of attorney are necessary in the following cases: xxxx
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration. (emphasis supplied)
Article 1878 does not state that the authority be in writing. As long as the mandate is
express, such authority may be either oral or written. We unequivocably declared in one
casethat the requirement under Article 1878 of the Civil Code refers to the nature of the
authorization and not to its form. Be that as it may, the authority must be duly established
by competent and convincing evidence other than the self serving assertion of the party
claiming that such authority was verbally given. And more recently, We stated that, if the
special authority is not written, then it must be duly established by evidence.
Here, the contract of loan entered into by Gutierrez in behalf of the Petitioner should be
nullified for being void; petitioner is not bound by the Contract of Loan.
A review of the records reveals that Gutierrez did not have any authority to borrow money
in behalf of the petitioner. Records do not show that the petitioner executed any special
power of attorney (SPA) in favor of Gutierrez. In fact, the petitioner’s testimony confirmed
that he never authorized
Gutierrez (or anyone for that matter), whether verbally or in writing, to borrow money in his
behalf, nor was he aware of any such transaction:
Marasigan however submits that the petitioner’s acts of pre-signing the blank checks and
releasing them to Gutierrez suffice to establish that the petitioner had authorized Gutierrez
to fill them out and contract the loan in his behalf.
Marasigan’s submission fails to persuade us. In the absence of any authorization, Gutierrez
could not enter into a contract of loan in behalf of the petitioner.
In the absence of any showing of any agency relations or special authority to act for and in
behalf of the petitioner, the loan agreement Gutierrez entered into with Marasigan is null
and void. Thus, the petitioner is not bound by the parties’ loan agreement.
Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not
legally sufficient because the authority to enter into a loan can never be presumed. The
contract of agency and the special fiduciary relationship inherent in this contract must exist
as a matter of fact. The person alleging it has the burden of proof to show, not only the fact
of agency, but also its nature and extent.
The records show that Marasigan merely relied on the words of Gutierrez without securing a
copy of the SPA in favor of the latter and without verifying from the petitioner whether he
had authorized the borrowing of money or release of the check. He was thus bound by the
risk accompanying his trust on the mere assurances of Gutierrez.
JOCELYN B. DOLES, Petitioner, vs. MA. AURA TINA ANGELES, Respondent. G.R. No. 14935,
FIRST DIVISION, June 26, 2006, AUSTRIA-MARTINEZ, J.
If an act done by one person in behalf of another is in its essential nature one of agency, the
former is the agent of the latter notwithstanding he or she is not so called. The question is
to be determined by the fact that one represents and is acting for another, and if relations
exist which will constitute an agency, it will be an agency whether the parties understood
the exact nature of the relation or not.
FACTS
Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific Performance
with Damages against Jocelyn B. Doles (petitioner). Respondent alleged that petitioner was
indebted to the former in the concept of a personal loan amounting to P405,430.00
representing the principal amount and interest; that by virtue of a "Deed of Absolute Sale",3
petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as the
improvements thereon, located at a subdivision project known as Camella Townhomes
Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this
property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to
secure petitioner’s loan in the sum of P337,050.00 with that entity; that as a condition for
the foregoing sale, respondent shall assume the undue balance of the mortgage and pay the
monthly amortization of P4,748.11 for the remainder of the 25 years which began on
September 3, 1994; that the property was at that time being occupied by a tenant paying a
monthly rent of P3,000.00; that upon verification with the NHMFC, respondent learned that
petitioner had incurred arrearages amounting toP26,744.09, inclusive of penalties and
interest; that upon
informing the petitioner of her arrears, petitioner denied that she incurred them and refused
to pay the same; that despite repeated demand, petitioner refused to cooperate with
respondent to execute the necessary documents and other formalities required by the
NHMFC to effect the transfer of the title over the property; that petitioner collected rent
over the property for the month of January 1997 and refused to remit the proceeds to
respondent; and that respondent suffered damages as a result and was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint, denied that
she borrowed money from respondent, and averred that from June to September 1995, she
referred her friends to respondent whom she knew to be engaged in the business of lending
money in exchange for personal checks through her capitalist Arsenio Pua. She alleged that
her friends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and
Elizabeth Tomelden, borrowed money from respondent and issued personal checks in
payment of the loan; that the checks bounced for insufficiency of funds; that despite her
efforts to assist respondent to collect from the borrowers, she could no longer locate them;
that, because of this, respondent became furious and threatened petitioner that if the
accounts were not settled, a criminal case will be filed against her; that she was forced to
issue eight checks amounting to P350,000 to answer for the bounced checks of the
borrowers she referred; that prior to the issuance of the checks she informed respondent
that they were not sufficiently funded but the latter nonetheless deposited the checks and
for which reason they were subsequently dishonored; that respondent then threatened to
initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that she was
forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor,
Cavite, to avoid criminal prosecution; that the said deed had no valid consideration; that
she did not appear before a notary public; that the Community Tax Certificate number on
the deed was not hers and for which respondent may be prosecuted for falsification and
perjury; and that she suffered damages and lost rental as a result.
Petitioner argued that respondent categorically admitted in open court that she acted only
as agent or representative of Arsenio Pua, the principal financier and, hence, she had no
legal capacity to sue petitioner; and that the CA failed to consider the fact that petitioner’s
father, who co-owned the subject property, was not impleaded as a defendant nor was he
indebted to the respondent and, hence, she cannot be made to sign the documents to effect
the transfer of ownership over the entire property.
ISSUE
Whether the respondent is an agent of Arsenio Pua
RULING
Yes. Respondent is estopped to deny that she herself acted as agent of a certain Arsenio
Pua, her disclosed principal. She is also estopped to deny that petitioner acted as agent for
the alleged debtors, the friends whom she (petitioner) referred.
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation. The question of whether an agency has been created is ordinarily a question
which may be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention. Agency may even be
implied from the words and
conduct of the parties and the circumstances of the particular case. Though the fact or
extent of authority of the agents may not, as a general rule, be established from the
declarations of the agents alone, if one professes to act as agent for another, she may be
estopped to deny her agency both as against the asserted principal and the third persons
interested in the transaction in which he or she is engaged.
In this case, petitioner knew that the financier of respondent is Pua; and respondent knew
that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of [petitioner],
the actual borrowers, did not present themselves to [respondent]" as evidence that negates
the agency relationship—it is sufficient that petitioner disclosed to respondent that the
former was acting in behalf of her principals, her friends whom she referred to respondent.
For an agency to arise, it is not necessary that the principal personally encounter the third
person with whom the agent interacts. The law in fact contemplates, and to a great degree,
impersonal dealings where the principal need not personally know or meet the third person
with whom her agent transacts: precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent.29
In the case at bar, both petitioner and respondent have undeniably disclosed to each other
that they are representing someone else, and so both of them are estopped to deny the
same. It is evident from the record that petitioner merely refers actual borrowers and then
collects and disburses the amounts of the loan upon which she received a commission; and
that respondent transacts on behalf of her "principal financier", a certain Arsenio Pua. If
their respective principals do not actually and personally know each other, such ignorance
does not affect their juridical standing as agents, especially since the very purpose of
agency is to extend the personality of the principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-lending" the money loaned from
respondent to other individuals for profit, it must be stressed that the manner in which the
parties designate the relationship is not controlling. If an act done by one person in behalf
of another is in its essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called. The question is to be determined by the fact that
one represents and is acting for another, and if relations exist which will constitute an
agency, it will be an agency whether the parties understood the exact nature of the relation
or not.
That both parties acted as mere agents is shown by the undisputed fact that the friends of
petitioner issued checks in payment of the loan in the name of Pua. If it is true that
petitioner was "re-lending", then the checks should have been drawn in her name and not
directly paid to Pua.
FLORENTINO RALLOS, ET AL., plaintiff-appellee, vs. TEODORO R. YANGCO, defendant-
appellant. G.R. No. 6906, EN BANC, September 27, 1911, MORELAND, J.
Having advertised the fact that Collantes was his agent and having given them a special
invitation to deal with such agent, it was the duty of the defendant on the termination of the
relationship of principal and agent to give due and timely notice thereof to the plaintiffs.
Failing to do so, he is responsible to them for whatever goods may have been in good faith
and without negligence sent to the agent without knowledge, actual or constructive, of the
termination of such relationship.
FACTS
The plaintiffs proceeded to do a considerable business with the defendant through the said
Collantes, as his factor, sending to him as agent for the defendant a good deal of produce to
be sold on commission. Later, and in the month of February, 1909, the plaintiffs sent to the
said Collantes, as agent for the defendant, 218 bundles of tobacco in the leaf to be sold on
commission, as had been other produce previously. The said Collantes received said tobacco
and sold it for the sum of P1,744. The charges for such sale were P206.96. leaving in the
hands of said Collantes the sum of P1,537.08 belonging to the plaintiffs. This sum was,
apparently, converted to his own use by said agent.
It appears, however, that prior to the sending of said tobacco the defendant had severed his
relations with Collantes and that the latter was no longer acting as his factor. This fact was
not known to the plaintiffs; and it is conceded in the case that no notice of any kind was
given by the defendant to the plaintiffs of the termination of the relations between the
defendant and his agent. The defendant refused to pay the said sum upon demand of the
plaintiffs, placing such refusal upon the ground that at the time the said tobacco was
received and sold by Collantes he was acting personally and not as agent of the defendant.
This action was brought to recover said sum.
ISSUE
Whether the plaintiffs, acting in good faith and without knowledge, having sent produce to
sell on commission to the former agent of the defendant, can recover of the defendant
under the circumstances above set forth
RULING
Yes. We are of the opinion that the defendant is liable. Having advertised the fact that
Collantes was his agent and having given them a special invitation to deal with such agent,
it was the duty of the defendant on the termination of the relationship of principal and agent
to give due and timely notice thereof to the plaintiffs. Failing to do so, he is responsible to
them for whatever goods may have been in good faith and without negligence sent to the
agent without knowledge, actual or constructive, of the termination of such relationship.
JESUS M. GOZUN, Petitioner, v. JOSE TEOFILO T. MERCADO A.K.A. 'DON PEPITO
MERCADO,Respondent.
G.R. NO. 167812, THIRD DIVISION, December 19, 2006, CARPIO MORALES, J.
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein
that she was acting for and in behalf of respondent. She thus bound herself in her personal
capacity and not as an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on
real property executed by an agent, it must upon its face purport to be made, signed and
sealed in the name of the principal, otherwise, it will bind the agent only.
FACTS
In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga.
Upon respondent's request, petitioner, owner of JMG Publishing House, a printing shop
located in San Fernando, Pampanga, submitted to respondent draft samples and price
quotation of campaign materials.
By petitioner's claim, respondent's wife had told him that respondent already approved his
price quotation and that he could start printing the campaign materials, hence, he did print
campaign materials like posters bearing respondent's photograph,3 leaflets containing the
slate of party candidates,4 sample ballots,5 poll watcher identification cards,6 and stickers.
Given the urgency and limited time to do the job order, petitioner availed of the services and
facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his daughter
Jennifer Gozun and mother Epifania Macalino Gozun, respectively.7 Petitioner delivered the
campaign materials to respondent's headquarters along Gapan-Olongapo Road in San
Fernando, Pampanga.8
Meanwhile, on March 31, 1995, respondent's sister-in-law, Lilian Soriano (Lilian) obtained
from petitioner "cash advance" of P253,000 allegedly for the allowances of poll watchers
who were attending a seminar and for other related expenses. Lilian acknowledged on
petitioner's 1995 diary9 receipt of the amount.10
Petitioner later sent respondent a Statement of Account11 in the total amount of
P2,177,906 itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro
Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash advance"
obtained by Lilian.
On August 11, 1995, respondent's wife partially paid P1,000,000 to petitioner who issued a
receipt12therefor. Despite repeated demands and respondent's promise to pay, respondent
failed to settle the balance of his account to petitioner.
Petitioner thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a
complaint15against respondent to collect the remaining amount of P1,177,906 plus
"inflationary adjustment" and attorney's fees.
In his Answer with Compulsory Counterclaim, respondent denied having transacted with
petitioner or entering into any contract for the printing of campaign materials. He alleged
that the various campaign materials delivered to him were represented as donations from
his family, friends and political supporters. He added that all contracts involving his personal
expenses were coursed through and signed by him to ensure compliance with pertinent
election laws. On petitioner's claim that Lilian, on his (respondent's) behalf, had obtained
from him a cash advance of P253,000, respondent denied having given her authority to do
so and having received the same.
ISSUE
Whether respondent is bound by the loan contracted by Lilian
RULING
No. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter. Contracts entered into in the name of another person by one who has been given no
authority or legal representation or who has acted beyond his powers are classified as
unauthorized contracts and are declared unenforceable, unless they are ratified.
Generally, the agency may be oral, unless the law requires a specific form. However, a
special power of attorney is necessary for an agent to, as in this case, borrow money, unless
it be urgent and indispensable for the preservation of the things which are under
administration. Since nothing in this case involves the preservation of things under
administration, a determination of whether Soriano had the special authority to borrow
money on behalf of respondent is in order.
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein
that she was acting for and in behalf of respondent. She thus bound herself in her personal
capacity and not as an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on
real property executed by an agent, it must upon its face purport to be made, signed and
sealed in the name of the principal, otherwise, it will bind the agent only.
In sum, respondent has the obligation to pay the total cost of printing his campaign
materials delivered by petitioner in the total ofP1,924,906, less the partial payment
ofP1,000,000, or P924,906.
LAUREANO T. ANGELES, Petitioner, vs. PHILIPPINE NATIONAL RAILWAYS (PNR) AND
RODOLFO FLORES, Respondents.
G.R. No. 150128, SECOND DIVISION, August 31, 2006, GARCIA, J.
A power of attorney is only but an instrument in writing by which a person, as principal,
appoints another as his agent and confers upon him the authority to perform certain
specified acts on behalf of the principal. The written authorization itself is the power of
attorney, and this is clearly indicated by the fact that it has also been called a letter of
attorney. Its primary purpose is not to define the authority of the agent as between himself
and his principal but to evidence the authority of the agent to third parties with whom the
agent deals. The letter under consideration is sufficient to constitute a power of attorney.
Except as may be required by statute, a power of attorney is valid although no notary public
intervened in its execution.
FACTS
Therespondent PNR informed a certain Gaudencio Romualdez(Romualdez,hereinafter)that it
has accepted the latters offer to buy, on an AS IS, WHERE IS basis, the PNRs
scrap/unserviceable rails for the total amount of P96,600.00. After paying the stated
purchase price, Romualdez addressed a letter to Atty. Cipriano Dizon, PNRs Acting
Purchasing Agent that Romualdez is authorizing Lizette Wijangco to be his lawful
representative in the withdrawal of the scrap/unserviceable rails awarded to him.
The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles, petitioner's
now deceased wife. Lizette requested the PNR to transfer the location of withdrawal for the
reason that thescrap/unserviceable rails werenotready for hauling.ThePNR granted said
request and allowed Lizette to withdraw scrap/unserviceable rails in Tarlac instead. However,
the PNR subsequently suspended the withdrawal in view ofwhat it considered as
documentary discrepancies coupled by reported pilferages of over P500,000.00 worth of
PNR scrap properties in Tarlac.
Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00. The
PNR, however, refused to pay, alleging that as per delivery receipt duly signed by Lizette,
54.658 metric tons of unserviceable rails had already been withdrawn which, at P2,100.00
per metric ton, were worth P114,781.80, an amount that exceeds the claim for refund.
The spouses Angeles filed suit against the PNR and its corporate secretary, Rodolfo Flores,
among others, forspecificperformance and damages. In it, they prayed that PNR be d
irectedtodeliver46metric tons of scrap/unserviceable rails and to pay them damages and
attorney's fees. Meanwhile, Lizette W. Angeles passed away and was substituted by her
heirs, among whom is her husband, herein petitioner Laureno T. Angeles.
The trial court postulated that the spouses Angeles are not the real parties-in-interest,
rendered judgment dismissing their complaint for lack of cause of action. As held by the
court, Lizette was merely a representative of Romualdez in the withdrawal of scrap or
unserviceable rails awarded to him and not an assignee to the latter's rights with respect to
the award. CA affirmed the decision of RTC.
ISSUE
Whether Lizette W. Angeles is agent or an assignee of his (Romualdez's) interest in the
scrap rails awarded to San Juanico Enterprises
RULING
Yes. The CAs conclusion, affirmatory of that of the trial court, is that Lizette was not an
assignee, but merely an agent whose authority was limited to the withdrawal of the scrap
rails, hence, without personality to sue.
Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the
principal and not to the agent and the relationship of the third party to the principal is the
same as that in a contract in which there is no agent. Normally, the agent has neither rights
nor liabilities as against the third party. He cannot thus sue or be sued on the contract.
Since a contract may be violated only by the parties thereto as against each other, the real
party-in-interest, either as plaintiff or defendant in an action upon that contract must,
generally, be a contracting party.
The legal situation is, however, different where an agent is constituted as an assignee. In
such a case, the agent may, in his own behalf, sue on a contract made for his principal, as
an assignee of such contract. The rule requiring every action to be prosecuted in the name
of the real party-in- interest recognizes the assignment of rights of action and also
recognizes that when one has a right
assigned to him, he is then the real party-in-interest and may maintain an action upon such
claim or right.[4]
Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26, 1980,
it is at once apparent that Lizette was to act just as a representative of Romualdez in the
withdrawal of rails, and not an assignee.
Petitioner makes much of the fact that the terms agent or attorney-in-fact were not used in
the Romualdez letter aforestated. It bears to stress, however, that the words principal and
agent, are not the only terms used to designate the parties in an agency relation. The agent
may also be called an attorney, proxy, delegate or, as here, representative.
It cannot be over emphasized that Romualdez's use of the active verb authorized, instead of
assigned, indicated an intent on his part to keep and retain his interest in the subject
matter. Stated a bit differently, he intended to limit Lizettes role in the scrap transaction to
being the representative of his interest therein.
Petitioner submits that the second paragraph of the Romualdez letter, stating-I have given
[Lizette] the original copy of the award x x x which will indicate my waiver of rights,
interests and participationin favor of Lizette R. Wijanco-clarifiesthatLizettewas intended to
be an assignee, and not a mere agent.
We are not persuaded. As it were,thepetitionerconvenientlyomittedanimportant phrase
preceding the paragraph which would have put the whole matter in context. The phraseis
For this reason, and the antecedent thereof is his (Romualdez) having appointed Lizette as
his representative in the matter of the withdrawal of the scrap items.In fine, the key phrase
clearly conveys the idea that Lizette was given the original copy of the contract award to
enable her to withdraw the rails as Romualdezs authorized representative
When put into the context of the letter as a whole, it is abundantly clear that the rights
which Romualdez waived or ceded in favor of Lizette were those in furtherance of the
agency relation that he had established for the withdrawal of the rails.
At any rate, any doubt as to the intent of Romualdez generated by the way his letter was
couched could be clarified by the acts of the main players themselves.Article 1371 of the
Civil Code provides that to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. In other words, in
case of doubt, resort may be made to the situation, surroundings, and relations of the
parties.
The fact ofagencywas, as the trial court aptly observed,[5]confirmed in subsequent letters
from the Angeles spouses in which they themselves refer to Lizette as authorized
representative of San Juanico Enterprises. Mention may also be made that the withdrawal
receipt which Lizette had signed indicated that she was doing so in a representative
capacity. One professing to act as agent for another is estopped to deny his agency both as
against his asserted principal and third persons interested in the transaction which he
engaged in.
Whether or not an agency has been created is a question to be determined by the fact that
one represents and is acting for another. The appellate court, and before it, the trial court,
had
peremptorily determined that Lizette, with respect to the withdrawal of the scrap in
question, was acting for Romualdez. And with the view we take of this case, there were
substantial pieces of evidence adduced to support this determination. The desired reversal
urged by the petitioner cannot, accordingly, be granted. For, factual findings of the trial
court, adopted and confirmed by the CA, are, as a rule, final and conclusive and may not be
disturbed on appeal.[6] So it must be here. Petitioner maintains that the Romualdez letter
in question was not in the form of a special power of attorney, implying that the latter had
not intended to merely authorize his wife, Lizette, to perform an act for him (Romualdez).
The contention is specious. In the absence of statute, no form or method of execution is
required for a valid power of attorney; it may be in any form clearly showing on its face the
agents authority.[7]
A power of attorney is only but an instrument in writing by which a person, as principal,
appoints another as his agent and confers upon him the authority to perform certain
specified acts on behalf of the principal. The written authorization itself is the power of
attorney, and this is clearly indicated by the fact that it has also been called a letter of
attorney. Its primary purpose is not to define the authority of the agent as between himself
and his principal but to evidence the authority of the agent to third parties with whom the
agent deals. The letter under consideration is sufficient to constitute a power of attorney.
Except as may be required by statute, a power of attorney is valid although no notary public
intervened in its execution.
A power of attorney must be strictly construed and pursued. The instrument will be held to
grant only those powers which are specified therein, and the agent may neither go beyond
nor deviate from the power of attorney.[10] Contextually, all that Lizette was authorized to
do was to withdraw the unserviceable/scrap railings. Allowing her authority to sue therefor,
especially in her own name, would be to read something not intended, let alone written in
the Romualdez letter.
Finally, the petitioner's claim that Lizette paid the amount of P96,000.00 to the PNR appears
to be a mere afterthought; it ought to be dismissed outright under the estoppel principle. In
earlier proceedings, petitioner himself admitted in his complaint that it wasRomualdezwho
paid this amount.
SC affirmed CA.
V-GENT, INC., Petitioner, vs. MORNING STAR TRAVEL and TOURS, INC., Respondent.
G.R. No. 186305, SECOND DIVISION, July 22, 2015, BRION, J.
An agent may sue or be sued solely in its own name and without joining the principal when
the following elements concur: (1) the agent acted in his own name during the transaction;
(2) the agent acted for the benefit of an undisclosed principal; and (3) the transaction did
not involve the property of the principal.
When these elements are present, the agent becomes bound as if the transaction were its
own.
FACTS
The petitioner V-Gent, Inc. (V-Gent) bought twenty-six (26)2 two-way plane tickets (Manila-
Europe- Manila) from the respondent Morning Star Travel and Tours, Inc. (Morning Star).
On June 24, 1998 and September 28, 1998, V-Gent returned a total of fifteen (15) unused
tickets worth $8,747.50 to the defendant. Of the 15, Morning Star refunded only six (6)
tickets worth $3,445.62. Morning Star refused to refund the remaining nine (9) unused
tickets despite repeated demands.
On December 15, 2000, petitioner V-Gent filed a money claim against Morning Star for
payment of the unrefunded $5,301.88 plus attorney's fees.
Morning Star countered that V-Gent was not entitled to a refund because the tickets were
bought on the airline company's "buy one, take one" promo. It alleged that there were only
fourteen (14) unused tickets and only seven (7) of these were refundable; considering that
it had already refunded six (6) tickets (which is more or less 50o/o of 14), then there was
nothing else to refund.
Morning Star also questioned V-Gent's personality to file the suit. It asserted that the
passengers, in whose names the tickets were issued, are the real parties-in-interest.
ISSUE
Whether VGENT, the agent, has legal standing to file the complaint
RULING
No. Every action must be prosecuted or defended in the name of the real party-in-interest -
the party who stands to be benefited or injured by the judgment in the suit.8 In suits where
an agent represents a party, the principal is the real party-in-interest; an agent cannot file a
suit in his own name on behalf of the principal.
Rule 3, Section 3 of the Rules of Court provides the exception when an agent may sue or be
sued without joining the principal.
Section 3. Representatives as parties. - Where the action is allowed to be prosecuted and
defended by a representative or someone acting in a fiduciary capacity, the beneficiary shall
be included in the title of the case and shall be deemed to be the real party-in-interest. A
representative may be a trustee of an express trust, a guardian, an executor or
administrator, or a party authorized by law or these Rules. An agent acting in his own name
and for the benefit of an undisclosed principal may sue or be sued without joining the
principal except when the contract involves things belonging to the principal. (Emphasis
supplied.)
Thus an agent may sue or be sued solely in its own name and without joining the principal
when the following elements concur: (1) the agent acted in his own name during the
transaction; (2) the agent acted for the benefit of an undisclosed principal; and (3) the
transaction did not involve the property of the principal.
When these elements are present, the agent becomes bound as if the transaction were its
own. This rule is consistent with Article 1883 of the Civil Code which says:
Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal. In such case,
the agent is the one directly bound in favor of the person with whom he has contracted, as
if the transaction were his own, except when the contract involves things belonging to the
principal.
The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent.
In the present case, only the · first element is present; the purchase order and the receipt
were in the name of V-Gent. However, the remaining elements are absent because: (1) V-
Gent disclosed the names of the passengers to Morning Star - in fact the tickets were in
their names; and (2) the transaction was paid using the passengers' money. Therefore, Rule
3, Section 3 of the Rules of Court cannot apply.
To define the actual factual situation, V-Gent, the agent, is suing to recover the money of its
principals - the passengers - who are the real parties-in-interest because they stand to be
injured or benefited in case Morning Star refuses or agrees to grant the refund because the
money belongs to them. From this perspective, V-Gent evidently does not have a legal
standing to file the complaint.
Finally, V-Gent argues that by making a partial refund, Morning Star was already estopped
from refusing to make a full refund on the ground that V-Gent is not the real party-in-
interest to demand reimbursement. We find no merit in this argument. The power to collect
and receive payments on behalf of the principal is an ordinary act of administration covered
by the general powers of an agent. On the other hand, the filing of suits is an act of strict
dominion.
PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners, vs. INTERMEDIATE APPELLATE
COURT and TERESITA NACIANCENO, respondents.
G.R. No. L-67889, FIRST DIVISION, October 10, 1985, GUTIERREZ, JR., J
A general agent is one authorized to do all acts pertaining to a business of a certain kind or
at a particular place, or all acts pertaining to a business of a particular class or series. He
has usually authority either expressly conferred in general terms or in effect made general
by the usages, customs or nature of the business which he is authorized to transact.
FACTS
Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the
then Department of Education and Culture, hereinafter called Department, to purchase
without public bidding, one million pesos worth of national flags for the use of public schools
throughout the country. The respondent was able to expedite the approval of the purchase
by hand-carrying the different indorsements from one office to another, so that by the first
week of September, 1974, all the legal requirements had been complied with, except the
release of the purchase orders. When Nacianceno was informed by the Chief of the Budget
Division of the Department that the purchase orders could not be released unless a formal
offer to deliver the flags in accordance with the required specifications was first submitted
for approval, she contacted the owners of the United Flag Industry on September 17, 1974.
On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry.
The next day, on October 17, 1974, the respondent's authority to represent the United Flag
Industry was revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the payment of
P469,980.00 on October 23, 1974 for the first delivery, tendered the amount of P23,900.00
or five percent (5%) of the amount received, to the respondent as payment of her
commission. The latter allegedly protested. She refused to accept the said amount insisting
on the 30% commission agreed upon. The respondent was prevailed upon to accept the
same, however, because of the assurance of the petitioners that they would pay the
commission in full after they delivered the other half of the order. The respondent states
that she later on learned that petitioner Siasat had already received payment for the second
delivery of 7,833 flags. When she confronted the petitioners, they vehemently denied
receipt of the payment, at the same time claiming that the respondent had no participation
whatsoever with regard to the second delivery of flags and that the agency had already
been revoked.
The respondent originally filed a complaint with the Complaints and Investigation Office in
Malacañang but when nothing came of the complaint, she filed an action in the Court of First
Instance of Manila to recover the following commissions: 25%, as balance on the first
delivery and 30%, on the second delivery.
ISSUE
Whether respondent is an agent
RULING
Yes.
There are several kinds of agents.
An agent may be (1) universal: (2) general, or (3) special. A universal; agent is one
authorized to do all acts for his principal which can lawfully be delegated to an agent. So far
as such a condition is possible, such an agent may be said to have universal authority. (Mec.
Sec. 58).
A general agent is one authorized to do all acts pertaining to a business of a certain kind or
at a particular place, or all acts pertaining to a business of a particular class or series. He
has usually authority either expressly conferred in general terms or in effect made general
by the usages, customs or nature of the business which he is authorized to transact.
An agent, therefore, who is empowered to transact all the business of his principal of a
particular kind or in a particular place, would, for this reason, be ordinarily deemed a
general agent. (Mec Sec. ,30).
A special agent is one authorized to do some particular act or to act upon some particular
occasion. lie acts usually in accordance with specific instructions or under limitations
necessarily implied from the nature of the act to be done.
One does not have to undertake a close scrutiny of the document embodying the agreement
between the petitioners and the respondent to deduce that the 'latter was instituted as a
general agent. Indeed, it can easily be seen by the way general words were employed in the
agreement that
no restrictions were intended as to the manner the agency was to be carried out or in the
place where it was to be executed. The power granted to the respondent was so broad that
it practically covers the negotiations leading to, and the execution of, a contract of sale of
petitioners' merchandise with any entity or organization.
Moreover, we deny the petitioners' contention that respondent Nacianceno is not entitled to
the stipulated commission on the second delivery because of the revocation of the agency
effected after the first delivery. The revocation of agency could not prevent the respondent
from earning her commission because as the trial court opined, it came too late, the
contract of sale having been already perfected and partly executed.
The principal cannot deprive his agent of the commission agreed upon by cancelling the
agency and, thereafter, dealing directly with the buyer.
FRANCISCO A. VELOSO, Petitioner, v. COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted
by her husband GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF
MANILA, Respondents.
G.R. No. 102737, SECOND DIVISION, August 21, 1996., TORRES, JR., J.
There was no need to execute a separate and special power of attorney since the general
power of attorney had expressly authorized the agent or attorney in fact the power to sell
the subject property. The special power of attorney can be included in the general power
when it is specified therein the act or transaction for which the special power is required.
FACTS
Petitioner owns a parcel of land and such was registered in his name when he was still
single. Later on, a new title was issued, in favor of the respondent, Escario.
Petitioner alleged that his wife, through a forged general power of attorney sold the said
parcel of land. Petitioner Veloso filed an action for annulment of documents, reconveyance
of property with damages and preliminary injunction and/or restraining order. He contended
that the sale of the property, and the subsequent transfer thereof, were null and void.
Petitioner then prayed that a TRO be issued to prevent the transfer of the property; that the
General Power of Attorney, the Deed of Absolute Sale and the TCT in favor of respondent be
annulled; and the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and
denied any knowledge of the alleged irregularity. She allegedly relied on the general power
of attorney of Irma Veloso which was sufficient in form and substance and was duly
notarized. She contended that plaintiff had no cause of action against her.
In the decision of the trial court, defendant Aglaloma Escaro was adjudged the lawful owner
of the property as she was deemed an innocent purchaser for value. The assailed general
power of attorney was held to be valid and sufficient for the purpose. The trial court ruled
that there was no need for a special power of attorney when the special power was already
mentioned in the general one. It also declared that plaintiff failed to substantiate allegation
of fraud. This is affirmed by the CA.
ISSUE
Whether the petitioner’s contention is meritorious
RULING
No.
An examination of the records showed that the assailed power of attorney was valid and
regular on its face. It was notarized and as such, it carries the evidentiary weight conferred
upon it with respect to its due execution. While it is true that it was denominated as a
general power of attorney, a perusal thereof revealed that it stated an authority to sell, to
wit:
"2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and
hereditaments or other forms of real property, more specifically TCT No. 49138, upon such
terms and conditions and under such covenants as my said attorney shall deem fit and
proper."
Thus, there was no need to execute a separate and special power of attorney since the
general power of attorney had expressly authorized the agent or attorney in fact the power
to sell the subject property. The special power of attorney can be included in the general
power when it is specified therein the act or transaction for which the special power is
required.
The general power of attorney was accepted by the Register of Deeds when the title to the
subject property was cancelled and transferred in the name of private Respondent. In LRC
Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:
"Whether the instrument be denominated as "general power of attorney" or "special power
of attorney," what matters is the extent of the power or powers contemplated upon the
agent or attorney in fact. If the power is couched in general terms, then such power cannot
go beyond acts of administration. However, where the power to sell is specific, it not being
merely implied, much less couched in general terms, there can not be any doubt that the
attorney in fact may execute a valid sale. An instrument may be captioned as "special power
of attorney" but if the powers granted are couched in general terms without mentioning any
specific power to sell or mortgage or to do other specific acts of strict dominion, then in that
case only acts of administration may be deemed conferred."
Petitioner contends that his signature on the power of attorney was falsified. He also alleges
that the same was not duly notarized for as testified by Atty. Tubig himself, he did not sign
thereon nor was it ever recorded in his notarial register. To bolster his argument, petitioner
had presented checks, marriage certificate and his residence certificate to prove his alleged
genuine signature which when compared to the signature in the power of attorney, showed
some difference.
We found, however, that the basis presented by the petitioner was inadequate to sustain his
allegation of forgery. Mere variance of the signatures cannot be considered as conclusive
proof that the same were forged. Forgery cannot be presumed. 17 Petitioner, however,
failed to prove his allegation and simply relied on the apparent difference of the signatures.
His denial had not established that the signature on the power of attorney was not his.
Thus, the respondent, relying on the GPA, is an innocent purchaser for value
KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY,"
petitioner, vs. THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.
G.R. No. 88539, THIRD DIVISION, October 26, 1993, BIDIN, J.
It is a well-established rule that one who clothes another with apparent authority as his
agent and holds him out to the public as such cannot be permitted to deny the authority of
such person to act as his agent, to the prejudice of innocent third parties dealing with such
person in good faith and in the honest belief that he is what he appears to be.
FACTS
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of
newsprint, bond paper and scrap, with places of business at Baesa, Quezon City, and Sto.
Cristo, Binondo, Manila. Private respondent Valiant Investment Associates, on the other
hand, is a partnership duly organized and existing under the laws of the Philippines with
business address at Kalookan City.
From December 4, 1979 to February 15, 1980, private respondent delivered various kinds of
paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The
deliveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac
who was then employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's
instructions that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid
for the merchandise by issuing several checks payable to cash at the specific request of Tiu
Huy Tiac. In turn, Tiac issued nine (9) postdated checks to private respondent as payment
for the paper products. Unfortunately, sad checks were later dishonored by the drawee
bank.
Thereafter, private respondent made several demands upon petitioner to pay for the
merchandise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner as the
manager of his Binondo office, to enter into the questioned transactions with private
respondent and Lilian Tan. Petitioner denied any involvement in the transaction entered into
by Tiu Huy Tiac and refused to pay private respondent the amount corresponding to the
selling price of the subject merchandise.
Left with no recourse, private respondent filed an action against petitioner for the collection
of P297,487.30 representing the price of the merchandise.
ISSUE
Whether Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold the
latter liable for the disputed transaction.
RULING
Yes. It is a well-established rule that one who clothes another with apparent authority as his
agent and holds him out to the public as such cannot be permitted to deny the authority of
such person to act as his agent, to the prejudice of innocent third parties dealing with such
person in good faith and
in the honest belief that he is what he appears to be. From the facts and the evidence on
record, there is no doubt that this rule obtains. The petition must therefore fail.
It is evident from the records that by his own acts and admission, petitioner held out Tiu
Huy Tiac to the public as the manager of his store in Sto. Cristo, Binondo, Manila. More
particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva,
respondent's manager, as his (petitioner's) branch manager as testified to by Bernardino
Villanueva. Secondly, Lilian Tan, who has been doing business with petitioner for quite a
while, also testified that she knew Tiu Huy Tiac to be the manager of petitioner's Sto. Cristo,
Binondo branch. This general perception of Tiu Huy Tiac as the manager of petitioner's Sto.
Cristo store is even made manifest by the fact that Tiu Huy Tiac is known in the community
to be the "kinakapatid" (godbrother) of petitioner. In fact, even petitioner admitted his close
relationship with Tiu Huy Tiac when he said that they are "like brothers" (Rollo, p. 54).
There was thus no reason for anybody especially those transacting business with petitioner
to even doubt the authority of Tiu Huy Tiac as his manager in the Sto. Cristo Binondo
branch.
By his representations, petitioner is now estopped from disclaiming liability for the
transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the
representations are intentional or merely negligent so long as innocent, third persons relied
upon such representations in good faith and for value.
Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an
agent of petitioner by estoppel, an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying
thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back
on his own acts and representations to the prejudice of the other party who, in good faith,
relied upon them (Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA
680 [1990]).
Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy Tiac on his
behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to fact as though he had full powers
(Article 1911 Civil Code), as in the case at bar.
RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner, vs. HON. COURT OF
APPEALS, EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO, respondents.
G.R. No. 95703, FIRST DIVISION, August 3, 1992, GRIÑO-AQUINO, J.
FACTS
On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special
power of attorney in favor of Rufina S. Aquino authorizing him:
1. To secure a loan from any bank or lending institution for any amount or otherwise
mortgage the property covered by Transfer Certificate of Title No. S-79238 situated at Las
Piñas, Rizal, the same being my paraphernal property, and in that connection, to sign, or
execute any deed of mortgage and sign other document requisite and necessary in securing
said loan and to receive the proceeds thereof in cash or in check and to sign the receipt
therefor and thereafter endorse the check representing the proceeds of loan. (p. 10, Rollo.)
Thereupon, Gallardo delivered to Aquino both the special power of attorney and her owner's
copy of Transfer Certificate of Title No. S-79238 (19963-A).
On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in
favor of the Rural Bank of Bombon (Camarines Sur), Inc. (hereafter, defendant Rural Bank)
over the three parcels of land covered by TCT No. S-79238. The deed stated that the
property was being given as security for the payment of "certain loans, advances, or other
accommodations obtained by the mortgagor from the mortgagee in the total sum of Three
Hundred Fifty Thousand Pesos only (P350,000.00), plus interest at the rate of fourteen
(14%) per annum . . ." (p. 11, Rollo).
On January 6, 1984, the spouses Ederlinda Gallardo and Daniel Manzo filed an action
against Rufino Aquino and the Bank because Aquino allegedly left his residence at San
Pascual, Hagonoy, Bulacan, and transferred to an unknown place in Bicol. She discovered
that Aquino first resided at Sta. Isabel, Calabanga, Camarines Sur, and then later, at San
Vicente, Calabanga, Camarines Sur, and that they (plaintiffs) were allegedly surprised to
discover that the property was mortgaged to pay personal loans obtained by Aquino from
the Bank solely for personal use and benefit of Aquino; that the mortgagor in the deed was
defendant Aquino instead of plaintiff Gallardo whose address up to now is Manuyo, Las
Piñas, M.M., per the title (TCT No. S-79238) and in the deed vesting power of attorney to
Aquino; that correspondence relative to the mortgage was sent to Aquino's address at "Sta.
Isabel, Calabanga, Camarines Sur" instead of Gallardo's postal address at Las Piñas, Metro
Manila; and that defendant Aquino, in the real estate mortgage, appointed defendant Rural
Bank as attorney in fact, and in case of judicial foreclosure as receiver with corresponding
power to sell and that although without any express authority from Gallardo, defendant
Aquino waived Gallardo's rights under Section 12, Rule 39, of the Rules of Court and the
proper venue of the foreclosure suit.
On January 23, 1984, the trial court, thru the Honorable Fernando P. Agdamag, temporarily
restrained the Rural Bank "from enforcing the real estate mortgage and from foreclosing it
either judicially or extrajudicially until further orders from the court"
Rufino S. Aquino in his answer said that the plaintiff authorized him to mortgage her
property to a bank so that he could use the proceeds to liquidate her obligation of P350,000
to him. The obligation to pay the Rural Bank devolved on Gallardo.
ISSUE
Whether the Deed of Real Estate Mortgage dated August 26, 1981, executed by Rufino S.
Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the Rural Bank of Bombon is
valid
RULING
No.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on
real property executed by an agent, it must upon its face purport to be made, signed and
sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough
merely that the agent was in fact authorized to make the mortgage, if he has not acted in
the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent
describes himself as acting by virtue
of a power of attorney, if in fact the agent has acted in his own name and has set his own
hand and seal to the mortgage. This is especially true where the agent himself is a party to
the instrument. However clearly the body of the mortgage may show and intend that it shall
be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of
his principal and as the act and deed of the principal, it is not valid as to the principal.
In view of this rule, Aquino's act of signing the Deed of Real Estate Mortgage in his name
alone as mortgagor, without any indication that he was signing for and in behalf of the
property owner, Ederlinda Gallardo, bound himself alone in his personal capacity as a debtor
of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo
Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since
it was executed in accordance with Article 1883 which provides:
Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal.
In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.
The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to
the case at bar. Herein respondent Aquino acted purportedly as an agent of Gallardo, but
actually acted in his personal capacity. Involved herein are properties titled in the name of
respondent Gallardo against which the Bank proposes to foreclose the mortgage constituted
by an agent (Aquino) acting in his personal capacity. Under these circumstances, we hold,
as we did in Philippine Sugar Estates Development Co. vs. Poizat, supra, that Gallardo's
property is not liable on the real estate mortgage that there is no principle of law by which a
person can become liable on a real mortgage which she never executed either in person or
by attorney in fact.
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and the
ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP
MORTGAGE REDEMPTION INSURANCE POOL, respondents.
G.R. No. L-109937, FIRST DIVISION, March 21, 1994, QUIASON, J
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not
personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers."
The DBP is not authorized to accept applications for MRI when its clients are more than 60
years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it accepted Dan's application
for MRI by collecting the insurance premium, and deducting its agent's commission and
service fee.
The liability of an agent who exceeds the scope of his authority depends upon whether the
third person is aware of the limits of the agent's powers. There is no showing that Dans
knew of the limitation on DBP's authority to solicit applications for MRI.
FACTS
In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law,
applied for a loan of P500,000.00 with the Development Bank of the Philippines (DBP),
Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP
to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987
and released on August 11, 1987. From the proceeds of the loan, DBP deducted the amount
of P1,476.00 as payment for the MRI premium. On August 15, 1987, Dans accomplished
and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI
Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was
credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool
was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this
information to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP
that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years
at the time of application. On October 21, 1987, DBP apprised Candida Dans of the
disapproval of her late husband's MRI application. The DBP offered to refund the premium of
P1,476.00 which the deceased had paid, but Candida Dans refused to accept the same,
demanding payment of the face value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept anex gratiasettlement of P30,000.00, which the DBP later
offered.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a
complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance
pool for "Collection of Sum of Money with Damages."
ISSUE
Whether DBP exceeded the scope of its authority
RULING
Yes.
It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure
MRI coverage. Instead of allowing Dans to look for his own insurance carrier or some other
form of insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI
coverage. When Dan's loan was released on August 11, 1987, DBP already deducted from
the proceeds thereof the MRI premium. Four days latter, DBP made Dans fill up and sign his
application for MRI, as well as his health statement. The DBP later submitted both the
application form and health statement to the DBP MRI Pool at the DBP Main Building, Makati
Metro Manila. As service fee, DBP deducted 10 percent of the premium collected by it from
Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second
as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying for said
insurance, thereby leading him and his family to believe that they had already fulfilled all
the requirements for the MRI and that the issuance of their policy was forthcoming.
Apparently, DBP had full knowledge that Dan's application was never going to be approved.
The maximum age for MRI acceptance is 60 years as clearly and specifically provided in
Article 1 of the Group Mortgage Redemption Insurance Policy signed in 1984 by all the
insurance companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not
personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers."
The DBP is not authorized to accept applications for MRI when its clients are more than 60
years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it accepted Dan's application
for MRI by collecting the insurance premium, and deducting its agent's commission and
service fee.
The liability of an agent who exceeds the scope of his authority depends upon whether the
third person is aware of the limits of the agent's powers. There is no showing that Dans
knew of the limitation on DBP's authority to solicit applications for MRI.
If the third person dealing with an agent is unaware of the limits of the authority conferred
by the principal on the agent and he (third person) has been deceived by the non-disclosure
thereof by the agent, then the latter is liable for damages to him.
SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR.,v.LAND BANK OF THE PHILIPPINES
and the REGISTER OF DEEDS FOR DAVAO CITY
G.R. No. 192602, January 18, 2017, Third Division, JARDELEZA, J.
An agent appointed in a Power of Attorney with authority to sign documents relating to a
mortgage, may appoint a substitute if the principal has not prohibited him from doing so. A
bank can thus validly transact with a substitute agent as long as the Power of Attorney does
not prohibit the appointment of a substitute.
A real estate mortgage can be validly executed before the loan is released, provided that
the loan is actually released thereafter.
An assignment of inventory (given in addition to a real estate mortgage) is not a substitute
for payment of sums of money. As such, it does not serve to extinguish the loan and the
accessory real estate mortgage.
FACTS:
In 1996, the Spouses May and Johnny Villauz (“Spouses”) executed an SPA in favor of May
Villauz’s mother. Paula Agbisit, which authorized the latter to “sign in our behalf all
documents relating the sale, mortgage, or other disposition’ of a property owned by the
Spouses located in Davao City. The property was to be used as collateral for a loan to
expand Paula Agbisit’s backyard cut flower business.
On June 19, 1996, Paula Agbisit executed her own SPA appointing (as her substitute agent)
Milflores Cooperative (of which she was the Chairperson) as attorney-in-fact in obtaining a
loan from and executing a real estate mortgage in favor of the Land Bank of the Philippines.
Milflores Cooperative also executed a Deed of Assignment of Produce/ Inventory as
additional collateral for the loan.
Land Bank of the Philippines approved a P3 million loan in favor of Milflores Cooperative and
on June 25, 1996 made a partial release of P995, 500. On the same day, Paula Agbisit
borrowed the amount of P604, 750 from Milflores Cooperative.
The trial court dismissed the complaint and which dismissal was affirmed by the Court of
Appeals. Hence, this petition to the Supreme Court.
ISSUES:
Whether Paula Agbisit could further delegate her authority as attorney-in-fact for the
Spouses Villaluz? If not, was the mortgage in favor of Land Bank executed by Milflores
Cooperative void.
Whether the real estate mortgage can be deemed void since there was no loan yet when the
mortgage was executed.
Whether the SPA issued by the Spouses in favor of Paula Agbisit was extinguished when
Milflores Cooperative assigned its produce and inventory to Land Bank as additional
collateral.
RULING:
1. YES. The delegation of authority made by Paula Agbisit to Milflores Cooperative is valid.
Articles 1892 and 1893 of the Civil Code provide the rules regarding the appointment of a
substitute by an agent. The law created a presumption that an agent has the power to
appoint a substitute. The consequence of the presumption is that, upon valid appointment
of a substitute by the agent, there ipso facto arises an agency relationship between the
principal and the substitute, i.e. the substitute becomes the agent of the principal. As a
result, the principal is bound by the acts of the substitute as if these acts had been done by
the principal’s appointed agent.
In this case, the SPA executed by the Spouses in favor of Paula Agbisit contains no
restrictive language indicative of an intention to prohibit Paula Agbisit from appointing a
substitute agent. Thus, Paula Agbisit’s appointment of Milflores as substitute agent was valid
and consequently, the real estate mortgage is considered validly executed.
2. The Spouses floated a new theory that the mortgage was void because the loan was not
yet in existence when the mortgage was executed on June 21, 1996 as the loan was
released only on June 25, 1996.
The Supreme Court ruled that although the validity of the real estate mortgage is dependent
upon the validity of the loan, what is essential is that the loan contract intended to be
secured is actually
perfected (although the proceeds are not yet released) prior to the execution of the
mortgage contract.
In loan transactions, it is customary for the lender to require the borrower to execute the
security contracts prior to the initial loan drawdown. This is understandable since a prudent
bank would not want to release its funds without the security arrangements in place. On the
other hand, the borrower would not be prejudiced by mere execution of the security
contract because unless the proceeds are delivered, the obligations under the security
contracts will not arise.
In other words, the security contract, in this case, the real estate mortgage, is conditioned
upon the release of the loan amount. This suspensive condition was satisfied when Land
Bank released the first tranche of the ₱3,000,000 loan to Milflores Cooperative, which
consequently gave rise to the Spouses’ obligations under the real estate mortgage.
The Spouses’ theory that the additional security by Milflores Cooperative of its produce/
inventory extinguished the loan and consequently the agency contract, was likewise found
to be unacceptable.
The assignment was for the express purpose of “securing the payment of the line/ loan,
interest, and charges thereon.” Nowhere in the deed can it be reasonably deduced that the
collaterals assigned by Milflores Cooperative were intended to substitute the payment of the
sum of money under the loan. It was merely an accessory contract to secure the principal
loan obligation.
The Spouses understandably feel shorthanded because their property was foreclosed by
reason of another person’s inability to pay. However, they were not coerced to grant an SPA
in favor of Paula Agbisit. Nor were they prohibited from prescribing conditions on how such
power may be exercised. Absent such express limitations, the law recognized Land Bank’s
right to rely on the terms of the power of attorney as written.
SPOUSES ROLANDO AND HERMINIA SALVADOR, Petitioners, v. SPOUSES ROGELIO AND
ELIZABETH RABAJA AND ROSARIO GONZALES, Respondents.
G.R. No. 199990, SECOND DIVISION, February 04, 2015, MENDOZA, J.
Persons dealing with an agent must ascertain not only the fact of agency, but also the
nature and extent of the agent’s authority. A third person with whom the agent wishes to
contract on behalf of the principal may require the presentation of the power of attorney, or
the instructions as regards the agency. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover on his own peril the authority of
the agent. In this case, Spouses Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney before they transacted
with her principal. And when Gonzales presented the SPA to Spouses Rabaja, the latter had
no reason not to rely on it.
FACTS
Sometime in July 1998, Spouses Rabaja learned that Spouses Salvador were looking for a
buyer of the subject property. Petitioner Herminia Salvador (Herminia) personally introduced
Gonzales to them as the administrator of the said property. Spouses Salvador even handed
to Gonzales the owner’s duplicate certificate of title over the subject property. On July, 3,
1998, Spouses Rabaja made an initial payment of P48,000.00 to Gonzales in the presence
of Herminia. Gonzales then
presented the Special Power of Attorney3 (SPA), executed by Rolando Salvador (Rolando)
and dated July 24, 1998. On the same day, the parties executed the Contract to Sell4 which
stipulated that for a consideration of P5,000,000.00, Spouses Salvador sold, transferred and
conveyed in favor of Spouses Rabaja the subject property. Spouses Rabaja made several
payments totalling P950,000.00, which were received by Gonzales pursuant to the SPA
provided earlier as evidenced by the check vouchers signed by Gonzales and the improvised
receipts signed by Herminia.
Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that
they did not receive any payment from Gonzales. This prompted Spouses Rabaja to suspend
further payment of the purchase price; and as a consequence, they received a notice to
vacate the subject property from Spouses Salvador for non-payment of rentals.
Thereafter, Spouses Salvador instituted an action for ejectment against Spouses Rabaja. In
turn, Spouses Rabaja filed an action for rescission of contract against Spouses Salvador and
Gonzales, the subject matter of the present petition.
ISSUE
Whether Gonzales, as agent of Spouses Salvador, could validly receive the payments of
Spouses Rabaja
RULING
Yes.
The Court agrees with the courts below in finding that the contract entered into by the
parties was essentially a contract of sale which could be validly rescinded. Spouses Salvador
insist that they did not receive the payments made by Spouses Rabaja from Gonzales which
totalled P950,000.00 and that Gonzales was not their duly authorized agent. These
contentions, however, must fail in light of the applicable provisions of the New Civil Code
which state:
Art. 1900. So far as third persons are concerned, an act is deemed to have been performed
within the scope of the agent's authority, if such act is within the terms of the power of
attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent.
xxxx
Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal
may require the presentation of the power of attorney, or the instructions as regards the
agency. Private or secret orders and instructions of the principal do not prejudice third
persons who have relied upon the power of attorney or instructions shown them.
xxxx
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
Persons dealing with an agent must ascertain not only the fact of agency, but also the
nature and extent of the agent’s authority. A third person with whom the agent wishes to
contract on behalf of the principal may require the presentation of the power of attorney, or
the instructions as regards the agency. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover on his own peril the authority of
the agent. In this case, Spouses Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney before they transacted
with her principal. And when Gonzales presented the SPA to Spouses Rabaja, the latter had
no reason not to rely on it.
Perhaps the most significant point which defeats the petition would be the fact that it was
Herminia herself who personally introduced Gonzalez to Spouses Rabaja as the
administrator of the subject property. By their own ostensible acts, Spouses Salvador made
third persons believe that Gonzales was duly authorized to administer, negotiate and sell the
subject property. This fact was even affirmed by Spouses Salvador themselves in their
petition where they stated that they had authorized Gonzales to look for a buyer of their
property.40 It is already too late in the day for Spouses Salvador to retract the
representation to unjustifiably escape their principal obligation.
As correctly held by the CA and the RTC, considering that there was a valid SPA, then
Spouses Rabaja properly made payments to Gonzales, as agent of Spouses Salvador; and it
was as if they paid to Spouses Salvador. It is of no moment, insofar as Spouses Rabaja are
concerned, whether or not the payments were actually remitted to Spouses Salvador. Any
internal matter, arrangement, grievance or strife between the principal and the agent is
theirs alone and should not affect third persons. If Spouses Salvador did not receive the
payments or they wish to specifically revoke the SPA, then their recourse is to institute a
separate action against Gonzales. Such action, however, is not any more covered by the
present proceeding.
GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner vs. THE INTERMEDIATE
APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE CORPORATION, respondents. G.R.
No. L-49395, SECOND DIVISION, December 26, 1984, ABAD SANTOS, J.
Art. 1905. The commission agent cannot, without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment in
cash, but the commission agent shall be entitled to any interest or benefit, which may result
from such sale.
FACTS
Squibb and Green Valley entered into a letter agreement the text of which reads as follows:
E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied
Products, Inc. as a non-exclusive distributor for Squibb Veterinary Products, as
recommended by Dr. Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales
Supervisor.
As a distributor, Green Valley Poultry & Allied Products, Inc. wig be entitled to a discount as
follows:
Feed Store Price (Catalogue) Less 10%
Wholesale Price
Less 10%
Distributor Price
There are exceptions to the above price structure. At present, these are:
1. Afsillin Improved — 40 lbs. bag
The distributor commission for this product size is 8% off P120.00
2. Narrow — Spectrum Injectible Antibiotics
These products are subject to price fluctuations. Therefore, they are invoiced at net price
per vial.
3. Deals and Special Offers are not subject to the above distributor price structure. A 5%
distributor commission is allowed when the distributor furnishes copies for each sale of a
complete deal or special offer to a feedstore, drugstore or other type of account.
Deals and Special Offers purchased for resale at regular price invoiced at net deal or special
offer price.
Prices are subject to change without notice. Squibb will endeavor to advise you promptly of
any price changes. However, prices in effect at the tune orders are received by Squibb Order
Department will apply in all instances.
Green Valley Poultry & Allied Products, Inc. win distribute only for the Central Luzon and
Northern Luzon including Cagayan Valley areas. We will not allow any transfer or stocks
from Central Luzon and Northern Luzon including Cagayan Valley to other parts of Luzon,
Visayas or Mindanao which are covered by our other appointed Distributors. In line with
this, you will follow strictly our stipulations that the maximum discount you can give to your
direct and turnover accounts will not go beyond 10%.
It is understood that Green Valley Poultry and Allied Products, Inc. will accept turn-over
orders from Squibb representatives for delivery to customers in your area. If for credit or
other valid reasons a turn-over order is not served, the Squibb representative will be
notified within 48 hours and hold why the order will not be served.
It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of
P20,000.00 from a mutually acceptable bonding company.
Payment for Purchases of Squibb Products will be due 60 days from date of invoice or the
nearest business day thereto. No payment win be accepted in the form of post-dated
checks. Payment by check must be on current dating.
It is mutually agreed that this non-exclusive distribution agreement can be terminated by
either Green Valley Poultry & Allied Products, Inc. or Squibb Philippines on 30 days notice.
ISSUE
Whether the case involves a contract of sale
RULING
Yes. We do not have to categorize the contract. Whether viewed as an agency to sell or as a
contract of sale, the liability of Green Valley is indubitable. Adopting Green Valley's theory
that the contract is an agency to sell, it is liable because it sold on credit without authority
from its principal. The Civil Code has a provision exactly in point. It reads:
Art. 1905. The commission agent cannot, without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment in
cash, but the commission agent shall be entitled to any interest or benefit, which may result
from such sale.
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs. THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA, respondents-appellees.
G.R. No. L-41182-3, SECOND DIVISION, April 16, 1988, SARMIENTO, J.
FACTS
Mrs. Noguera leased her property to Tourist World Service (TWS) represented by Eliseo
Canilao in Mabina St., Manila with Lina Sevilla holding herself solidarily liable for the
payment of the monthly rentals agreed on. When the branch office was opened, the same
was run by the herein appellant payable to Tourist World Service Inc. by any airline for any
fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was
to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 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. dated Dec. 2, 1961, 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. It further appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was terminated and while the effectivity
thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants
used it since Nov. 1961. Because of this, and 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. When neither
the appellant Lina Sevilla nor any of her employees could enter the locked premises, a
complaint wall 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.
ISSUE
Whether Sevilla is an employee of Tourist World Service
RULING
No, she is an agent.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo,
Tourist World's employee. As we said, employment is determined by the right-of-control test
and certain economic parameters. But titles are weak indicators.
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 14 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 15 and where each party exercises equal rights in the conduct of the
business.16 furthermore, the parties did not hold themselves out as partners, and the
building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of
a distinct partnership name.
It is the Court's considered opinion, that 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.18 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..
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. 19 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 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.
INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE PHILIPPINES vs SPOUSES
JEROME AND QUINNIE BRIONES, AND JOHN DOE
G.R. No. 205657, March 29, 2017, Leonen,J.
Upon accepting an agency, the agent becomes bound to carry out the agency and shall be
held liable for the damages, which the principal may incur due to the agent's non-
performance
FACTS:
Spouses Briones took out a loan of P3.7M from iBank (now Union Bank) to purchase a BMW
Z4 Roadster. They executed a promissory note that required them to take out an insurance
policy on the car and to give iBank, as attomey-infact, irrevocable authority to file an
insurance claim in case of loss or damage to the vehicle. The BMW was carnapped so the
spouses declared the loss to iBank, which instructed them to continue paying the next three
monthly installments "as a sign of good faith,” a directive they complied with. After they
finished paying the 3 installments, iBank demanded full payment of the lost vehicle. The
spouses submitted a notice of claim with their insurance company which was denied due to
a delay in the reporting of the lost vehicle. iBank filed a complaint for replevin or sum of
money against the spouses alleging default in paying the monthly amortizations of the
mortgaged vehicle
ISSUE:
W/N Spouses Briones are liable to iBank for the monthly amortizations of the BMW.
RULING:
NO. Under the promissory note, Spouses Briones appointed iBank as their attorney-in-fact
(agent), authorizing it to file a claim with the insurance company if the mortgaged vehicle
was lost or damaged. iBank was also authorized to collect the insurance proceeds as the
beneficiary of the insurance policy.
As the agent, petitioner was mandated to look after the interests of the Spouses Briones by
collecting the insurance proceeds. However, instead of going after the insurance proceeds,
as expected of it as the agent, petitioner opted to claim the full amount from the Spouses
Briones, disregarding the established principal-agency relationship, and putting its own
interests before those of its principal. The insurance policy was valid when the vehicle was
lost, and that the insurance claim was only denied because of the belated filing.
Having been negligent in its duties as the duly constituted agent, petitioner must be held
liable for the denial of the insurance claim suffered by the Spouses Briones because of non-
performance of its obligation as the agent, and because it prioritized its interests over that
of its principal. Petitioner's bad faith was evident when it advised the Spouses Briones to
continue paying three (3) monthly installments after the loss, purportedly to show their
good faith.
If petitioner was indeed acting in good faith, it could have timely informed the Spouses
Briones that it was terminating the agency and its right to file an insurance claim, and could
have advised them to facilitate the insurance proceeds themselves. This would have allowed
the spouses to collect from their insurer and pay the amortizations on the BMW. Petitioner's
failure to do so only
compounds its negligence and underscores its bad faith. Thus, it will be inequitable now to
compel the Spouses Briones to pay the full amount of the lost property.