Agency Trusts and Partnership Case Digest

AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 1 of 33
Sunga-Chan vs. Chua, G.R. No. 143340, Aug. 15, 2001
FACTS: Verbally enter into partnership, registered under the name of 1 partner.
Doctrine: Partnership retains its juridical personality even if it fails to register because registration merely gives notice to
third parties.
FACTS: Respondent Lamberto Chua alleged that in 1977, he verbally entered into a partnership with Jacinto in the
distribution of Shellane Liquefied Petroleum Gas (LPG). Respondent and Jacinto allegedly agreed to register the
business name of their partnership, Shellite Gas Appliance Center, under the name of Jacinto as a sole proprietorship.
Respondent delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn produced
P100,000.00, with the intention that the profits would be equally divided between them.
Upon Jacinto’s death in 1989, his wife Cecilia and his daughter Lilibeth Sunga, took over the operations, control, custody,
disposition and management of Shellite without respondent’s consent. Despite respondent’s repeated demands upon
petitioners for accounting, inventory, appraisal, winding up and restitution, petitioners failed to comply. Subsequently,
Lilibeth gave P200,000.00 to the respondent representing the latter’s share in the partnership. Still, petitioners failed to
comply with their duty to account, and continued to benefit from Shellite.
On June 22, 1992, respondent filed a complaint against Lilibeth Sunga Chan and Cecilia Sunga for “Winding Up of
Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment”
with the Regional Trial Court.
The trial court rendered its Decision ruling for respondent. The court direct the petitioners to render an accounting, submit
an inventory, and appraisal; order them to return and restitute to the partnership and the plaintiff; order them to wind up
the affairs of the partnership and terminate its business activities pursuant to law; finding them especially Lilibeth Sunga-
Chan guilty of breach of trust and in bad faith, and hold them liable for moral and exemplary damages, attorney’s fees and
litigation expenses. However, the Court of Appeals dismissed the appeal. The decision is AFFIRMED in all respects.
ISSUE: Whether or not the non-registration of the contract of partnership invalidate the partnership.
RULING: Petitioners maintain that said partnership had an initial capital of P200,000.00 should have been registered with
the Securities and Exchange Commission (SEC) since registration is mandated by the Civil Code.
True, Article 1772 of the Civil Code requires that partnerships with a capital of P3,000.00 or more must register with the
SEC, however, this registration requirement is not mandatory. Article 1768 of the Civil Code explicitly provides that the
partnership retains its juridical personality even if it fails to register. The failure to register the contract of partnership does
not invalidate the same as among the partners, so long as the contract has the essential requisites, because the main
purpose of registration is to give notice to third parties, and it can be assumed that the members themselves knew of the
contents of their contract. In the case at bar, noncompliance with this directory provision of the law will not invalidate the
partnership considering that the totality of the evidence proves that respondent and Jacinto indeed forged the partnership
in question.
G.R. No. 159333 July 31, 2006, ARSENIO T. MENDIOLA, petitioner,

vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS.,
INC. and/or CELLMARK AB, respondents.
DECISION
PUNO, J.:
On appeal are the Decision1 and Resolution2 of the Court of Appeals, dated January 30, 2003 and July 30, 2003,
respectively, in CA-G.R. SP No. 71028, affirming the ruling3 of the National Labor Relations Commission (NLRC), which in
turn set aside the July 30, 2001 Decision4 of the labor arbiter. The labor arbiter declared illegal the dismissal of petitioner
from employment and awarded separation pay, moral and exemplary damages, and attorney's fees.
The facts are as follows:
Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws
of California, USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of
Sweden, with principal office in Gothenburg, Sweden.
Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources
(Phils.), Inc."5 with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already
approved by the Securities and Exchange Commission [SEC] on the said date." 6 The Side Agreement outlines the
business relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a
Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its President.
Petitioner's base salary and the overhead expenditures of the company shall be borne by the representative office and
funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM and Pacfor-usa.
On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to transact business in the
Philippines under the name of Pacfor or Pacfor Phils.7 In its application, private respondent Pacfor proposed to establish
its representative office in the Philippines with the purpose of monitoring and coordinating the market activities for paper
products. It also designated petitioner as its resident agent in the Philippines, authorized to accept summons and
processes in all legal proceedings, and all notices affecting the corporation.8
In March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the
Representative Office Known as Pacific Forest Resources (Philippines),"9 where the salary of petitioner was increased to
$78,000 per annum. Both agreements show that the operational expenses will be borne by the representative office and
funded by all parties "as equal partners," while the profits and commissions will be shared among them.
In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of
Pacfor Phils.10 Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-
owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and
distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50." 11 Petitioner
presumably knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the
setting up of a representative office, and "not a branch office" in the Philippines to save on taxes.12
Petitioner claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would
have been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp. 13 Had
he known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his own
company, ATM Marketing Corp.14 Petitioner raised other issues, such as the rentals of office furniture, salary of the
employees, company car, as well as commissions allegedly due him. The issues were not resolved, hence, in October
2000, petitioner wrote Pacfor-USA demanding payment of unpaid commissions and office furniture and equipment rentals,
amounting to more than one million dollars.15
On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over to it all papers,
documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or
Pacfor Phils.16 On December 18, 2000, private respondent Pacfor also required petitioner to remit more than three
hundred thousand-peso Christmas giveaway fund for clients of Pacfor Phils. 17 Lastly, private respondent Pacfor withdrew
all its offers of settlement and ordered petitioner to transfer title and turn over to it possession of the service car.18
Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Pacfor Phils.
In its letter to Intercontinental Paper Industries, Inc., dated November 21, 2000, private respondent Pacfor stated:
Until further notice, please course all inquiries and communications for Pacific Forest Resources (Philippines) to:
Pacific Forest Resources

200 Tamal Plaza, Suite 200
Corte Madera, CA, USA 94925
(415) 927 1700 phone
(415) 381 4358 fax
Please do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the offices of ATM Marketing
Corporation at Room 504, Concorde Building, Legaspi Village, Makati City, Philippines.19
In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December 2000, private respondent
directed said client "to please communicate directly with us on any further questions associated with these payments or
any future business. Do not communicate with [Pacfor] and/or [ATM]."20
Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the
termination of his employment as resident manager of Pacfor Phils.21 In a memorandum to the employees of Pacfor
Phils., dated January 29, 2001, he stated:
I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all records to them effective
December 19, 2000. The company records were turned over only on January 26, 2001. This means our jobs with
Pacific Forest were terminated effective December 19, 2000. I am concerned about your welfare. I would like to
help you by offering you to work with ATM Marketing Corporation.
Please let me know if you are interested.22
On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that
he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also
reiterated his demand for unpaid commissions, and proposed to offset these with the remaining Christmas giveaway fund
in his possession.23 Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the lessor of the office
premises of Pacfor Phils., wherein he was the signatory to the lease agreement.24
On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and ordered him to show
cause why no disciplinary action should be taken against him. Private respondent Pacfor charged petitioner with willful
disobedience and serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which
he applied to his alleged unpaid commissions. Private respondent also alleged loss of confidence and gross neglect of
duty on the part of petitioner for allegedly allowing another corporation owned by petitioner's relatives, High End Products,
Inc. (HEPI), to use the same telephone and facsimile numbers of Pacfor, to possibly steal and divert the sales and
business of private respondent for HEPI's principal, International Forest Products, a competitor of private respondent.25
Petitioner denied the charges. He reiterated that he considered the import of Pacfor President William Gleason's letters as
a "cessation of his position and of the existence of Pacfor Phils." He likewise informed private respondent Pacfor that ATM
Marketing Corp. now occupies Pacfor Phils.' office premises,26 and demanded payment of his separation pay.27 On
February 15, 2001, petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of
attorney's fees with the NLRC.28
In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a memorandum dated March 5,
2001, private respondent directed petitioner to explain why he should not be disciplined for serious misconduct and
conflict of interest. Private respondent charged petitioner anew with serious misconduct for the latter's alleged act of fraud
and misrepresentation in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed
upon by the parties. Private respondent also accused petitioner of disloyalty and representation of conflicting interests for
having continued using the Pacfor Phils.' office for operations of HEPI. In addition, petitioner allegedly solicited business
for HEPI from a competitor company of private respondent Pacfor.29
Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn
over all office records and materials, regardless of whether he may have retained copies, private respondent Pacfor
virtually deprived petitioner of his job by the gradual diminution of his authority as resident manager. Petitioner's position
as resident manager whose duty, among others, was to maintain the security of its business transactions and
communications was rendered meaningless. The dispositive portion of the decision of the Labor Arbiter reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering herein respondents Cellmark AB and
Pacific Forest Resources, Inc., jointly and severally to compensate complainant Arsenio T. Mendiola separation
pay equivalent to at least one month for every year of service, whichever is higher (sic), as reinstatement is no
longer feasible by reason of the strained relations of the parties equivalent to five (5) months in the amount of
$32,000.00 plus the sum of P250,000.00; pay complainant the sum of P500,000.00 as moral and exemplary
damages and ten percent (10%) of the amounts awarded as and for attorney's fees.
All other claims are dismissed for lack of basis.
SO ORDERED.30
Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001, the NLRC set aside the
July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack of merit. 31 It held there was no employer-
employee relationship between the parties. Based on the two agreements between the parties, it concluded that petitioner
is not an employee of private respondent Pacfor, but a full co-owner (50/50 equity).
The NLRC denied petitioner's Motion for Reconsideration.32
Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld the ruling of the NLRC.
Petitioner's Motion for Reconsideration33 of the decision of the Court of Appeals was denied.
Hence, this appeal.34
Petitioner assigns the following errors:
A. The Respondent Court of Appeals committed reversible error and abused its discretion in rendering judgment
against petitioner since jurisdiction has been acquired over the subject matter of the case as there exists
employer-employee relationship between the parties.
B. The Respondent Court of Appeals committed reversible error and abused its discretion in ruling that
jurisdiction over the subject matter cannot be waived and may be alleged even for the first time on appeal or
considered by the court motu prop[r]io.35
The first issue is whether an employer-employee relationship exists between petitioner and private respondent Pacfor.
Petitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an
employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the
partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised
Operating and Profit Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal
basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence,
the Labor Code cannot apply.
We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists
between the parties.
In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be
acquired thereby and through the efforts of the members. 36 The property or stock of the partnership forms a community of
goods, a common fund, in which each party has a proprietary interest.37 In fact, the New Civil Code regards a partner as a
co-owner of specific partnership property.38 Each partner possesses a joint interest in the whole of partnership property. If
the relation does not have this feature, it is not one of partnership. 39 This essential element, the community of interest, or
co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private
respondent Pacfor. Petitioner is not a part-owner of Pacfor Phils. William Gleason, private respondent Pacfor's President
established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the
income 50-50. He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to
private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on
taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership.40
Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or
charter.41 This doctrine is based on the following considerations: (1) that the mutual agency between the partners,
whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and
officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and
exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not
contemplated by the stockholders when they originally invested in the corporation. 42 No such authorization has been
proved in the case at bar.
Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship is present in the case at
bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's
conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.43
In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor which selected and
engaged the services of petitioner as its resident agent in the Philippines. Second, as stipulated in their Side Agreement,
private respondent Pacfor pays petitioner his salary amounting to $65,000 per annum which was later increased to
$78,000. Third, private respondent Pacfor holds the power of dismissal, as may be gleaned through the various
memoranda it issued against petitioner, placing the latter on preventive suspension while charging him with various
offenses, including willful disobedience, serious misconduct, and gross neglect of duty, and ordering him to show cause
why no disciplinary action should be taken against him.
Lastly and most important, private respondent Pacfor has the power of control over the means and method of petitioner in
accomplishing his work.
The power of control refers merely to the existence of the power, and not to the actual exercise thereof. The principal
consideration is whether the employer has the right to control the manner of doing the work, and it is not the actual
exercise of the right by interfering with the work, but the right to control, which constitutes the test of the existence of an
employer-employee relationship.44 In the case at bar, private respondent Pacfor, as employer, clearly possesses such
right of control. Petitioner, as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only an agent of
the corporation, a representative of Pacfor, who transacts business, and accepts service on its behalf.
This right of control was exercised by private respondent Pacfor during the period of November to December 2000, when
it directed petitioner to turn over to it all records of Pacfor Phils.; when it ordered petitioner to remit the Christmas
giveaway fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered petitioner
to transfer title and turn over to it the possession of the service car. It was also during this period when private respondent
Pacfor sent letters to its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR,
advising them not to deal with petitioner and/or Pacfor Phils. In its letter to DAVCOR, private respondent Pacfor replied to
the client's request for an invoice payment extension, and formulated a revised payment program for DAVCOR. This is
one unmistakable proof that private respondent Pacfor exercises control over the petitioner.
Next, we shall determine if petitioner was constructively dismissed from employment.
The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would not quit however, private
respondent Pacfor began to systematically deprive petitioner of his duties and benefits to make him feel that his presence
in the company was no longer wanted. First, private respondent Pacfor directed petitioner to turn over to it all records of
Pacfor Phils. This would certainly make the work of petitioner very difficult, if not impossible. Second, private respondent
Pacfor ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils. Then it ordered
petitioner to transfer title and turn over to it the possession of the service car. It also advised its clients in the Philippines,
particularly Intercontinental Paper Industries, Inc. and DAVCOR, not to deal with petitioner and/or Pacfor Phils. Lastly,
private respondent Pacfor appointed a new resident agent for Pacfor Phils.45
Although there is no reduction of the salary of petitioner, constructive dismissal is still present because continued
employment of petitioner is rendered, at the very least, unreasonable.46 There is an act of clear discrimination, insensibility
or disdain by the employer that continued employment may become so unbearable on the part of the employee so as to
foreclose any choice on his part except to resign from such employment.47
The harassing acts of the private respondent are unjustified. They were undertaken when petitioner sought clarification
from the private respondent about his supposed 50% equity on Pacfor Phils. Private respondent Pacfor invokes its rights
as an owner. Allegedly, its issuance of the foregoing directives against petitioner was a valid exercise of management
prerogative. We remind private respondent Pacfor that the exercise of management prerogative is not absolute. "By its
very nature, encompassing as it could be, management prerogative must be exercised in good faith and with due regard
to the rights of labor – verily, with the principles of fair play at heart and justice in mind." The exercise of management
prerogative cannot be utilized as an implement to circumvent our laws and oppress employees.48
As resident agent of private respondent corporation, petitioner occupied a position involving trust and confidence. In the
light of the strained relations between the parties, the full restoration of an employment relationship based on trust and
confidence is no longer possible. He should be awarded separation pay, in lieu of reinstatement.
IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision in CA-G.R. SP No.
71028 and July 30, 2003 Resolution, affirming the December 20, 2001 Decision of the National Labor Relations
Commission, are ANNULED and SET ASIDE. The July 30, 2001 Decision of the Labor Arbiter is REINSTATED with
the MODIFICATION that the amount of P250,000.00 representing an alleged increase in petitioner's salary shall be
deducted from the grant of separation pay for lack of evidence.
SO ORDERED.
Sandoval-Gutierrez, Corona, Azcuna, Garcia, J.J., concur.
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 maycontinue 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.
Tocao vs. Court of Appeals, G.R. No. 127405, October 4, 2000
Ponente: J. Ynares-Santiago
FACTS: Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra
Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who
conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares
Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the
marketing department and later, vice-president for sales
The parties agreed that Belo's name should not appear in any documents relating to their transactions with West Bend
Company. Anay having secured the distributorship of cookware products from the West Bend Company and organized
the administrative staff and the sales force, the cookware business took off successfully. They operated under the name
of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name.
The parties agreed further that Anay would be entitled to:

(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belo's
assurances that he was sincere, dependable and honest when it came to financial commitments.
On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the
effect that she was no longer the vice-president of Geminesse Enterprise.
Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8,
1988 to February 5, 1988 and the audit of the company to determine her share in the net profits.
Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did
not receive the same commission although the company netted a gross sales of P 13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against
Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140
The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the defendants. The
Court of Appeals affirmed the lower court’s decision.
ISSUE: Whether the parties formed a partnership
HELD: Yes, the parties involved in this case formed a partnership
The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these requisites:
(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and
(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form; a public
instrument is necessary only where immovable property or real rights are contributed thereto.
This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one.
In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay as head of the
marketing department and later, vice-president for sales. Furthermore, Anay was entitled to a percentage of the net profits
of the business.
Therefore, the parties formed a partnership.

Pascual vs. CIR, L-78133, October 18, 1988
FACTS: Petitioners bought two (2) parcels of land and a year after, they bought another three (3) parcels of land.
Petitioners subsequently sold the said lots in 1968 and 1970, and realized net profits. 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, the
Acting BIR Commissioner assessed and required Petitioners 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 asserting that they had
availed of tax amnesties way back in 1974. In a reply, 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; 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.
ISSUE: Whether the Petitioners should be treated as an unregistered partnership or a co-ownership for the purposes of
income tax.
RULING: The Petitioners are simply under the regime of co-ownership and not under unregistered partnership.
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 (Art. 1767, Civil Code of the Philippines). 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. 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. Hence, 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.
WolfangAurbach vs. Sanitary Wares, G.R. No. 75875, December 19, 1989
FACTS: Saniwares (domestic corporation) and ASI (foreign corporation) entered into an agreement to engage primarily in
the business of manufacturing in the Philippines and selling here and abroad vitreous china and sanitary wares.They also
agreed that the business operations in the Philippines shall be carried on by an incorporated enterprise and that the name
of the corporation shall initially be “Sanitary Wares Manufacturing Corp.”
Unfortunately, with the business successes came the deterioration of the initially harmonious relationship between the
two. The disagreement was allegedly due to Saniwares desire to expand the export operations which was objected by
ASI as it apparently had other subsidiaries of joint venture groups in countries contemplated by Saniwares.
Several incidents in the annual stockholders’ meeting triggered the filing of separate petitions by the parties, both parties
claiming to be the legitimate directors of the corporation.
According to Aurbach, the actual intention of the parties should be viewed from the agreement wherein it is clearly stated
that the parties’ intention was to form a corporation and not a joint venture. No other evidence should be admitted on the
ground that it contravenes the parol evidence rule under sec. 7, Rule 130, Revised Rules of Court. Saniwares on the
other hand alleged that the agreement failed to express the true intent of the parties.
ISSUE: Whether or not the business established by the parties was a joint venture or a corporation.
RULING: It was a joint venture. The rule is that whether the parties to a particular contract have thereby established
among themselves a joint venture or some other relation depends upon their actual intention which is determined in
accordance with the rules governing the interpretation and construction of contracts. In the instant cases, our examination
of important provisions of the Agreement as well as the testimonial evidence presented by the Lagdameo and Young
Group shows that the parties agreed to establish a joint venture and not a corporation. The history of the organization of
Saniwares and the unusual arrangements which govern its policy making body are all consistent with a joint venture and
not with an ordinary corporation.
According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement with ASI in behalf of the
Philippine nationals. He testified that ASI agreed to accept the role of minority vis-a-vis the Philippine National group of
investors, on the condition that the Agreement should contain provisions to protect ASI as the minority.
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.
This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or
universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code).
It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by
the law of partnerships. The Supreme Court has however recognized a distinction between these two business forms, and
has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture
with others.
Benjamin Yu vs. NLRC, G.R. No. 97212, June 30, 1993
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;
However, the legal consequence of dissolution of a partnership do not automatically result in the termination of
the legal personality of the old partnership as according to Art. 1829, “ on dissolution of the partnership is not
AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 10 of
terminated, but continues until the winding up of the partnership affairs is completed. The new partnership
simply continued the operations of the old partnership under its old firm name without winding up the business
the old partnership.
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.
Rojas vs. Maglana, G.R. No. 30616, December 10, 1990
FACTS: Maglana and Rojas executed their Articles of Co-Partnership with only the two of them as partners and
registered the same with the SEC. One of the purposes of the duly-registered partnership was to “apply or secure timber
and/or minor forests products licenses and concessions over public and/or private forest lands and to operate, develop
and promote such forests rights and concessions.”
Under the said Articles of Co-Partnership, Maglana shall manage the business affairs of the partnership, while Rojas shall
be the logging superintendent and shall manage the logging operations of the partnership. It is also provided in the said
articles of co-partnership that all profits and losses of the partnership shall be divided share and share alike between the
partners and there is no definite term of the existence of the partnership.
For some time, there was no operation of said partnership. Because of the difficulties encountered, Rojas and Maglana
decided to avail of the services of Pahamotang as industrial partner. Maglana, Rojas and Agustin Pahamotang executed
their Articles of Co-Partnership and did not register the same before the SEC. The second partnership realized profits.
Later, Pahamotang, Maglana and Rojas executed a document agreeing among themselves that Maglana and Rojas shall
purchase the interest, share and participation in the Partnership of Pahamotang. It was also agreed that the two (Maglana
and Rojas) shall become the owners of all equipment contributed by Pahamotang and the second partnership, be
dissolved.
After the withdrawal of Pahamotang, the partnership was continued by Maglana and Rojas without the benefit of any
written agreement or reconstitution of their written Articles of Partnership.
Subsequently, Rojas entered into a management contract with another logging enterprise. He left and abandoned the
partnership. He withdrew his equipment from the partnership for use in the newly acquired area. The equipment
withdrawn were his supposed contributions to the first partnership.
Maglana then wrote Rojas reminding the latter of his obligation to contribute, either in cash or in equipment, to the capital
investments of the partnership as well as his obligation to perform his duties as logging superintendent. Rojas then told
Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent.
Maglana then told Rojas that the latter’s share will just be 20% of the net profits. Meanwhile, Rojas took funds from the
partnership more than his contribution. Maglana notified Rojas that he dissolved the partnership.
Rojas filed an action against Maglana for the recovery of properties, accounting, receivership and damages.
The trial court, rendered judgment against Rojas. Rojas interposed the instant appeal.
ISSUES:
(1) What is the nature of the partnership and legal relationship of the Maglana-Rojas after Pahamotang retired from
the second partnership.
(2) Whether or not Maglana can unilaterally dissolve the partnership.
(3) Whether Maglana can be held liable for damages.
RULING:
(1) Under the circumstances, the relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be
considered as a De Facto Partnership, nor a Partnership at Will, for as stressed, there is an existing partnership, duly
registered.
After a careful study of the records as against the conflicting claims of Rojas and Maglana, it appears evident that it was
not the intention of the partners to dissolve the first partnership, upon the constitution of the second one, which they
unmistakably called an “Additional Agreement”. To all intents and purposes therefore, the First Articles of Partnership
were only amended, in the form of Supplementary Articles of Co-Partnership which was never registered. Otherwise
stated, even during the existence of the second partnership, all business transactions were carried out under the duly
registered articles. As found by the trial court, it is an admitted fact that even up to now, there are still subsisting
obligations and contracts of the latter. No rights and obligations accrued in the name of the second partnership except in
favor of Pahamotang which was fully paid by the duly registered partnership.
(2) YES, Maglana can unilaterally dissolve the partnership.
Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can cause its dissolution by
expressly withdrawing even before the expiration of the period, with or without justifiable cause. Of course, if the cause is
not justified or no cause was given, the withdrawing partner is liable for damages but in no case can he be compelled to
remain in the firm. With his withdrawal, the number of members is decreased, hence, the dissolution. And in whatever
way he may view the situation, the conclusion is inevitable that Rojas and Maglana shall be guided in the liquidation of the
partnership by the provisions of its duly registered Articles of Co-Partnership; that is, all profits and losses of the
partnership shall be divided “share and share alike” between the partners.
It is a settled rule that when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a
debtor of the partnership for whatever he may have promised to contribute (Article 1786, Civil Code) and for interests and
damages from the time he should have complied with his obligation (Article 1788, Civil Code) Being a contract of
partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership.
(3) NO, Maglana is not liable for damages for his withdrawal.
It will be recalled that after the withdrawal of Pahamotang, Rojas entered into a management contract with another
logging enterprise, the CMS Estate, Inc., a company engaged in the same business as the partnership. He withdrew his
equipment, refused to contribute either in cash or in equipment to the capital investment and to perform his duties as
logging superintendent, as stipulated in their partnership agreement. The records also show that Rojas not only
abandoned the partnership but also took funds in an amount more than his contribution. In the given situation Maglana
cannot be said to be in bad faith nor can he be liable for damages.
CIR vs. Suter, 27 SCRA 152 (1969)
Summary:
The case involves the Commissioner of Internal Revenue theorizing that the marriage of a general partner and limited
partner, and their subsequent acquisition of the interests of the remaining partner in the partnership dissolved the limited
partnership and consequently, the income tax return of respondent should include his and his wife’s individual incomes
and that of the limited partnership.
Doctrine:
A husband and a wife may not enter into a contract of general copartnership, because under the Civil Code, which applies
in the absence of express provision in the Code of Commerce, persons prohibited from making donations to each other
are prohibited from entering into universal partnerships. (2 Echaverri 196) It follows that the marriage of partners
necessarily brings about the dissolution of a pre-existing partnership.
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own, distinct
and separate from that of its partners
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed by herein respondent William J. Suter as
the general partner, and Julia Spirig and Gustav Carlson, as the limited partner and was registered with SEC. The
partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. The firm engaged, among
other activities, in the importation, marketing, distribution and operation of automatic phonographs, radios, television sets
and amusement machines, their parts and accessories
In 1948, however, general partner Suter and limited partner Spirig got married and, thereafter, on 18 December 1948,
limited partner Carlson sold his share in the partnership to Suter and his wife.
In 1959, Commissioner of Internal Revenue consolidated the income of the firm and the individual incomes of the
partners-spouses Suter and Spirig resulting in a determination of a deficiency income tax against respondent Suter.
The Court of Tax Appeals reversed the decision of the CIR.
Hence, the petition.
Issues Ratio:
Whether or not the marriage of Suter and Spirig and their subsequent ac quisition of the interests of remaining partner
Carlson in the partnership dissolved the limited partnership
NO. William J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular one since the contributions of
the partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one of
them was an industrial partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were
forbidden to enter by Article 1677 of the Civil Code of 1889.
Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of the causes
provided for that purpose either by the Spanish Civil Code or the Code of Commerce
Whether or not the income of the limited partnership be included In the individual tax return of respondent
NO. Although section 24 of the Internal Revenue Code merges registered general co-partnerships (compañias colectivas)
with the personality of the individual partners for income tax purposes, the limited partnership's separate individuality
makes it impossible to equate its income with that of the component members.
The code taxes the latter on its income, but not the former, because it is in the case of compañias colectivas that the
members, and not the firm, are taxable in their individual capacities for any dividend or share of the profit derived from the
duly registered general partnership
Dispositive:
FOR THE FOREGOING REASONS, the decision under review is hereby affirmed. No costs.
Other Notes:
DEFINITION OF UNIVERSAL PARTNERSHIP:
As appears from Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was the law in force when the subject
firm was organized in 1947), a universal partnership requires either that the object of the association be all the present
property of the partners, as contributed by them to the common fund, or else "all that the partners may acquire by their
industry or work during the existence of the partnership".
Tai Tong Chuache vs. Insurance Commission, L-55397, February 29, 1988
Facts: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the
payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. Arsenio
Chua, representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity Corporation
for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof)
Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent Zenith Insurance
Corporation. On July 16, 1975, another Fire Insurance was procured from respondent Philippine British Assurance
Company, covering the same building for P50,000.00 and the contents thereof for P70,000.00.
The building and the contents were totally razed by fire.
Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith Insurance, Phil.
British Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding shares of the loss. Complainants
were paid the following: P41,546.79 by Philippine British Assurance Co., P11,877.14 by Zenith Insurance Corporation,
and P5,936.57 by S.S.S. Group of Accredited Insurers Demand was made from respondent Travellers Multi-Indemnity for
its share in the loss but the same was refused. Hence, complainants demanded from the other three (3) respondents the
balance of each share in the loss in the amount of P30,894.31 (P5,732.79-Zenith Insurance: P22,294.62, Phil. British:
and P2,866.90, SSS Accredited) but the same was refused, hence, this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on the ground that the
claim of the complainants had already been waived, extinguished or paid. Both companies set up counterclaim in the total
amount of P 91,546.79.
SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the balance had been paid
in the amount in full.
Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire Policy, covering the
furniture and building of complainants was secured by a certain Arsenio Chua and that the premium due on the fire policy
was paid by Arsenio Chua.
Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire Insurance Policy issued
by respondent Travellers Multi-Indemnity.
As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the ground that the
insurance policy subject of the complaint was taken out by Tai Tong Chuache & Company, for its own interest only as
mortgagee of the insured property and thus complainant as mortgagors of the insured property have no right of action
against the respondent. It likewise dismissed petitioner's complaint in intervention in the following words:
From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was likewise denied
hence, the present petition.
ISSUE: Is the petitioner allowed to recover indemnity?
RULING: Yes, it is.
Art. 1800. The partner who has been appointed manager in the articles of partnership may execute all acts of
administration despite the opposition of his partners, unless he should act in bad faith; and his power is irrevocable
without just or lawful cause. The vote of the partners representing the controlling interest shall be necessary for such
revocation of power.
A power granted after the partnership has been constituted may be revoked at any time.
It should be borne in mind that petitioner being a partnership may sue and be sued in its name or by its duly authorized
representative.
The fact that Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner’s declaration that Arsenio
Lopez Chua acts as the managing partner of the partnership was corroborated by respondent insurance company. Thus
Chua as the managing partner of the partnership may execute all acts of administration including the right to sue debtors
of the partnership in case of their failure to pay their obligations when it became due and demandable. Or at the very
least, Chua being a partner of petitioner Tai Tong Chuache& Company is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm.
Information Technology vs. COMELEC, G.R. No. 159139, January 13, 2004
FACTS: Petitioners were participating bidders questioning the identity and eligibility of the awarded contractor Mega
Pacific Consortium (MPC) where the competing bidder is Mega Pacific eSolutions, Inc. (MPEI) as signed by Mr. Willy Yu
of the latter. Private respondent claims that MPEI is the lead partner tied up with other companies like SK C&C, WeSolv,
Election.com and ePLDT. Respondent COMELEC obtained copies of Memorandum of Agreements and Teaming
Agreements.
ISSUE: Whether or not there was an existence of a consortium.
RULING: NO. There was no documentary or other basis for Comelec to conclude that a consortium had actually been
formed amongst MPEI, SK C&C and WeSolv, along with Election.com and ePLDT. The president of MPEI signing for
allegedly in behalf of MPC without any further proof, did not by itself prove the existence of the consortium. It did not
show that MPEI or its president have been duly pre-authorized by the other members of the putative consortium to
represent them, to bid on their collective behalf and, more important, to commit them jointly and severally to the bid
undertakings. The letter is purely self-serving and uncorroborated.
Mobil Oil vs. CFI of Rizal, G.R. No. 40457, May 8, 1992
FACTS: Petitioner filed a complaint in the Court of First Instance of Rizal against the partnership La Mallorca and its
general partners, which included private respondents, for collection of a sum of money arising from gasoline purchased
on credit but not paid.
Petitioner, with leave of court, filed an Amended Complaint impleading the heirs of the deceased partners as defendants.
A decision was rendered in favor of the petitioner and against defendants which was moved by private respondents for
modification and/or motion of reconsideration on the ground that Miguel Enriquez, not being a general partner, could not
bind the partnership in the Sales Agreement he signed with plaintiff and defendant Geminiano Yabut who already
withdrew as partner and president of La Mallorca be liable.
ISSUE: Whether or not the petition for modification of decision proper.
RULING: We do not find the grounds relied upon in private respondents’ Petition to Modify Decision to be meritorious.
Mr. Miguel Enriquez automatically became a general partner of the partnership La Mallorca being one of the heirs of the
deceased partner Mariano Enriquez. Article IV of the uncontested Articles of Co-Partnership of La Mallorca provides:
IV. Partners. –– The parties above-named, with their civil status, citizenship and residences set forth after their respective
names, shall be members comprising this partnership, all of whom shall be general partners.
If during the existence of this co-partnership, any of the herein partners should die, the co-partnership shall continue to
exist amongst the surviving partners and the heir or heirs of the deceased partner or partners; Provided, However, that if
the heir or heirs of the deceased partner or partners elect not to continue in the co-partnership, the surviving partners
shall have the right to acquire the interests of the deceased partner or partners at their book value based upon the last
balance sheet of the co-partnership, and in proportion to their respective capital contributions; And, Provided Further, that
should a partner or partners desire to withdraw from the co-partnership and the remaining partners are not willing to
acquire his or their shares or interest in the co-partnership in accordance with the foregoing provisions, the co-partnership
shall not thereby be dissolved, but such retiring partner or partners shall only be entitled to his or their shares in the
assets of the co-partnership according to the latest balance sheet which have been drawn prior to the date of his or their
withdrawal. In such event, the co-partnership shall continue amongst the remaining partners.
As to respondent Geminiano Yabut’s claim that he cannot be liable as a partner, he having withdrawn as such, does not
convince us. The debt was incurred long before his withdrawal as partner and his resignation as President of La Mallorca
on September 14, 1972.
Respondent Geminiano Yabut could not just withdraw unilaterally from the partnership to avoid his liability as a general
partner to third persons like the petitioner in the instant case.
Lim Tong Lim vs. Phil. Fishing Gear, G.R. No. 136448, November 3, 1999
FACTS: On behalf of “Ocean Quest Fishing Corporation,” Antonio Chua and Peter Yao entered into a Contract dated
February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (herein
respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was
not a signatory to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces of floats worth
P68,000 were also sold to the Corporation.
The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent filed a collection suit
against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought
against the three in their capacities as general partners, on the allegation that “Ocean Quest Fishing Corporation” was a
nonexistent corporation as shown by a Certification from the Securities and Exchange Commission
Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay. He also turned over
to respondent some of the nets which were in his possession. The Trial Court ordered the sale of the fishing nets at a
public auction. Philippine Fishing Gear Industries won the bidding and deposited with the said court the sales proceeds of
P900,000. On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was
entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay Respondent.
The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses
presented and (2) on a Compromise Agreement executed by the three 9 in Civil Case No. 1492-MN which Chua and Yao
had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity of commercial documents; (b) a
reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e) damages.
The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that joint liability
could be presumed from the equal distribution of the profit and loss. 12
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.
ISSUE: Whether a partnership agreement existed.
RULING: Yes. Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth
P3.35 million, financed by a loan secured from Jesus Lim who was petitioner’s brother. In their Compromise Agreement,
they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally
among them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed money,
fell under the term “common fund” under Article 1767. 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.
Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the nets and the
floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business. It
would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the
aforesaid equipment, without which the business could not have proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in the fishing
business. They purchased the boats, which constituted the main assets of the partnership, and they agreed that the
proceeds from the sales and operations thereof would be divided among them.
A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the
profits or losses that may arise therefrom, even if it is shown that they have not contributed any capital of their own to a
“common fund.” Their contribution may be in the form of credit or industry, not necessarily cash or fixed assets. Being
partners, they are all liable for debts incurred by or on behalf of the partnership. The liability for a contract entered into on
behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly
transacted on its behalf, but reaped benefits from that contract.
Ortega vs. Court of Appeals, G.R. No. 109248, July 3, 1995
Facts: The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry
on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records
show that there were several subsequent amendments to the articles of partnership to change the firm name. On 19
December 1980, Joaquin L. Misa, Jesus B. Bito, and Mariano M. Lozada associated themselves together, as senior
partners with Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. On February 17,
1988, MISA petitioner-appellant wrote the respondents-appellees a letter stating his withdrawal and retirement from the
firm of Bito, Misa and Lozada and requested to make proper liquidation including his interest to the two floors of the
building.
The petitioner led with this Commission's Securities Investigation and Clearing Department (SICD) a petition for
dissolution and liquidation of partnership which resulted to respondents-appellees filing their opposition. The Hearing
Officer held that the withdrawal of Atty. Misa had dissolved the partnership of Bito, Misa and Lozada. A Motion for
Reconsideration was sought but during the pendency of the case in the CA, Bito and Lozada died which prompted Misa
to renew his application for receivership.
Issues: Whether or not CA has erred in holding that the partnership of Bito, Misa & Lozada is a partnership at will;
Whether or not CA has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of
his good or bad faith; and
Whether or not CA 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.
Held: YES> 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. Any one of the partners may, at his sole
pleasure, dictate a dissolution of the partnership at will.
Neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation
prevent the dissolution of any partnership by an act or will of a partner. Among partners, mutual agency arises and the
doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the
partnership.
The Court we accord to the CA and the respondent Commission on their common factual finding, 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 to let any of the partners remain in the partnership under such an atmosphere of animosity;
certainly, not against their will. 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.
Dan Fue Leung vs. IAC, G.R. No. 70926, January 31, 1989
FACTS: The Sun Wah Panciteria was registered as a single proprietorship and its licenses and permits were issued to
and in favor of petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial
of the case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having
contributed P4,000.00 to its initial establishment. Private respondent avers that he gave P4,000 to petitioner as financial
aid to establish the business in exchange for the right to 22% of its annual earnings. As such he is merely demanding
what is rightfully his.
The petitioner argues that private respondent extended 'financial assistance' to herein petitioner at the time of the
establishment of the Sun Wah Panciteria, in return of which private respondent allegedly will receive a share in the profits
of the restaurant. Lower court ruled in favor of the private respondent. Petitioner appealed the trial court's amended
decision. However,the questioned decision was further modified and affirmed by the appellate court.
Petitioner prays that the court reverses the ruling of the trial court and the IAC that ordered it to pay the private
respondent 22% of his annual earnings as same was his partner in the panciteria. He maintains that he was the sole
proprietor of the business, as evidenced by his licenses and documents that bear only his name.
Petitioner counters that 22 years have past since the alleged receipt of such financial aid, hence the action has already
prescribed.
ISSUE: Was the private respondent entitled to such earnings?
RULING: Yes, as he was petitioner’s partner.
The lower courts did not err in construing the complaint as one wherein the private respondent asserted his rights as
partner of the petitioner in the establishment of the Sun Wah Panciteria, notwithstanding the use of the term financial
assistance therein. We agree with the appellate court’s observation to the effect that “… given its ordinary meaning,
financial assistance is the giving out of money to another without the expectation of any returns therefrom’. It connotes
an ex gratia dole out in favor of someone driven into a state of destitution.
But this circumstance under which the P4,000.00 was given to the petitioner does not obtain in this case.’ (p. 99, Rollo)
The complaint explicitly stated that “as a return for such financial assistance, plaintiff (private respondent) would be
entitled to twenty-two percentum (22%) of the annual profit derived from the operation of the said panciteria.
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are — 1)
two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2) intention on
the part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106
Phil. 110)-have been established.
As stated by the respondent, a partner shares not only in profits but also in the losses of the firm. If excellent relations
exist among the partners at the start of business and all the partners are more interested in seeing the firm grow rather
than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It would be incorrect to state that if
a partner does not assert his rights anytime within ten years from the start of operations, such rights are irretrievably lost.
The private respondent’s cause of action is premised upon the failure of the petitioner to give him the agreed profits in the
operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of his interests in the
partnership.
Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806, 1807,
and 1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run
only upon the dissolution of the partnership when the final accounting is done.
Emnace vs. Court of Appeals, G.R. No. 126334, November 23, 2001
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business known
as Ma. Nelma Fishing Industry. In 1986, they decided to dissolve their partnership and executed an agreement
of partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracia's
withdrawal from the partnership. When petitioner failed to comply with the terms of the agreement and also on
his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the total assets of the partnership,
amounting to P30,000,000.00, respondents, Tabanao's heirs, filed an action for accounting, payment of shares,
division of assets and damages against petitioner. Petitioner filed a motion to dismiss the complaint and argued
that the trial court did not acquire jurisdiction over the action because the prescribed docket fee was not paid
considering the huge amount involved in the claim. The trial court, however, noted that a request for accounting
was made in order that the exact value of the partnership may be ascertained and, thus, the correct docket fee
may be paid. Petitioner questioned the order of dismissal through a petition for certiorari before the Court of
Appeals. The appellate court rendered the assailed decision dismissing the petition for certiorari, upon a finding
that no grave abuse of discretion amounting to lack or excess of jurisdiction was committed by the trial court in
issuing the questioned orders denying petitioner's motions to dismiss.
ISSUE: Whether the private respondents have the legal capacity to sue.
HELD: YES. The surviving spouse does not need to be appointed as executrix or administratrix of the estate before she
can file the action. She and her children are complainants in their own right as successors of Vicente Tabanao. From the
very moment of Vicente Tabanao’s death, his rights insofar as the partnership was concerned were transmitted to his
heirs, for rights to the succession are transmitted from the moment of death of the decedent. Whatever claims and rights
Vicente Tabanao had against the partnership and petitioner were transmitted to respondents by operation of law, more
particularly by succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance of a person are transmitted. Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died. A prior settlement of the estate, or even the
appointment of Salvacion Tabanao as executrix or administratrix, is not necessary for any of the heirs to acquire legal
capacity to sue. As successors who stepped into the shoes of their decedent upon his death, they can commence any
action originally pertaining to the decedent. From the moment of his death, his rights as a partner and to demand
fulfillment of petitioner’s obligations as outlined in their dissolution agreement were transmitted to respondents. They,
therefore, had the capacity to sue and seek the court’s intervention to compel petitioner to fulfill his obligations.
petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to sue since she was never
appointed as administratrix or executrix of his estate. Petitioner’s objection in this regard is misplaced.
ISSUE:
WON the partnership was terminated due to prescription
HELD:
NO.Petitioner contends that the trial court should have dismissed the complaint on the ground of prescription,
arguing that respondents' action prescribed four (4) years after it accrued in 1986. The trial court and the Court
of Appeals gave scant consideration to petitioner's hollow arguments, and rightly so. The three (3) final stages
of a partnership are: (1) dissolution; (2) winding-up; and (3) termination. The partnership, although dissolved,
continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs,
including the partitioning and distribution of the net partnership assets to the partners. For as long as the
partnership exists, any of the partners may demand an accounting of the partnership's business. Prescription of
the said right starts to run only upon the dissolution of the partnership when the final accounting is done.
Contrary to petitioner's protestations that respondents' right to inquire into the business affairs of the partnership
accrued in 1986, prescribing four (4) years thereafter, prescription had not even begun to run in the absence of a
final accounting. Article 1842 of the Civil Code provides: The right to an account of his interest shall accrue to
any partner, or his legal representative as against the winding up partners or the surviving partners or the person
or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the
contrary. Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the above-
cited provision states that the right to demand an accounting accrues at the date of dissolution in the absence of
any agreement to the contrary. When a final accounting is made, it is only then that prescription begins to run.
In the case at bar, no final accounting has been made, and that is precisely what respondents are seeking in their
action before the trial court, since petitioner has failed or refused to render an accounting of the partnership's
business and assets. Hence, the said action is not barred by prescription.
Applied to the instant case, respondents have a specific claim — 1/3 of the value of all the partnership
assets — but they did not allege a specific amount. They did, however, estimate the partnership's total assets to
be worth Thirty Million Pesos (P30,000,000.00), in a letter addressed to petitioner. Respondents cannot now say
that they are unable to make an estimate, for the said letter and the admissions therein form part of the records
of this case. They cannot avoid paying the initial docket fees by conveniently omitting the said amount in their
amended complaint. This estimate can be made the basis for the initial docket fees that respondents should pay.
Even if it were later established that the amount proved was less or more than the amount alleged or estimated,
Rule 141, Section 5(a) of the Rules of Court specifically provides that the court may refund the excess or exact
additional fees should the initial payment be insufficient. It is clear that it is only the difference between the
amount finally awarded and the fees paid upon filing of this complaint that is subject to adjustment and which
may be subjected to a lien.
FACTS: Petitioners Emnace, Tabanao and Divigranacia were partners in a business known as Ma. Nelma Fishing
Industry. Sometime in January 1986, they decided to dissolve their partnership and executed an agreement of partition
and distribution. Throughout the existence of the partnership, and even after Tabanao’s death, petitioner failed to submit
to Tabanao’s heirs any financial statements. Petitioner also reneged on his promise to turn over the 1/3 share in the total
assets of the partnership to the heirs. Private respondents filed an action for accounting, payment of shares, division of
assets and damages. Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of
jurisdiction and lack of capacity of the estate of Tabanao to sue. The trial court denied the motion to dismiss. The trial
court held that the heirs of Tabanao had a right to sue in their own names, in view of the provision of Art. 777 of the CC.
Conveyance or assignment of a partner's interest

JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDENG JASO
G.R. No. 178782 September 21, 2011
FACTS: Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis Eric Amaury Biondo, a French
national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo as the
capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20% to be
used for the payment of the ice making machine which was purchased for the business. For and in consideration of the
sum of P500,000.00, however, Biondo subsequently executed a Deed of Assignment transferring all his rights and
interests in the business in favor of respondent Eden Jaso, the wife of respondent Prosencio Jaso. With Biondo’s
eventual departure from the country, the Spouses Jaso caused their lawyer to send Josefina a letter apprising her of their
acquisition of said Frenchmans share in the business and formally demanding an accounting and inventory thereof as
well as the remittance of their portion of its profits.
Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit for specific
performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint venture,
appointment of a receiver and damages. The said complaint alleged that the Spouses Realubit had no gainful occupation
or business prior to their joint venture with Biondo and that aside from appropriating for themselves the income of the
business, they have fraudulently concealed the funds and assets thereof thru their relatives, associates or dummies. The
Spouses Realubit claimed that they have been engaged in the tube ice trading business under a single proprietorship
even before their dealings with Biondo.
The RTC rendered its Decision discounting the existence of sufficient evidence from which the income, assets and the
supposed dissolution of the joint venture can be adequately reckoned. Upon the finding, however, that the Spouses Jaso
had been nevertheless subrogated to Biondos rights in the business in view of their valid acquisition of the latters share
as capitalist partner. On appeal before the CA, the foregoing decision was set aside
upon the following findings that the Spouses Jaso validly acquired Biondos share in the business which had been
transferred to and continued its operations and not dissolved as claimed by the Spouses Realubit.
ISSUES
1. Whether there was a valid assignment or rights to the joint venture
2. Whether the joint venture is a contract of partnership
3. Whether Jaso acquired the title of being a partner based on the Deed of Assignment
RULING
1. Yes. As a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a
presumption of regularity but is also considered prima facie evidence of the facts therein stated. A party assailing the
authenticity and due execution of a notarized document is, consequently, required to present evidence that is clear,
convincing and more than merely preponderant. In view of the Spouses Realubits failure to discharge this onus, we find
that both the RTC and the CA correctly upheld the authenticity and validity of said Deed of Assignment upon the
combined strength of the above-discussed disputable presumptions and the testimonies elicited from Eden and Notary
Public Rolando Diaz.
2. Yes. Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened
to a particular partnership or one which has for its object determinate things, their use or fruits, or a specific undertaking,
or the exercise of a profession or vocation. The rule is settled that joint ventures are governed by the law on partnerships
which are, in turn, based on mutual agency or delectus personae.
3. No. It is evident that the transfer by a partner of his partnership interest does not make the assignee of such
interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to
receive anything except the assignees profits. The assignment does not purport to transfer an interest in the partnership,
but only a future contingent right to a portion of the ultimate residue as the assignor may become entitled to receive by
virtue of his proportionate interest in the capital. Since a partner’s interest in the partnership includes his share in the
profits, we find that the CA committed no reversible error in ruling that the Spouses Jaso are entitled to Biondos share in
the profits, despite Juanitas lack of consent to the assignment of said Frenchmans interest in the joint venture. Although
Eden did not, moreover, become a partner as a consequence of the assignment and/or acquire the right to require an
accounting of the partnership business, the CA correctly granted her prayer for dissolution of the joint venture
conformably with the right granted to the purchaser of a partner’s interest under Article 1831 of the Civil Code.
Guy vs. Gacott, G.R. No. 206147, January 13, 2016

FACTS: Gacott purchased two (2) brand new transreceivers from Quantech Systems Corp (QSC) through its employee
Rey Medestomas. Due to major defects, Gacott returned the items to QSC and requested for replacement. However,
despite several demands, Gacott was never given a replacement or a refund. Thus, Gacott filed a complaint for damages.
Summons was served upon QSC and Medestomas, afterwhich they filed their Answer. RTC’s decision ordered the
defendants to jointly and severally pay plaintiff. The decision became final as QSC and Medestomas did not interpose an
appeal. Gacott then secured a Writ of Execution. During the execution stage, Gacott learned that QSC was not a
corporation, but was in fact a general partnership. In the articles of partnership, Guy was appointed as General Manager
of QSC. The sheriff attached Guy’s vehicle. Guy filed his Motion to Lift Attachment Upon Personalty, arguing that he was
not a judgment debtor and, therefore, his vehicle could not be attached. On June 28, 2009, the RTC issued an order
denying Guy’s motion and his subsequent motion for reconsideration. RTC’s ratio: All partners are liable solidarily with the
partnership for everything chargeable to the partnership under Article 1822 and 1823. Guy to seek relief before the CA.
The CA dismissed Guy’s appeal for the same reasons given by the trial court. Guy filed a motion for reconsideration but it
was denied by the CA. Guy arguments: 1. That jurisdiction over the person of the partnership (QSC) was not acquired
because the summons was never served upon it or through any of its authorized officer; 2. Article 1816 of the Civil Code
which states that the liability of the partners to the partnership is merely joint and subsidiary in nature. And he is not
solidarily liable with the partnership because the solidary liability of the partners under Articles 1822, 1823 and 1824 of the
Civil Code only applies when it stemmed from the act of a partner. In this case, the alleged lapses were not attributable to
any of the partners.
ISSUE: Whether or not the private respondents are barred by prescription from proving their filiation
HELD: No. In the present case, private respondents could not have possibly waived their successional rights because
they are yet to prove their status as acknowledged illegitimate children of the deceased. Petitioner himself has
consistently denied that private respondents are his co-heirs. It would thus be inconsistent to rule that they waived their
hereditary rights when petitioner claims that they do not have such right. Hence, petitioner’s invocation of waiver on the
part of private respondents must fail.
Anent the issue on private respondents’ filiation, the Court agree with the Court of Appeals that a ruling on the same
would be premature considering that private respondents have yet to present evidence. As regards Remedios’ Release
and Waiver of Claim, the same does not bar private respondents from claiming successional rights. To be valid and
effective, a waiver must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to
give up a right or benefit which legally pertains to him. A waiver may not be attributed to a person when its terms do not
explicitly and clearly evince an intent to abandon a right.
In this case, the Supreme Court find that there was no waiver of hereditary rights. The Release and Waiver of Claim does
not state with clarity the purpose of its execution. It merely states that Remedios received P300,000.00 and an
educational
plan for her minor daughters “by way of financial assistance and in full settlement of any and all claims of whatsoever
nature and kind against the estate of the late Rufino Guy Susim.” Considering that the document did not specifically
mention private respondents’ hereditary share in the estate of Sima Wei, it cannot be construed as a waiver of
successional rights.
Moreover, even assuming that Remedios truly waived the hereditary rights of private respondents, such waiver will not
bar the latter’s claim. Article 1044 of the Civil Code, provides:
ART. 1044. Any person having the free disposal of his property may accept or repudiate an inheritance.
Any inheritance left to minors or incapacitated persons may be accepted by their parents or guardians. Parents or
guardians may repudiate the inheritance left to their wards only by judicial authorization.
WON a partners’ liability is subsidiary and generally joint and WON immediate levy upon the property of a partner can
be made. HELD. NO partner’s liability is not subsidiary and generally joint and the partner’s property cannot be
immediately levied. SC RATIO:
Article 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the
partnership assets have been exhausted , for the contracts which may be entered into in the name and for the account of
the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may
enter into a separate obligation to perform a partnership contract. This provision clearly states that, first, the partners’
obligation with respect to the partnership liabilities is subsidiary in nature. To say that one’s liability is subsidiary means
that it merely becomes secondary and only arises if the one primarily liable fails to sufficiently satisfy the obligation. In this
case, Guy’s liability would only arise after the properties of QSC would have been exhausted. The records, however,
miserably failed to show that the partnership’s properties were exhausted. Clearly, no genuine efforts were made to locate
the properties of QSC that could have been attached to satisfy the judgment − contrary to the clear mandate of Article
1816. Second, Article 1816 provides that the partners’ obligation to third persons with respect to the partnership liability
is pro rata or joint. Liability is joint when a debtor is liable only for the payment of only a proportionate part of the debt. In
contrast, a solidary liability makes a debtor liable for the payment of the entire debt. In the same vein, Article 1207 does
not presume solidary liability unless: 1) the obligation expressly so states; or 2) the law or nature requires solidarity. With
regard to partnerships, ordinarily, the liability of the partners is not solidary.
Villareal v. Ramirez
G.R. No. 144214, 14 July
2003
FACTS: Petitioners formed a partnership for the operation of a restaurant and catering business. Respondent joined as a
partner in the business. Subsequently, one of the partners withdrew from the partnership, and his capital contribution of
1/4 was refunded to him in cash by agreement of the partners.
Meanwhile, without prior knowledge of respondents, petitioners closed down the restaurant, allegedly because of
increased rental. Respondent informed petitioners that they were no longer interested in continuing their partnership or in
reopening the restaurant, and that they were accepting the latters offer to return their capital contribution consisting of 1/3
share. However, all their written requests left unheeded.
Respondents subsequently filed a Complaint for the collection of a sum of money from petitioners.
Petitioners contended that respondents had no right to demand a return of their equity because their share, together with
the rest of the capital of the partnership, had been spent as a result of irreversible business losses. On the other hand,
Respondents alleged that they did not know of any loan encumbrance on the restaurant. According to them, the loans
incurred by petitioners should be regarded as purely personal and, as such, not chargeable to the partnership.
Respondents further averred that they had not received any regular report or accounting from the latter, who had solely
managed the business.
Hence, this Petition.
ISSUE: Whether petitioners are liable to respondents for the latters share in the partnership.
RULING: NO. We hold that respondents have no right to demand from petitioners the return of their equity share.
Both the trial and the appellate courts found that a partnership had indeed existed, and that it was dissolved when
respondents informed petitioners of the intention to discontinue it because of the formers dissatisfaction with, and loss of
trust in, the latters management of the partnership affairs. Except as managers of the partnership, 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, the amount to be refunded is necessarily limited to its total resources. In other words, it
can only pay out what it has in its coffers, which consists of all its assets. However, before the partners can be paid their
shares, the creditors of the partnership must first be compensated. After all the creditors have been paid, whatever is left
of the partnership assets becomes available for the payment of the partners shares.
The records show that the partnership capital was actually reduced. When petitioners and respondents ventured into
business together, they should have prepared for the fact that their investment would either grow or shrink. In the present
case, the investment of respondents substantially dwindled. The original amount of P250,000 which they had invested
could no longer be returned to them, because one third of the partnership properties at the time of dissolution did not
amount to that much.
It is a long established doctrine that the law does not relieve parties from the effects of unwise, foolish or disastrous
contracts they have entered into with all the required formalities and with full awareness of what they were doing. Courts
have no power to relieve them from obligations they have voluntarily assumed, simply because their contracts turn out to
be disastrous deals or unwise investments.
Spouses Alcantara & Spouses Rubi v. Nido G.R. No. 165133; April 19, 2010
Facts: Revelen, who is respondent’s daughter, is the owner of an unregistered land. Respondentand
petitioners entered into a contract to sell, whereby petitioners paid down payment and the balance
was payable on installment. When petitioners defaulted in payment, respondent, acting as
administrator and attorney of Revelen, filed a complaint for recovery of possession with damages
and prayer for preliminary injunction against petitioners with the RTC. Petitioners submit that the sale
of land by an agent who has no written authority is not void but merely voidable, and thus may be
ratified, expressly or impliedly.
Issue: Is the contention of petitioner valid?
Held: No. Article 1874 of the Civil Code explicitly requires a written authority before an agent can sell
an immovable property. Based on a review of the records, there is absolutely no proof of
respondent’s written authority to sell the lot to petitioners. Consequently, the sale of the lot by
respondent who did not have a written authority from Revelen is void. A void contract produces no
effect either against or in favor of anyone and cannot be ratified. A special power of attorney is also
necessary to enter into any contract by which the ownership of an immovable is transmitted or
acquired for a valuable consideration. Without an authority in writing, respondent cannot validly sell
the lot to petitioners. Hence, any "sale" in favor of the petitioners is void. Respondent did not have
the written authority to enter into a contract to sell the lot. As the consent of Revelen, the real owner,
was not obtained in writing as required by law, no contract was perfected. Petitioners failed to validly
acquire the lot.
G.R. No. 190277 July 23, 2014
ABSOLUTE MANAGEMENT CORPORATION vs. METROPOLITAN BANK AND TRUST

COMPANY
FACTS:
Sherwood Holdings Corporation and Spouses Sandy Ang and Arlene Ang filed a case for sum of money against
private respondent Absolute Management Corporation before the RTC of QC. The trial court set the case for
pre-trial on February 7, 2004, but the same was cancelled on account of the filing by petitioner of a motion to
admit fourth-party-complaint against the Estate of Jose L. Chua. When the counsels of the parties were asked by
the trial court to produce their respective authorizations to appear at the said hearing, [counsel for petitioner]
manifested that [her] authority to appear for petitioner was submitted by them at the first pre-trial hearing way
back [in] 2004. Petitioner’s counsel was given the chance to go over the records to look for [the] Secretary’s
Certificate she allegedly submitted in 2004. Petitioner’s counsel, however, failed to show any written authority.
Respondent clarified that the failure of the undersigned counsel to present the above-mentioned
authorization at the said occasion was due to their impression that the same was already submitted by them
during the initial pre-trial hearing of the case that was held on February 27, 2004. Because of such impression,
undersigned counsel did not bring anymore the required authorization from [respondent].
ISSUE: WON A SPECIAL POWER OF ATTORNEY NEED NOT BE PRESENTED IN COURT DURING
PRE-TRIAL HEARINGS SINCE THE AUTHORITY OF A LAWYER TO APPEAR IN BEHALF OF HIS
CLIENT IS PRESUMED.
HELD: Yes.
The court a quo merely applied the law in this case when it declared that respondent’s counsel did not have the
authority to act on behalf of respondent as its representative during the pretrial on November 20, 2006. The applicable
provision under Rule 18 of the 1997 Rules of Civil Procedure, as amended, states, viz.:
SEC. 4. Appearance of parties. - It shall be the duty of the parties and their counsel to appear at the pre-trial.
The non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall
appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative
modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents. 15
SEC. 5. Effect of failure to appear. - The failure of the plaintiff to appear when so required pursuant to the next
preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless
otherwise ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff
to present his evidence ex parteand the court to render judgment on the basis thereof.
What needs stressing is that the parties as well as the Trial Court must realize that at the pre-trial, the parties are
obliged not only to make formal identification and specification of the issues and of their proofs, as above described –
indeed, there is no reason why the Court may not oblige the parties to set these matters down in separate writings and
submit them to the Court prior to the pre-trial, and then to discuss, refine and embody the matters agreed upon in a single
document at or shortly after the pretrial – but also and equally as peremptorily, to directly address and discuss with
sincerity and candor and in entire good faith each of the other
Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the parties as
well to appear for this purpose before the Court, and when a party "fails to appear at a pre-trial conference (he) may be
non-suited or considered as indefault." The obligation "to appear" denotes not simply the personal appearance, or the mere
physical presentation by a party of one’s self, but connotes as importantly, preparedness to go into the different subject
assigned by law to a pre-trial. And in those instances where a party may not himself be present at the pre-trial, and another
person substitutes for him, or his lawyer undertakes to appear not only as an attorney but in substitution of the client’s
person, it is imperative for that representative of the lawyer to have "special authority" to make such substantive
agreements as only the client otherwise has capacity to make. That "special authority" should ordinarily be in writing or at
the very least be "duly established by evidence other than the selfserving assertion of counsel (or the proclaimed
representative) himself." Without that special authority, the lawyer or representative cannot be deemed capacitated to
appear in place of the party; hence, it will be considered that the latter has failed to put in an appearance at all, and he
[must] therefore "be non-suited or considered as in default," notwithstanding his lawyer’s or delegate’s presence.
It should be noted that Atty. Buendia also appeared as a representative of Respondent in the pre-trial hearing. In
this regard, Section 4, Rule 18 of the Rules of Court specifically mandates that such representative must be armed with a
written authority from the party litigant. Unfortunately, she was not able to present one.
Citing this Honorable Court’s rulings in the cases of Land Bank of the Philippines vs. Pamintuan Development
Co.x x x and Cebu Stevedoring Co. vs. Ramoletex x x[,] the CA highlighted the established principles that a lawyer is not
required to present a written authorization from a client such that even the absence of a formal notice of entry of
appearance will not even invalidate the acts performed by counsel in the client’s name.(Liberal Construction)
However, the facts in the case at bar do not warrant a liberal construction of the rules. To be sure, the only
explanation proffered by respondent’s counsel for not having the proper authorization to represent respondent at pre-trial
was her manifestation in open court that the written authority was submitted to the court a quo during the first pre-trial
hearing way back in 2004. Respondent had failed to substantiate its sole excuse for its representative’s apparent lack of
authority to be its representative, in addition to being its counsel, during the pre-trial conference. Such document
conveying authority – having originated from and issued by respondent itself – would have been produced with relative
facility. Respondent, however, failed to produce this document before the court a quo, the appellate court and this Court.
As fairly observed by petitioner, the SPA later submitted by respondent’s counsel is dated December 5, 2006 or "after" the
pre-trial conference
The crux of this controversy is whether respondent's counsel had the authority to represent respondent in her
capacity as its representative during the subject pre-trial, and not in her capacity as its counsel. Prescinding from the
foregoing disquisitions, we agree with the court a quo that respondent's counsel did not have the proper authority
JESUS M. GOZUN, Petitioner, vs. JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO,
Respondent.
FACTS: In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon
respondents 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 petitioners claim, respondents 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. 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. Petitioner delivered the campaign
materials to respondents headquarters. Meanwhile, on March 31, 1995, respondents sisterinlaw,
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. Petitioner
later sent respondent a Statement of Account 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,
respondents wife partially paid P1,000,000 to petitioner who issued a receipt therefor. Despite
repeated demands and respondents promise to pay, respondent failed to settle the balance of his
account to petitioner.
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 petitioners claim that Lilian, on his (respondents) 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. At the witness stand, respondent, reiterating his allegations in his Answer,
claimed that petitioner was his overall coordinator in charge of the conduct of seminars for volunteers
and the monitoring of other matters bearing on his candidacy; and that while his campaign manager,
Juanito Johnny Cabalu (Cabalu), who was authorized to approve details with regard to printing
materials, presented him some campaign materials, those were partly donated. When confronted
with the official receipt issued to his wife acknowledging her payment to JMG Publishing House of the
amount of P1,000,000, respondent claimed that it was his first time to see the receipt, albeit he
belatedly came to know from his wife and Cabalu that the P1,000,000 represented compensation [to
petitioner] who helped a lot in the campaign as a gesture of goodwill. Acknowledging that petitioner is
engaged in the printing business, respondent explained that he sometimes discussed with petitioner
strategies relating to his candidacy, he (petitioner) having actively volunteered to help in his
campaign; that his wife was not authorized to enter into a contract with petitioner regarding campaign
materials as she knew her limitations; that he no longer questioned the P1,000,000 his wife gave
petitioner as he thought that it was just proper to compensate him for a job well done; and that he
came to know about petitioners claim against him only after receiving a copy of the complaint, which
surprised him because he knew fully well that the campaign materials were donations. Finally,
respondent, disclaiming knowledge of the Comelec rule that if a campaign material is donated, it
must be so stated on its face, acknowledged that nothing of that sort was written on all the materials
made by petitioner.
ISSUE: won respondent is liable to petitioner.
HELD: Yes, but not for Lilian's cash advance. 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. While petitioner claims that Lilian was
authorized by respondent, the statement of account marked as Exhibit A states that the amount was
received by Lilian in behalf of Mrs. Annie Mercado. Invoking Article 1873 of the Civil Code, petitioner
submits that respondent informed him that he had authorized Lilian to obtain the loan, hence,
following Macke v. Camps which holds that one who clothes another with apparent authority as his
agent, and holds him out to the public as such, respondent cannot be permitted to deny the authority.
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. ~oOo~
BRAVO-GUERRERO vs. BRAVO, G.R. No. 152658 July 29, 2005
FACTS: Spouses Mauricio Bravo ("Mauricio") and Simona5 Andaya Bravo ("Simona") owned two
parcels of land ("Properties") located along Evangelista Street, Makati City, Metro Manila. They have
three children - Roland, Cesar and Lily, all surnamed Bravo. Cesar died without issue. Lily Bravo
married David Diaz, and had a son, David B. Diaz, Jr. ("David Jr."). Roland had six children, namely,
Lily Elizabeth Bravo-Guerrero ("Elizabeth"), Edward Bravo ("Edward"), Roland Bravo, Jr. ("Roland
Jr."), Senia Bravo, Benjamin Mauricio Bravo, and their half-sister, Ofelia Bravo ("Ofelia"). Simona
executed a General Power of Attorney ("GPA") on 17 June 1966 appointing Mauricio as her attorney-
in-fact. In the GPA, Simona authorized Mauricio to "mortgage or otherwise hypothecate, sell, assign
and dispose of any and all of my property, real, personal or mixed, of any kind whatsoever and
wheresoever situated, or any interest therein xxx." Mauricio subsequently mortgaged the Properties
to the Philippine National Bank (PNB) and Development Bank of the Philippines (DBP) for P10,000
and P5,000, respectively. On 25 October 1970, Mauricio executed a Deed of Sale with Assumption
of Real Estate Mortgage ("Deed of Sale") conveying the Properties to "Roland A. Bravo, Ofelia A.
Bravo and Elizabeth Bravo"8 ("vendees"). However, the Deed of Sale was not annotated on TCT
Nos.
58999 and 59000. Neither was it presented to PNB and DBP. The mortage loans and the receipts for
loan payments issued by PNB and DBP continued to be in Mauricio’s name even after his death on
20 November 1973. Simona died in 1977. On 23 June 1997, Edward, represented by his wife,
Fatima Bravo, filed an action for the judicial partition of the Properties. Edward claimed that he and
the other grandchildren of Mauricio and Simona are co-owners of the Properties by succession.
Despite this, petitioners refused to share with him the possession and rental income of the
Properties.
ISSUE: Whether Simona validly appointed Mauricio as her attorney-in-fact to dispose the properties
in question.
DECISION: The SC also agree with the trial court that Simona authorized Mauricio to dispose of the
Properties when she executed the GPA. True, Article 1878 requires a special power of attorney for
an agent to execute a contract that transfers the ownership of an immovable. However, the Court has
clarified that Article 1878 refers to the nature of the authorization, not to its form. Even if a document
is titled as a general power of attorney, the requirement of a special power of attorney is met if there
is a clear mandate from the principal specifically authorizing the performance of the act. In Veloso v.
Court of Appeals, the Court explained that a general power of attorney could contain a special power
to sell that satisfies the requirement of Article 1878, thus: 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. In this case, Simona expressly authorized Mauricio in the GPA
to "sell, assign and dispose of any and all of my property, real, personal or mixed, of any kind
whatsoever and wheresoever situated, or any interest therein xxx" as well as to "act as my general
representative and agent, with full authority to buy, sell, negotiate and contract for me and in my
behalf." Taken together, these provisions constitute a clear and specific mandate to Mauricio to sell
the Properties. Even if it is called a "general power of attorney," the specific provisions in the GPA
are sufficient for the purposes of Article 1878. These provisions in the GPA likewise indicate that
Simona consented to the sale of the Properties.
San Juan Structural and Steel Fabricators, Inc. vs Court of Appeals

296 SCRA 631 [GR No. 129459 September 29, 1998]
Facts: Plaintiff-appellant San Juan structural and steel fabricators Inc.’s amended complaint alleged that on February 14, 1989,
plaintiff-appellant entered into an agreement with defendant-appellee Motorich Sales Corporation for the transfer to it of a parcel of
land identified as lot 30, Block 1 of the Acropolis Greens Subdivision located in the district of Murphy, Quezon City, Metro Manila
containing an area of 414 sqm, covered by TCT no. 362909; that as stipulated in the agreement of February 14, 1i989, plaintiff-
appellant paid the down payment in the sum of P100,000, the balance to be paid on or before March 2, 19889; that on March 1,
1989,Mr. Andres T. Co, president of Plaintiff-appellant corporation, wrote a letter to defendant-appellee Motorich Sales Corporation
requesting a computation for the balance to be paid; that said letter was coursed through the defendant-appellee’s broker. Linda Aduca
who wrote the computation of the balance; that on March 2, 1989, plaintiff-appellant was ready with the amount corresponding to the
balance, covered by Metrobank cashier’s check no. 004223 payable to defendant-appellee Motorich Sales Corporation; that plaintiff-
appellant and defendant-appellee were supposed to meet in the plaintiff-appellant’s office but defendant-appellee’s treasurer, Nenita
Lee Gruenbeg did not appear; that defendant-appelle despite repeated demands and in utter disregard of its commitments had refused
to execute the transfer of rights/deed of assignment which is necessary to transfer the certificate of title; that defendant ACL
development corporation is impleaded as a necessary party since TCT no. 362909 is still in the name of said defendant; while
defendant VNM Realty and Development Corporation is likewise impleaded as a necessary party in view of the fact that it is the
transferor of the right in favor of defendant-appellee Motorich Sales Corporation; that on April 6, 1989 defendant ACL Development
Corporation and Motorich Sales Corporation entered into a deed of absolute sale whereby the former transferred to the latter the
subject property; that by reason of said transfer; the registry of deeds of Quezon City issued a new title in the name of Motorich Sales
Corporation, represented by defendant-appellee Nenita Lee Gruenbeg and Reynaldo L. Gruenbeg, under TCT no. 3751; that as a result
of defendants-appellees Nenita and Motorich’s bad faith in refusing to execute a formal transfer of rights/deed of assignment,
plaintiff-appellant suffered moral and nominal damages which may be assessed against defendant-appellees in the sum of P500,000;
that as a result of an unjustified and unwarranted failure to execute the required transfer or formal deed of sale in favor of plaintiff-
appellant, defendant-appellees should be assessed exemplary damages in the sum of P100,000; that by reason of the said bad faith in
refusing to execute a transfer in favor of plaintiff-appellant the latter lost opportunity to construct a residential building in the sum of
P100,000 and that as a consequence of such bad faith, it has been constrained to obtain the services of counsel at an agreed fee of
P100,000 plus appearance fee of for every appearance in court hearings.
Issues: Whether or not the corporation’s treasurer act can bind the corporation.
Whether or not the doctrine of piercing the veil of corporate entity is applicable.
Held: No. Such contract cannot bind Motorich, because it never authorized or ratified such sale.
A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of the
corporation is not the property of the corporation is not the property of its stockholders or members and may not be sold by the
stockholders or members without express authorization from the corporation’s board of directors.
Section 23 of BP 68 provides the Board of Directors or Trustees – Unless otherwise provided in this code, the corporate powers of all
corporations formed under this code shall be exercised, all business conducted, and all property of such corporations controlled and
held by the board of directors or trustees to be elected from among the stockholders of stocks, or where there is no stock, from among
the members of the corporations, who shall hold office for 1 year and until their successors are elected and qualified.
As a general rule, the acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers exce
Because Motorich had never given a written authorization to respondent Gruenbeg to sell its parcel of land, we hold that the February 14, 1989
The statutorily granted privilege of a corporate veil may be used only for legitimate purposes. On equitable consideration,the veil can be disreg
We stress that the corporate fiction should be set aside when it becomes a shield against liability for fraud, or an illegal act on inequity commi
MANILA MEMORIAL PARK CEMETERY, INC.vs.PEDRO L.

LINSANGAN
FACTS:
Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross Memorial Park
owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot under Contract No.
25012 was no longer interested in acquiring the lot and had opted to sell his rights subject to reimbursement of
the amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once
reimbursement is made to the former buyer, the contract would be transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the original
buyer and to complete the down payment to MMPCI. Baluyot issued handwritten and typewritten receipts for
these payments. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the new
contract price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan, Baluyot
executed a document confirming that while the contract price is P132,250.00, Atty. Linsangan would pay only
the original price of P95,000.00.
Later on, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons the latter
could not explain. For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint for Breach of Contract and Damages against the former.
MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the contract because of
non-payment of arrearages. MMPCI stated that Baluyot was not an agent but an independent contractor, and as
such was not authorized to represent MMPCI or to use its name except as to the extent expressly stated in the
Agency Manager Agreement. Moreover, MMPCI was not aware of the arrangements entered into by Atty.
Linsangan and Baluyot, as it in fact received a down payment and monthly installments as indicated in the
contract.
The trial court held MMPCI and Baluyot jointly and severally liable. The Court of Appeals affirmed the
decision of the trial court.
ISSUES:
1. Whether or not there was a contract of agency between Baluyot and MMPCI?
2. Whether or not MMPCI should be liable for Baluyot’s act?
HELD:
First Issue. Yes. 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. As properly found both by the
trial court and the Court of Appeals, Baluyot was authorized to solicit and remit to MMPCI offers to purchase
interment spaces obtained on forms provided by MMPCI. The terms of the offer to purchase, therefore, are
contained in such forms and, when signed by the buyer and an authorized officer of MMPCI, becomes binding
on both parties.
Second Issue. No. While there is no more question as to the agency relationship between Baluyot and MMPCI,
there is no indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the
authority to alter the standard contracts of the company. Neither is there any showing that prior to signing
Contract No. 28660, MMPCI had any knowledge of Baluyot's commitment to Atty. Linsangan. Even assuming
that Atty. Linsangan was misled by MMPCI's actuations, he still cannot invoke the principle of estoppel, as he
was clearly negligent in his dealings with Baluyot, and could have easily determined, had he only been cautious
and prudent, whether said agent was clothed with the authority to change the terms of the principal's written
contract.
To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless the latter
ratifies the same. It also bears emphasis that when the third person knows that the agent was acting beyond his
power or authority, the principal cannot be held liable for the acts of the agent. If the said third person was
aware of such limits of authority, he is to blame and is not entitled to recover damages from the agent, unless
the latter undertook to secure the principal's ratification.
Air France v. Court of Appeals

G.R. No. L-57339, 29 December 1983
FACTS:
In February, 1970, the late Jose G. Gana and his family, (the GANAS), purchased from AIR FRANCE through
Imperial Travels, Incorporated, a duly authorized travel agent, nine “open-dated” air passage tickets for the
Manila/Osaka/Tokyo/Manila route.
On April 24, 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for the
same route. At this time, the GANAS were booked for the Manila/Osaka segment on AIR FRANCE Flight 184 for
May 8, 1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on May 22, 1970. The aforesaid
tickets were valid until May 8, 1971.The GANAS did not depart on 8 May 1970.
Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the Sta. Clara Lumber Company where
Jose Gana was the Director and Treasurer, for the extension of the validity of their tickets, which were due to expire
on May 8, 1971. Teresita enlisted the help of Lee Ella Manager of the Philippine Travel Bureau, who used to handle
travel arrangements for the personnel of the Sta. Clara Lumber Company. Ella sent the tickets to Cesar Rillo, Office
Manager of AIR FRANCE.
The tickets were returned to Ella who was informed that extension was not possible. Ella then returned the tickets to
Teresita and informed her of the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on May 7, 1971 or one day before the expiry date. In
the morning of the very day of their scheduled departure on the first leg of their trip, Teresita requested travel agent
Ella to arrange the revalidation of the tickets. Ella gave the same negative answer and warned her that although the
tickets could be used by the GANAS if they left onMay 7, 1971, the tickets would no longer be valid for the rest of
their trip because the tickets would then have expired on May 8,1971. Teresita replied that it will be up to the
GANAS to make the arrangements. Notwithstanding the warnings, the GANAS departed from Manila in the
afternoon of May 7, 1971 on board AIR FRANCE Flight 184 for Osaka, Japan.
However, for the Osaka/Tokyo flight on May 17, 1971, Japan Airlines refused to honor the tickets because of their
expiration, and the GANAS had to purchase new tickets. They encountered the same difficulty with respect to their
return trip to Manila as AIR FRANCE also refused to honor their tickets. They were able to return only after pre-
payment in Manila, through their relatives, of the readjusted rates. They finally flew back to Manila on separate Air
France Frights.
ISSUE:
Whether or not Teresita was the agent of the GANAS and notice to of the rejection of the request of the validity of
the tickets was notice to the GANAS, her principals.
RULING:
The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out that
Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of the advice of
Reno, the Office Manager of Air France, that the tickets in question could not be extended beyond the period of their
validity without paying the fare differentials and additional travel taxes brought about by the increased fare rate and
travel taxes.
To all legal intents and purposes, Teresita was the agent of the GANAS and notice to her of the rejection of the
request for extension of the validity of the tickets was notice to the GANAS, her principals.
WHEREFORE, the judgment under review is hereby reversed and set aside, and the Amended Complaint filed by
private respondents hereby dismissed.
SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC
G.R. No. 161757; January 25, 2006
Ponente: J. Carpio-Morales
FACTS:
Petitioner, Sunace International Management Services (Sunace), deployed to Taiwan Divina A. Montehermozo (Divina)
as a domestic helper under a 12-month contract effective February 1, 1997. The deployment was with the assistance of a
Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese employer, Hang
Rui Xiong, for two more years, after which she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint before the National Labor Relations Commission
(NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign principal alleging that she
was jailed for three months and that she was underpaid
Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ". . . ANSWER TO COMPLAINANT'S POSITION
PAPER" alleging that Divina's 2-year extension of her contract was without its knowledge and consent, hence, it had no
liability attaching to any claim arising therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of
Responsibility and an Affidavit of Desistance, copy of each document was annexed to said
The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more years was without its
knowledge and consent.
ISSUE:
Whether the act of the foreigner-principal in renewing the contract of Divina be attributable to Sunace
HELD:
No, the act of the foreigner-principal in renewing the contract of Divina is not attributable to Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under the 2-year employment contract
extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be held solidarily liable for any of
Divina's claims arising from the 2-year employment extension.
Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship with its foreign
principal when, after the termination of the original employment contract, the foreign principal directly negotiated with
Divina and entered into a new and separate employment contract in Taiwan.
Fieldman's Insurance vs. Songco, L-24833, September 23, 1968
FACTS: Federico Songco of Floridablanca, Pampanga, a man of scant education being only a first
grader ¦, owned a private jeepney for the year 1960. On September 15, 1960, he was induced by
Fieldmens Insurance Company Pampanga agent Benjamin Sambat to apply for a Common Carriers
Liability Insurance Policy covering his motor vehicle ¦ Upon paying an annual premium of P16.50,
defendant Fieldmens Insurance Company, Inc. issued on September 19, 1960, Common Carriers
Accident Insurance Policy¦ the duration of which will be for one (1) year, effective September 15, 1960
to September 15, 1961. On September 22, 1961, upon payment of the corresponding premium, the
company renewed the policy by extending the coverage from October 15, 1961 to October 15, 1962.
This time Federico Songcos private jeepney carried Plate No. J-68136-Pampanga-1961.
On October 29, 1961, during the effectivity of the renewed policy, the insured vehicle while being
driven by Rodolfo Songco, a duly licensed driver and son of Federico (the vehicle owner) collided with
a car in the municipality of Calumpit, province of Bulacan, as a result of which mishap Federico
Songco (father) and Rodolfo Songco (son) died, Carlos Songco (another son), the latters wife,
Angelita Songco, and a family friend by the name of Jose Manuel sustained physical injuries of
varying degree. 1 Amor Songco, son of deceased Federico Songco, declared that when insurance
agent Benjamin Sambat was inducing his father to insure his vehicle, he butted in saying: That cannot
be, Mr. Sambat, because our vehicle is an owner private vehicle and not for passengers, to which
agent Sambat replied: whether our vehicle was an owner type or for passengers it could be insured
because their company is not owned by the Government and the Government has nothing to do with
their company. So they could do what they please whenever they believe a vehicle is insurable ISSUE:
Whether or not the Songcos can claim the insurance proceeds despite the fact that the vehicle
concerned was an owner and not a common carrier. HELD: YES RULING: The basis for the favorable
judgment is the doctrine announced in Qua Chee Gan v. Law Union and Rock Insurance Co., where
inequitable conduct is shown by an insurance firm, it is estopped from enforcing forfeitures in its
favor, in order to forestall fraud or imposition on the insured. This is a case where the doctrine of
estoppel undeniably calls for application. After petitioner Fieldmens Insurance Co., Inc. had led the
insured Federico Songco to believe that he could qualify under the common carrier liability insurance
policy, and to enter into contract of insurance paying the premiums due, it could not, be permitted to
change its stand to the detriment of the heirs of the insured. lt would now rely on the fact that the
insured owned a private vehicle, not a common carrier, something which it knew all along when not
once but twice its agent, no doubt without any objection in its part, exerted the utmost pressure on
the insured, a man of scant education, to enter into such a contract.
This was clearly a deception on the part of the company. Article 1377: the interpretation of obscure
words or stipulations in a contract shall not favor the party who caused the obscurity. In the case at
bar, even if it be assumed that there was an ambiguity, taking into account the well known rule that
ambiguities or obscurities must be strictly interpreted against the party that caused them (fieldman in
the present case). This rigid application of the rule on ambiguities has become necessary in view of
current business practices.
The courts cannot ignore that nowadays monopolies, cartels and concentration of capital, endowed
with overwhelming economic power, manage to impose upon parties dealing with them cunningly
prepared agreements that the weaker party may not change one whit, his participation in the
agreement being reduced to the alternative to take it or leave it labelled since Raymond Saleilles
contracts by adherence (contrats dadhesion), in contrast to those entered into by parties bargaining
on an equal footing, such contracts (of which policies of insurance and international bills of lading are
prime examples) obviously call for greater strictness and vigilance on the part of courts of justice with
a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps
for the unwary The contract of insurance is one of perfect good faith (uberima fides) not for the
insured alone,but equally so for the insurer; in fact, it is more so for the latter, since its dominant
bargaining position carries with it stricter responsibility.
9 This is merely to stress that while the morality of the business world is not the morality of
institutions of rectitude like the pulpit and the academe, it cannot descend so low as to be another
name for guile or deception. Moreover, should it happen thus, no court of justice should allow itself
to lend its approval and support.1awph®l.n¨t We have no choice but to recognize the monetary
responsibility of petitioner Fieldmens Insurance Co., Inc. It did not succeed in its persistent effort to
avoid complying with its obligation in the lower court and the Court of Appeals. Much less should it
find any receptivity from us for its unwarranted and unjustified plea to escape from its liability.
NEW LIFE ENTERPRISES AND JULIAN SY VS. CA
9.
GR 94071 March 31, 1992 Ponente: Regalado, J. Summary: HINDI NIYA NABASA NA KELANGAN
I-DECLARE KUNG MAY PREVIOUSLY INSURED [ CO-INSURANCE] YUNG SAME OBJECT. In this
case: pwede non-disclosure provided total indemnity is not more than 200k
Julian Sy and Jose Sy Bang have formed a business partnership in the City of Lucena. Under the
business name of New Life Enterprises, the partnership engaged in the sale of construction materials
at its place of business, a two-storey building situated at Iyam, Lucena City. Julian Sy insured the
stocks in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and
Insurance. Co., Inc., and Equitable Insurance Corporation. Acquired fire insurance from 3 different
insurance companies a. May 15, 1981 - Western Guaranty Corporation issued Fire Insurance Policy
No. 37201 in the amount of P350,000.00. This policy was renewed on May, 13, 1982. b. July
30,1981, Reliance Surety and Insurance Co., Inc. issued Fire Insurance Policy No. 69135 in the
amount of P300,000.00 (Renewed under Renewal Certificate No. 41997) An additional insurance
was issued by the same company on November 12, 1981 under Fire Insurance Policy No. 71547 in
the amount of P700,000.00. c. February 8, 1982n- Equitable Insurance Corporation issued Fire
Insurance Policy No. 39328 in the amount of P200,000.00. Fire incident occurred: When the building
occupied by the New Life Enterprises was gutted by fire at about 2:00 am of October 19, 1982,
stocks in the trade inside said building were insured against fire in the total amount of P1,550,000.00.
Electrical cause of the said accident: According to the certification issued by the Headquarters,
Philippine Constabulary /Integrated National Police, Camp Crame, the cause of fire was electrical in
nature.
According to the plaintiffs, the building and the stocks inside were burned.: After the fire, Julian Sy
went to the agent of Reliance Insurance whom he asked to accompany him to the office of the
company so that he can file his claim. He averred that in support of his claim, he submitted the fire
clearance, the insurance policies and inventory of stocks. Insurance companies- Denial of Claim:
Julian Sy further testified that the three insurance companies are sister companies, when he was
followingup his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance
Insurance and if said company agrees to pay, they would
12.
13.
14. 15.
also pay. The same treatment was given him by the other insurance companies. Ultimately, the three
insurance companies denied plaintiffs' claim for payment. Denial of Claim- Initial Reason: Reliance
Insurance purveyed the same message in its letter dated November 23, 1982 and signed by
Executive Vice-President Mary Dee Co, which said that "plaintiff's claim is denied for breach of policy
conditions. Denial of Claim -Non-Disclosure of Previous Insurance on said goods Admission of non-
disclosure that it co-insure said goods: Petitioners admit that the respective insurance policies issued
by private respondents did not state or endorse thereon the other insurance coverage obtained or
subsequently effected on the same stocks in trade for the loss of which compensation is claimed by
petitioners In other words, the coverage by other insurance or co-insurance effected or subsequently
arranged by petitioners were neither stated nor endorsed in the policies of the three (3) private
respondents, warranting forfeiture of all benefits thereunder if we are to follow the express stipulation
in the aforequoted Policy Condition No. 3. Petitioners contend that they are not to be blamed for the
omissions, alleging that insurance agent Leon Alvarez (for Western) and Yap Kam Chuan (for
Reliance and Equitable) knew about the existence of the additional insurance coverage and that they
were not informed about the requirement that such other or additional insurance should be stated in
the policy, as they have not even read policies. Petitioner should have express his disagreement with
the said insurance contract Petitioners should be aware of the fact that a party is not relieved of the
duty to exercise the ordinary care and prudence that would be exacted in relation to other contracts.
The conformity of the insured to the terms of the policy is implied from his failure to express any
disagreement with what is provided for
ISSUE: WON Conditions 3 and 27 of the Insurance Contracts were violated by petitioners thereby
resulting in their forfeiture of all the benefits thereunder (YES) RATIO 1. a.
Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is
uniformly contained in all the aforestated insurance contracts of herein petitioners, as follows: The
insured shall give notice to the Company of any insurance or insurances already effected, or which
may subsequently be effected, covering any of the property or properties consisting of stocks in
trade, goods in process and/or inventories only hereby insured, and unless such notice be given and
the particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant
to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any
loss or damage, all benefits under this policy shall be deemed forfeited, force at the time of loss or
damage not more than P200,000.00.
2.
3. 4. 5. 6.
7. 8.
9.
Sy never disclosed co-insurance in the contracts he entered into with the three corporations. The
insured is specifically required to disclose the insurance that he had contracted with other
companies. Sy also contended that the insurance agents knew of the co-insurance. However, the
theory of imputed knowledge, that the knowledge of the agent is presumed to be known by the
principal, is not enough. When the words of the document are readily understandable by an ordinary
reader, there is no need for construction anymore. The conformity of the insured to the terms of the
policy is implied with his failure to disagree with the terms of the contract. Since Sy, was a
businessman, it was incumbent upon him to read the contracts. In Pioneer Insurance and Surety
Corporation vs. Yap, the obvious purpose of the aforesaid requirement in the policy is to prevent
overinsurance and thus avert the perpetration of fraud. The public, as well as the insurer, is
interested in preventing the situation in which a fire would be profitable to the insured. “Also, policy
condition 15 was used. It stated: 15.. if any false declaration be made or used in support thereof, . . .
all benefits under this Policy shall be forfeited . . .” As for condition number 27, the stipulation read: a.
27. Action or suit clause. — If a claim be made and rejected and an action or suit be not commenced
either in the Insurance Commission or any court of competent jurisdiction of notice of such rejection,
or in case of arbitration taking place as provided herein, within twelve (12) months after due notice of
the award made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be
deemed to have been abandoned and shall not thereafter be recoverable hereunder. This is
regarding Sy’s claim for one of the companies. Recovery was filed in court by petitioners only on
January 31, 1984, or after more than one (1) year had elapsed from petitioners' receipt of the
insurers' letter of denial on November 29, 1982. This made it void.
FALLO: WHEREFORE, finding no cogent reason to disturb the judgment of respondent Court of
Appeals, the same is hereby AFFIRMED.

Agency Trusts and Partnership Case Digest

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AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 1 of 33

Sunga-Chan vs. Chua, G.R. No. 143340, Aug. 15, 2001

G.R. No. 159333 July 31, 2006, ARSENIO T. MENDIOLA, petitioner,

The facts are as follows:

Pacific Forest Resources

Please let me know if you are interested.22

All other claims are dismissed for lack of basis.

The NLRC denied petitioner's Motion for Reconsideration.32

Hence, this appeal.34

Petitioner assigns the following errors:

Next, we shall determine if petitioner was constructively dismissed from employment.

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

Tocao vs. Court of Appeals, G.R. No. 127405, October 4, 2000

The parties agreed further that Anay would be entitled to:

ISSUE: Whether the parties formed a partnership

HELD: Yes, the parties involved in this case formed a partnership

Therefore, the parties formed a partnership.

Benjamin Yu vs. NLRC, G.R. No. 97212, June 30, 1993

Rojas vs. Maglana, G.R. No. 30616, December 10, 1990

(2) YES, Maglana can unilaterally dissolve the partnership.

CIR vs. Suter, 27 SCRA 152 (1969)

The Court of Tax Appeals reversed the decision of the CIR.

Hence, the petition.

RULING: Yes, it is.

ISSUE: Whether or not there was an existence of a consortium.

ISSUE: Whether or not the petition for modification of decision proper.

ISSUE: Whether a partnership agreement existed.

Ortega vs. Court of Appeals, G.R. No. 109248, July 3, 1995

ISSUE: Was the private respondent entitled to such earnings?

RULING: Yes, as he was petitioner’s partner.

Conveyance or assignment of a partner's interest

Guy vs. Gacott, G.R. No. 206147, January 13, 2016

Hence, this Petition.

Issue: Is the contention of petitioner valid?

G.R. No. 190277 July 23, 2014

ABSOLUTE MANAGEMENT CORPORATION vs. METROPOLITAN BANK AND TRUST

ISSUE: won respondent is liable to petitioner.

BRAVO-GUERRERO vs. BRAVO, G.R. No. 152658 July 29, 2005

San Juan Structural and Steel Fabricators, Inc. vs Court of Appeals

MANILA MEMORIAL PARK CEMETERY, INC.vs.PEDRO L.

Air France v. Court of Appeals

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NLRC

Fieldman's Insurance vs. Songco, L-24833, September 23, 1968

NEW LIFE ENTERPRISES AND JULIAN SY VS. CA

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