1. G.R. No.

70926 January 31, 1989

DAN FUE LEUNG, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG
YIU, respondents.

FACTS:

The petitioner asks for the reversal of the decision of the

Appellate Court in which affirmed the decision of the lower
court declaring private respondent Leung Yiu a partner of
petitioner Dan Fue Leung in the business of Sun Wah
Panciteria and ordering the petitioner to pay to the private
respondent his share in the annual profits of the said
restaurant.

This case originated from a complaint filed by respondent

Leung Yiu with the lower court to recover the sum equivalent
to twenty-two percent (22%) of the annual profits derived
from the operation of Sun Wah Panciteria since October,
1955 from petitioner Dan Fue Leung.

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.

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. Both the trial court and the
appellate court declared that the private petitioner is a
partner and is entitled to a share of the annual profits of the
restaurant. Hence, an appeal to the SC.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.
It was, therefore, error for the Appellate Court to interpret or
construe 'financial assistance' to mean the contribution of
capital by a partner to a partnership.

ISSUE:

WON the private respondent is a partner of the petitioner in

the establishment of Sun Wah Panciteria.

HELD:

In essence, the private respondent alleged that when Sun

Wah Panciteria was established, he gave P4,000.00 to the
petitioner with the understanding that he would be entitled to
twenty-two percent (22%) of the annual profit derived from
the operation of the said panciteria. These allegations, which
were proved, make the private respondent and the petitioner
partners in the establishment of Sun Wah Panciteria because
Article 1767 of the Civil Code provides that "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".

Therefore, 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.

SC affirmed appellate court’s decision and ordered the

dissolution of the partnership.
 2. Heirs of Tan Eng Kee vs. CA

G.R. No. 126881| October 2000 | J. De Leon

Facts

After the death of Tan Eng Kee, Matilde Abubo, the common-
law spouse of the decedent joined by their children
collectively known as petitioners Heirs of Tan Eng Kee, filed a
suit against the decedent’s brother Tan Eng Lay in the RTC of
Baguio for accounting, liquidation and winding up of the
alleged P formed after WWII between Tang Eng Kee and Tan
Eng Lay. The amended complaint alleged that after the WWII,
Tan Eng Kee and Tan Eng Lay pooled their resources and
industry together, entered into a partnership engaged in the
business of selling lumber and hardware and construction
supplies. However, they claimed that Tan Eng Lay and his
children subsequently caused the conversion of the
partnership “Benguet Lumber” into a corporation called
“Benguet Lumber Company.” The incorporation was
purportedly a ruse to deprive Tan Eng Kee and his heirs of
their rightful participation in the profits of the business.

Issue: W/N there was a partnership between Tan Eng Kee

and his brother Tan Eng Lay notwithstanding the absence of
a) firm account; b) firm letterheads; c) certificate of
partnership; d) agreement as to profits; and e) time fixed for
the duration of the partnership

Held: None

Ratio: The Court held that undoubtedly, the best evidence

would have been the contract of P itself, or the articles of P,
but there is none. The alleged partnership was never formally
organized.

In the absence of evidence, the Court could not accept as an

established fact that Tan Eng Kee allegedly contributed his
resources to a common fund for the purpose of establishing a
P. The Court further held that it is indeed odd, if not
unnatural, that despite the forty years the P was allegedly in
existence, Tan Eng Kee never asked for an accounting. The
essence of a P is that the partners share in the profits and
losses. Each has the right to demand an accounting as long
as the partnership exists.

Furthermore, one of the exhibits presented consisting of

payrolls purporting to show that Tan Eng Kee was an ordinary
employee of Benguet Lumber was not overcome by the
petitioners. The exhibits in fact shows that Tan Eng Kee
received sums as wages of an employee enough to hold that
Tan Eng Kee was only an employee, not a partner.

The collective effect of the circumstances such as the

exercise of powers of supervision of Tan Eng Kee over the
other employees and his duties to place orders with suppliers
are not persuasive indicia of a partnership. If anything, the
ascendancy of Tan Eng Kee over the other employees could
only be because he’s a brother of the owner of the business.

*The Court has occasioned to discuss the meaning of a joint

venture which for it “presupposes generally a parity of
standing between the joint co-ventures or partners…”
Nonetheless, in Aurbach, et al. v. Sanitary Wares Mfg Corp.,
et al., a joint venture may be likened to a particular
partnership. A joint venture has been generally understood to
mean an org formed for some temporary purpose. It is hardly
distinguishable from the P 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 jurisdiction is that the
P 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.
3. PASCUAL VS. CIR

FACTS: The petitioners Pascual and dragon bought 5 parcels

of land. The first 2 were sold in 1968, while the remaining 3
were sold in 1970. Petitioners paid the corresponding
capital gains taxes on both sales availing the tax amnesties
way back in 1974. However,the CIR assessed and required
petitioners to pay corporate income taxes for the said years.
Respondent insisted that in both years, petitioners as co-
owners in the real estate transactions formed an unregistered
partnership taxable as corporation.

ISSUE: W/N petitioners formed a partnership in both

transactions.

HELD: No.There is no evidence that the petitioners entered

into an agreement to contribute money, property or
industry in a common fund, and that they intended to divide
the profits among themselves. Respondent CIR just assumed
these conditions to be present on the basis of the fact that
petitioners purchased certain parcels of land and became
co-owners thereof.

•The transactions were isolated. The character of habituality

peculiar to business transactions for the purpose of gain was
not present.

•The sharing of returns does not initself establish a

partnership whether or not the persons sharing there in 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.
4. Evangelista & Co. vs. Abad Santos
51 SCRA 416

Facts:
In 1954, partnership was formed under the name of
“Evangelista & Co.”. On June 7, 1955, the articles of co-
partnership were amended so as to include herein
respondent, Estrella Abad Santos, as industrial partner with
petitioners herein Domingo Evangelista Jr, Leonardo Atienza
Abad Santos and Conchita Navarro, the original capitalist
partners, remaining in that capacity with a contribution of 17,
500 each. The amended articles provided, inter alia: “the
contribution of Estrella Abad Santos consists of her industry
being an industrial partner, and that the profits and losses
shall be divided and distributed among the partners… in the
proportion of 70% for the first partners, Domingo Evangelista
Jr, Conchita Navarro & Leonardo Atienza Abad Santos to be
divided among them equally and 30% for the fourth partner,
Estrella Abad Santos.”

In 1963, Estrella Abad Santos filed a suit against the

other three partners, alleging that the partnership which was
also made a party-defendant, had been paying dividends to
the partners, except to her and refuse to let her examine the
partnership books and pay to her share in the dividends
declared by the partnership. RTC and CA declared Estrella
Abad Santos to be an industrial partner of the partnership,
and ordering the other three partners to render Estrella an
accounting of the business operations. Hence, the Appeal.

Issue:
W/not the defendant is an industrial partner or merely a
profit-sharer entitled to 30% of the net profits that may be
realized by the partnership?

Held:
 The judgment appealed from is affirmed. Estrella Abad
Santos, is an industrial partner.
It is not the function of the SC to analyze or weigh such
evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by
the lower court. The CA found the evidences presented
conclusive, together with the other factors, consisting both
testimonial and documentary.
5. Compaña Maritima vs. Muñoz
9 Phil 326

Facts:
In March 31, 1905, the defendants Francisco Muñoz,
Emilio Muñoz and Rafael Naval formed an ordinary, general
mercantile partnership under the name of Francisco Muñoz
and Sons, for the purpose of carrying on the mercantile
business in the Province of Albay which had formerly been
carried on by Francisco Muñoz. Francisco Muñoz was a
capitalist partner and Emilio Muñoz and Rafael Naval were
industrial partners. The Articles of Partnership were recorded
in the mercantile registry of the Province of Albay. As
industrial partners, by signing the Articles, agree to
contribute their work to the partnership and Article 138 of the
Code of Commerce prohibits them from engaging I other
work except y express consent of the partnership.

Issue:
W/not, an industrial partner in an ordinary, general
mercantile partnership be relieved from liability to third
persons for the debts of the partnership?

Held:
The court ruled that neither on principle nor an authority
can the industrial partner be relieved from liability to third
persons for the debts of the partnership. Hence, although
exempted for the share on losses, industrial partners are held
liable. Execution on such judgment shall not issue against the
private property of Francisco Muñoz, Emilio Muñoz or Rafael
Naval, until the property of Francisco Muñoz is exhausted.
6. BACHRACH V. “LA PROTECTORA”, 37 PHIL 441

Facts:

In the year 1913, the individuals in this action formed a civil

partnership, called "La Protectora," for the purpose of
engaging in the business of transporting passengers and
freight at Laoag, Ilocos Norte.

Marcelo Barba, acting as manager, came to Manila and upon

June 23, 1913, negotiated the purchase of two automobile
trucks from E. M. Bachrach, for the agreed price of P16,500.
He paid the sum of 3,000 in cash, and for the balance
executed promissory notes representing the deferred
payments. As preliminary to the purchase of these trucks, the
defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores,
and Modesto Serrano, upon June 12, 1913, executed in due
form a document in which they declared that they were
members of the firm "La Protectora" and that they had
granted to its president full authority "in the name and
representation of said partnership to contract for the
purchase of two automobiles". Three of these notes, for the
sum of P3,375 each, have been made the subject of the
present action, and there are exhibited with the complaint in
the cause. One was signed by Marcelo Barba in the following
manner (the other 2, the word “by” was omitted):
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
In the body of the note the word "I" instead of "we" is used
before the words "promise to pay" used in the printed form.
Additional purchases were made for automobile effects and
accessories amounting to P2,916.57. After a chattel
mortgage was instituted by Bachrach, there was a deficiency.
Hence, this case was filed to recover this balance, together
with the sum due for additional purchases. CFI Manila ruled in
favor of Bachrach and only the 4 partners (excluding Barba)
appealed from this decision.

Issue:
Whether the said partners of “La Protecta” are liable for the
firm debts and if so to what extent.

Held:
Yes. From what has been said it results that the appellants
are severally liable for their respective shares of the entire
indebtedness found to be due; and the Court of First Instance
committed no error in giving judgment against them. The
business conducted under the name of "La Protectora" was
evidently that of a civil partnership.

The authority of Marcelo Barba to bind the partnership, in the

purchase of the trucks, is fully established by the document
executed by the four appellants upon June 12, 1913.

The transaction by which Barba secured these trucks was in

conformity with the tenor of this document.

The promissory notes constitute the obligation exclusively of

"La Protectora" and of Marcelo Barba; and they do not in any
sense constitute an obligation directly binding on the four
appellants. Their liability is based on the fact that they are
members of the civil partnership and as such are liable for its
debts.”
7. ELMO MUÑASQUE vs. COURT OF APPEALS,
CELESTINO GALAN TROPICAL COMMERCIAL COMPANY
and RAMON PONS

G.R. No. L-39780 November 11, 1985

FACTS:
Petitioner Elmo Muñasque, in behalf of the partnership of
"Galan and Muñasque", entered into a contract with Tropical
Commercial, Co. Inc. (Tropical) and Ramon Pons for the
remodelling of their Cebu Branch building for P25,000, P7000
to be paid upon the start of construction and P6000 every 15
days till paid.
The first payment was in the form of a check for P7,000.00,
which was delivered to petitioner. Petitioner endorsed the
check in favour of Galan, so that the latter may pay for the
materials and labor. Galan allegedly spend P 6138.37 for
personal use.
When the second payment came, petitioner refused to
endorse the check. Tropical instead issued the check in the
name of “Galan and Associates”, the registered name of the
partnership.
Petitioner claimed that he was placed in great financial
difficulty because he was supposed to use the P13000 to pay
creditors for construction materials.
Petitioner filed a complaint for payment of sum of money and
damages against respondent Galan, Tropical and Pons.
The trial court ruled that there existed a partnership between
petitioner and Galan and they are both jointly and severally
liable to the two intervenors, Cebu Southern Hardware
Company and Blue Diamond Glass Palace, both of whom
extended credit to their partnership. The Court of Appeals
modified the ruling but holding petitioner and Galan as jointly
liable.

ISSUE:
(1) Whether or not there existed a partners between
Celestino Galan and Elmo Muñasque; and
(2) Whether or not there existed a justifiable cause on the
part of respondent Tropical to disburse money to
respondent Galan.

RULING:

Presumption that acting partner has authority to bind

the partnership
When petitioner indorsed the first payment in his name in
favour of Galan, it appeared that there was a partnership
relationship. Tropical, as well as the creditors, had every right
to presume that they were true partners. The payments
made to the partnership were, therefore, valid payments.

The payment made by Tropical to Galan was a good payment

which binds both Galan and the petitioner. Since the two
were partners when the debts were incurred, they, are also
both liable to third persons who extended credit to their
partnership.

Solidary liability – the law protects him who in good

faith, relied upon the authority of a partner
The appellate court; however, erred in holding the partners
jointly liable. The liability of the partners are merely joint in
transactions entered into by the partnership in accordance
with Article 1816; however, a third person who transacted
with said partnership can hold the partners solidarily liable
for the whole obligation if the case of the third person falls
under Articles 1822 or 1823.
“The obligation is solidary, because the law protects him, who
in good faith relied upon the authority of a partner, whether
such authority is real or apparent.”
Since Tropical, as well as the creditors, had reason to
presume that a partnership existed between Galan and
petitioner, thereby extending credit to one of the partners,
the consequences of any wrongful act committed by any of
the partners therein should be answered solidarily by all the
partners and the partnership as a whole.

Partner who acted in bad faith is obliged to reimburse.

Since Galan acted in bad faith, justice dictates that Muñasque
be reimbursed by Galan for the payments made by the
former representing the liability of their partnership to herein
intervenors,
8. Summmary: Lim vs. Philippine Fishing Gear
Industries Inc. (GR 136448, 3 November 1999)
Lim vs. Philippine Fishing Gear Industries Inc.
[GR 136448, 3 November 1999]
Third Division, Panganiban (J): 3 concur

Facts: On behalf of "Ocean Quest Fishing Corporation,"

Antonio Chua and Peter Yao entered into a Contract dated 7
February 1990, for the purchase of fishing nets of various
sizes from the Philippine Fishing Gear Industries, Inc. (PFGI).
They claimed that they were engaged in a business venture
with Lim Tong Lim, who however was not a signatory to the
agreement. The total price of the nets amounted to
P532,045. 400 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, PFGI filed a collection suit
against Chua, Yao and 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. On 20 September 1990, the
lower court issued a Writ of Preliminary Attachment, which
the sheriff enforced by attaching the fishing nets on board
F/B Lourdes which was then docked at the Fisheries Port,
Navotas, Metro Manila. Instead of answering the Complaint,
Chua filed a Manifestation admitting his liability and
requesting a reasonable time within which to pay. He also
turned over to PFGI some of the nets which were in his
possession. Peter Yao filed an Answer, after which he was
deemed to have waived his right to cross-examine witnesses
and to present evidence on his behalf, because of his failure
to appear in subsequent hearings. Lim Tong Lim, on the other
hand, filed an Answer with Counterclaim and Crossclaim and
moved for the lifting of the Writ of Attachment. The trial court
maintained the Writ, and upon motion of PFGI, ordered the
sale of the fishing nets at a public auction. PFGI won the
bidding and deposited with the said court the sales proceeds
of P900,000. On 18 November 1992, the trial court rendered
its Decision, ruling that PFGI was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as general partners,
were jointly liable to pay PFGI. 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 in Civil Case
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. Lim appealed to the Court of Appeals (CA)
which, affirmed the RTC. Lim filed the Petition for Review on
Certiorari. Lim argues, among others, that under the doctrine
of corporation by estoppel, liability can be imputed only to
Chua and Yao, and not to him.

Issue: Whether Lim should be held jointly liable with Chua

and Yao.

Held: 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
Lim Tong Lim’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. 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. The sale of the boats, as well as the
division among the three of the balance remaining after the
payment of their loans, proves beyond cavil that F/B Lourdes,
though registered in his name, was not his own property but
an asset of the partnership. It is not uncommon to register
the properties acquired from a loan in the name of the person
the lender trusts, who in this case is Lim Tong Lim himself.
After all, he is the brother of the creditor, Jesus Lim. It is
unreasonable — indeed, it is absurd — for petitioner to sell
his property to pay a debt he did not incur, if the relationship
among the three of them was merely that of lessor-lessee,
instead of partners.

As to Lim's argument that under the doctrine of corporation

by estoppel, liability can be imputed only to Chua and Yao,
and not to him; Section 21 of the Corporation Code of the
Philippines provides that "All persons who assume to act as a
corporation knowing it to be without authority to do so shall
be liable as general partners for all debts, liabilities and
damages incurred or arising as a result thereof: Provided
however, That when any such ostensible corporation is sued
on any transaction entered by it as a corporation or on any
tort committed by it as such, it shall not be allowed to use as
a defense its lack of corporate personality. One who assumes
an obligation to an ostensible corporation as such, cannot
resist performance thereof on the ground that there was in
fact no corporation." Thus, even if the ostensible corporate
entity is proven to be legally nonexistent, a party may be
estopped from denying its corporate existence. "The reason
behind this doctrine is obvious — an unincorporated
association has no personality and would be incompetent to
act and appropriate for itself the power and attributes of a
corporation as provided by law; it cannot create agents or
confer authority on another to act in its behalf; thus, those
who act or purport to act as its representatives or agents do
so without authority and at their own risk. And as it is an
elementary principle of law that a person who acts as an
agent without authority or without a principal is himself
regarded as the principal, possessed of all the right and
subject to all the liabilities of a principal, a person acting or
purporting to act on behalf of a corporation which has no
valid existence assumes such privileges and obligations and
becomes personally liable for contracts entered into or for
other acts performed as such agent." The doctrine of
corporation by estoppel may apply to the alleged corporation
and to a third party. In the first instance, an unincorporated
association, which represented itself to be a corporation, will
be estopped from denying its corporate capacity in a suit
against it by a third person who relied in good faith on such
representation. It cannot allege lack of personality to be sued
to evade its responsibility for a contract it entered into and by
virtue of which it received advantages and benefits. On the
other hand, a third party who, knowing an association to be
unincorporated, nonetheless treated it as a corporation and
received benefits from it, may be barred from denying its
corporate existence in a suit brought against the alleged
corporation. In such case, all those who benefited from the
transaction made by the ostensible corporation, despite
knowledge of its legal defects, may be held liable for
contracts they impliedly assented to or took advantage of.
There is no dispute that PFGI is entitled to be paid for the
nets it sold. The only question here is whether Lim should be
held jointly liable with Chua and Yao. Lim contests such
liability, insisting that only those who dealt in the name of the
ostensible corporation should be held liable. Although
technically it is true that Lim did not directly act on behalf of
the corporation; however, having reaped the benefits of the
contract entered into by persons with whom he previously
had an existing relationship, he is deemed to be part of said
association and is covered by the scope of the doctrine of
corporation by estoppel.
9. Guquiolay vs. Sycip

Facts: The widow of Tan Sin An of the Goquiolay & Tan Sin
An partnership allegedly sold the real property of saod
partnership without the authority of Goquiolay. Goquiolay
seeks to recind and render invalid the sale to Washington
Sycip and Betty Lee on the grounds that Tan Sin An’s widow
is but a mere limited partner without authority to sell such
properties and that such sale was done to defraud Goquiolay.

Issue: Whether the sale was valid?

Held: Yes the Court finds the sale to be valid.

The contention that Tan Sin An’s widow is a mere limited

partner and thus without authority to manage or administer
the properties is without merit. It has been proven that Tan
Sin An’s widow and her family have been allowed to manage
and live on the property in contention by Goquiolay for years.
Goquiolay also made no objection for several years to the
such management. Such acts of administration and
management cannot be done by a mere limited partner.

Further, the articles of partnership between Goquiolay

and Tan Sin An clearly stipulate that in the event of the death
of either partner before the expiration of the term of the
partnership, such will not dissolve the partnership and shall
be continued with the deceased heirs or assigns as the
deceased partner’s representative. Thus, thus the widow
cannot be considered a mere limited partner from the being
based on the agreement as she is given the right to continue
the partnership. Although ordinarily upon the death of a
partner, his heirs and assigns assume limited partnership
status, this is done only to protect the heirs and his assets
from answering for the liabilities of the partnership. The heirs
may opt to waive such protect give by the law and assume
the post of a general partner. This has in effect happened
from the very beginning of this case as the widow managed
said property in dispute.

Third parties who transacted with Tan Sin An’s widow

shall not be prejudiced as they have every right to assume
that later had authority to sell said property as she was
indeed managing said property. Neither should these parties
inquire as to whether Tan Sin An’s widow had obtained
concurrence with Goquiolay to sell the co-partnership
property as the rules presume that she did get it for the
benefit of the third parties. Ultimately laches can be
attributed to Goquiolay for his inaction in all those years.

On the issue that the sale was done to defraud

Goquiolay, such must also fail. Said property being contested
is considered as stock in trade because the co-partnership
was established to buy and sell land. Thus it is not the
capital of the partnership which was sold but the actual
goods which their business trades in. Further, said sale was
made by the widow in order to answer for the debts of the
partnership, and the proceeds of such sale have also accrued
to the benefit of said partnership.

The inadequacy of the price cannot also be questioned

as it was sold during a time when the price of land was low
due to the war. The subsequent valuation made and relied
on by Goquiolay was made post war and at a time when land
prices were on the rise. Allegations that the buyers connived
with the widow to get the land also fail due to lack of
evidence. No proof was shown that said buyers did not have
the funds to buy the properties themselves.

Finally said sale was made in order to answer for

partnership debts which were already due. Tan Sin An’s
widow only fulfilled her duty to pay the partnership’s
creditors who were demanding from her. Goquiolay should
have, if he did not want the sale to occur, answered for the
partnership debts as he was also a partner; instead of sitting
back and doing nothing.
 10. TOCAO vs. CA (2000)

FACTS: Petitioners maintain that there was no partnership

between petitioner Belo, on one hand, and respondent Nenita
Anay, on the other hand; and that the latter being merely an
employee of petitioner Tocao. It was found out that Belo
sometimes would participate in Geminesse Enterprise
meetings to help petitioner Tocao.

ISSUE: W/N Belo is a partner of Tocao.

HELD: No. Belo’s presence in Geminesse Enterprise’s

meetings was merely asguarantor of the company and to
help Tocao his personal friend.

•Respondent herself professed lacked of knowledge that

petitioner Belo received any share in the profits of
Geminesse.

•On the other hand, Tocao declared that Belo was not
entitled to any share in the profits of the enterprise.

•With no participation in the profits, petitioner Belo cannot be

deemed a partner; since the essence of a partnership is
that the partners share in the profits and losses.
11. VICTORIAS MILLING CO., INC vs CA and Consolidated
Sugar Corporation

GR. NO. 117356, June 19, 2000

Facts: St. Therese Merchandising (STM) bought 25,000

bags of sugar from petitioner Victorias Milling Co. Inc.
(VMC). VMC issued several Shipping List/Delivery
Receipts No. 1214 (SLDR No. 1214) to STM as proof of
purchased. Later on, STM sold to private respondent
Consolidated Sugar Corporation (CSC) its rights in SLDR
No. 1214 for covering the 25,000 bags of sugar. Thus,
CSC wrote to petitioner that it had been authorized by
STM to withdraw the sugar covered by SLDR No. 1214M
together with the letter of authority from STM
authorising CSC “to withdraw for and in our behalf” the
refined sugar covered by SLDR No. 1214. However, CSC
was only allowed to withdraw 2,000 bags from the
warehouse. Hence, CSC filed an action for specific
performance against petitioner. Petitioner contended
that the dealings between it and STM were part of a
series of transactions involving only one account or one
general contract of sale. Hence, STM or any of its
authorized agents could withdraw bags of sugar only
against cleared checks of STM. Petitioner heavily relies
upon STM's letter of authority allowing CSC to withdraw
sugar against SLDR No. 1214M to show that the latter
was STM's agent. Private respondent CSC countered that
the sugar purchases involving SLDR No. 1214M were
separate and independent transactions only. The trial
court ruled in favor of CSC. CA affirmed such decision
and ruled that CSC was not an agent of STM. Thus, CSC
is entitled to the remaining 23,000 bags of sugar.
.

Issue: Whether or not CSC was an agent of STM and

hence, stopped to sue upon SLDR no. 1214 as an
assignee.

Held: NO. Under Art. 1868 of the NCC, “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." The
basis of agency is representation: principal must have
the intention to appoint and the agent must have the
intention to accept the same. Thus, the principal must
have the power to control the agent, who agrees to act
under his control and direction.

In this case, private respondent CSC was a buyer of

the SLDR form and not an agent of STM. CSC was not
subject to STM’s control. That the authorization given to
CSC contained the phrase "for and in our (STM's) behalf"
did not establish an agency. Ultimately, what is decisive
is the intention of the parties. That no agency was
meant to be established by the CSC and STM is clearly
shown by CSC's communication to petitioner that SLDR
No. 1214M had been "sold and endorsed" to it. The use
of the words "sold and endorsed" means that STM and
CSC intended a contract of sale, and not an agency.
12. LVN Pictures, Inc. vs. Phil Musicians Guild, 1 scra
132

FACTS: The Philippine Musicians Guild averred that it is a

duly registered legitimate labor organization; that LVN
Pictures, Inc., Sampaguita Pictures, Inc., and Premiere
Productions, Inc. are corporations, duly organized under the
Philippine laws, engaged in the making of motion pictures
and in the processing and distribution thereof; that said
companies employ musicians for the purpose of making
music recordings for title music, background music, musical
numbers, finale music and other incidental music, without
which a motion picture is incomplete; that ninety-five (95%)
percent of all the musicians playing for the musical
recordings of said companies are members of the Guild; and
that the same has no knowledge of the existence of any
other legitimate labor organization representing musicians in
said companies. Premised upon these allegations, the Guild
prayed that it be certified as the sole and exclusive
bargaining agency for all musicians working in the
aforementioned companies. In their respective answers, the
latter denied that they have any musicians as employees,
and alleged that the musical numbers in the filing of the
companies are furnished by independent contractors.

ISSUE: Whether or not the musicians in question are

employees of the film companies

HELD: The right of control of the film company over the

musicians is shown (1) by calling the musicians through 'call
slips' in 'the name of the company; (2) by arranging
schedules in its studio for recording sessions; (3) by
furnishing transportation and meals to musicians; and (4) by
supervising and directing in detail, through the motion
picture director, the performance of the musicians before the
camera, in order to suit the music they are playing to the
picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent

decisions of the United States Courts on the matter to the
facts established in this case, we cannot but conclude that to
effectuate the policies of the Act and by virtue of the 'right of
control' test, the members of the Philippine Musicians Guild
are employees of the three film companies and, therefore,
entitled to right of collective bargaining under Republic Act
No. 875.

In view of the fact that the three (3) film companies did not
question the union's majority, the Philippine Musicians Guild
is hereby declared as the sole collective bargaining
representative for all the musicians employed by the film
companies.
13. LAVINA vs. COURT OF APPEALS

FACTS OF THE CASE:

On April 6, 1983, Carmen Paterno, single, 72 years old,

executed a donation MORTIS CAUSA in favor of Josefina
Gabriel (widowed sis-in-law) a 3,081 sq.m lot in Sampaloc
Manila. The donation was thumbmarked by Carmen before
Notary Public and the donation was accepted by donee.

Four months after such donation was made, Carmen who was
gravely ill with breast cancer executed a Last Will and
Testament in which she bequeathed the same Sampaloc
property to Remedios Muyot and a small 240 sq.m lot in
Antipolo to Josefina Gabriel. In the Last Will and Testament,
she named Concepcion De Garcia as executrix of her will.

Carmen also executed a General Power of Attorney

appointing Remedios MUyot as her atty.-in-fact.

On Nov.3,1963 Josefina registered an adverse claim over the

property in Sampaloc. Remedios hired Atty. Lavina as
Carmen’s counsel. Carmen thumbmarked an Affidavit of
Denial alleging that Josefina obtained such donation through
fraud and trickery and that she had no intention to donate
the property to Josefina. Carmen also made a Revocation of
Donation on November 19, 1983, which was registered on
December 1, 1983. Remedios then sold the Sampaloc
property to Cebrero spouses for Php 2,664,655 on November
21, 1983. Carmen passed away on Nov.29, 1983.
Josefina filed a complaint against Carmen’s estate and ROD
to annul the deed of revocation on the ground that it was
fictitious and false. Remedios received the summons. Josefina
also asked the Court to appoint an executor or administrator
over Carmen’s estate. However, regarding the executor or
administrator over Carmen’s estate, the court ruled that
Concepcion De Garcia is the executor as appointed by
Carmen in her Last will and Testament.

ISSUE: Whether or not the GPOA appointing Remedios as

Carmen’s atty.-in-fact ceased upon her death

HELD: YES. Upon Carmen’s death, the general power of

attorney appointing Remedios as Carmen’s agent was
extinguished upon Carmen’s demise. Only the executor or
administrator may represent Carmen’s estate because only
the administrator may sue and be sued and bring or defend
actions for recovery or protection of the property or rights of
the deceased.

Furthermore, Atty. Lavina’s authority to represent Carmen

also ceased upon Carmen’s death because a dead client has
no personality and cannot be represented by an attorney.

14. Green Valley Poultry /Allied Products Inc. Vs. IAC

and Squibb and Sons Philippine Corp.
133 Scra 697
Facts: Squibb and Sons Appointed Petitioner as the
Distributor of the Former's Animal Feed Products in order to
sell the same within any place at Luzon. The Parties further
stipulated that Petitioner, if ever it sold on credit the products
of Squibb and the same was not yet paid, petitioner must
notify Squibb why the same was not yet paid. Payment for
Purchases of Squibb Products will be due 60 days from date
of invoice or the nearest business day thereto. No payment
win be accepted in the form of post-dated checks. Payment
by check must be on current dating. For goods delivered to
Green Valley but unpaid, Squibb filed suit to collect. The trial
court as aforesaid gave judgment in favor of Squibb which
was affirmed by the Court of Appeals.

Issue: Whether or not Petitioner is a Comission agent of

Squibb and Sons

Held: Whether viewed as an agency to sell or as a contract of

sale, the liability of Green Valley is indubitable. The
Court, Adopting Green Valley's theory that the contract is an
agency to sell, Held that Petitioner is liable because it sold on
credit without authority from its principal. The Civil Code has
a provision exactly in point. It reads:

Art. 1905. The commission agent cannot, without the express

or implied consent of the principal, sell on credit. Should he
do so, the principal may demand from him payment in cash,
but the commission agent shall be entitled to any interest or
benefit, which may result from such sale.
15. G.R. No. L-6389 November 29, 1954
PASTOR AMIGO and JUSTINO AMIGO, petitioners,
vs.
SERAFIN TEVES, respondent.

FACTS:
On August 11, 1937, Macario Amigo and Anacleto Cagalitan
executed in favor of their son, Marcelino Amigo, a power of
attorney granting to the latter, among others, the power "to
lease, let, bargain, transfer, convey and sell, remise, release,
mortgage and hypothecate, part or any of the properties . . .
upon such terms and conditions, and under such covenants
as he shall think fit."
On October 30, 1938, Marcelino, in his capacity as attorney-
in-fact, sold a parcel of land in favor of Serafin Teves
stipulating therein that the vendors could repurchase the
land within a period of 18 months from the date of the sale.
In the same document, it was also stipulated that vendors
would remain in possession of the land as lessees for a period
of 18 months subject to the following terms and conditions:
(a) the lessees shall pay P180 as rent every six months from
the date of the agreement; (b) the period of the lease shall
terminate on April 30, 1940; (c) in case of litigation, the
lessees shall pay P100 as attorney's fees; and (d) in case of
failure to pay any rental as agreed upon, the lease shall
automatically terminate and the right of ownership of vendee
shall become absolute.
On July 20, 1939, the spouses Macario and Anacleta donated
to their sons Justino Amigo and Pastor Amigo several parcels
of land including their right to repurchase the land in
litigation. The deed of donation was made in a public
instrument, was duly accepted by the donees, and was
registered in the Office of the Register of Deeds.
The vendors-lessees paid the rental corresponding to the first
six months, but not the rental for the subsequent semester,
and so on January 8, 1940, Serafin Teves, the vendee-lessor,
executed an "Affidavit of Consolidation of Title" in view of the
failure of the lessees to pay the rentals as agreed upon, and
registered said affidavit in the Office of the Register of Deeds
of Negros Oriental, who, on January 28, 1940, issued to
Serafin Teves the corresponding transfer of title over the land
in question.
On March 9, 1940, Justino Amigo and Pastor Amigo, as
donees of the right to repurchase the land in question,
offered to repurchase the land from Serafin Teves by
tendering to him the payment of the redemption price but
the latter refused on the ground that the ownership had
already been consolidated in him as purchaser a retro.
Hence, on April 26, 1940, before the expiration of the 18th-
month period stipulated for the redemption of the land, the
donees instituted the present action.
Petitioners contend that, while the attorney-in-fact,
Marcelino, had the power to execute a deed of sale with right
to repurchase under the power of attorney granted to him,
however, the covenant of lease contained in said deed
whereby the vendors agreed to remain in possession of the
land as lessees is not germane to said power of attorney and,
therefore, Marcelino Amigo acted in excess of his powers as
such attorney-in-fact.

ISSUE:
Whether or not the lease covenant contained in the deed of
sale with pacto de retro executed by Marcelino as attorney-
in-fact in favor of Serafin is not germane to, nor within the
purview of, the powers granted to said attorney-in-fact and,
therefore, isultra vires and null and void.
HELD:
No, the powers granted to said attorney-in-fact is not ultra
vires nor null and void.
A cursory reading thereof would at once reveal that the
power granted to the agent is so broad that it practically
covers the celebration of any contract and the conclusion of
any covenant or stipulation. Thus, among the powers granted
are: to bargain,contract, agree for, purchase, receive, and
keep lands, tenements, hereditaments, and accept the
seizing and possessing of all lands," or "to lease, let,
bargain, transfer, convey and sell, remise, release, mortgage
and hypothecate . . . upon such terms and conditions, and
under such covenants as he shall think fit." When the power
of attorney says that the agent can enter into any contract
concerning the land, or can sell the land under any term or
condition and covenant he may think fit, it undoubtedly
means that he can act in the same manner and with the
same breath and latitude as the principal could concerning
the property. The fact that the agent has acted in accordance
with the wish of his principals can be inferred from their
attitude in donating to the herein petitioners the right to
redeem the land under the terms and conditions appearing in
the deed of sale executed by their agent.
16. ROBERTO ESCAY, ET AL., petitioners,
vs.
COURT OF APPEALS, ET AL., respondents.

61 SCRA 369

G.R. No. L-37504 December 18, 1974

THE FACTS:

Emilio Escay mortgaged his properties now in question, to the Philippine National Bank.
He died in 1924 before he could pay his obligation with the bank which had mounted. The bank
then filed in 1930 a foreclosure suit against the estate of Emilio represented by the administrator,
Atty. Eduardo Arboleda. Pending the said suit, on April 28, 1933, a contract hereafter referred to
as original contract was entered among the Philippine National Bank, Jose Escay, Sr., the
brother, and the administrator, Atty. Arboleda, under which Jose assumed the mortgage
indebtedness of his deceased brother Emilio. This was agreed to by Magdalena Escay, widow of
Emilio, in her own behalf and as guardian ad litem of their children. When it was discovered that
the original contract failed to state the transfer of the ownership of the properties in question to
Jose in consideration of his assumption of the mortgage indebtedness of Emilio (subject to the
right of repurchase of the heirs of Emilio within five (5) years after the mortgage indebtedness
had been fully paid), a supplementary contract was entered into among the Philippine National
Bank, the administrator, Atty. Arboleda and Jose Escay, Sr. This was approved by the probate
court taking cognizance of the estate of the deceased Emilio Escay.

In 1941, Magdalena Escay, Roberto and the other children filed a complaint against Jose Escay,
Sr. and Atty. Arboleda (administrator of the deceased Emilio), for the recovery of the ownership
and posession of the properties in question. This case was provisionally dismissed.

ISSUE:

W/N there was grave abuse of discretion on the part of the Court of Appeals in its decision?

RULING:

No. All the findings of fact by the Court of Appeals were supported by the evidence, and in any
event, there was no grave abuse of discretion by the Court of Appeals in arriving at its findings.

The SC in its ruling on the issues raised in the CA held that:

(Validity of the original contract, the supplementary contract, and the Order approving the latter)

Magdalena Escay gave her conformity to the deed of conveyance. She gave her consent to the
original contract executed by Atty. Arboleda in favor of Jose and the bank . She had, therefore,
for herself, and as guardian ad litem of her children, given her consent to the transfer of the rights
of the estate to the lots mortgaged to the bank in favor of Jose Escay and the widow also agreed
to the execution of the supplementary contract.

It is clear that the intention in the original contract was to transfer the properties to Jose Escay,
Sr. since this intention was confirmed in the written consent. It is not true that Magdalena Vda.
de Escay understood the original contract or her written conformity to mean only the transfer of
possession and administration of the properties.

(Acquisition of the properties by adverse possession)

As early as 1939, the titles over the properties in question were transferred to Jose Escay, Sr.
who was therefore the registered owner thereof since that time. These are titled properties in the
name of Jose Escay Sr. since 1939 and, therefore, this matter of acquisitive prescription in his
favor really need not be discussed except for the fact that this was raised as an alternative
defense.

He alone was possessing and enjoying the fruits of the properties and he introduced permanent
improvements consisting of roads and fruit trees. This possession in the concept of owner was
continuous, uninterrupted, public, open and adverse, and recognized particularly by plaintiff
Roberto Escay and by his mother Magdalena Escay.

(Holding of the properties in trust (implied) for the heirs of Emilio Escay)

The SC held that no fraud was proved. The evidence is clear that the original and supplementary contracts
were the result of a series of negotiations by the testate estate of Emilio Escay through its Judicial
Administrator and legal representative; its creditor, the Philippine National Bank; the heirs represented by
their guardian ad litem, Magdalena Vda. de Escay;

Since there was no fraud, there was no trust relation that arose. Actions based on express trust also
prescribe and the property held in trust may be acquired by adverse possession from the moment the trust
is repudiated by the trustee.
The prescriptibility of an action for reconveyance based on implied or constructive trust, is now a
settled question in this jurisdiction. It prescribes in ten years. Express trusts prescribe 10 years
from the repudiation of the trust

The SC dismissed the petitioners' petition for certiorari, and denied their motion for
reconsideration
18. BELCODERO vs. CA
G.R. No. 89667 October 20, 1993

FACTS:
In 1946 The husband, Alayo D. Bosing, he left the
conjugal home, and he forthwith started to live instead with
Josefa Rivera with whom he later begot one child, named
Josephine Bosing, now Josephine Balcobero. On 23 August
1949, Alayo purchased a parcel of land on installment basis
from the Magdalena Estate, Inc. In the deed, he indicated his
civil status as, "married to Josefa R. Bosing," the common-law
wife. In a letter, dated 06 October 1959, which he addressed
to Magdalena Estate, Inc., he authorized the latter to transfer
the lot in the name of his "wife Josefa R. Bosing."
On 06 June 1958, Alayo married Josefa even while his
prior marriage with Juliana was still subsisting. Alayo died on
11 march 1967. About three years later, or on 17 September
1970, Josefa and Josephine executed a document of
extrajudicial partition and sale of the lot in question, which
was there described as "conjugal property" of Josefa and
deceased Alayo. In this deed, Josefa's supposed one-half (1/2)
interest as surviving spouse of Alayo, as well as her one-
fourth (1/4) interest as heir, was conveyed to Josephine for a
P10,000.00 consideration, thereby completing for herself,
along with her one-fourth (1/4) interest as the surviving child
of Alayo, a full "ownership" of the property. The notice of
extrajudicial partition was published on 04, 05 and 06
November 1970 in the Evening Post; the inheritance and
estate taxes were paid; and a new Transfer Certificate of Title
No. 198840 was issued on 06 June 1974 in the name of
Josephine. On 30 October 1980, Juliana (deceased Alayo's
real widow) and her three legitimate children filed with the
court a quo an action for reconveyance of the property.
the trial court ruled in favor of the plaintiffs. The
defendants went to the Court of Appeals which affirmed the
trial court's order for reconveyance. Hence, this appeal.
ISSUE: Wether or not the action for reconveyance
instituted by juliana and her legittimate children is
proper.
HELD:
The SC held in the affirmative.
The applicable prescriptive period for an action seeking
a reconveyance of the property by the beneficiaries thereof is
ten (10) years (Article 1144, Civil Code). Ordinarily, that
period starts from the establishment of the implied trust
being the day when the cause of action would be considered
to have accrued (Article 1150, Civil Code). Unfortunately for
Josefa and Josephine, however, the property involved in this
case is a realty titled under the Torrens System. The
prescriptive period is thus to be counted from the time the
transaction affecting the property is registered with the
corresponding issuance of a new certificate of title. 3 Between
the time Transfer of Certificate of Title No. 198840 was issued
on 06 June 1974, and the filing of the action for the
reconveyance of the property with the court a quo on 30
October 1980, barely a period of six (6) years and four (4)
months had elapsed. The case has accordingly been initiated
seasonably.
It cannot be seriously contended that, simply because the
property was titled in the name of Josefa at Alayo's request,
she should thereby be deemed to be its owner. The property
unquestionably was acquired by Alayo. Alayo's letter, dated
06 October 1959, to Magdalena Estate, Inc., merely
authorized the latter to have title to the property transferred
to her name. More importantly, she implicitly recognized
Alayo's ownership when, three years after the death of Alayo,
she and Josephine executed the deed of extrajudicial partition
and sale in which she asserted a one-half (1/2) interest in the
property in what may be described as her share in the
"conjugal partnership" with Alayo, plus another one-fourth
(1/4) interest as "surviving widow," the last one-fourth (1/4)
going to Josephine as the issue of the deceased. Observe that
the above adjudication would have exactly conformed with a
partition in intestacy had they been the sole and legitimate
heirs of the decedent.
20. DELUAO V. CASTEEL

AUGUST 29, 1969

FACTS:

Sec. 63 of Act 4003 states that “Permits or leases

entitling the holders thereof, for a certain stated period of
time not to exceed twenty years, to enter upon definite tracts
of a public forest land to be devoted exclusively for fishpond
purposes, or to take certain fishery products or to construct
fishponds within tidal, mangrove and other swamps, ponds
and streams within public forest lands or proclaimed timber
lands or established forest reserves, may be issued or
executed by the Secretary of Agriculture and Natural
Resources,….four. “

It is clear from the Fisheries Act that only holders of

permits or leases issued or executed by the Secretary of
Agriculture and Natural Resources can devoted exclusively
for fishpond purposes. A transferee or sub-lessee of a
fishpond is not a holder of a permit or lease. He cannot
lawfully enter upon definite tracts of a public forest land to be
devoted exclusively for fishpond purposes.

Appellees insist that the prohibition in Fisheries

Administrative Order 24, sec 37 (a), refers to fishponds
covered by permits or leases and since no permit or lease
had as yet been granted to Casteel, the prohibition does not
apply. They also assai as inaccurate the statement in the
SC’s decision after the Secretary of Agriculture and Natural
Resources approved the appellant’s application because he
(Secretary) did not approve the appellant’s fishpond
application but merely reinstated and gave due course to the
same.

On October 26, 1961, the Director of Fisheries issued a

memorandum to the District Fishery Officer, Davao
instructing the latter to take immediate steps to execute the
decisions of the Secretary of Agriculture.

July 9, 1963, a new protest against the execution of the

decisions with the Commissioner of Fisheries. Said protest
was dismissed by the Acting Commissioner of Fisheries in a
letter to Mrs. Innocencia Deluao dated June 1, 1964.

An appeal from the foregoing dismissal was taken by the

appellees to the DANR Secretary who dismissed the same in
a letter dated September 12, 1967.

ISSUE:

Whether or not there was a valid partnership and

whether or not there is a valid trust.

HELD:

1.) No. There was no valid partnership. The Supreme

Court held that the contract of partnership to divide the
fishpond between them after such award became illegal
because there are prohibitory laws in it. Hence, it cannot be
made subject to any suspensive condition and a partnership
can not be formed for an illegal purpose or one contrary to
public policy and that where the object of a partnership is the
prosecution of an illegal business or one which is contrary to
public policy, the partnership is void. The change in the
intention of the parties to divide the fishpond referred solely
to joint administration before the actual division of the
fishpond.

2.) There is no valid trust. “Trust is the right,

enforceable in equity, to the beneficial employment of
property the legal title to which is in another. Since the
second part of the contract was held to be illegal, no rights or
obligations could have arisen therefrom. Hence, no trust
could have resulted from an act violative of the law.