LIM TONG LIM, petitioner,

INDUSTRIES, INC., respondent.

vs.

PHILIPPINE

FISHING

GEAR

jointly liable for the unpaid prices of fishing nets & floats in favor of
PHILIPPINE FISHING GEAR INDUSTRIES. The CA held that petitioner was a
partner of Chua and Yao. That their undertaking was to divide the profits
themselves which is what a partnership essentially is.

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."

P532,045.00 representing [the] unpaid purchase price of the fishing nets

covered by the Agreement plus P68,000.00 representing the unpaid price of
the floats not covered by said Agreement.

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.

These nets and floats, purchased by Yao, Chua and Lim, were attached and
sold at a public auction with Philippine Fishing Gear Industries as the
highest bidder. The total price was 900,000. This was deposited with the
court. The amount of P900,000. replaced the attached property as a
guaranty for any judgment that plaintiff may be able to secure in this case.
It is also noteworthy that the ownership of the nets and the floats remained
with herein defendant. In effect, the plaintiff attached its own properties.

Doctrine:

Facts:
Lim requested Peter Yao who was already a partner of Antonio Chua to
engage in commercial fishing. Lim Chua and Yao agreed to buy 2 fishing
boats, the FB Lourdes and FB Nelson for the sum of P3.35 million. P3.25
was loaned from Jesus Lim. The brother of Lim Tong Lim. They bought the
boats from CMF Fishing Corp. and that a deed of sale was issued only in
favor of Lim Tong Lim. The boats served as security for the loan extended
by Jesus Lim.
That Lim, Chua and Yao agreed that the refurbishing , re-equipping,
repairing, dry docking and other expenses for the boats would be
shouldered by Chua and Yao. For lack of funds, Jesus Lim again extended a
loan to the partnership in the amount of P1 million secured by a check,
because of which, Yao and Chua entrusted the ownership papers of two
other boats, Chuas FB Lady Anne Mel and Yaos FB Tracy to Lim Tong Lim.
That in the pursuance of the business, Yao and Chua bought nets from the
Philippine Fishing Gear in behalf of Ocean Quest Fishing Corp.
That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC,
Branch 72 by Antonio Chua and Peter Yao against Lim Tong Lim for (a)
declaration of nullity of commercial documents; (b) reformation of
contracts; (c) declaration of ownership of fishing boats; (4) injunction; and
(e) damages.
This was, however, settled amicable thru a compromise agreement
executed by the parties.
Lim Tong Lim assails the November 26, 1998 Decision of the Court of
Appeals which found them, Peter Yao, Antonio Chua and petitioner himself,

The CA ruled that it would be inequitable, unfair and unjust to award the
excess to the defendants who are not entitled to damages and who did not
put up a single centavo to raise the amount of P900,000. The CA relieved
the defendants for any and all liabilities arising from the monetary
judgment.
Issues:
1.
2.

3.
4.

The CA erred in finding a partnership exists based on a mere

compromise agreement.
The CA erred in finding the petitioner liable since it was only Chua
who was representing and acting for and in behalf of the Ocean
Quest Fishing Corporation.
That under the doctrine of corporation by estoppel, liability can be
imputed only to Chua and Yao, and not to petitioner.
The writ of attachment was improper.

Ruling:
The SC held that, given the preceding facts, it was clear that among the
three, there existed 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.
The compromise agreement was also not the sole basis for determining the
existence of partnership among the three. The compromise agreement was
but an embodiment of the relationship extant among the parties prior to its
execution.

Petitioner was a partner and not a lessor. Petitioners allegation defies logic.
In effect, he would like the SC to believe that he consented to the sale of his
own boats to pay a debt of Chua and Yao, with the excess of the proceeds
to be divided among the three of them. No lessor would do what
petitioner did. Indeed, his consent to the sale proved that there was a
preexisting partnership among all three. It was 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.
According to Section 21 of the Corporation Code of the Philippines, 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.
Therefore, since petitioner benefited from the Ocean Quest Fishing Corp, he
is barred from denying its existence in a suit brought against the alleged
corporation.
Clearly, under the law on estoppel, those acting on behalf of a corporation
and those benefited by it, knowing it to be without valid existence, are held
liable as general partners. (General partners are those who are liable for all
the debts incurred by the partnership/corporation. They can be made
personally liable.)
As to the validity of the attachment, this was rendered moot and academic.
But the SC said that its issuance was proper.

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA

EVANGELISTA, petitioners, vs. THE COLLECTOR OF INTERNAL
REVENUE and THE COURT OF TAX APPEALS, respondents.
Facts:
This is a petition filed by Eufemia Evangelista, Manuela Evangelista and
Francisca Evangelista, for review of a decision of the Court of Tax Appeals
which found them liable for the income tax, real estate dealer's tax and the
residence tax for the years 1945 to 1949.
1. That the petitioners borrowed from their father the sum of P59,1400.00
which amount together with their personal monies was used by them for
the purpose of buying real properties,.
2. That on February 2, 1943, they bought from Mrs. Josefina Florentino a lot
with an area of 3,713.40 sq. m. including improvements thereon from the
sum of P100,000.00; this property has an assessed value of P57,517.00 as
of 1948;

3. That on April 3, 1944 they purchased from Mrs. Josefa Oppus 21 parcels
of land with an aggregate area of 3,718.40 sq. m. including improvements
thereon for P130,000.00; this property has an assessed value of P82,255.00
as of 1948;
4. That on April 28, 1944 they purchased from the Insular Investments Inc.,
a lot of 4,353 sq. m. including improvements thereon for P108,825.00. This
property has an assessed value of P4,983.00 as of 1948;
5. That on April 28, 1944 they bought form Mrs. Valentina Afable a lot of
8,371 sq. m. including improvements thereon for P237,234.34. This
property has an assessed value of P59,140.00 as of 1948;
6. That in a document dated August 16, 1945, they appointed their brother
Simeon Evangelista to 'manage their properties with full power to lease; to
collect and receive rents; to issue receipts therefor; in default of such
payment, to bring suits against the defaulting tenants; to sign all letters,
contracts, etc., for and in their behalf, and to endorse and deposit all notes
and checks for them;
7. That after having bought the above-mentioned real properties the
petitioners had the same rented or leases to various tenants;
That the Collector of Internal Revenue demanded the payment of income
tax on corporations, real estate dealer's fixed tax and corporation residence
tax for the years 1945-1949.
When the letter of demand was sent to them on December 3, 1954, they
instituted the present case in the CTA praying to reverse the decision of
herein respondent and that they be absolved from the payment of such
taxes. The CTA ruled against petitioners. They elevated the case to the SC.
Issue:
Whether petitioners are subject to the tax on corporations provided for in
section 24 of Commonwealth Act. No. 466, otherwise known as the National
Internal Revenue Code, as well as to the residence tax for corporations and
the real estate dealers fixed tax.
Ruling:
Article 1767 of the Civil Code of the Philippines provides:
By the contract of partnership two or more persons bind themselves to
contribute money, properly, or industry to a common fund, with the
intention of dividing the profits among themselves.
Pursuant to the article, the essential elements of a partnership are two,
namely:

(a) an agreement to contribute money, property or industry to a

common fund; and
(b) intent to divide the profits among the contracting parties.

By this petition for certiorari the Court is asked to determine if a

partnership exists between members of the same family arising from their
joint ownership of certain properties.

The first element is undoubtedly present in the case at bar, for, admittedly,
petitioners have agreed to, and did, contribute money and property to a
common fund.

Petitioner and private respondents are brothers and sisters who are coowners of certain lots at the corner of Annapolis and Aurora Blvd.,
QuezonCity which were then being leased to the Shell Company of the
Philippines Limited (SHELL). They agreed to open and operate a gas station
thereat to be known as Estanislao Shell Service Station.

On the second element, this was also satisfied. The SC was fully satisfied
that their purpose was to engage in real estate transactions for monetary
gain and then divide the same among themselves.
Said common fund was not something they found already in existence. It
was not property inherited by them pro indiviso. They created it
purposely. What is more they jointly borrowed a substantial portion
thereof in order to establish said common fund. The aforesaid lots were not
devoted to residential purposes, or to other personal uses, of petitioners
herein. The properties were leased separately to several persons.
Since August, 1945, the properties have been under the management of
one person, namely Simeon Evangelista, with full power to lease, to collect
rents, to issue receipts, to bring suits, to sign letters and contracts, and to
indorse and deposit notes and checks. Thus, the affairs relative to said
properties have been handled as if the same belonged to a corporation and
operated for profit.
Considering that the pertinent part of this provision is analogous to that of
section 24 and 84 (b) of our National Internal Revenue Code it is apparent
that the terms "corporation" and "partnership" are used in both statutes
with substantially the same meaning. Consequently, petitioners are subject,
also, to the residence tax for corporations.
Lastly, the records show that petitioners have habitually engaged in leasing
the properties above mentioned for a period of over twelve years, and that
the yearly gross rentals of said properties from June 1945 to 1948 ranged
from P9,599 to P17,453. Thus, they are subject to the tax provided in
section 193 (q) of our National Internal Revenue Code, for "real estate
dealers,"

A joint affidavit was executed by them which was prepared by Atty.

Democrito Angeles. They agreed to help their brother, petitioner herein, by
allowing him to operate and manage the gasoline service station of the
family. For practical purposes and in order not to run counter to the
company's policy of appointing only one dealer, it was agreed that
petitioner would apply for the dealership.
Respondent Remedios helped in managing the business with petitioner
from May 3, 1966 up to February 16, 1967.
On May 26, 1966, the parties herein entered into an Additional Cash Pledge
Agreement with SHELL wherein a proviso says that said agreement "cancels
and supersedes the Joint Affidavit dated 11 April 1966 executed by the coowners."
For sometime, the petitioner submitted financial statements regarding the
operation of the business to private respondents, but therafter petitioner
failed to render subsequent accounting. Hence through Atty. Angeles, a
demand was made on petitioner to render an accounting of the profits.
The financial report of December 31, 1968 shows that the business was
able to make a profit of P 87,293.79 and that by the year ending 1969, a
profit of P 150,000.00 was realized. This prompted respondents to file a
complaint in the CFI of Rizal against petitioner praying that he be ordered:
1.
2.

3.
ELIGIO ESTANISLAO, JR., petitioner, vs. THE HONORABLE COURT OF
APPEALS,
REMEDIOS
ESTANISLAO,
EMILIO
and
LEOCADIO
SANTIAGO, respondents.
Facts:

4.

To execute a document embodying all provisions of the partnership

agreement as provided in article 1771 of the New Civil Code;
To render a formal accounting of the business from May 6, 1966 up
to December 21, 1968 and from January 1, 1969 up to the time the
order is issued and that the same be subject to proper audit;
to pay the plaintiffs their lawful shares and participation in the net
profits of the business in an amount of no less than P l50,000.00
with interest at the rate of 1% per month from date of demand
until full payment thereof for the entire duration of the business;
and
to pay the plaintiffs the amount of P 10,000.00 as attorney's fees
and costs of the suit.

After trial on the merits, on October 15, 1975, Hon. Lino Anover who was
then the temporary presiding judge of Branch IV of the trial court, rendered
judgment dismissing the complaint and counterclaim and ordering private
respondents to pay petitioner P 3,000.00 attorney's fee and costs. Private
respondent filed a motion for reconsideration of the decision.
On December 10, 1975, Hon. Ricardo Tensuan who was the newly
appointed presiding judge of the same branch, set aside the aforesaid
derision and rendered another decision in favor of said respondents. Said
judge granted all the prayers except lowering the amount of attorneys fees
to P5,000. Petitioner appealed to the CA which affirmed the decision of the
trial court in toto.

2.

3.

Petitioner gave a written authority to private respondent Remedies

Estanislao, his sister, to examine and audit the books of their
"common business'.
5Respondent Remedios assisted in the running of the business.

There is no doubt that the parties hereto formed a partnership when they
bound themselves to contribute money to a common fund with the
intention of dividing the profits among themselves.
The sole dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was in compliance with the
afore-stated policy of SHELL and the understanding of the parties of having
only one dealer of the SHELL products.

Issues:
The petitioner asserts that the CA erred
1.
2.

In interpreting the legal import of the Joint Affidavit vis-a-vis the

Additional Cash Pledge Agreement;
In declaring that a partnership was established by and among the
petitioner and the private respondents as regards the ownership
and or operation of the gasoline service station business.

Petitioner relies heavily on the joint affidavit where it states that they are
lessors of 2 parcels of land which is owned by Shell Company of the
Philippines Limited, a corporation duly licensed to do business in the
Philippines. Said joint affidavit also states that they are co-owners.
Petitioner contends that because of the said stipulation cancelling and
superseding that previous Joint Affidavit, whatever partnership agreement
there was in said previous agreement had thereby been abrogated.
Ruling:
The SC said that the subsequent joint affidavit did not supersede the
previous one since it made reference to the same 15,000. Hence, there was
a need to provide in the subsequent document that it "cancels and
supersedes" the previous one. It is true that the latter document was silent
that the 15,000 was the capital investment of the parties, but this should
still be considered as that in the latter document.
Moreover, other evidence in the record shows that there was in fact such
partnership agreement between the parties. This is attested by the
testimonies of private respondent Remedies Estanislao and Atty. Angeles.
1.

Petitioner submitted to private respondents periodic accounting of

the business.

HEIRS OF JOSE LIM, represented by ELENITO LIM, Petitioners, vs.

JULIET VILLA LIM, respondent
Facts:
Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow
Cresencia Palad (Cresencia); and their children Elenito, Evelia, Imelda,
Edelyna and Edison, all surnamed Lim (petitioners), represented by Elenito
Lim (Elenito). They filed a Complaint[4] for Partition, Accounting and
Damages against respondent Juliet Villa Lim (respondent), widow of the late
Elfledo Lim (Elfledo), who was the eldest son of Jose and Cresencia.
Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in
Cagsiay, Mauban, Quezon. Sometime in 1980, Jose, together with his
friends Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a partnership
to engage in the trucking business.
Jose managed the operations of this trucking business until his death on
August 15, 1981. Thereafter, Jose's heirs, including Elfledo, and partners
agreed to continue the business under the management of Elfledo. The
shares in the partnership profits and income that formed part of the estate
of Jose were held in trust by Elfledo, with petitioners' authority for Elfledo to
use, purchase or acquire properties using said funds.
Petitioners alleged that Elfedo was not a partner or an investor in the
business and merely supervised the purchase of additional trucks using the
income from the trucking business of the partners. By the time the
partnership ceased, it had nine trucks, which were all registered in Elfledo's
name.
Petitioners asseverated that it was also through Elfledos management of
the partnership that he was able to purchase numerous real properties by

using the profits derived therefrom, all of which were registered in his name
and that of respondent. In addition to the nine trucks, Elfledo also acquired
five other motor vehicles.

The SC reviewed the factual issues in the case because the findings of the
RTC were different from that of the CA Thus, review by the SC of such
findings is warranted.

On May 18, 1995, Elfledo died leaving his wife, Juliet Lim as sole heir.

A careful review of the records persuades the SC to affirm the CA decision.

The evidence presented by petitioners falls short of the quantum of proof
required to establish that:

Petitioners claimed that respondent took over the administration of the

aforementioned properties, which belonged to the estate of Jose, without
their consent and approval. They claim that they are co-owners of the
property and required Juliet to submit an accounting of all income, profits
and rentals received from the estate of Elfedo, and to surrender
administration thereof. Juliet refused which led to this case.
Respondent traversed petitioners' allegations and claimed that Elfledo was
himself a partner of Norberto and Jimmy. She also claims that Jose gave
Elfedo 50,000 as the latters capital in the informal partnership with Jimmy
and Norberto. She said that thru the efforts of Elfedo, the business
flourished.
Respondent also stressed that Jose left no properties that Elfledo could
have held in trust. Respondent maintained that all the properties involved
in this case were purchased and acquired through her and her husbands
joint efforts and hard work, and without any participation or contribution
from petitioners or from Jose.

(1) Jose was the partner and not Elfledo; and

(2) all the properties acquired by Elfledo and respondent form part of
the estate of Jose, having been derived from the alleged
partnership.
In civil cases, the party having the burden of proof must establish his case
by a preponderance of evidence. This is found in Rule 133, Section 1 of the
Rules of Court.
"Preponderance of evidence" is the weight, credit, and value of the
aggregate evidence on either side and is usually considered synonymous
with the term "greater weight of the evidence" or "greater weight of the
credible evidence. It also means probability of truth.
The SC cited the case of Heirs of Tan Eng Kee vs. CA. There article 1769 was
used. One of its provisions was:

She submits that these are conjugal properties, and thus, she had the right
to refuse to render an accounting for the income and profits of their own
business.

Co-ownership or co-possession does not of itself establish a

partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of the property;

The RTC ruled in favor of the heirs. The CA reversed the RTCs decision and
ruled in favor of the wife of Elfedo.

Applying the legal provision to the facts of this case, the following
circumstances tend to prove that Elfledo was himself the partner of
Jimmy and Norberto:

Issue:
Can the testimony of one of the petitioners be given greater weight than
that by a former partner on the issue of the identity of the other partners in
the partnership?
Ruling:
Petitioners argue that according to the testimony of Jimmy, the sole
surviving partner, Elfledo was not a partner; and that he and Norberto
entered into a partnership with Jose.
Thus, the CA erred in not giving that testimony greater weight than that of
Cresencia, who was merely the spouse of Jose and not a party to the
partnership.

1.

2.
3.
4.
5.

Cresencia testified that Jose gave Elfledo P50,000.00, as share in

the partnership, on a date that coincided with the payment of the
initial capital in the partnership;
Elfledo ran the affairs of the partnership with absolute control;
all of the properties, particularly the nine trucks of the partnership,
were registered in the name of Elfledo;
Elfedo did not receive salary but shares of profits of the business;
That none of the heirs alleged that Jose, during his lifetime,
demanded periodic accounting from Elfedo.

As repeatedly stressed in Heirs of Tan Eng Kee, a demand for

periodic accounting is evidence of a partnership.
Finally, the heirs failed to prove that the real property registered in the
name of Elfedo was part of the estate of Jose, having been derived from
Joses alleged partnership with Jimmy and Norberto. Thus, we apply the

basic rule of evidence that between documentary and oral evidence,

the former carries more weight.
If it were true that it was Jose Lim and not Elfledo who was the partner, then
upon his death the partnership should have been dissolved and its assets
liquidated. On the contrary, these were not done but instead its operation
continued under the helm of Elfledo and without any participation from the
heirs of Jose Lim.

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitionersappellants, vs. THE COURT OF APPEALS, TOURIST WORLD SERVICE,
INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondentsappellees.
Facts:
The petitioners invoke the provisions on human relations of the Civil Code
in this appeal by certiorari.
The Tourist World Service, Inc. represented by Mr. Eliseo Canilao leased the
premises belonging to Mrs. Segundina Noguera to DR. CARLOS L. SEVILLA
and LINA O. SEVILLA for the latter to use as their branch office. This was in
Oct, 19, 1960.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival
firm, the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office. It then
the authorized the corporate secretary to receive the properties of the
Tourist World Service then located at the said branch office.
It further appears that on Jan. 3, 1962, the contract with the appellees for
the use of the Branch Office premises was terminated and while the
effectivity thereof was Jan. 31, 1962, the appellees no longer used it.
As a matter of fact appellants used it since Nov. 1961. Because of this, and
to comply with the mandate of the Tourist World Service, the corporate
secretary Gabino Canilao went over to the branch office, and, finding the
premises locked, and, being unable to contact Lina Sevilla, he padlocked
the premises on June 4, 1962 to protect the interests of the Tourist World
Service.
When neither the appellant Lina Sevilla nor any of her employees could
enter the locked premises, a complaint was filed by the herein appellants
against the appellees with a prayer for the issuance of mandatory
preliminary injunction.

The appellee Segundina Noguera sought reconsideration of the order

dismissing her counterclaim which the court a quo, in an order dated June
8, 1963, granted permitting her to present evidence in support of her
counterclaim.
The complaints were jointly heard by the court a quo and rendered a
decision dismissing both cases for lack of merit.
The appellants contend that lower court erred in holding that appellant Mrs.
Lina O. Sevila's arrangement (with appellee tourist world service, inc.) was
one merely of employer-employee relation and in failing to hold that the
said arrangement was one of joint business venture.
They also aver that the lower court erred in ruling that plaintiff-appellant
Mrs. Lina O. Sevila is estopped from denying that she was a mere employee
of defendant-appellee tourist world service, inc. even as against the latter
and that the lower court erred in not holding that appellees had no right to
evict appellant Mrs. Lina O. Sevila from the Mabini office.
Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager.
The trial court held for the private respondent on the premise that the
private respondent, Tourist World Service, Inc., being the true lessee, it was
within its prerogative to terminate the lease and padlock the premises. It
likewise found the petitioner, Lina Sevilla, to be a mere employee of said
Tourist World Service, Inc. and as such, she was bound by the acts of her
employer. This was affirmed by the CA.
Issues:
1.

2.

3.

The CA erred in holding that the padlocking of the premises by

tourist world service inc. without the knowledge and consent of
the appellant lina sevilla and without notifying mrs. lina o. sevilla
or any of her employees did not entitle them to damages.
That the CA erred in not giving due course to Mrs. Sevillas cause
of action founded on articles 19, 20 and 21 of the civil code on
relations.
That the CA did not find that Mrs. Sevilla was in a joint venture
with TWS which could not be unilaterally revoked by the TWS.

In effect, the court is being asked to declare the true nature of the relation
between Lina Sevilla and Tourist World Service.
Ruling:

The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation between
the parties was in the character of employer and employee, the courts
would have been without jurisdiction to try the case, labor disputes being
the exclusive domain of the Court of Industrial Relations, later, the Bureau
Of Labor Relations.
The court has, in the past, relied on the control test to determine WON
there exists a ER-EE relationship. In addition to the standard of right-of
control, the existing economic conditions prevailing between the parties,
like the inclusion of the employee in the payrolls, was also used by the
court in determining the existence of an employer-employee relationship.
The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as to
the result of the enterprise or as to the means used in connection
therewith.
This is seen by the fact the Mrs. Sevilla bound herself in solidum as and for
rental of payments. Even if the trial court considered Mrs. Sevilla as mere
guarantor, this does not make her an employee of Tourist World, since in
any case, a true employee cannot be made to part with his own
money in pursuance of his employer's business or otherwise,
assume any liability thereof.
The fact that Sevilla had been designated 'branch manager" does not make
her, ergo, Tourist World's employee. As we said, employment is determined
by the right-of-control test and certain economic parameters. Title is a weak
indicator.
A joint venture, including a partnership, presupposes generally an equal
standing between the joint co-venturers or partners, in which each party
has an equal proprietary interest in the capital or property contributed and
where each party exercises equal rights in the conduct of the business.
This was not true in the present case since Mrs. Sevilla had conceded, in
her letter, the right of TWS to stop the operation of its branch office. In
effect, accepting TWSs control over the manner in which the business was
run. Furthermore, the parties did not hold themselves out as partners, and
the building itself was embellished with the electric sign "Tourist World
Service, Inc. in lieu of a distinct partnership name.
The SC is of the opinion that Mrs. Sevilla, when she agreed to man the
TWSs office in Ermita, she must have done so pursuant to a contract of
agency.
It is the essence of this contract that the agent renders services
"in representation or on behalf of another.

The SC is convinced that the tie between Mrs. Sevilla and TWS was that of a
principal-agent relationship, rather than a joint managament or a
partnership.
But unlike simple grants of a power of attorney, an agency, that we
hereby declare to be compatible with the intent of the parties, cannot be
revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for mutual interest, of the agent and the
principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages.
The fact that Tourist World Service, Inc. was the lessee named in the lease
con-tract did not accord it any authority to terminate that contract without
notice to its actual occupant, and to padlock the premises in such fashion.
As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal
stake in the business itself, and necessarily, in the equipment pertaining
thereto. Furthermore, Sevilla was not a stranger to that contract having
been explicitly named therein as a third party in charge of rental payments.
The Court is satisfied that from the chronicle of events, there was indeed
some malevolent design to put the petitioner, Lina Sevilla, in a bad light
following disclosures that she had worked for a rival firm. The SC ordered
TWS liable for moral damages under Article 21 and 2219 of the New Civil
Code. And respondent Eliseo Canilao as a joint tortfeasor, is also ordered to
pay the same damages in a solidary capacity.

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

EMETERIA BARING, petitioners, vs. COURT OF APPEALS and
MANUEL TORRES,respondents.
Doctrine:
Courts may not extricate parties from the necessary consequences of their
acts. That the terms of a contract turn out to be financially
disadvantageous to them will not relieve them of their obligations therein.
The lack of an inventory of real property will not ipso facto release the
contracting partners from their respective obligations to each other arising
from acts executed in accordance with their agreement.
Facts:

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into
a "joint venture agreement" with Respondent Manuel Torres for the
development of a parcel of land into a subdivision.
Pursuant to the contract, they executed a Deed of Sale covering the said
parcel of land in favor of respondent, who then had it registered in his
name. By mortgaging the property, respondent obtained from Equitable
Bank a loan of P40,000 which, under the Joint Venture Agreement, was to
be used for the development of the subdivision. All three of them also
agreed to share the proceeds from the sale of the subdivided lots.
The project did not push through, and the land was subsequently foreclosed
by the bank.
According to petitioners, the project failed because of respondents lack of
funds or means and skills. They add that respondent used the loan not for
the development of the subdivision, but in furtherance of his own company,
Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement
the Agreement. With the said amount, he was able to effect the survey and
the subdivision of the lots.
He also caused the construction of roads, curbs and gutters. Likewise, he
entered into a contract with an engineering firm for the building of sixty
low-cost housing units and actually even set up a model house on one of
the subdivision lots. He did all of these for a total expense of P85,000.
Respondent claimed that the subdivision project failed, however, because
petitioners and their relatives had separately caused the annotations of
adverse claims on the title to the land, which eventually scared away
prospective buyers.
Subsequently, petitioners filed a criminal case for estafa against
respondent and his wife, who were however acquitted. Thereafter, they
filed the present civil case which, upon respondent's motion, was later
dismissed by the trial court. On appeal, however, the appellate court
remanded the case for further proceedings. The RTC ruled against herein
petitioners and was, on appeal, affirmed by the CA. Hence, the present case
before the SC.
In affirming the trial court, the Court of Appeals held that petitioners and
respondent had formed a partnership for the development of the
subdivision. Thus, they must bear the loss suffered by the partnership in
the same proportion as their share in the profits stipulated in the contract.
The CA relied on article 1797 of the New Civil Code which states that:

The losses and profits shall be distributed in conformity with the

agreement. If only the share of each partner in the profits has
been agreed upon, the share of each in the losses shall be in the
same proportion.
Issue:
WON the CA erred in finding that the transaction between them was a joint
venture/partnership, ignoring 1769 and other provisions of the New Civil
Code.
Ruling:
The SC denies the petitioners contention.
Petitioners deny having formed a partnership with respondent. They
contend that the Joint Venture Agreement and the earlier Deed of Sale, both
of which were the bases of the appellate courts finding of a partnership,
were void.
A reading of the terms embodied in the Agreement indubitably shows the
existence of a partnership pursuant to Article 1767 of the Civil Code.
ART. 1767. By the contract of partnership two or more persons
bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
themselves.
Under the above-quoted Agreement, petitioners would contribute property
to the partnership in the form of land which was to be developed into a
subdivision; while respondent would give, in addition to his industry, the
amount needed for general expenses and other costs. Furthermore, the
income from the said project would be divided according to the stipulated
percentage. Clearly, the contract manifested the intention of the parties to
form a partnership.
Respondents actions clearly belie petitioners contention that he made no
contribution to the partnership. Under Article 1767 of the Civil Code, a
partner may contribute not only money or property, but also industry.
Under Article 1315 of the Civil Code, contracts bind the parties not only to
what has been expressly stipulated, but also to all necessary consequences
thereof.
As to the contention that the joint venture agreement is void under Article
1773, the SC ruled in the negative.
ART. 1773. A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said property is

not made, signed by the parties, and attached to the public

instrument.
In the present cases, there is no 3rd party that will be prejudiced.
Petitioners also contend that the Joint Venture Agreement is void under
Article 1422. This is also erroneous. The Joint Venture Agreement clearly
states that the consideration for the sale was the expectation of profits
from the subdivision project.
The SC affirmed the decision of the CA when it held that:
In the absence of stipulation, the share of each partner in the
profits and losses shall be in proportion to what he may have
contributed.

NOBIO SARDANE, petitioner, vs. THE COURT OF APPEALS and

ROMEO J. ACOJEDO, respondents

damages, exemplary damages and attorney's fees, as well as the costs of

suit.
The CFI if Zamboanga concluded that the promissory notes
involved were merely receipts for the contributions to said
partnership and, therefore, upheld the claim that there was ambiguity in
the promissory notes, hence parol evidence was allowable to vary or
contradict the terms of the represented loan contract.
Acojedo then sought relief from the CA. The CA ruled in favor of Acojedo.
Hence, this appeal.
Issues:
1.

2.

Facts:
Romeo Acojedo brought an action in the City Court of Dipolog for collection
of a sum of P5,217.25 based on promissory notes executed by the Nobio
Sardane in favor of Acojedo. Acojedo bases his right to collect on Exhibits B,
C, D, E, F, and G executed on different dates.
It has been established in the trial court that on many occasions, the
Acojedo demanded the payment of the total amount of P5,217.25. The
failure of the Sardane to pay the said amount prompted Acojedo to seek the
services of lawyer who made a letter (Exhibit 1) formally demanding the
return of the sum loaned.
Because of the failure of Sardane to heed the demands extrajudicially
made by herein respondent, the latter was constrained to bring an action
for collection of sum of money.
During the scheduled day for trial, Sardane failed to appear and to file an
answer. On motion by the Acojedo, the City Court of Dipolog issued an order
dated May 18, 1976 declaring Sardane in default and allowed the petitioner
to present his evidence ex-parte. Based on herein respondents evidence,
the City Court of Dipolog rendered judgment by default in favor of Acojedo.
Therein defendant Sardane appealed to the Court of First Instance of
Zamboanga del Norte which reversed the decision of the lower court by
dismissing the complaint and ordered the plaintiff-appellee Acojedo to pay
said defendant-appellant P500.00 each for actual damages, moral

Firstly, whether the oral testimony for the therein private

respondent Sardane that a partnership existed between him and
therein petitioner Acojedo are admissible to vary the meaning of
the abovementioned promissory notes; and
Secondly, whether because of the failure of therein petitioner to
cross-examine therein private respondent on his sur-rebuttal
testimony, there was a waiver of the presumption accorded in
favor of said petitioner by Section 8, Rule 8 of the Rules of Court.

Ruling:
As correctly pointed out by the respondent Court (CA) the exceptions to the
rule do not apply in this case as there is no ambiguity in the writings in
question.
On their face, nothing appears to be vague or ambiguous, for the terms of
the promissory notes clearly show that it was incumbent upon the private
respondent to pay the amount involved in the promissory notes if and when
the petitioner demands the same.
The Court of Appeals held, and the SC agrees, that even if evidence aliunde
other than the promissory notes may be admitted to alter the meaning
conveyed thereby, still the evidence is insufficient to prove that a
partnership existed between the private parties hereto.
The fact that he had received 50% of the net profits does not conclusively
establish that he was a partner of the private respondent herein.
Article 1769(4) of the Civil Code is explicit that while the receipt by a
person of a share of the profits of a business is prima facie evidence that he
is a partner in the business, no such inference shall be drawn if such profits
were received in payment as wages of an employee.

On the second issue, the record shows that herein petitioner did not deny
under oath in his answer the authenticity and due execution of the
promissory notes which had been duly pleaded and attached to the
complaint, thereby admitting their genuineness and due execution.
Neither did the failure of herein private respondent to cross-examine herein
petitioner on the latter's sur-rebuttal testimony constitute a waiver of the
aforesaid implied admission.
As found by the respondent Court, said sur-rebuttal testimony consisted
solely of the denial of the testimony of herein private respondent and no
new or additional matter was introduced in that sur-rebuttal testimony to
exonerate herein petitioner from his obligations under the aforesaid
promissory notes.

MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs. COURT OF

APPEALS and NENITA A. ANAY, respondents.
Facts:
Fresh from her stint as marketing adviser of Technolux in Bangkok,
Thailand, 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 cook wares.
Belo volunteered to finance the joint venture and assigned to Anay the job
of marketing the product considering her experience and established
relationship with West Bend Company, a manufacturer of kitchen wares in
Wisconsin, U.S.A. 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.
Anay organized the administrative staff and sales force while Tocao hired
and fired employees, determined commissions and/or salaries of the
employees, and assigned them to different branches. The parties agreed
that Belos name should not appear in any documents relating to their
transactions with West Bend Company.
Instead, they agreed to use Anays name in securing distributorship of
cookware from that company.
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 Belos
assurances that he was sincere, dependable and honest when it came to
financial commitments.
They operated under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocaos name. Belo made good his
monetary commitments to Anay.
Roger Muencheberg of West Bend Company invited Anay to the
distributor/dealer meeting in West Bend, Wisconsin, U.S.A., from July 19 to
21, 1987 and a convention in Pismo Beach. Anay accepted the invitation
with the consent of Tocao, who even wrote a letter to the Visa section of the
US Embassy in Manila. Anay arrived in the US and immediately undertook
the task of saving the business in Makati and Cubao.
On October 7, 1987, in the presence of Anay, Belo signed a memo[5]
entitling her to a thirty-seven percent (37%) commission for her personal
sales "up Dec 31/87. Belo explained to her that said commission was apart
from her ten percent (10%) share in the profits.
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. The following day, October 10, she
received a note from Lina T. Cruz, marketing manager, that Marjorie Tocao
had barred her from holding office and conducting demonstrations in both
Makati and Cubao offices. Anay attempted to contact Belo. She wrote him
twice. When her letters were not answered, Anay consulted her lawyer,
who, in turn, wrote Belo a letter. Still, that letter was not answered.
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 P13,300,360.00.
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.
In their answer, Marjorie Tocao and Belo asserted that the alleged
agreement with Anay that was neither reduced in writing, nor ratified, was
either unenforceable or void or inexistent. As far as Belo was concerned, his
only role was to introduce Anay to Marjorie Tocao.

There could not have been a partnership because, as Anay herself

admitted, Geminesse Enterprise was the sole proprietorship of Marjorie
Tocao. Because Anay merely acted as marketing demonstrator of
Geminesse Enterprise for an agreed remuneration, and her complaint
referred to either her compensation or dismissal, such complaint should
have been lodged with the Department of Labor and not with the regular
court.

Herein petitioners went then to the CA but their plight was still denied.
Hence, they elevated the case to the SC.

Petitioners (defendants therein) further alleged that Anay filed the

complaint on account of ill-will and resentment because Marjorie Tocao did
not allow her to lord it over in the Geminesse Enterprise. Anay had acted
like she owned the enterprise because of her experience and expertise.

It has been held that the findings of fact of the lower court are binding upon
the SC when supported by substantial evidence. The determination of WON
a partnership exists is a factual question. In the case at bar, both the RTC
and CA held that there was. This is now binding upon the SC.

Belo claimed that he wrote the memo granting the plaintiff thirty-seven
percent (37%) commission upon her dismissal from the business venture at
the request of Tocao, because Anay had no other income.

To be considered a juridical personality, a partnership must fulfill these

requisites:

For her part, Marjorie Tocao denied having entered into an oral partnership
agreement with Anay. However, she admitted that Anay was an expert in
the cookware business and hence, they agreed to grant her the following
commissions.
The trial court held that there was indeed an oral partnership agreement
between the plaintiff and the defendants, based on the following:
(a) there was an intention to create a partnership;
(b) a common fund was established through contributions consisting
of money and industry, and
(c) there was a joint interest in the profits.
The trial court further held that the payment of commissions did not
preclude the existence of the partnership inasmuch as such practice is
often resorted to in business circles as an impetus to bigger sales volume. It
did not matter that the agreement was not in writing because Article 1771
of the Civil Code provides that a partnership may be constituted in any
form.
The fact that Geminesse Enterprise was registered in Marjorie Tocaos name
is not determinative of whether or not the business was managed and
operated by a sole proprietor or a partnership.
The trial court finally held that a partner who is excluded wrongfully from a
partnership is an innocent partner. Hence, the guilty partner must give him
his due upon the dissolution of the partnership as well as damages or share
in the profits realized from the appropriation of the partnership business
and goodwill.

Issue:
WON there exists a partnership between Tocao, Belo and Anay.
Ruling:

(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. Where no immovable property or
real rights are involved, what matters is that the parties have complied with
the requisites of a partnership.
The fact that there appears to be no record in the Securities and Exchange
Commission of a public instrument embodying the partnership agreement
pursuant to Article 1772 of the Civil Code did not cause the nullification of
the partnership.
Art. 1768. The partnership has a juridical personality separate and distinct
from that of each of the partners, even in case of failure to comply with the
requirements of article 1772, first paragraph.
Belos claim that he was merely a guarantor is belied by that personal act
of proprietorship in the business. While Article 2055 of the Civil Code simply
provides that guaranty must be express, Article 1403, the Statute of Frauds,
requires that a special promise to answer for the debt, default or
miscarriage of another be in writing.
The inevitable conclusion, therefore, was that petitioners merged their
respective capital and infused the amount into the partnership of
distributing cookware with private respondent as the managing partner.
Anay was not an employee of the Geminesse Enterprise. In the first place,

private respondent had a voice in the management of the affairs of the

cookware distributorship. Second, her admissions militate against an ER-EE
relationship. She admitted that like Anay, she was also receiving
commissions and transportation and representation allowances and not a
fixed salary.

partnership and considered herself as having ceased to be associated with

the partnership in the carrying on of the business.

The fact that the cookware distributorship was operated under the name of
Geminesse Enterprise, a sole proprietorship, is of no moment. What was
registered with the Bureau of Domestic Trade on August 19, 1987 was
merely the name of that enterprise.

The partnership among petitioners and private respondent is ordered

dissolved, and the parties are ordered to effect the winding up and
liquidation of the partnership pursuant to the pertinent provisions of the
Civil Code.

The best evidence of the existence of the partnership, which was not yet
terminated (though in the winding up stage), were the unsold goods and
uncollected receivables, which were presented to the trial court. Since the
partnership has not been terminated, the petitioner and private
complainant remained as co-partners.

The SC also affirmed the award of exemplary damages Exemplary damages

is by way of example or correction for the public good.

It is not surprising then that, even after private respondent had been
unceremoniously booted out of the partnership in October 1987, she still
received her overriding commission until December 1987.

Nevertheless, the partnership was not terminated thereby; it continues until

the winding up of the business.

Aurbach v. Sanitary Wares Manufacturing Corporation

Facts:

Since the partnership created by petitioners and private respondent has no

fixed term and is therefore a partnership at will predicated on their mutual
desire and consent, it may be dissolved by the will of a partner.

Petition seeks the review of the amended decisions of the CA and the IAC
and directed that in all subsequent elections for directors of Sanitary Wares
Manufacturing Corp. (SANIWRES), American Standards Inc. (ASI) cannot
nominate more than 3 directors; that the Filipino stockholders can only
nominate 6 candidates and in the event they cannot agree on the 6
nominees, they shall vote among themselves to determine who the 6
nominees will be, cumulative voting to be allowed WITHOUT the
interference from ASI.

Verily, any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must, however, act in
good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership but that it can result in a liability for
damages.

This was the case where there were essentially two groups of shareholders
in the company: one composed of Filipinos, and the other group of foreign
investors. There was an increase in the latters shares in the company so
they wanted a proportionate increase in their nominees to the companys
Board of Directors.

However, a mere falling out or misunderstanding between partners does

not convert the partnership into a sham organization. The partnership
exists until dissolved under the law.

An unjustified dissolution by a partner can subject him to action for

damages because by the mutual agency that arises in a partnership, the
doctrine of delectus personae allows the partners to have the power,
although not necessarily the right to dissolve the partnership.
(For if you had the right, you cannot be made liable even if you
unilaterally terminated the partnership with no reason
whatsoever.)
By the memo that was sent by Tacao to the Cubao office stating that
private respondent was no longer the vice president for sales of the
Geminesse Enterprise, she effected her own withdrawal from the

Issues:
1.
2.

The nature of the business established by the parties whether it

was a joint venture or a corporation and
whether or not the ASI Group may vote their additional 10% equity
during elections of Saniwares' board of directors

Ruling:
Although a corporation cannot enter into a partnership, it can nevertheless
engage in a joint venture enterprise with others. In this case, taking into
consideration their intent and history, the parties formed a joint venture
and not a corporation. This becomes relevant because it implies that the

argument of ASI (the foreign investors), having been based on the

Corporation Code, will not apply.
A joint venture has been generally understood to mean an organization
formed for some temporary purpose. It is distinguished mainly from a
partnership in that the latter contemplates a general business with some
continuity while the former is formed for the execution of a single
transaction.
The ASI Group and petitioner Salazar contend that the actual intention of
the parties should be viewed strictly on the "Agreement" dated August
15,1962 wherein it is clearly stated that the parties' intention was to form a
corporation and not a joint venture.
They object to the admission of other evidence which tends to show that
the parties' agreement was to establish a joint venture
The parol evidence Rule under Rule 130 provides:
Evidence of written agreements-When the terms of an agreement
have been reduced to writing, it is to be considered as containing all such
terms, and therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other
than the contents of the writing, except in the following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties or the validity
of the agreement is put in issue by the pleadings.
(b) When there is an intrinsic ambiguity in the writing.
Contrary to ASI Group's stand, the Lagdameo and Young Group pleaded in
their Reply and Answer to Counterclaim in SEC Case No. 2417 that the
Agreement failed to express the true intent of the parties

Moreover, in order to judge the intention of the contracting parties, their

contemporaneous and subsequent acts shall be principally considered. (Art.
1371, New Civil Code).
In an action at law, where there is evidence tending to prove that the
parties joined their efforts in furtherance of an enterprise for their joint
profit, the question whether they intended by their agreement to create a
joint adventure, or to assume some other relation is a question of fact for
the jury.
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.
With these findings, we the decisions of the SEC Hearing Officer and SEC
which were impliedly affirmed by the appellate court declaring Messrs.
Wolfgang Aurbach, John Griffin, David P Whittingham, Emesto V. Lagdameo,
Baldwin young, Raul A. Boncan, Emesto V. Lagdameo, Jr., Enrique
Lagdameo, and George F. Lee as the duly elected directors of Saniwares at
the March 8,1983 annual stockholders' meeting.
A joint venture being a form of partnership, it is to be governed by the laws
on partnership.
Doctrine:
A corporation may enter into a joint venture with another where the nature
of that venture is in line with the business authorized by its charter.
What is a closed corporation?
A close corporation means that all the corporation's issued stock of all
classes, exclusive of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding twenty (20). That the
corporation shall not list in any stock exchange or make any public offering
of any of its stock of any class.