Torres for the development of a parcel of land into a subdivision.
LIM TONG LIM vs. PHILIPPINE FISHING
INDUSTRIES, INC.
317 SCRA 728, G.R. No. 136448, Nov. 3, 1999, Panganiban, J.:p
FACTS: Antonio Chua and Peter Yap bought nets of various sizes
and floats from Philippine Fishing Gear (PFG) for Ocean Quest
Fishing Corporation (OQF), saying that petitioner was also
involved with OQF despite not being a signatory to the agreement.
The total price of the nets amounted to P532,045. Four hundred
pieces of floats worth P68,000 were also sold to the Corporation.
They failed to pay the purchase price, hence PFG filed a collection
case against OQF. PFG also alleged that OQF is a non-existent
corporation by virtue of a certification by the SEC. RTC issued the
writ of preliminary attachment on the nets (F/B Lourdes, Fisheries
Port, Navotas), and was sold at a public auction with the proceeds
deposited to the court. RTC ruled there was partnership between
the three (Chua, Yao, Lim) anchoring on the Compromise
Agreement they executed in the civil case filed by Chua and Yao
against Lim for the declaration of ownership of the fishing boats,
among other things (joint liability could be presumed from the
equal distribution of the profit and loss1 ). CA affirmed.
ISSUE: Whether or not by their acts, Lim, Chua, and Yao are
deemed to have entered into a partnership.
HELD: Yes. A partnership is a contract where 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. The three engaged in a commercial venture for
commercial fishing and contracted loans to buy two fishing boats,
and the nets and floats needed to operate the fishing business. 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 17672.
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. It extended to the fishing nets and
the floats, both essential to fishing, which were obviously acquired
in furtherance of their business.
Petitioner’s defense that he was a mere lessor does not hold water.
In effect, he would like this Court 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.
Corporation by estoppels: Although the partnership/corporation
was never legally formed for unknown reasons, this fact alone does
not preclude the liabilities of the three as contracting parties in
representation of it. Clearly, under the law on estoppel, those acting
on behalf of a corporation and those benefited by it, knowing it to
be without valid existence, are held liable as general partners.
ANTONIA TORRES, assisted by her husband, ANGELO
TORRES; and EMETERIA BARING, petitioners, vs. COURT OF
APPEALS and MANUEL
G.R. No. 134559. December 9, 1999 FACTS:
Sisters Antonia Torres and Emeteria Baring, herein petitioners,
entered into a "joint venture agreement" with Respondent Manuel
1
c) If the proceeds of the sale the vessels will be less than P5,750,000.00
whatever the deficiency shall be shouldered and paid to JL Holding
Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao."
2
"ARTICLE 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."
GEAR
They executed a Deed of Sale covering the said parcel of land in
favor of Manuel, who then had it registered in his name and
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 through mortgage of said property.
All three of them also agreed to share the proceeds from the sale
of the subdivided lots.
The project failed and the property was foreclosed. Petitioner
alleged that it was due to Manuel’s ’s lack of funds or means and
skills. And also alleged that the latter misappropriate the amount
loaned to his own company (Universal Umbrella co.)
On the other hand, respondent alleged that he used the loan to
implement the Agreement, which incurred P85,000 expenses.
And further avers that failure of project was due to petitioners and
their relatives had separately caused the annotations of adverse
claims on the title to the land, which eventually scared away
prospective buyers, forcing him to give up on the project.
Subsequently, petitioners filed a criminal case for estafa against
respondent and his wife, but were acquitted. They filed a civil
case, but was dismissed by trial court and affirmed by Court of
Appeals. Hence, this petition.
ISSUE:
1. Whether the petitioners have
formed partnership with the respondent and if they
do, whether or not it was void.
2. Whether or not respondent shall be held liable to the failure of
the project.
3. Whether or the JVA was void due to lack of inventory of the
real property contributed to the public instrument
HELD:
1. A reading of the terms embodied in the Agreement
indubitably shows the existence of a partnership pursuant to
Article 1767 of the Civil Code, which provides: “By the
contract of partnership two or more persons bind themselves
to contribute money, property, or industryto a common fund,
with the intention of dividing the profits among themselves.”
Under the Agreement, petitioners would contribute property to
the partnership in the form of land which was to be developed
into a subdivision; while respondent would give, in addition to
his industry, the amount needed for general expenses and other
costs. Furthermore, the income from the said project would be
divided according to the stipulated percentage.
It should be stressed that the parties implemented the contract.
Thus, petitioners transferred the title to the land to facilitate its
use in the name of the respondent. On the other hand,
respondent caused the subject land to be mortgaged, the
proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the
roads, the curbs and the gutters of the subdivision and entered
into a contract to construct low-cost housing units on the
property.
Respondent’s actions clearly belie petitioners’ contention
that he made no contribution to the partnership.
Further, under 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.” This was intended
primarily to protect third persons “the execution of a public
instrument would be useless if there is no inventory of the
property contributed, because without its designation and
description, they cannot be subject to inscription in the Registry
of Property, and their contribution cannot prejudice third
persons. This will result in fraud to those
who contract with the partnership in the belief [in] the efficacy
 of the guaranty in which the immovables may consist. Thus, the contract
2. The Court of Appeals held that petitioners’ acts were not the
cause of the failure of the project. But it also ruled that neither
was respondent responsible therefor. In imputing the blame
solely to him, petitioners failed to give any reason why we
should disregard the factual findings of the appellate court
relieving him of fault. Verily, factual issues cannot be resolved
in a petition for review under Rule 45, as in this case.
Petitioners have not alleged, not to say shown, that their
Petition constitutes one of the exceptions to this doctrine.
Accordingly, we find no reversible error in the CA's ruling that
petitioners are not entitled to damages.
3. Petitioners argue that the Joint Venture Agreement is void under
Article 1773 of the Civil Code, which provides:
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.
Article 1773 was intended primarily to protect third persons.
Article 1771, the execution of a public instrument would be useless
if there is no inventory of the property contributed, because without
its designation and description, they cannot be subject to
inscription in the Registry of Property, and their contribution
cannot prejudice third persons. This will result in fraud to those
who contract with the partnership in the belief [in] the efficacy of
the guaranty in which the immovables may consist. Thus, the
contract is declared void by the law when no such inventory is
made. The case at bar does not involve third parties who may be
prejudiced.Petitioners themselves invoke the allegedly void
contract as basis for their claim that respondent should pay them 60
percent of the value of the property.
G.R. No. 159333 July 31, 2006
ARSENIO T. MENDIOLA, petitioner,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION, PACIFIC FOREST RESOURCES, PHILS.,
INC. and/or CELLMARK AB, respondents.
PUNO, J.:
Facts:
Petitioner Mendiola (ATM) entered into a Side Agreement with
Pacfor (Pacific Forest Resources , Inc. California, USA) who will
set up a representative office in the Philippines. They named said
office as Pacfor Phils in which petitioner is president. In the
agreement, petitioner’s base salary and the company’s overhead
expenditures shall be borne by the representative office and shall
be funded by Pacfor/ATM being equally owned on 50-50 equity by
ATM and Pacfor-USA.
The Side Agreement was later amended through a Revised
Operating and Profit Sharing Agreement where petitioner’s salary
was increased ($78K). However, both agreements show that the
operational expenses will be borne by the representative office
(monitoring and coordinating the market activities for paper
products) and funded by all parties “as equal partners,” while the
profits and commissions will be shared among them.
Years later, petitioner wrote Pacfor’s VP (Kevin Daley) for Asia
seeking confirmation of his 50% equity of Pacfor Phils to which
Pacfor’s President (William Gleason) replied that petitioner is not a
part-owner, his office being just a representative office, a
“theoretical company with the purpose of dividing the income 50-
50.” He even stressed that the petitioner knew of this arrangement
from beginning, having been the one to propose to them the setting
up of a representative office, instead of a branch office, to save on
taxes.
Privateisrespondent
declared void
Pacfor
by the
withdrew
law when
all no
its such
offersinventory is made.”
of settlement and The c
ordered petitioner to transfer title and turn over to it possession of
the service car and advised Philippine clients not to deal with
Pacfor Phils. Pacfor charged petitioner with willful disobedience
and serious misconduct for his refusal to turn over the service car
and the Christmas giveaway fund which he applied to his alleged
unpaid commissions as well as serious misconduct for the latter's
alleged act of fraud and misrepresentation in authorizing the
release of an additional peso salary for himself, and disloyalty and
representation of conflicting interests for having continued using
the Pacfor Phils.' office for operations of HEPI.
Labor Arbiter ruled in favor of petitioner, finding there was
constructive dismissal. the NLRC set aside the decision of LA for
there was no employer-employee relationship between the parties
Based on the two agreements between the parties, it concluded that
petitioner is not an employee of private respondent Pacfor, but a
full co-owner (50/50 equity).
Issue:
1. Whether an employer-employee relationship exists between
petitioner and private respondent Pacfor.
2. Whether or not a partnership or co-ownership exists between the
parties.
Held:
1. Petitioner is an employee of Pacfor.
Be that as it may, we hold that on the basis of the evidence, an
employer-employee relationship is present in the case at bar. The
elements to determine the existence of an employment relationship
are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee's conduct. The most
important element is the employer's control of the employee's
conduct, not only as to the result of the work to be done, but also as
to the means and methods to accomplish it.
In the instant case, all the foregoing elements are present. First, it
was private respondent Pacfor which selected and engaged the
services of petitioner as its resident agent in the Philippines.
Second, as stipulated in their Side Agreement, private respondent
Pacfor pays petitioner his salary amounting to $65,000 per annum
which was later increased to $78,000. Third, private respondent
Pacfor holds the power of dismissal, as may be gleaned through the
various memoranda it issued against petitioner, placing the latter on
preventive suspension while charging him with various offenses,
including willful disobedience, serious misconduct, and gross
neglect of duty, and ordering him to show cause why no
disciplinary action should be taken against him.
Lastly and most important, private respondent Pacfor has the power
of control (the manner of doing the work refers merely to existence
of the power) over the means and method of petitioner in
accomplishing his work.
2. No partnership or co-ownership exists between the parties.
In a partnership, the members become co-owners of what is
contributed to the firm capital and of all property that may be
acquired thereby and through the efforts of the members. The
property or stock of the partnership forms a community of goods, a
common fund, in which each party has a proprietary interest. In
fact, the New Civil Code regards a partner as a co-owner of
specific partnership property. Each partner possesses a joint
interest in the whole of partnership property. If the relation does
not have this feature, it is not one of partnership.
This essential element, the community of interest, or co-ownership
of, or joint interest in partnership property is absent in the relations
between petitioner and private respondent Pacfor. Petitioner is not
a part-owner of Pacfor Phils. Pacfor's President established this fact
when he said that Pacfor Phils. is simply a "theoretical company"
for the purpose of dividing the income 50-50. He stressed that
petitioner knew of this arrangement from the very start, having
been the one to propose to private respondent Pacfor the setting up
of a representative office, and "not a branch office" in the
Philippines to save on taxes. Thus, the parties in this case, merely
shared profits. This alone does not make a partnership.
Besides, a corporation cannot become a member of a partnership in
the absence of express authorization by statute or charter. This
doctrine is based on the following considerations: (1) that the
mutual agency between the partners, whereby the corporation
would be bound by the acts of persons who are not its duly
appointed and authorized agents and officers, would be
inconsistent with the policy of the law that the corporation shall
manage its own affairs separately and exclusively; and, (2) that
such an arrangement would improperly allow corporate property to
become subject to risks not contemplated by the stockholders when
they originally invested in the corporation. No such authorization
has been proved in the case at bar.
MARJORIE TOCAO and WILLIAM T. BELO, Petitioners, v.
COURT OF APPEALS and NENITA A. ANAY, Respondents.
[G.R. No. 127405. October 4, 2000.]
Facts:
Private respondent Nenita A. Anay met petitioner
William T. Belo, then the vice-president for operations of Ultra
Clean Water Purifier, through her former employer in Bangkok.
Belo introduced Anay to petitioner Marjorie Tocao, who conveyed
her desire to enter into a joint venture with her for the importation
and local distribution of kitchen cookwares. 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.
They agreed to use Anay’s name in securing
distributorship of cookware from that company West Bend
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
They operated under the name of Geminesse Enterprise,
a sole proprietorship registered in Marjorie Tocao’s name.
When her letters were not answered, Anay consulted her
lawyer, who, in turn, wrote Belo a letter. Nenita A. Anay filed
Civil Case for a complaint for sum of money with damages against
Marjorie D. Tocao and William Belo before the Regional Trial
Court of Makati. Anay prayed that defendants be ordered to pay
her, unpaid overriding commission , moral damages, and
exemplary damages. The plaintiff also prayed for an audit of the
finances of Geminesse Enterprise from the inception of its business
operation until she was "illegally dismissed".
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."
Issue: Whether or not the plaintiff was an employee or partner of
Marjorie Tocao and Belo, and
Ruling:
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 testimony of Elizabeth Bantilan,
Anay’s cousin and the administrative officer of Geminesse
Enterprise from August 21, 1986 until it was absorbed by Royal
International, Inc., buttressed the fact that a partnership existed
between the parties. The letter of Roger Muencheberg of West
Bend Company stating that he awarded the distributorship to Anay
and Marjorie Tocao because he was convinced that with Marjorie’s
financial contribution and Anay’s experience, the combination of
the two would be invaluable to the partnership, also supported that
conclusion.
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 Tocao’s name is
not determinative of whether or not the business was managed and
operated by a sole proprietor or a partnership. What was registered
with the Bureau of Domestic Trade was merely the business name
or style of Geminesse Enterprise.
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."
An innocent partner thus possesses "pecuniary interest in every
existing contract that was incomplete and in the trade name of the
co-partnership and assets at the time he was wrongfully expelled."
To be considered a juridical personality, a partnership must fulfill
these requisites: (1) two or more persons bind themselves to
contribute money, property or industry to a common fund; and (2)
intention on the part of the partners to divide the profits among
themselves. 15 It may be constituted in any form; a public
instrument is necessary only where immovable property or real
rights are contributed thereto.16 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.
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 17 did not
cause the nullification of the partnership. The pertinent provision of
the Civil Code on the matter states:chanrob1es virtual 1aw library
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
HOMEOWNERS SAVINGS & LOAN BANK vs. MIGUELA
C. DAILO
NOVEMBER 11, 2010 ~ VBDIAZ
HOMEOWNERS SAVINGS & LOAN BANK vs. MIGUELA
C. DAILO,
G.R. No. 153802
March 11, 2005
FACTS:
Miguela Dailo and Marcelino Dailo, Jr. were married on August 8,
1967. During their marriage the spouses purchased a house and lot
situated at San Pablo City from a certain Dalida. The subject
property was declared for tax assessment purposes The Deed of
Absolute Sale, however, was executed only in favor of the late
Marcelino Dailo, Jr. as vendee thereof to the exclusion of his
wife.
Marcelino Dailo, Jr. executed a Special Power of Attorney (SPA)
in favor of one Gesmundo, authorizing the latter to obtain a loan
from petitioner Homeowners Savings and Loan Bank to be secured
by the spouses Dailo’s house and lot in San Pablo City. Pursuant to
the SPA, Gesmundo obtained a loan from petitioner. As security
therefor, Gesmundo executed on the same day a Real Estate
Mortgage constituted on the subject property in favor of petitioner.
The abovementioned transactions, including the execution of the
SPA in favor of Gesmundo, took place without the knowledge and
consent of respondent.[
Upon maturity, the loan remained outstanding. As a result,
petitioner instituted extrajudicial foreclosure proceedings on the
mortgaged property. After the extrajudicial sale thereof, a
Certificate of Sale was issued in favor of petitioner as the highest
bidder. After the lapse of one year without the property being
redeemed, petitioner consolidated the ownership thereof by
executing an Affidavit of Consolidation of Ownership and a Deed
of Absolute Sale.
In the meantime, Marcelino Dailo, Jr. died. In one of her visits to
the subject property, Miguela learned that petitioner had already
employed a certain Brion to clean its premises and that her car, a
Ford sedan, was razed because Brion allowed a boy to play with
fire within the premises.
Claiming that she had no knowledge of the mortgage constituted on
the subject property, which was conjugal in nature, respondent
instituted with the RTC San Pablo City a Civil Case for Nullity of
Real Estate Mortgage and Certificate of Sale, Affidavit of
Consolidation of Ownership, Deed of Sale, Reconveyance with
Prayer for Preliminary Injunction and Damages against petitioner.
In the latter’s Answer with Counterclaim, petitioner prayed for the
dismissal of the complaint on the ground that the property in
question was the exclusive property of the late Marcelino Dailo, Jr.
After trial on the merits, the trial court rendered
a Decision declaring the said documents null and void and further
ordered the defendant to reconvey the property subject of this
complaint to the plaintiff, to pay the plaintiff the sum representing
the value of the car which was burned, the attorney’s fees, moral
and exemplary damages.
The appellate court affirmed the trial court’s Decision, but deleted
the award for damages and attorney’s fees for lack of basis. Hence,
this petition
ISSUE:
1. WON THE MORTGAGE CONSTITUTED BY THE LATE
MARCELINO DAILO, JR. ON THE SUBJECT PROPERTY AS
CO-OWNER THEREOF IS VALID AS TO HIS UNDIVIDED
SHARE.
2. WON THE CONJUGAL PARTNERSHIP IS LIABLE FOR
THE PAYMENT OF THE LOAN OBTAINED BY THE LATE
MARCELINO DAILO, JR. THE SAME HAVING REDOUNDED
TO THE BENEFIT OF THE FAMILY.
HELD: the petition is denied.
1. NO. Article 124 of the Family Code provides in part:
ART. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. . . .
In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the
other spouse may assume sole powers of administration. These
powers do not include the powers of disposition or encumbrance
which must have the authority of the court or the written consent of
the other spouse. In the absence of such authority or consent, the
disposition or encumbrance shall be void. . . .
In applying Article 124 of the Family Code, this Court declared
that the absence of the consent of one renders the entire sale null
and void, including the portion of the conjugal property pertaining
to the husband who contracted the sale.
Respondent and the late Marcelino. were married on August 8,
1967. In the absence of a marriage settlement, the system of
relative community or conjugal partnership of gains governed
the property relations between respondent and her late
husband. With the effectivity of the Family Code on August 3,
1988, Chapter 4 on Conjugal Partnership of Gains in the Family
Code was made applicable to conjugal partnership of
gains already established before its effectivity unless vested
rights have already been acquired under the Civil Code or other
laws.
The rules on co-ownership do not even apply to the property
relations of respondent and the late Marcelino even in a suppletory
manner. The regime of conjugal partnership of gains is a special
type of partnership, where the husband and wife place in a
common fund the proceeds, products, fruits and income from their
separate properties and those acquired by either or both spouses
through their efforts or by chance. Unlike the absolute community
of property wherein the rules on co-ownership apply in a
suppletory manner, the conjugal partnership shall be governed by
the rules on contract of partnership in all that is not in conflict with
what is expressly determined in the chapter (on conjugal
partnership of gains) or by the spouses in their marriage
settlements. Thus, the property relations of respondent and her late
husband shall be governed, foremost, by Chapter 4 on Conjugal
Partnership of Gains of the Family Code and, suppletorily, by the
rules on partnership under the Civil Code. In case of conflict, the
former prevails because the Civil Code provisions on partnership
apply only when the Family Code is silent on the matter.
The basic and established fact is that during his lifetime, without
the knowledge and consent of his wife, Marcelino constituted a real
estate mortgage on the subject property, which formed part of their
conjugal partnership. By express provision of Article 124 of the
Family Code, in the absence of (court) authority or written consent
of the other spouse, any disposition or encumbrance of the conjugal
property shall be void.
The aforequoted provision does not qualify with respect to the
share of the spouse who makes the disposition or encumbrance in
the same manner that the rule on co-ownership under Article 493
of the Civil Code does. Where the law does not distinguish, courts
should not distinguish. Thus, both the trial court and the appellate
court are correct in declaring the nullity of the real estate mortgage
on the subject property for lack of respondent’s consent.
2. NO. Under Article 121 of the Family Code, “[T]he conjugal
partnership shall be liable for: . . .
(1) Debts and obligations contracted by either spouse without
the consent of the other to the extent that the family may have been
benefited; . . . .”
Certainly, to make a conjugal partnership respond for a liability
that should appertain to the husband alone is to defeat and frustrate
the avowed objective of the new Civil Code to show the utmost
concern for the solidarity and well-being of the family as a unit.
The burden of proof that the debt was contracted for the benefit of
the conjugal partnership of gains lies with the creditor-party litigant
claiming as such. Ei incumbit probatio qui dicit, non qui negat (he
who asserts, not he who denies, must prove). Petitioner’s sweeping
conclusion that the loan obtained by the late Marcelino to finance
the construction of housing units without a doubt redounded to the
benefit of his family, without adducing adequate proof, does not
persuade this Court. Consequently, the conjugal partnership cannot
be held liable for the payment of the principal obligation.
NOTES:
In addition, a perusal of the records of the case reveals that during
the trial, petitioner vigorously asserted that the subject property
was the exclusive property of the late Marcelino Dailo, Jr.
Nowhere in the answer filed with the trial court was it alleged that
the proceeds of the loan redounded to the benefit of the family.
Even on appeal, petitioner never claimed that the family benefited
from the proceeds of the loan. When a party adopts a certain theory
in the court below, he will not be permitted to change his theory on
appeal, for to permit him to do so would not only be unfair to the
other party but it would also be offensive to the basic rules of fair
play, justice and due process. A party may change his legal theory
on appeal only when the factual bases thereof would not require
presentation of any further evidence by the adverse party in order
to enable it to properly meet the issue raised in the new theory.
HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No.
126881, October 3, 2000
FACTS:
After the second World War, Tan EngKee and Tan Eng Lay,
pooling their resources and industry together, entered into a
partnership engaged in the business of selling lumber and hardware
and construction supplies. They named their enterprise "Benguet
Lumber" which they jointly managed until Tan EngKee's death.
Petitioners herein averred that the business prospered due to the
hard work and thrift of the alleged partners. However, they claimed
that in 1981, Tan Eng Lay and his children caused the conversion
of the partnership "Benguet Lumber" into a corporation called
"Benguet Lumber Company." The incorporation was purportedly a
ruse to deprive Tan EngKee and his heirs of their rightful
participation in the profits of the business. Petitioners prayed for
accounting of the partnership assets, and the dissolution, winding
up and liquidation thereof, and the equal division of the net assets
of Benguet Lumber. The RTC ruled in favor of petitioners,
declaring that Benguet Lumber is a joint venture which is akin to a
particular partnership. The Court of Appeals rendered the assailed
decision reversing the judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are
joint adventurers and/or partners in a business venture and/or
particular partnership called Benguet Lumber and as such should
share in the profits and/or losses of the business venture or
particular partnership
RULING:
Legal Basis: A contract of partnership is defined by law as one
where:
. . . 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.
Two or more persons may also form a partnership for the exercise
of a profession.14
Thus, in order to constitute a partnership, it must be established
that (1) two or more persons bound themselves to contribute
money, property, or industry to a common fund, and (2) they intend
to divide the profits among themselves.15 The agreement need not
be formally reduced into writing, since statute allows the oral
constitution of a partnership, save in two instances: (1) when
immovable property or real rights are contributed,16 and (2) when
the partnership has a capital of three thousand pesos or more.17 In
both cases, a public instrument is required.18 An inventory to be
signed by the parties and attached to the public instrument is also
indispensable to the validity of the partnership whenever
immovable property is contributed to the partnership.
There was no partnership whatsoever. Except for a firm name,
there was no firm account, no firm letterheads submitted as
evidence, no certificate of partnership, no agreement as to profits
and losses, and no time fixed for the duration of the partnership.
There was even no attempt to submit an accounting corresponding
to the period after the war until Kee's death in 1984. It had no
business book, no written account nor any memorandum for that
matter and no license mentioning the existence of a partnership.
Also, the trial court determined that Tan EngKee and Tan Eng Lay
had entered into a joint venture, which it said is akin to a particular
partnership.
A particular partnership is distinguished from a joint adventure, to
wit: (a) A joint adventure (an American concept similar to our joint
accounts) is a sort of informal partnership, with no firm name and
no legal personality. In a joint account, the participating merchants
can transact business under their own name, and can be
individually liable therefor. (b) Usually, but not necessarily a joint
adventure is limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination may continue for a
number of years; a partnership generally relates to a continuing
business of various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint co-
ventures or partners, in which each party has an equal proprietary
interest in the capital or property contributed, and where each party
exercises equal rights in the conduct of the business. The evidence
presented by petitioners falls short of the quantum of proof
required to establish a partnership. In the absence of evidence, we
cannot accept as an established fact that Tan EngKee allegedly
contributed his resources to a common fund for the purpose of
establishing a partnership. Besides, it is indeed odd, if not
unnatural, that despite the forty years the partnership was
allegedly in existence, Tan EngKee never asked for an accounting.
The essence of a partnership is that the partners share in the profits
and losses .Each has the right to demand an accounting as long as
the partnership exists. A demand for periodic accounting is
evidence of a partnership. During his lifetime, Tan EngKee
appeared never to have made any such demand for accounting from
his brother, Tang Eng Lay. We conclude that Tan EngKee was
only an employee, not a partner since they did not present and offer
evidence that would show that Tan EngKee received amounts of
money allegedly representing his share in the profits of the
enterprise. There being no partnership, it follows that there is no
dissolution, winding up or liquidation to speak of.
Partnership presuppose the following elements [citation omitted]:
1) a contract, either oral or written. However, if it involves real
property or where the capital is P3,000.00 or more, the execution of
a contract is necessary; 2) the capacity of the parties to execute the
contract; 3) money property or industry contribution; 4) community
of funds and interest, mentioning equality of the partners or one
having a proportionate share in the benefits; and 5) intention to
divide the profits, being the true test of the partnership. The
intention to join in the business venture for the purpose of
obtaining profits thereafter to be divided, must be established. We
cannot see these elements from the testimonial evidence of the
appellees.
It is hardly distinguishable from the partnership, since their
elements are similar — community of interest in the business,
sharing of profits and losses, and a mutual right of control.The
main distinction cited by most opinions in common law jurisdiction
is that the partnership contemplates a general business with some
degree of continuity, while the joint venture is formed for the
execution of a single transaction, and is thus of a temporary nature.
G.R. No. L-21906 December 24, 1968
INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-
appellees,
vs.
NICANOR CASTEEL and JUAN DEPRA, defendants,
NICANOR CASTEEL, defendant-appellant.
FACTS:
Nicanor Casteel filed a fishpond application for a big tract of
swampy land in the then Sitio of Malalag in Davao. No action was
taken thereon by the authorities concerned. several applications
were submitted by other persons for portions of the area covered by
Casteel's application. Felipe Deluao filed his own fishpond
application for the area covered by Casteel's application. , Casteel
realized the urgent necessity of expanding his occupation thereof
by constructing dikes and cultivating marketable fishes, in order to
prevent old and new squatters from usurping the land. But lacking
financial resources at that time, he sought financial aid from his
uncle Felipe Deluao who then extended loans totalling more or less
P27,000 with which to finance the needed improvements on the
fishpond. Hence, a wide productive fishpond was built.
the Director of Fisheries nevertheless rejected Casteel's application
on October 25, 1949, required him to remove all the improvements
which he had introduced on the land, and ordered that the land be
leased through public auction. Failing to secure a favorable
resolution of his motion for reconsideration of the Director's order,
Casteel appealed to the Secretary of Agriculture and Natural
Resources.
Inocencia Deluao (wife of Felipe Deluao) as party of the first part,
and Nicanor Casteel as party of the second part, executed a contract
— denominated a "contract of service stating that Casteel will be
the Manager and sole buyer of all the produce of the fish that will
be produced from said fishpond; and Inocencia will be the
administrator of the same she having financed the construction and
improvement of said fishpond.
Director of Fisheries rejected the application filed by Felipe
Deluao. the Secretary of Agriculture and Natural Resources issued
a decision in DANR Nicanor Casteel stating that he be reinstated
and given due course for the area . Nicanor Casteel forbade
Inocencia Deluao from further administering the fishpond, and
ejected the latter's representative (encargado), Jesus Donesa, from
the premises. Inocencia Deluao and Nicanor Casteel, Felipe Deluao
and Inocencia Deluao filed an action for specific performance and
damages against Nicanor Casteel and Juan Depra. praying inter
alia, (a) that Casteel be ordered to respect and abide by the terms
and conditions of said contract and that Inocencia Deluao be
allowed to continue administering the said fishpond and collecting
the proceeds from the sale of the fishes caught from time to time;
and (b) that the defendants be ordered to pay jointly and severally
to plaintiffs the sum of P20,000 in damages.
ISSUE: WON there was contract of service or partnership.
Ruling:
We shall therefore construe the contract as one of partnership,
divided into two parts — namely, a contract of partnership to
exploit the fishpond pending its award to either Felipe Deluao or
Nicanor Casteel, and a contract of partnership to divide the
fishpond between them after such award. The first is valid, the
second illegal.
The evidence preponderates in favor of the view that the initial
intention of the parties was not to form a co-ownership but to
establish a partnership — Inocencia Deluao as capitalist partner
and Casteel as industrial partner — the ultimate undertaking of
which was to divide into two equal parts such portion of the
fishpond as might have been developed by the amount extended by
the plaintiffs-appellees, with the further provision that Casteel
should reimburse the expenses incurred by the appellees over one-
half of the fishpond that would pertain to him.
Pursuant to the foregoing suggestion of the appellant that a
document be drawn evidencing their partnership, the appellee
Inocencia Deluao and the appellant executed exhibit A which,
although denominated a "contract of service," was actually the
memorandum of their partnership agreement. That it was not a
contract of the services of the appellant, was admitted by the
appellees themselves in their letter10 to Casteel dated December
19, 1949 wherein they stated that they did not employ him in his
(Casteel's) claim but because he used their money in developing
and improving the fishpond, his right must be divided between
them. Of course, although exhibit A did not specify any wage or
share appertaining to the appellant as industrial partner, he was so
entitled — this being one of the conditions he specified for the
execution of the document of partnership.11
Further exchanges of letters between the parties reveal the
continuing intent to divide the fishpond.
Since the partnership had for its object the division into two equal
parts of the fishpond between the appellees and the appellant after
it shall have been awarded to the latter, and therefore it envisaged
the unauthorized transfer of one-half thereof to parties other than
the applicant Casteel, it was dissolved by the approval of his
application and the award to him of the fishpond. The approval was
an event which made it unlawful for the business of the partnership
to be carried on or for the members to carry it on in partnership.
To organize a corporation or a partnership that could claim a
juridical personality of its own and transact business as such, is not
a matter of absolute right but a privilege which may be enjoyed
only under such terms as the State may deem necessary to impose.
That the State, through Congress, and in the manner provided by
law, had
the right to enact Republic Act No. 1180 and to provide therein that
only Filipinos and concerns wholly owned by Filipinos may
engage in the retail business can not be seriously disputed. That
this provision was clearly intended to apply to partnership already
existing at the time of the enactment of the law is clearly showing
by its provision giving them the right to continue engaging in their
retail business until the expiration of their term or life.
when the partners amended the articles of partnership, the
provisions of Republic Act 1180 were already in force, and there
can be not the slightest doubt that the right claimed by appellants to
extend the original term of their partnership to another five years
would be in violation of the clear intent and purpose of the law
aforesaid.
ANG PUE & COMPANY, ET AL. vs. SECRETARY OF
COMMERCE AND INDUSTRY
G.R. No. L-17295 July 30, 1962 What the law prohibits was when the spouses entered into a
general partnership. In the case at bar, the partnership was limited.
Facts: Ang Pue and Tan Siong, both Chinese citizens, organized
the partnership Ang Pue & Company for a term of five years from
May 1, 1953, extendible by their mutual consent. The purpose of
the partnership was "to maintain the business of general
merchandising, buying and selling at wholesale and retail,
particularly of lumber, hardware and other construction materials
for commerce, either native or foreign."

On June 19, 1954 Republic Act No. 1180 was enacted to regulate
the retail business. It provided, among other things, that, after its
enactment, a partnership not wholly formed by Filipinos could
continue to engage in the retail business until the expiration of its
term.

When the amended articles were presented for registration in the

Office of the Securities & Exchange Commission on April 16,
1958, registration was refused upon the ground that the extension
was in violation of the aforesaid Act.

From the decision of the lower court dismissing the action, with
costs, the plaintiffs interposed this appeal.

Issue: WON the partners could extend the term of the partnership

Ruling: When the partners amended the articles of partnership, the

provisions of Republic Act 1180 were already in force, and there
can be not the slightest doubt that the right claimed by appellants to
extend the original term of their partnership to another five years
would be in violation of the clear intent and purpose of the law
aforesaid.

CIR VS. SUTER

FACTS:

A limited partnership named William J. Suter 'Morcoin' Co., Ltd

was formed 30 September 1947 by William J. Suter as the general
partner, and Julia Spirig and Gustav Carlson. They contributed,
respectively, P20,000.00, P18,000.00 and P2,000.00. it was also
duly registered with the SEC. On 1948 Suter and Spirig got
married and in effect Carlson sold his share to the couple, the same
was also registered with the SEC.

The limited partnership had been filing its income tax returns as
a corporation, without objection by the herein petitioner,
Commissioner of Internal Revenue, until in 1959 when the latter, in
an assessment, consolidated the income of the firm and the
individual incomes of the partners-spouses Suter and Spirig
resulting in a determination of a deficiency income tax against
respondent Suter in the amount of P2,678.06 for 1954 and
P4,567.00 for 1955.

ISSUE:

Whether or not the limited partnership has been dissolved after

the marriage of Suter and Spirig and buying the interest of limited
partner Carlson.

RULING:

No, the limited partnership was not dissolved.

“A husband and a wife may not enter into a contract of general

copartnership, because under the Civil Code, which applies in the
absence of express provision in the Code of Commerce, persons
prohibited from making donations to each other are prohibited
from entering into universal partnerships. (2 Echaverri 196) It
follows that the marriage of partners necessarily brings about the
dissolution of a pre-existing partnership. “