Facts:

In 1996, petitioner Excellent Quality Apparel entered into a contract with Multi-Rich
Builders, a registered sole proprietorship, for the construction of a garment factory. In
1997, herein respondent Win Multi Rich Builders was incorporated with the SEC. It then
filed a complaint for sum of money against petitioner. In a hearing held, the counsel of
respondent Win moved that that its name in the case be changed to that of Multi Rich
Builders. Petitioner noticing the variance in the name moved to dismiss the case
asserting Win was not the contractor neither a party to the contract, thus it cannot
institute the case.

Issue:

Whether or not Win has legal personality to institute the case.

*click here for the Remedial Law issue*

Ruling: NO.

Win admitted that the contract was executed between Multi-Rich and petitioner. It
further admitted that Multi-Rich was a sole proprietorship with a business permit issued
by the Office of the Mayor of Manila. A sole proprietorship is the oldest, simplest, and
most prevalent form of business enterprise. It is an unorganized business owned by one
person. The sole proprietor is personally liable for all the debts and obligations of the
business. A sole proprietorship does not possess a juridical personality separate and
distinct from the personality of the owner of the enterprise. The law does not vest a
separate legal personality on the sole proprietorship or empower it to file or defend an
action in court.

The original petition was instituted by Win, which is a SEC-registered corporation. It filed
a collection of sum of money suit which involved a construction contract entered into by
petitioner and Multi-Rich, a sole proprietorship. The counsel of Win wanted to change
the name of the plaintiff in the suit to Multi-Rich. The change cannot be countenanced.
The plaintiff in the collection suit is a corporation. The name cannot be changed to that

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of a sole proprietorship. Again, a sole proprietorship is not vested with juridical
personality to file or defend an action.

In order for a corporation to be able to file suit and claim the receivables of its
predecessor in business, in this case a sole proprietorship, it must show proof that the
corporation had acquired the assets and liabilities of the sole proprietorship. Win could
have easily presented or attached any document e.g., deed of assignment which will
show whether the assets, liabilities and receivables of Multi-Rich were acquired by Win.
Having been given the opportunity to rebut the allegations made by petitioner, Win
failed to use that opportunity. Thus, we cannot presume that Multi-Rich is the
predecessor-in-business of Win and hold that the latter has standing to institute the
collection suit.Corporate Law Case Digest: Pioneer Insurance v. CA (1989)

G.R. No. 84197 July 28, 1989

Lessons Applicable: Defective attempt to form a corp. does NOT result in at least a
partnership absent intent to form one (Corporate Law)

FACTS:

1965: Jacob S. Lim is an owner-operator of Southern Airlines (SAL), a single

proprietorship

May 17 1965: Japan Domestic Airlines (JDA) and Lim entered into a sales contract
regarding:

2 DC-#A type aircrafts

1 set of necessary spare parts

Total: $ 190,000 in installments

May 22 1965: Pioneer Insurance and Surety Corp. as surety executed its surety bond in
favor of JDA on behalf of its principal Lim

Border Machinery and Heacy Equipment Co, Inc. Francisco and Modesto Cervantes and
Constancio Maglana contributed funds for the transaction based on the
misrepresentation of Lim that they will form a new corp.. to expand his business

Jun 10 1965: Lim as SAL executed in favor of Pioneer a deed of chattel mortgage as
security

Restructuring of obligation to change the maturity was done 2x w/o the knowledge of
other defendants

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made the surety of JDA prescribed so not entitled to reimbursement

Upon default on the 2/8 payments, Pioneer paid for him and filed a petition for the
foreclosure of chattel mortgage as security

CA affirmed Trial of Merits: Only Lim is liable to pay

ISSUE: W/N failure of respondents to incorporate = de facto partnership.

HELD: NO. CA affirmed.

Partnership inter se does NOT necessarily exist, for ordinarily CANNOT be made to
assume the relation of partners as bet. themselves, when their purpose is that no
partnership shall exists

Should be implied only when necessary to do justice bet. the parties (i.e. only pretend to
make others liable)

Lim never intended to form a corp.

Of Axioms, Provisions and Whatnot

Case digests, reviewers, audio codals and everything else that you may pack up in your
law school survival bag.

Wednesday, April 20, 2011

Case Digest: Kilosbayan, Incorporated, et. al. vs. Teofisto Guingona, PCSO and PGMC

05 May 1994 G.R. No. 113375

Ponente: Davide, JR., J.

FACTS:

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The PCSO decided to establish an online lottery system for the purpose of increasing its
revenue base and diversifying its sources of funds. Sometime before March 1993, after
learning that the PCSO was interested in operating on an online lottery system, the
Berjaya Group Berhad, with its affiliate, the International Totalizator Systems, Inc.
became interested to offer its services and resources to PCSO. Considering the
citizenship requirement, the PGMC claims that Berjaya Group undertook to reduce its
equity stakes in PGMC to 40% by selling 35% out of the original 75% foreign
stockholdings to local investors. An open letter was sent to President Ramos strongly
opposing the setting up of an online lottery system due to ethical and moral concerns,
however the project pushed through.

ISSUES:

Whether the petitioners have locus standi (legal standing); and

Whether the Contract of Lease is legal and valid in light of Sec. 1 of R.A. 1169 as
amended by B.P. Blg. 42.

RULING:

The petitioners have locus standi due to the transcendental importance to the public
that the case demands. The ramifications of such issues immeasurably affect the social,
economic and moral well-being of the people. The legal standing then of the petitioners
deserves recognition, and in the exercise of its sound discretion, the Court brushes aside
the procedural barrier.

Sec. 1 of R.A. No. 1169, as amended by B.P. Blg. 42, prohibits the PCSO from holding
and conducting lotteries “in collaboration, association or joint venture with any person,
association, company, or entity, whether domestic or foreign.” The language of the
section is clear that with respect to its franchise or privilege “to hold and conduct charity
sweepstakes races, lotteries and other similar activities,” the PCSO cannot exercise it “in
collaboration, association or joint venture” with any other party. This is the unequivocal
meaning and import of the phrase. By the exception explicitly made, the PCSO cannot
share its franchise with another by way of the methods mentioned, nor can it transfer,
assign or lease such franchise.

ReenFab at 10:58:00 PM

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