PARTNERSHIP CASES ATTY.

BATUNGBAKAL

1. Tocao and Belo vs Court of Appeals and Anay

Business Organization Partnership, Agency, Trust Dissolution of the Partnership
William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The three
agreed to form a joint venture for the sale of cooking wares. Belo was to contribute
P2.5 million; Tocao also contributed some cash and she shall also act as president
and general manager; and Anay shall be in charge of marketing. Belo and Tocao
specifically asked Anay because of her experience and connections as a marketer.
They agreed further that Anay shall receive the following:
10% share of annual net profits
6% overriding commission for weekly sales
30% of sales Anay will make herself
2% share for her demo services
They operated under the name Geminesse Enterprise, this name was however
registered as a sole proprietorship with the Bureau of Domestic Trade under Tocao.
The joint venture agreement was not reduced to writing because Anay trusted
Belos assurances.
The venture succeeded under Anays marketing prowess.
But then the relationship between Anay and Tocao soured. One day, Tocao advised
one of the branch managers that Anay was no longer a part of the company. Anay
then demanded that the company be audited and her shares be given to her.

ISSUE: Whether or not there is a partnership.

HELD: Yes, even though it was not reduced to writing, for a partnership can be
instituted in any form. The fact that it was registered as a sole proprietorship is of
no moment for such registration was only for the companys trade name.
Anay was not even an employee because when they ventured into the agreement,
they explicitly agreed to profit sharing this is even though Anay was receiving
commissions because this is only incidental to her efforts as a head marketer.
The Supreme Court also noted 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.
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

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personae allows the partners to have the power, although not necessarily the right
to dissolve the partnership.
Tocaos unilateral exclusion of Anay from the partnership is shown by her memo to
the Cubao office plainly stating that Anay was, as of October 9, 1987, no longer the
vice-president for sales of Geminesse Enterprise. By that memo, petitioner Tocao
affected her own withdrawal from the partnership and considered herself as having
ceased to be associated with the partnership in the carrying on of the business.
Nevertheless, the partnership was not terminated thereby; it continues until the
winding up of the business.

2. HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October
3, 2000

FACTS: After the second World War, Tan EngKee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership engaged in the business
of selling lumber and hardware and construction supplies. They named their
enterprise "Benguet Lumber" which they jointly managed until Tan EngKee's death.
Petitioners herein averred that the business prospered due to the hard work and
thrift of the alleged partners. However, they claimed that in 1981, Tan Eng Lay and
his children caused the conversion of the partnership "Benguet Lumber" into a
corporation called "Benguet Lumber Company." The incorporation was purportedly a
ruse to deprive Tan EngKee and his heirs of their rightful participation in the profits
of the business. Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the net
assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring that
Benguet Lumber is a joint venture which is akin to a particular partnership. The
Court of Appeals rendered the assailed decision reversing the judgment of the trial
court.

ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers
and/or partners in a business venture and/or particular partnership called Benguet
Lumber and as such should share in the profits and/or losses of the business
venture or particular partnership

RULING: There was no partnership whatsoever. Except for a firm name, there was
no firm account, no firm letterheads submitted as evidence, no certificate of
partnership, no agreement as to profits and losses, and no time fixed for the
duration of the partnership. There was even no attempt to submit an accounting
corresponding to the period after the war until Kee's death in 1984. It had no
business book, no written account nor any memorandum for that matter and no
license mentioning the existence of a partnership. Also, the trial court determined
that Tan EngKee and Tan Eng Lay had entered into a joint venture, which it said is

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akin to a particular partnership. A particular partnership is distinguished from a joint

adventure, to wit:(a) A joint adventure (an American concept similar to our joint
accounts) is a sort of informal partnership, with no firm name and no legal
personality. In a joint account, the participating merchants can transact business
under their own name, and can be individually liable therefor. (b) Usually, but not
necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination maycontinue for a number of
years; a partnership generally relates to a continuing business of various
transactions of a certain kind. A joint venture "presupposes generally a parity of
standing between the joint co-ventures or partners, in which each party has an
equal proprietary interest in the capital or property contributed, and where each
party exercises equal rights in the conduct of the business. The evidence presented
by petitioners falls short of the quantum of proof required to establish a partnership.
In the absence of evidence, we cannot accept as an established fact that Tan
EngKee allegedly contributed his resources to a common fund for the purpose of
establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite
the forty years the partnership was allegedly in existence, Tan EngKee never asked
for an accounting. The essence of a partnership is that the partners share in the
profits and losses .Each has the right to demand an accounting as long as the
partnership exists. A demand for periodic accounting is evidence of a partnership.
During his lifetime, Tan EngKee appeared never to have made any such demand for
accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee was only
an employee, not a partner since they did not present and offer evidence that would
show that Tan EngKee received amounts of money allegedly representing his share
in the profits of the enterprise. There being no partnership, it follows that there is no
dissolution, winding up or liquidation to speak of.

3. LORENZO OA V CIR
Facts: Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her
five children. A civil case was instituted for the settlement of her state, in which Oa
was appointed administrator and later on the guardian of the three heirs who were
still minors when the project for partition was approved. This shows that the heirs
have undivided interest in 10 parcels of land, 6 houses and money from the War
Damage Commission.
Although the project of partition was approved by the Court, no attempt was made
to divide the properties and they remained under the management of Oa who used
said properties in business by leasing or selling them and investing the income
derived therefrom and the proceeds from the sales thereof in real properties and
securities. As a result, petitioners properties and investments gradually increased.
Petitioners returned for income tax purposes their shares in the net income but they
did not actually receive their shares because this left with Oa who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered
partnership and therefore, subject to the corporate income tax, particularly for

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years 1955 and 1956. Petitioners asked for reconsideration, which was denied
hence this petition for review from CTAs decision.

Issue:
W/N there was a co-ownership or an unregistered partnership
W/N the petitioners are liable for the deficiency corporate income tax

Held: Unregistered partnership. The Tax Court found that instead of actually
distributing the estate of the deceased among themselves pursuant to the project of
partition, the heirs allowed their properties to remain under the management of
Oa and let him use their shares as part of the common fund for their ventures,
even as they paid corresponding income taxes on their respective shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically
converted into an unregistered partnership the moment the said common properties
and/or the incomes derived therefrom are used as a common fund with intent to
produce profits for the heirs in proportion to their respective shares in the
inheritance as determined in a project partition either duly executed in an
extrajudicial settlement or approved by the court in the corresponding testate or
intestate proceeding. The reason is simple. From the moment of such partition, the
heirs are entitled already to their respective definite shares of the estate and the
incomes thereof, for each of them to manage and dispose of as exclusively his own
without the intervention of the other heirs, and, accordingly, he becomes liable
individually for all taxes in connection therewith. If after such partition, he allows his
share to be held in common with his co-heirs under a single management to be
used with the intent of making profit thereby in proportion to his share, there can be
no doubt that, even if no document or instrument were executed, for the purpose,
for tax purposes, at least, an unregistered partnership is formed.
For purposes of the tax on corporations, our National Internal Revenue Code
includes these partnerships
The term partnership includes a syndicate, group, pool, joint venture or other
unincorporated organization, through or by means of which any business, financial
operation, or venture is carried on (8 Mertens Law of Federal Income Taxation, p.
562 Note 63; emphasis ours.)
with the exception only of duly registered general copartnerships within the
purview of the term corporation. It is, therefore, clear to our mind that petitioners
herein constitute a partnership, insofar as said Code is concerned, and are subject
to the income tax for corporations. Judgment affirmed.

4. Gatchalian vs. Collector of Internal Revenue [G.R. No. L-45425, April 29,
1939]

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Facts: Plaintiffs purchased, in the ordinary course of business, from one of the duly
authorized agents of the National Charity Sweepstakes Office one ticket for the sum
of two pesos (P2), said ticket was registered in the name of Jose Gatchalian and
Company. The ticket won one of the third-prizes in the amount of P50,000.
Jose Gatchalian was required to file the corresponding income tax return covering
the prize won. Defendant-Collector made an assessment against Jose Gatchalian
and Co. requesting the payment of the sum of P1,499.94 to the deputy provincial
treasurer of Pulilan, Bulacan. Plaintiffs, however through counsel made a request for
exemption. It was denied.
Plaintiffs failed to pay the amount due, hence a warrant of distraint and levy was
issued. Plaintiffs paid under protest a part of the tax and penalties to avoid the
effects of the warrant. A request that the balance be paid by plaintiffs in
installments was made. This was granted on the condition that a bond be filed.
Plaintiffs failed in their installment payments. Hence a request for execution of the
warrant of distraint and levy was made. Plaintiffs paid under protest to avoid the
execution.
A claim for refund was made by the plaintiffs, which was dismissed, hence the
appeal.

Issue: Whether the plaintiffs formed a partnership hence liable for income tax.

Held: Yes. According to the stipulation facts the plaintiffs organized a partnership of
a civil nature because each of them put up money to buy a sweepstakes ticket for
the sole purpose of dividing equally the prize which they may win, as they did in
fact in the amount of P50,000. The partnership was not only formed, but upon the
organization thereof and the winning of the prize, Jose Gatchalian personally
appeared in the office of the Philippines Charity Sweepstakes, in his capacity as co-
partner, as such collection the prize, the office issued the check for P50,000 in favor
of Jose Gatchalian and company, and the said partner, in the same capacity,
collected the said check. All these circumstances repel the idea that the plaintiffs
organized and formed a community of property only.

5. LIWANAG v. CA

FACTS: Petitioner Carmen Liwanag and a certain Thelma Tabligan went to the house
of complainant Isidora Rosales (Rosales) and asked her to join them in the business
of buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales
readily agreed. Under their agreement, Rosales would give the money needed to

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buy the cigarettes while Liwanag and Tabligan would act as her agents, with a
corresponding 40% commission to her if the goods are sold; otherwise the money
would be returned to Rosales. Consequently, Rosales gave several cash advances to
Liwanag and Tabligan amounting to P633,650.00
Alarmed that Liwanag was no longer visiting her regarding their business and
believing that the amounts she advanced were being misappropriated, Rosales filed
a case of estafa against Liwanag.
Liwanag advances the theory that the intention of the parties was to enter into a
contract of partnership, wherein Rosales would contribute the funds while she would
buy and sell the cigarettes, and later divide the profits between them. She also
argues that the transaction can also be interpreted as a simple loan, with Rosales
lending to her the amount stated on an installment basis. RTC found Liwanag
guilty for the crime of estafa. The Court of Appeals affirmed the lower courts
decision

ISSUE: Whether Liwanag can be acquitted from the crime of estafa because she and
Rosales formed a partnership

HELD:

No, Liwanag could not be acquitted from the crime of estafa.

The Supreme Court held that Estafa is a crime committed by a person who
defrauds another causing him to suffer damages, by means of unfaithfulness or
abuse of confidence, or of false pretenses or fraudulent acts.
In the case at hand, even assuming that a contract of partnership was indeed
entered into by and between the parties, we have ruled that when money or
property have been received by a partner for a specific purpose (such as that
obtaining in the instant case) and he later misappropriated it, such partner is guilty
of estafa.

6. EVANGELISTA & CO. v. ABAD SANTOS

FACTS: On October 9, 1954 a co-partnership was formed under the name of

"Evangelista & Co." On June 7, 1955 the Articles of Co-partnership were amended so
as to include herein respondent, Estrella Abad Santos, as industrial partner, with
herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad Santos and
Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with
a contribution of P17,500 each

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On December 17, 1963 herein respondent filed suit against the three other
partners, alleging that the partnership, which was also made a party-defendant, had
been paying dividends to the partners except to her; and that notwithstanding her
demands the defendants had refused and continued to refuse to let her examine
the partnership books or to give her information regarding the partnership affairs or
to pay her any share in the dividends declared by the partnership
The defendants, in their answer, denied ever having declared dividends or
distributed profits of the partnership; denied likewise that the plaintiff ever
demanded that she be allowed to examine the partnership books; and by way of
affirmative defense alleged that the amended Articles of Co-partnership did not
express the true agreement of the parties, which was that the plaintiff was not an
industrial partner; that she did not in fact contribute industry to the partnership.

ISSUE: Whether Abad Santos is entitled to see the partnership books because she is
an industrial partner in the partnership

HELD: Yes, Abad Santos is entitled to see the partnership books.

The Supreme Court ruled that according to ART. 1299. Any partner shall have the
right to a formal account as to partnership affairs:

(1)If he is wrongfully excluded from the partnership business or possession of

its property by his co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and reasonable."

In the case at hand, the company is estopped from denying Abad Santos as an
industrial partner because it has been 8 years and the company never corrected
their agreement in order to show their true intentions. The company never bothered
to correct those up until Abad Santos filed a complaint.

7. CHOITHRAM JETHMAL RAMNANI et.al. vs CA

FACTS: Ishwar Jethmal Ramnani and his wife Sonya had their main business based
in New York. Ishwar received US $150,000.00 from his father-in-law in Switzerland.

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In 1965, Ishwar Jethmal Ramnani sent the amount of US $150,000.00 to Choithram

in two bank drafts of US$65,000.00 and US$85,000.00 for the purpose of investing
the same in real estate in the Philippines. Subsequently, spouses Ishwar executed a
general power of attorney appointing Ishwars full blood brothers Choithram and
Navalrai as attorneys-in-fact, empowering them to manage and conduct their
business concerns in the Philippines. Choithram, as attorney-in-factr, entered into
two agreements for the purchase of two parcels of land located in Pasig Rizal from
Ortigas & Company, Ltd. Partnership (Ortigas Ltd.) with a total area of
approximately 10,048 square meters. Three buildings were constructed thereon and
were leased out by Choithram as attorney-in-fact of spouses Ishwar. Two of these
buildings were later burned.

In 1970 Ishwar asked Choithram to account for the income and expenses relative to
these properties during the period 1967 to 1970. Choithram failed and refused to
render such accounting which prompted Ishwar to revoke the general power of
attorney. Choithram and Ortigas Ltd. were duly notified by notice in writing of such
revocation. It was also registered with the Securities and Exchange Commission and
published in The Manila Times. Nevertheless, Choithram as such attorney-in-fact of
Ishwar, transferred all rights and interests of Ishwar spouses in favor of Nirmla
Ramnani, the wife of Choitrams son, Moti. Ortigas also executed the corresponding
deeds of sale in favor of Nirmla and the TCT ISSUEd in her favour. Thus, spouses
Ishwar filed a complaint in the Court of First Instance of Rizal against Choithram and
spouses Nirmla and Moti (Choithram et al.) and Ortigas Ltd. for reconveyance of
said properties or payment of its value and damages.

Issue: Whether a partnership was formed?

Held: The Court held that there was a partnership formed. Even without a written
agreement, the scenario is clear. Spouses Ishwar supplied the capital of
$150,000.00 for the business. They entrusted the money to Choithram to invest in a
profitable business venture in the Philippines. For this purpose they appointed
Choithram as their attorney-in-fact. We have a situation where two brothers
engaged in a business venture. One furnished the capital, the other contributed his
industry and talent. Justice and equity dictate that the two share equally the fruit of
their joint investment and efforts.

8. Philippine National Bank vs Lo et al

Business Organization Partnership, Agency, Trust Firm Name
In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam and
Peng formed a commercial partnership under the name of Tai Sing and Co., with a
capital of P40,000 contributed by said partners. The firm name was registered in the

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mercantile registrar in the Province of Iloilo. Ping, in the articles of partnership, was
assigned as the general manager. However, in 1917, he executed a special power of
attorney in favor of Lam to act in his behalf as the manager of the firm.
Subsequently, Lam obtained a loan from PNB the loan was under the firms name.
In the same year, Ping died in China. From 1918 to 1920, the firm, via GM Lam,
incurred other loans from PNB. The loans were not objected by any of the partners.
Later, PNB sued the firm for non-payment. Lo, in his defense, argued that he cannot
be liable as a partner because the partnership, according to him, is void; that it is
void because the firms name did not comply with the requirement of the Code of
Commerce that a firm name should contain the names of all of the partners, of
several of them, or only one of them. Lo also argued that the acts of Lam after the
death of Ping is not binding upon the other partners because the special power of
attorney shall have already ceased.
ISSUE: Whether or not Lo is correct in both arguments.
HELD: No. The anomalous adoption of the firm name above noted does not affect
the liability of the general partners to third parties under Article 127 of the Code of
Commerce. The object of the Code of Commerce in requiring a general partnership
to transact business under the name of all its members, of several of them, or of
one only, is to protect the public from imposition and fraud; it is for the protection of
the creditors rather than of the partners themselves. It is unenforceable as between
the partners and at the instance of the violating party, but not in the sense of
depriving innocent parties of their rights who may have dealt with the offenders in
ignorance of the latter having violated the law; and that contracts entered into by a
partnership firm defectively organized are valid when voluntarily executed by the
parties, and the only question is whether or not they complied with the agreement.
Therefore, Lo cannot invoke in his defense the anomaly in the firm name which they
themselves adopted. Lo was not able to prove his second argument. But even
assuming arguendo, his second contention does not deserve merit because (a) Lam,
in acting as a GM, is also a partner and his actions were never objected to by the
partners, and (b) it also appeared from the evidence that Lo, Lam and the other
partners authorized some of the loans.

9. La Compaia Maritama vs Francisco Muoz et al

Business Organization Partnership, Agency, Trust Liability of Industrial Partners to
Third Persons

FACTS: In 1905, Francisco Muoz, Emilio Muoz, and Rafael Naval formed an
ordinary general mercantile partnership in accordance with the Code of Commerce.
They named the partnership Francisco Muoz & Sons. Francisco was the capitalist
partner while the other two were industrial partners. In the articles of partnership, it
was agreed upon by the three that for profits, Francisco shall have a 3/4th share
while the other two would have 1/8th each. For losses, only Francisco shall bear it.

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Later, the partnership was sued by La Compaia Martitama for collection of sum of
money amounting to P26,828.30. The partnership lost the case and was ordered to
make said payment; that in case the partnership cant pay the debt, all the partners
should be liable for it.
The ruling is in accordance with Article 127 of the Code of Commerce which states:
All the members of the general copartnership, be they or be they not managing
partners of the same, are liable personally and in solidum with all their property for
the results of the transactions made in the name and for the account of the
partnership, under the signature of the latter, and by a person authorized to make
use thereof. (emphasis supplied)
Francisco now argues that the industrial partners should NOT be liable pursuant to
Article 141 of the Code of Commerce which states:

Losses shall be charged in the same proportion among the partners who have
contributed capital, without including those who have not, unless by special
agreement the latter have been constituted as participants therein. (emphasis
supplied)

ISSUE: Whether or not the industrial partners are liable to third parties like La
Compaia Martitama.

HELD: Yes. The controlling law is Article 127. There is no injustice in imposing this
liability upon the industrial partners. They have a voice in the management of the
business, if no manager has been named in the articles; they share in the profits
and as to third persons it is no more than right that they should share in the
obligations. It is admitted that if in this case there had been a capitalist partner who
had contributed only P100 he would be liable for this entire debt of P26,000.
Article 141 relates exclusively to the settlement of the partnership affairs among
the partners themselves and has nothing to do with the liability of the partners to
third persons; that each one of the industrial partners is liable to third persons for
the debts of the firm; that if he has paid such debts out of his private property
during the life of the partnership, when its affairs are settled he is entitled to credit
for the amount so paid, and if it results that there is not enough property in the
partnership to pay him, then the capitalist partners must pay him.
In relation to this, the Supreme Court noted that partnerships under the Civil Code
provides for a scenario where all partners are industrial partners (like when it is a
partnership for the exercise of a profession). In such case, if it is permitted that
industrial partners are not liable to third persons then such third persons would get
practically nothing from such partnerships if the latter is indebted.

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10. SANTIAGO SYJUCO, INC. VS CASTRO

Facts: The private respondents, Eugenio Lim, et al., borrowed from petitioner
Santiago Syjuco, Inc., the sum of P800,000.00. The loan was given on the security of
a first mortgage on property registered in the names of said borrowers as owners in
common under Transfer Certificates of Title Numbered 75413 and 75415 of the
Registry of Deeds of Manila. Thereafter, additional loans on the same security were
obtained by the private respondents from Syjuco, so that as of May 8, 1967, the
aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the
security had been augmented by bringing into the mortgage other property, also
registered as owned pro indiviso by the private respondents under two titles: TCT
Nos. 75416 and 75418 of the Manila Registry.
The private respondents failed to pay it despite demands therefore; that Syjuco
consequently caused extra-judicial proceedings for the foreclosure of the mortgage
to be commenced by the Sheriff of Manila; and that the latter scheduled the auction
sale of the mortgaged property on December 27, 1968. The attempt to foreclose
triggered off a legal battle that has dragged on for more than twenty years now,
fought through five (5) cases in the trial courts, two (2) in the Court of Appeals,
and three (3) more in the Supreme Court.
One of the complaints filed by the private respondents was filed not in their
individual names, but in the name of a partnership of which they themselves were
the only partners: "Heirs of Hugo Lim." The complaint advocated the theory that the
mortgage which they, together with their mother, had individually constituted (and
thereafter amended during the period from 1964 to 1967) over lands standing in
their names in the Property Registry as owners pro indiviso, in fact no longer
belonged to them at that time, having been earlier deeded over by them to the
partnership, "Heirs of Hugo Lim," more precisely, on March 30, 1959, hence, said
mortgage was void because executed by them without authority from the
partnership. Syjuco filed an instant petition for certiorari, prohibition and
mandamus. It prays in its petition that the default judgment rendered against it by
Judge Castro be annulled on the ground of, among others, estoppel, res judicata,
and Article 1819 of the Civil Code.

Issue: Whether or not the private respondents are estopped to avoid the
aforementioned mortgage.

Held: Yes. The Supreme Court ruled that the respondent partnership was
inescapably chargeable with knowledge of the mortgage executed by all the
partners thereof, its silence and failure to impugn said mortgage within a
reasonable time, let alone a space of more than 17 years, brought into play the
doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly
unauthorized. Equally or even more preclusive of the respondent partnerships
claim to the mortgaged property is the last paragraph of Art. 1819 of the Civil Code,
which contemplates a situation similar to the case at bar. It states that where the

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title to real property is in the names of all the partners, a conveyance executed by
the entire partners pass all their rights in such property. Consequently, those
members' acts, declarations and omissions cannot be deemed to be simply the
individual acts of said members, but in fact and in law, those of the partnership.
Finally, the Supreme Court emphasizes that the right of the private respondents to
assert the existence of the partnership could have been stressed at the time they
instituted their first action, considering that the actions involved property
supposedly belonging to it, and therefore, the partnership was the real party in
interest. What was done by them was to split their cause of action in violation of the
well-known rule that only one suit may be instituted for a single cause of action.

11. Philippine National Bank vs. Intermediate Appellate Court

FACTS: Leticia de la Vina-Sepe executed a real estate mortgage in favor of

petitioner, over a lot registered in her name to secure the payment of a sugar crop
loan. Later, Leticia Sepe, acting as attorney-in-fact for her brother-in-law, Alcedo,
executed an amended real estate mortgage to include his Alcedo's lot. Leticia Sepe
and Alcedo verbally agreed to split fifty-fifty (50-50) the proceeds of the loan but
failing to receive his one-half share from her, Alcedo wrote a letter on to the PNB,
San Carlos Branch, revoking the Special Power of Attorney which he had given to
Leticia Sepe to mortgage his Lot. The petitioner Branch Manager, Jose T. Gellegani
advised Alcedo that his land had already been included as collateral for Sepe's
1970-71 sugar crop loan, which the latter had already availed of, nevertheless, he
assured Alcedo that the bank would exclude his lot as collateral for Sepe's
forthcoming (1971-72) sugar crop loan. Alcedo received letters from PNB informing
her failure to pay the loan. Petitioner alleged that it had no knowledge of the
agreement between Mrs. Sepe and Alcedo to split the crop loan proceeds between
them. It required Sepe to put up other collaterals when it granted her an additional
loan because Alcedo informed the Bank that he was revoking the Special Power of
Attorney he gave Sepe; that the revocation was not formalized in accordance with
law.

ISSUE: Whether or not petitioner validly foreclosed the real estate mortgage on
Alcedo's property despite notice of Alcedo's revocation of the Special Power of
Attorney

HELD: No. The Court held that under the doctrine of promissory estoppels, the act
and assurance given by the petitioner to Alcedo "that we shall exclude the

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aforementioned lot as a collateral of Leticia de la Vina-Sepe in our recommendation

for her 1971-72 sugar crop loan" is binding on the bank. Having given that
assurance, the bank may not turn around and do the exact opposite of what it said
it would not do. One may not take inconsistent positions. A party may not go back
on his own acts and representations to the prejudice of the other party who relied
upon them.
While Article 1358 of the New Civil Code requires that the revocation of Alcedo's
Special Power of Attorney to mortgage his property should appear in a public
instrument nevertheless, a revocation embodied in a private writing is valid and
binding between the parties. The legalization by a public writing and the recording
of the same in the registry are not essential requisites of a contract entered into, as
between the parties, but mere conditions of form or solemnities which the law
imposes in order that such contract may be valid as against third persons, and to
insure that a publicly executed and recorded agreement shall be respected by the
latter.

12. Philex Mining Corporation vs. Commission of Internal Revenue

FACTS: Petitioner entered into an agreement with Baguio Gold Mining Corporation
for the former to manage the latters mining claim know as the Sto. Mine. The
parties agreement was denominated as Power of Attorney. The mine suffered
continuing losses over the years, which resulted in petitioners withdrawal as
manager of the mine. The parties executed a Compromise Dation in Payment.
Petitioner deducted said amount from its gross income in its annual tax income
return as loss on the settlement of receivables from Baguio Gold against reserves
and allowances. BIR disallowed the amount as deduction for bad debt. Petitioner
claims that it entered a contract of agency evidenced by the power of attorney
executed by them and the advances made by petitioners is in the nature of a loan
and thus can be deducted from its gross income.

ISSUE: Whether or not there is an agency.

HELD: No. The Court held that the Power of Attorney is the instrument material in
determining the true nature of the business relationship between petitioner and
Baguio. The said Power of Attorney reveals that a partnership was indeed intended
by the parties and establish a common fund for the purpose. While a corporation
like the petitioner cannot generally enter into a contract of partnership unless

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authorized by law or its charter, it has been held that it may enter into a joint
venture, which is akin to a particular partnership. They also had a joint interest in
the profits of the business as shown by the 50-50 sharing of income of the mine.
Furthermore, in an agency coupled with interest, it is the agency that cannot be
revoked or withdrawn by the principal due to an interest of a third party that
depends upon it or the mutual interest of both principal and agent. In this case the
non-revocation or non-withdrawal under the power of attorney applies to the
advances made by the petitioner who is the agent and not the principal under the
contract. Thus, it cannot be inferred from the stipulation that it is an agency

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