THIRD DIVISION
i. Accrued interest of P73,221.00 on Invoice No. 14407 for P385,377.80 dated February 9, 1990;
[G.R. No. 136448. November 3, 1999.]
LIM TONG LIM, Petitioner, v. PHILIPPINE FISHING GEAR INDUSTRIES, INC, Respondent.
DECISION
PANGANIBAN, J.:
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." 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.
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim assails the November 26, 1998
Decision of the Court of Appeals in CA-GR CV 41477, 1 which disposed as follows:
"WHEREFORE, [there being] no reversible error in the appealed decision, the same is hereby
affirmed." 2
The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed by
the CA, reads as follows:
"WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on
September 20, 1990;chanrobles virtual lawlibrary
2. That defendants are jointly liable to plaintiff for the following amounts, subject to the
modifications as hereinafter made by reason of the special and unique facts and circumstances
and the proceedings that transpired during the trial of this case;
a. 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;
b. 12% interest per annum counted from date of plaintiffs invoices and computed on their
respective amounts as follows:
ii. Accrued interest of P27,904.02 on Invoice No. 14413 for P146,868.00 dated February 13,
1990;
iii. Accrued interest of P12,920.00 on Invoice No. 14426 for P68,000.00 dated February 19, 1990;
c. P50,000.00 as and for attorneys fees, plus P8,500.00 representing P500.00 per appearance in
court;
d. P65,000.00 representing P5,000.00 monthly rental for storage charges on the nets counted
from September 20, 1990 (date of attachment) to September 12, 1991 (date of auction
sale);chanroblesvirtuallawlibrary
e. Cost of suit.
"With respect to the joint liability of defendants for the principal obligation or for the unpaid
price of nets and floats in the amount of P532,045.00 and P68,000.00, respectively, or for the
total amount of P600,045.00, this Court noted that these items were attached to guarantee any
judgment that may be rendered in favor of the plaintiff but, upon agreement of the parties, and,
to avoid further deterioration of the nets during the pendency of this case, it was ordered sold at
public auction for not less than P900,000.00 for which the plaintiff was the sole and winning
bidder. The proceeds of the sale paid for by plaintiff was deposited in court. In effect, the amount
of P900,000.00 replaced the attached property as a guaranty for any judgment that plaintiff may
be able to secure in this case with the ownership and possession of the nets and floats awarded
and delivered by the sheriff to plaintiff as the highest bidder in the public auction sale. It has also
been noted that ownership of the nets [was] retained by the plaintiff until full payment [was]
made as stipulated in the invoices; hence, in effect, the plaintiff attached its own properties. It
[was] for this reason also that this Court earlier ordered the attachment bond filed by plaintiff to
guaranty damages to defendants to be cancelled and for the P900,000.00 cash bidded and paid
for by plaintiff to serve as its bond in favor of defendants.
"From the foregoing, it would appear therefore that whatever judgment the plaintiff may be
entitled to in this case will have to be satisfied from the amount of P900,000.00 as this amount
replaced the attached nets and floats. Considering, however, that the total judgment obligation as
computed above would amount to only P840,216.92, 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 P900,000.00 aside from the fact that they are not the
owners of the nets and floats. For this reason, the defendants are hereby relieved from any and
all liabilities arising from the monetary judgment obligation enumerated above and for plaintiff
to retain possession and ownership of the nets and floats and for the reimbursement of the
P900,000.00 deposited by it with the Clerk of Court.
SO ORDERED."
 The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a
Contract dated February 7, 1990, for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that they were
engaged in a business venture with Petitioner Lim Tong Lim, who however was not 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. 4
The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent
filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of
preliminary attachment. The suit was brought against the three in their capacities as general
partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent
corporation as shown by a Certification from the Securities and Exchange Commission. 5 On
September 20, 1990, the lower court issued a Writ of Preliminary Attachment, which the sheriff
enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the
Fisheries Port, Navotas, Metro Manila.chanrobles law library : red
Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and
requesting a reasonable time within which to pay. He also turned over to respondent some of the
nets which were in his possession. Peter Yao filed an Answer, after which he was deemed to have
waived his right to cross-examine witnesses and to present evidence on his behalf, because of his
failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with
Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment. 6 The trial
court maintained the Writ, and upon motion of private respondent, ordered the sale of the
fishing nets at a public auction. Philippine Fishing Gear Industries won the bidding and deposited
with the said court the sales proceeds of P900,000. 7
On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear
Industries was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general
partners, were jointly liable to pay Respondent. 8
The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the
testimonies of the witnesses presented and (2) on a Compromise Agreement executed by the
three 9 in Civil Case No. 1492-MN which Chua and Yao had brought against Lim in the RTC of
Malabon, Branch 72, for (a) a declaration of nullity of commercial documents; (b) a reformation
of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e) damages.
10 The Compromise Agreement provided:chanroblesvirtualawlibrary
"a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in the
amount of P5,750,000.00 including the fishing net. This P5,750,000.00 shall be applied as full
payment for P3,250,000.00 in favor of JL Holdings Corporation and/or Lim Tong Lim;
"b) If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5,750,000.00
whatever will be the excess will be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3
Peter Yao;
"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." 11
The trial court noted that the Compromise Agreement was silent as to the nature of their
obligations, but that joint liability could be presumed from the equal distribution of the profit
and loss. 12
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing
business and may thus be held liable as such for the fishing nets and floats purchased by and for
the use of the partnership. The appellate court ruled:jgc:chanrobles.com.ph
"The evidence establishes that all the defendants including herein appellant Lim Tong Lim
undertook a partnership for a specific undertaking, that is for commercial fishing . . . . Obviously,
the ultimate undertaking of the defendants was to divide the profits among themselves which is
what a partnership essentially is . . . . By a 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 (Article 1767, New Civil Code)."
13chanroblesvirtual|awlibrary
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the
following grounds:jgc:chanrobles.com.ph
"I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE AGREEMENT THAT
CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A SEPARATE CASE, THAT A PARTNERSHIP
AGREEMENT EXISTED AMONG THEM.
"II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN QUEST
FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM PHILIPPINE FISHING, THE COURT
OF APPEALS WAS UNJUSTIFIED IN IMPUTING LIABILITY TO PETITIONER LIM AS WELL.
"III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF
PETITIONER LIMS GOODS."cralaw virtua1aw library
In determining whether petitioner may be held liable for the fishing nets and floats purchased
from respondent, the Court must resolve this key issue: whether by their acts, Lim, Chua and Yao
could be deemed to have entered into a partnership.chanroblesvirtuallawlibrary
This Courts Ruling
The Petition is devoid of merit.
First and Second Issues:chanrob1es virtual 1aw library
Existence of a Partnership and Petitioners Liability
In arguing that he should not be held liable for the equipment purchased from respondent,
petitioner controverts the CA finding that a partnership existed between him, Peter Yao and
Antonio Chua. He asserts that the CA based its finding on the Compromise Agreement alone.
Furthermore, he disclaims any direct participation in the purchase of the nets, alleging that the
negotiations were conducted by Chua and Yao only, and that he has not even met the
representatives of the respondent company. Petitioner further argues that he was a lessor, not a
partner, of Chua and Yao, for the "Contract of Lease" dated February 1, 1990, showed that he had
merely leased to the two the main asset of the purported partnership the fishing boat F/B
Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25 percent of the
gross catch of the boat.
We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts
clearly showed that there existed a partnership among Chua, Yao and him, pursuant to Article
1767 of the Civil Code which provides:jgc:chanrobles.com.ph
"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." chanrobles lawlibrary : rednad
Specifically, both lower courts ruled that a partnership among the three existed based on the
following factual findings: 15
(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to
join him, while Antonio Chua was already Yaos partner;
(2) That after convening for a few times, Lim Chua, and Yao verbally agreed to acquire two
fishing boats, the FB Lourdes and the FB Nelson for the sum of P3.35 million;
(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to
finance the venture.
(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of Sale
over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as security for the loan
extended by Jesus Lim;
(5) 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;
(6) That because of the "unavailability 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.chanroblesvirtual|awlibrary
(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets from
Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing Corporation," their
purported business name.
(8) 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.
(9) That the case was amicably settled through a Compromise Agreement executed between the
parties-litigants the terms of which are already enumerated above.
From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to
engage in a fishing business, which they started by buying boats worth P3.35 million, financed by
a loan secured from Jesus Lim who was petitioners brother. In their Compromise Agreement,
they subsequently revealed their intention to pay the loan with the proceeds of the sale of the
boats, and to divide equally among them the excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money, fell under the term "common fund" under
Article 1767. The contribution to such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also shows that they had indeed
formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also
to that of the nets and the floats. The fishing nets and the floats, both essential to fishing, were
obviously acquired in furtherance of their business. It would have been inconceivable for Lim to
involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment,
without which the business could not have proceeded.chanroblesvirtual|awlibrary
Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, 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.
We stress that under Rule 45, a petition for review like the present case should involve only
questions of law. Thus, the foregoing factual findings of the RTC and the CA are binding on this
Court, absent any cogent proof that the present action is embraced by one of the exceptions to
the rule. 16 In assailing the factual findings of the two lower courts, petitioner effectively goes
beyond the bounds of a petition for review under Rule 45.
Compromise Agreement Not the Sole Basis of Partnership
Petitioner argues that the appellate courts sole basis for assuming the existence of a partnership
was the Compromise Agreement. He also claims that the settlement was entered into only to end
the dispute among them, but not to adjudicate their preexisting rights and obligations. His
arguments are baseless. The Agreement was but an embodiment of the relationship extant
among the parties prior to its execution.
A proper adjudication of claimants rights mandates that courts must review and thoroughly
appraise all relevant facts. Both lower courts have done so and have found, correctly, a
preexisting partnership among the parties. In implying that the lower courts have decided on the
basis of one piece of document alone, petitioner fails to appreciate that the CA and the RTC
delved into the history of the document and explored all the possible consequential
combinations in harmony with law, logic and fairness. Verily, the two lower courts factual
findings mentioned above nullified petitioners argument that the existence of a partnership was
based only on the Compromise Agreement.chanrobles law library
Petitioner Was a Partner, Not a Lessor
We are not convinced by petitioners argument that he was merely the lessor of the boats to Chua
and Yao, not a partner in the fishing venture. His argument allegedly finds support in the
Contract of Lease and the registration papers showing that he was the owner of the boats,
including F/B Lourdes where the nets were found.
His allegation defies logic. 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.
Verily, as found by the lower courts, petitioner entered into a business agreement with Chua and
Yao, in which debts were undertaken in order to finance the acquisition and the upgrading of the
vessels which would be used in their fishing business. The sale of the boats, as well as the
division among the three of the balance remaining after the payment of their loans, proves
beyond cavil that F/B Lourdes, though registered in his name, was not his own property but an
asset of the partnership. It is not uncommon to register the properties acquired from a loan in
the name of the person the lender trusts, who in this case is the petitioner himself. After all, he is
the brother of the creditor, Jesus Lim.chanrobles.com.ph : virtual law library
We stress that it is unreasonable indeed, it is absurd for petitioner to sell his property to
pay a debt he did not incur, if the relationship among the three of them was merely that of lessor-
lessee, instead of partners.
Corporation by Estoppel
Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed
only to Chua and Yao, and not to him. Again, we disagree.
Section 21 of the Corporation Code of the Philippines provides:jgc:chanrobles.com.ph
"SECTION 21. Corporation by estoppel. All persons who assume to act as a corporation
knowing it to be without authority to do so shall be liable as general partners for all debts,
liabilities and damages incurred or arising as a result thereof: Provided however, That when any
such ostensible corporation is sued on any transaction entered by it as a corporation or on any
tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate
personality.
"One who assumes an obligation to an ostensible corporation as such, cannot resist performance
thereof on the ground that there was in fact no corporation." chanrobles.com:cralaw:red
Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be
estopped from denying its corporate existence. "The reason behind this doctrine is obvious an
unincorporated association has no personality and would be incompetent to act and appropriate
for itself the power and attributes of a corporation as provided by law; it cannot create agents or
confer authority on another to act in its behalf; thus, those who act or purport to act as its
representatives or agents do so without authority and at their own risk. And as it is an
elementary principle of law that a person who acts as an agent without authority or without a
principal is himself regarded as the principal, possessed of all the right and subject to all the
liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has
no valid existence assumes such privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such agent." 17
The doctrine of corporation by estoppel may apply to the alleged corporation and to a third
party. In the first instance, an unincorporated association, which represented itself to be a
corporation, will be estopped from denying its corporate capacity in a suit against it by a third
person who relied in good faith on such representation. It cannot allege lack of personality to be
sued to evade its responsibility for a contract it entered into and by virtue of which it received
advantages and benefits.
On the other hand, a third party who, knowing an association to be unincorporated, nonetheless
treated it as a corporation and received benefits from it, may be barred from denying its
corporate existence in a suit brought against the alleged corporation. In such case, all those who
benefited from the transaction made by the ostensible corporation, despite knowledge of its legal
defects, may be held liable for contracts they impliedly assented to or took advantage
of.chanrobles virtual lawlibrary
There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid
for the nets it sold. The only question here is whether petitioner should be held jointly 18 liable
with Chua and Yao. Petitioner contests such liability, insisting that only those who dealt in the
name of the ostensible corporation should be held liable. Since his name does not appear on any
of the contracts and since he never directly transacted with the respondent corporation, ergo, he SO ORDERED.
cannot be held liable.

Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat
which has earlier been proven to be an asset of the partnership. He in fact questions the
attachment of the nets, because the Writ has effectively stopped his use of the fishing vessel.

It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a
corporation. Although it 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.

Technically, it is true that petitioner did not directly act on behalf of the corporation. However,
having reaped the benefits of the contract entered into by persons with whom he previously had
an existing relationship, he is deemed to be part of said association and is covered by the scope of
the doctrine of corporation by estoppel. We reiterate the ruling of the Court in Alonso v.
Villamor: 19chanrobles.com.ph : virtual law library

"A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the
subtle art of movement and position, entraps and destroys the other. It is, rather, a contest in
which each contending party fully and fairly lays before the court the facts in issue and then,
brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by
a rapiers thrust. Technicality, when it deserts its proper office as an aid to justice and becomes
its great hindrance and chief enemy, deserves scant consideration from courts. There should be
no vested rights in technicalities."cralaw virtua1aw library

Third Issue:chanrob1es virtual 1aw library

Validity of Attachment

Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We
agree with the Court of Appeals that this issue is now moot and academic. As previously
discussed, F/B Lourdes was an asset of the partnership and that it was placed in the name of
petitioner, only to assure payment of the debt he and his partners owed. The nets and the floats
were specifically manufactured and tailor-made according to their own design, and were bought
and used in the fishing venture they agreed upon. Hence, the issuance of the Writ to assure the
payment of the price stipulated in the invoices is proper. Besides, by specific agreement,
ownership of the nets remained with Respondent Philippine Fishing Gear, until full payment
thereof.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
 FIRST DIVISION
[G.R. No. L-9996. October 15, 1957.]
EUFEMIA EVANGELISTA, MANUELA EVANGELISTA and FRANCISCA
EVANGELISTA, Petitioners, v. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF
TAX APPEALS, Respondents.
Santiago F. Alidio and Angel S. Dakila, Jr. for Petitioner.
Solicitor General Ambrosio Padilla, Assistant Solicitor General Esmeraldo Umali and
Solicitor Felicisimo R. Rosete for the respondents.
SYLLABUS
1. TAXATION; TAX ON CORPORATIONS INCLUDES ORGANIZATION WHICH ARE NOT
NECESSARY PARTNERSHIP. "Corporations" strictly speaking are distinct and different from
"partnership." When our Internal Revenue Code includes "partnership" among the entities
subject to the tax on "corporations", it must be allude to organization which are not necessarily
"partnership" in the technical sense of the term.
2. ID.; DULY REGISTERED GENERAL PARTNERSHIP ARE EXEMPTED FROM THE TAX UPON
CORPORATIONS. Section 24 of the Internal Revenue Code exempts from the tax imposed upon
corporations "duly registered general partnership", which constitute precisely one of the most
typical form of partnership in this jurisdiction.
3. ID.; CORPORATION INCLUDES PARTNERSHIP NO MATTER HOW ORGANIZED. As defined in
section 84 (b) of the Internal Revenue Code "the term corporation includes partnership, no
matter how created or organized." This qualifying expression clearly indicates that a joint
venture need not be undertaken in any of the standards form, or conformity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted for the
purposes of the tax on corporations.
4. ID.; CORPORATIONS INCLUDES "JOINT ACCOUNT" AND ASSOCIATIONS WITHOUT LEGAL
PERSONALITY. Pursuant to Section 84 (b) of the Internal Revenue Code, the term
"corporations" includes, among the others, "joint accounts (cuenta en participacion)" and
"associations", none of which has a legal personality of its own independent of that of its
members. For purposes of the tax on corporations, our National Internal Revenue Code includes
these partnership. with the exception only of duly registered general partnership. within
the purview of the term "corporations." Held: That the petitioners in the case at bar, who are
engaged in real estate transactions for monetary gain and divide the same among themselves,
constitute a partnership, so far as the said Code is concerned, and are subject to the income tax
for the corporation.
5. ID.; CORPORATION; PARTNERSHIP WITHOUT LEGAL PERSONALITY SUBJECT TO RESIDENCE
TAX ON CORPORATION. The pertinent part of the provision of Section 2 of Commonwealth Act
No. 465 which says: "The term corporation as used in this Act includes joint-stock company,
partnership, joint account (cuentas en participacion), association or insurance company, no
matter how created or organized." is analogous to that of Section 24 and 84 (b) of our Internal
Revenue Code which was approved the day immediately after the approval of said
Commonwealth Act No. 565. Apparently, the terms "corporation" and "Partnership" are used
both statutes with substantially the same meaning, Held: That the petitioners are subject to the
residence tax corporations.
DECISION
CONCEPCION, J.:
This is a petition, filed by Eufemia Evangelista, Manuela Evangelista and Francisca Evangelista,
for review of a decision of the Court of Tax Appeals, the dispositive part of which
reads:jgc:chanrobles.com.ph
"FOR ALL THE FOREGOING, we hold that the petitioners are liable for the income tax, real estate
dealers tax and the residence tax for the years 1945 to 1949, inclusive, in accordance with the
respondents assessment for the same in the total amount of P6,878.34, which is hereby affirmed
and the petition for review filed by petitioners is hereby dismissed with costs against
petitioners."cralaw virtua1aw library
It appears from the stipulation submitted by the parties:jgc:chanrobles.com.ph
"1. That the petitioners borrowed from their father the sum of P59,140.00 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 for 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 P18,000.00; this property
has an assessed value of P8,255.00 as of 1948;
"4. That on April 23, 1944 they purchased from the Insular Investments, Inc., a lot of 4,358 sq. m.
including improvements thereon for P108,825.00. This property has an assessed value of
P4,983.00 as of 1943;
"5. That on April 28, 1944 they bought from Mrs. Valentin Afable a lot of 8,371 sq. m. including
improvements thereon for P237,234.14. 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 tenant; 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 leased to various tenants;
"8. That from the month of March, 1945 up to and including December, 1945, the total amount
collected as rents on their real properties was P9,599.00 while the expenses amounted to
P3,650.00 thereby leaving them a net rental income of P5,948.33;
"9. That in 1946, they realized a gross rental income in the sum of P24,786.30, out of which
amount was deducted the sum of P16,288.27 for expenses thereby leaving them a net rental
income of P7,498.13;
"10. That in 1948 they realized a gross rental income of P17,453.00 out of the which amount was
deducted the sum of P4,837.65 as expenses, thereby leaving them a net rental income of
P12,615.35."cralaw virtua1aw library
It further appears that on September 24, 19a4, respondent Collector of Internal Revenue
demanded the payment of income tax on corporations, real estate dealers fixed tax and
corporation residence tax for the years 1945-1949, computed, according to the assessments
made by said officer, as follows:chanrob1es virtual 1aw library
INCOME TAXES
1945. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P614.84
1946. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,144.71
1947. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .910.34
1948. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,912.30
1949. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,575.90
_______________
Total including surcharge and compromise P6,157.09
REAL ESTATE DEALERS FIXED TAX
1946. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P37.50
1947. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150.00
1948. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150.00
1949. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150.00
____________
Total including penalty P527.50
RESIDENCE TAXES OF CORPORATION
1945. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P38.75
1946. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38.75
1947. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38.75
1948. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38.75
1949. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38.75
______________
Total including surchage P193.75
TOTAL TAXES DUE P6,878.34
Said letter of demand and the corresponding assessments were delivered to petitioners on
December 3, 1954, whereupon they instituted the present case in the Court of Tax Appeals, with
a prayer that "the decision of the respondent contained in his letter of demand dated September
24, 1954" be reversed, and that they be absolved from the payment of the taxes in question, with
costs against the Respondent.
After appropriate proceedings, the Court of Tax Appeals rendered the above-mentioned decision
for the respondent, and, a petition for reconsideration and new trial having been subsequently
denied, the case is now before Us for review at the instance of the petitioners.
The issue in this case is 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. With
respect to the tax on corporations, the issue hinges on the meaning of the terms "corporation"
and "partnership", as used in sections 24 and 84 of said Code, the pertinent parts of which
read:jgc:chanrobles.com.ph

"SEC. 24. Rate of tax on corporations. There shall be levied, assessed, collected, and paid
annually upon the total net income received in the preceding taxable year from all sources by
every corporation organized in, or existing under the laws of the Philippines, no matter how
created or organized but not including duly registered general co-partnerships (compaias
colectivas), a tax upon such income equal to the sum of the following: . . . ."cralaw virtua1aw
library
"Sec. 84(b). The term corporation includes partnerships, no matter how created or organized,
joint-stock companies, joint accounts (cuentas en participacion), associations or insurance
companies, but does not include duly registered general copartnerships (compaias
colectivas)."cralaw virtua1aw library
Article 1767 of the Civil Code of the Philippines provides:jgc:chanrobles.com.ph
"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."cralaw virtua1aw library
Pursuant to this 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. 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. Hence, the issue narrows down to their intent in acting as they did. Upon
consideration of all the facts and circumstances surrounding the case, we are fully satisfied that
their purpose was to engage in real estate transactions for monetary gain and then divide the
same among themselves, because:chanrob1es virtual 1aw library
1. Said common fund was not something they found already in existence. It was not a 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.
2. They invested the same, not merely in one transaction, but in a series of transactions. On
February 2, 1943, they bought a lot for P100,000.00. On April 3, 1944, they purchased 21 lots for
P18,000.000. This was soon followed, on April 23, 1944, by the acquisition of another real estate
for P108,825.00. Five (5) days later (April 28, 1944), they got a fourth lot for P237,234.14. The
number of lots (24) acquired and transactions undertaken, as well as the brief interregnum
between each, particularly the last three purchases, is strongly indicative of a pattern or common
design that was not limited to the conservation and preservation of the aforementioned common
fund or even of the property acquired by petitioners in February, 1943. In other words, one
cannot but perceive a character of habituality peculiar to business transactions engaged in for
purposes of gain.
3. 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, who, from 1945 to
1948 inclusive, paid the total sum of P70,068.30 by way of rentals. Seemingly, the lots are still
being so let, for petitioners do not even suggest that there has been any change in the utilization
thereof.
4. 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 or business
enterprise operated for profit.
5. The foregoing conditions have existed for more than ten (10) years, or, to be exact, over fifteen
(15) years, since the first property was acquired, and over twelve (12) years, since Simeon
Evangelista became the manager.
6. Petitioners have not testified or introduced any evidence, either on their purpose in creating
the set up already adverted to, or on the causes for its continued existence. They did not even try
to offer an explanation therefor.
Although, taken singly, they might not suffice to establish the intent necessary to constitute a
partnership, the collective effect of these circumstances is such as to leave no room for doubt on
the existence of said intent in petitioners herein. Only one or two of the aforementioned
circumstances were present in the cases cited by petitioners herein, and, hence, those cases are
not in point.
Petitioners insist, however, that they are mere co-owners, not copartners, for, in consequence of
the acts performed by them, a legal entity, with a personality independent of that of its members,
did not come into existence, and some of the characteristics of partnerships are lacking in the
case at bar. This pretense was correctly rejected by the Court of Tax Appeals.
To begin with, the tax in question is one imposed upon "corporations", which, strictly speaking,
are distinct and different from "partnerships." When our Internal Revenue Code includes
"partnerships" among the entities subject to the tax on "corporations", said Code must allude,
therefore, to organizations which are not necessarily "partnerships", in the technical sense of the
term. Thus, for instance, section 24 of said Code exempts from the aforementioned tax "duly
registered general partnerships", which constitute precisely one of the most typical forms of
partnerships in this jurisdiction. Likewise, as defined in section 84(b) of said Code, "the term
corporation includes partnerships, no matter how created or organized." This qualifying
expression clearly indicates that a joint venture need not be undertaken in any of the standard
forms, or in conformity with the usual requirements of the law on partnerships, in order that one
could be deemed constituted for purposes of the tax on corporations. Again, pursuant to said
section 84(b), the term "corporation" includes, among other, "joint accounts, (cuentas en
participacion)" and "associations", none of which has a legal personality of its own, independent
of that of its members. Accordingly, the lawmaker could not have regarded that personality as a
condition essential to the existence of the partnerships therein referred to. In fact, as above
stated, "duly registered general copartner ships" which are possessed of the aforementioned
personality have been expressly excluded by law (sections 24 and 84 [b]) from the
connotation of the term "corporation." It may not be amiss to add that petitioners allegation to
the effect that their liability in connection with the leasing of the lots above referred to, under the
management of one person even if true, on which we express no opinion tends to increase the
similarity between the nature of their venture and that of corporations, and is, therefore, an
additional argument in favor of the imposition of said tax on corporations.
Under the Internal Revenue Laws of the United States, "corporations" are taxed differently from
"partnerships." By specific provision of said laws, such "corporations" include "associations,
joint-stock companies and insurance companies." However, the term "association" is not used in
the aforementioned laws
". . . in any narrow or technical sense. It includes any organization, created for the transaction of
designated affairs, or the attainment of some object, which, like a corporation, continues
notwithstanding that its members or participants change, and the affairs of which, like corporate
affairs, are conducted by a single individual, a committee, a board, or some other group, acting in
a representative capacity. It is immaterial whether such organization is created by an agreement,
a declaration of trust, a statute, or otherwise. It includes a voluntary association, a joint-stock
corporation or company, a business trusts a Massachusetts trust, a common law trust, and
investment trust (whether of the fixed or the management type), an interinsurance exchange
operating through an attorney in fact, a partnership association, and any other type of
organization (by whatever name known) which is not, within the meaning of the Code, a trust or
an estate, or a partnership." (7A Mertens Law of Federal Income Taxation, p. 788; italics ours.)
Similarly, the American Law.
one thousand pesos, in accordance with the following schedule: . . .
"The term corporation as used in this Act includes joint-stock company, partnership, joint
account (cuentas en participacion), association or insurance company, no matter how created or
organized." (italics ours.)
Considering that the pertinent part of this provision is analogous to that of sections 24 and 84(b)
of our National Internal Revenue Code (Commonwealth Act No. 466), and that the latter was
approved on June 15, 1939, the day immediately after the approval of said Commonwealth Act
No. 465 (June 14, 1939), 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 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," inasmuch as,
pursuant to section 194(s) thereof:jgc:chanrobles.com.ph
"Real estate dealer includes any person engaged in the business of buying, selling, exchanging,
leasing, or renting property or his own account as principal and holding himself out as a full or
part- time dealer in real estate or as an owner of rental property or properties rented or offered
to rent for an aggregate amount of three thousand pesos or more a year. . . . ." (Italics ours.)

". . . provides its own concept of a partnership. Under the term partnership it includes not only a Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed with costs
partnership as known at common law but, as well, a syndicate, group, pool, joint venture, or against the petitioners herein. It is so ordered.
other unincorporated organization which carries on any business, financial operation, or
venture, and which is not, within the meaning of the Code, a trust, estate, or a corporation. . . . ."
(7A Mertens Law of Federal Income Taxation, p. 789; italics ours.)

"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; italics ours.)

For purposes of the tax on corporations, our National Internal Revenue Code, includes these
partnerships 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.

As regards the residence tax for corporations, section 2 of Commonwealth Act No. 465 provides
in part:jgc:chanrobles.com.ph

"Entities liable to residence tax. Every corporation, no matter how created or organized,
whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay
an annual residence tax of five pesos and an annual additional tax which, in no case, shall exceed
 FIRST DIVISION
[G.R. No. L-49982. April 27, 1988.]
ELIGIO ESTANISLAO, JR., Petitioner, v. THE HONORABLE COURT OF APPEALS, REMEDIOS
ESTANISLAO, EMILIO and LEOCADIO SANTIAGO, Respondents.
Agustin O. Benitez for Petitioner.
Benjamin C. Yatco for Private Respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PARTNERSHIP; FORMED WHERE MEMBERS OF
THE SAME FAMILY BOUND THEMSELVES TO CONTRIBUTE MONEY TO A COMMON FUND WITH
THE INTENTION OF DIVIDING THE PROFITS AMONG THEMSELVES. The Joint Affidavit of
April 11, 1966 (Exhibit A), clearly stipulated by the members of the same family that the
P15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in
the operation of the gasoline station. 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 Remedios Estanislao and Atty. Angeles. Petitioner submitted to private
respondents periodic accounting of the business. Petitioner gave a written authority to private
respondent Remedios Estanislao, his sister, to examine and audit the books of their "common
business" (aming negosyo). Respondent 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.
2. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE COURT OF APPEALS, GENERALLY
CONCLUSIVE ON APPEAL. The findings of facts of the respondent court are conclusive in this
proceeding, and its conclusion based on the said facts are in accordance with the applicable law.
DECISION
GANCAYCO, J.:
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.
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at
the corner of Annapolis and Aurora Blvd., Quezon City 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 with an initial investment of P15,000.00
to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots
owned in common by them. A joint affidavit was executed by them on April 11, 1966 which was
prepared by Atty. Democrito Angeles. 1 They agreed to help their brother, petitioner herein, by
allowing him to operate and manage the gasoline service station of the family. They negotiated
with SHELL. For practical purposes and in order not to run counter to the companys policy of
appointing only one dealer, it was agreed that petitioner would apply for the dealership.
Respondent Remedios helped in co-managing the business with petitioner from May 3, 1968 up
to February 16, 1967.
On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement with
SHELL wherein it was reiterated that the P15,000.00 advance rental shall be deposited with
SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement
"cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners." 2
For sometime, the petitioner submitted financial statements regarding the operation of the
business to private respondents, but thereafter 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
P87,293.79 and that by the year ending 1969, a profit of P150,000.00 was realized. 3
Thus, on August 25, 1970 private respondents filed a complaint in the Court of First Instance of
Rizal against petitioner saying among others that the latter be ordered:jgc:chanrobles.com.ph
"1. to execute a public document embodying all the provisions of the partnership agreement
entered into between plaintiffs and defendants provided in Article 1771 of the New Civil Code;
"2. to render a formal accounting of the business operation covering the period 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;
"3. to pay the plaintiffs their lawful shares and participation in the net profits of the business in
an amount of no less than P150,000.00 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
"4. to pay the plaintiffs the amount of P10,000.00 as attorneys fees and costs of the suit." (pp. 13-
14 Record on Appeal.)"
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 P3,000.00 attorneys fee and
costs. Private respondent filed a motion for reconsideration of the decision. On December 1,
1975, Hon. Ricardo Tensuan who was the newly appointed presiding judge of the same branch,
set aside the aforesaid decision and rendered another decision in favor of said
respondents.chanroblesvirtualawlibrary
The dispositive part thereof reads as follows:chanrob1es virtual 1aw library
WHEREFORE, the Decision of this Court dated October 14, 1975 is hereby reconsidered and a
new judgment is hereby rendered in favor of the plaintiffs and as against the
defendant:chanrob1es virtual 1aw library
(1) Ordering the defendant to execute a public instrument embodying all the provisions of the
partnership agreement entered into between plaintiffs and defendant as provided for in Article
1771, Civil Code of the Philippines;
(2) Ordering the defendant to render a formal accounting of the business operation from April
1969 up to the time this order is issued, the same to be subject to examination and audit by the
plaintiff;
(3) Ordering the defendant to pay plaintiffs their lawful shares and participation in the net
profits of the business in the amount of P150,000.00, with interest thereon at the rate of One
(1%) Per Cent per month from date of demand until full payment thereof;
(4) Ordering the defendant to pay the plaintiffs the sum of P5,000.00 by way of attorneys fees of
plaintiffs counsel; as well as the costs of suit." (pp. 161-162. Record on Appeal)."cralaw
virtua1aw library
Petitioner then interposed an appeal to the Court of Appeals enumerating seven (7) errors
allegedly committed by the trial court. In due course, a decision was rendered by the Court of
Appeals on November 28, 1978 affirming in toto the decision of the lower court with costs
against petitioner. **
A motion for reconsideration of said decision filed by petitioner was denied on January 30, 1979.
Not satisfied therewith, the petitioner now comes to this court by way of this petition
for certiorari alleging that the respondent court erred:jgc:chanrobles.com.ph
"1. In interpreting the legal import of the Joint Affidavit (Exh. "A") vis-a-vis the Additional Cash
Pledge Agreement (Exhs. "B-2," "6," and "L"); and
2. 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."cralaw virtua1aw library
Petitioner relies heavily on the provisions of the Joint Affidavit of April 11, 1966 (Exhibit A) and
the Additional Cash Pledge Agreement of May 20, 1966 (Exhibit 6) which are herein reproduced -
(a) The joint Affidavit of April 11, 1966, Exhibit A reads:jgc:chanrobles.com.ph
"(1) That we are the Lessors of two parcels of land fully described in Transfer Certificates of Title
Nos. 45071 and 71244 of the Register of Deeds of Quezon City, in favor of the LESSEE - SHELL
COMPANY OF THE PHILIPPINES LIMITED, a corporation duly licensed to do business in the
Philippines;
"(2) That we have requested the said SHELL COMPANY OF THE PHILIPPINES LIMITED, advanced
rentals in the total amount of FIFTEEN THOUSAND PESOS (P15,000.00) Philippine Currency, so
that we can use the said amount to augment our capital investment in the operation of that
gasoline station constructed by the said company on our two lots aforesaid by virtue of an
outstanding Lease Agreement we have entered into with the said company.
"(3) That the said SHELL COMPANY OF THE PHILIPPINES LIMITED out of its benevolence and
desire to help us in augmenting our capital investment in the operation of the said gasoline
station, has agreed to give us the said amount of P15,000.00, which amount will partake the
nature of ADVANCED RENTALS;
"(4) That we have freely and voluntarily agreed that upon receipt of the said amount of FIFTEEN
THOUSAND PESOS (P15,000,00) from the SHELL COMPANY OF THE PHILIPPINES LIMITED, the
said sum as ADVANCED RENTALS to us be applied as monthly rentals for the said two lots under
our Lease Agreement starting on the 25th of May, 1966 until such time that the said amount of
P15,000.00 be applicable, which time to our estimate will cover at four and one-half months from
May 25, 1966 or until the 10th of October, 1966 more or less;
"(5) That we have likewise agreed among ourselves that the SHELL COMPANY OF THE
PHILIPPINES LIMITED execute an instrument for us to sign embodying our conformity that the
said amount that it will generously grant us as requested be applied as ADVANCED RENTALS;
and
"(6) FURTHER AFFIANTS SAYETH NOT.
(b) The Additional Cash Pledge Agreement of May 20, 1966, Exhibit 6, is as
follows:jgc:chanrobles.com.ph
"WHEREAS, under the lease Agreement dated 13th November, 1963 (identified as doc. Nos. 491
& 1407, Page Nos. 99 & 66, Book Nos. V & 111, Series of 1963 in the Notarial Registers of
Notaries Public Rosauro Marquez, and R.D. Liwanag, respectively) executed in favour of SHELL
by the herein CO-OWNERS and another Lease Agreement dated 19th March 1964 . . . also
executed in favour of SHELL by CO-OWNERS Remedios and MARIA ESTANISLAO for the lessee of
adjoining portions of two parcels of land at Aurora Blvd., Annapolis, Quezon City, the CO-
OWNERS RECEIVE a total monthly rental of PESOS THREE THOUSAND THREE HUNDRED
EIGHTY TWO AND 29/100 (P3,382.29), Philippine Currency;
"WHEREAS, CO-OWNER Eligio Estanislao, Jr. is the Dealer of the Shell Station constructed on the
leased land, and as Dealer under the Cash Pledge Agreement dated 11th May 1966, he deposited
to SHELL in cash the amount of PESOS TEN THOUSAND (P10,000), Philippine Currency, to
secure his purchases on credit of Shell petroleum products; . . .chanroblesvirtualawlibrary
"WHEREAS, said DEALER, in his desire to be granted an increased credit limit up to P25,000, has
secured the conformity of his CO-OWNERS to waive and assign to SHELL the total monthly
rentals due to all of them to accumulate the equivalent amount of P15,000, commencing 24th
May 1966, this P15,000 shall be treated as additional cash deposit to SHELL under the same
terms and conditions of the aforementioned Cash Pledge Agreement dated 11th May 1966.
NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual covenants
among the CO-OWNERS herein and SHELL, said parties have agreed and hereby agree as
follows:jgc:chanrobles.com.ph
"1. The CO-OWNERS do hereby waive in favour of DEALER the monthly rentals due to all CO-
OWNERS, collectively, under the above described two Lease Agreements, one dated 13th
November 1963 and the other dated 19th March 1964 to enable DEALER to increase his existing
cash deposit to SHELL, from P10,000 to P25,000, for such purpose, the SHELL CO-OWNERS and
DEALER hereby irrevocably assign to SHELL the monthly rental of P3,382.29 payable to them
respectively as they fall due, monthly, commencing 24th May 1966, until such time that the
monthly rentals accumulated, shall be equal to P15,000.
"2. The above stated monthly rentals accumulated shall be treated as additional cash deposit by
DEALER to SHELL, thereby increasing his credit limit from P10,000 to P25,000. This agreement,
therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the CO-
OWNERS.
"3. Effective upon the signing of this agreement, SHELL agrees to allow DEALER to purchase from
SHELL petroleum products, on credit, up to the amount of P25,000.
"4. This increase in the credit limit shall also be subject to the same terms and conditions of the
above-mentioned Cash Pledge Agreement dated 11th May 1966." (Exhs. "B-2," "L," and "6"
; Italics supplied)
In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), it is clearly stipulated by the parties
that the P15,000.00 advance rental due to them from SHELL shall augment their "capital
investment" in the operation of the gasoline station, which advance rentals shall be credited as
rentals from May 25, 1966 up to four and one-half months or until 10 October 1966, more or less
covering said P15,000.00.
In the subsequent document entitled `Additional Cash Pledge Agreement" above reproduced
(Exhibit 6), the private respondents and petitioners assigned to SHELL the monthly rentals due
them commencing the 24th of May 1966 until such time that the monthly rentals accumulated
equal P15,000.00 which private respondents agree to be a cash deposit of petitioner in favor of
SHELL to increase his credit limit as dealer. As above-stated it provided therein that "This
agreement, therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by
the CO-OWNERS."cralaw virtua1aw library
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. We find no merit in this argument. Said cancelling provision was
necessary for the Joint Affidavit speaks of P15,000.00 advance rentals starting May 25, 1966
while the latter agreement also refers to advance rentals of the same amount starting May 24,
1966. There is, therefore, a duplication of reference to the P15,000.00 hence the need to provide
in the subsequent document that it "cancels and supersedes" the previous one. True it is that in
the latter document, it is silent as to the statement in the Joint Affidavit that the P15,000.00
represents the "capital investment" of the parties in the gasoline station business and it speaks of
petitioner as the sole dealer, but this is as it should be for in the latter document SHELL was a
signatory and it would be against its policy if in the agreement it should be stated that the
business is a partnership with private respondents and not a sole proprietorship of
petitioner.chanrobles.com:cralaw:red
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 Remedios
Estanislao and Atty. Angeles. Petitioner submitted to private respondents periodic accounting of
the business. 4 Petitioner gave a written authority to private respondent Remedios Estanislao,
his sister, to examine and audit the books of their "common business" (aming negosyo). 5
Respondent 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. 6 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.
Further, the findings of facts of the respondent court are conclusive in this proceeding, and its
conclusion based on the said facts are in accordance with the applicable law.
WHEREFORE, the judgment appealed from is AFFIRMED in toto with costs against petitioner.
This decision is immediately executory and no motion for extension of time to file a motion for
reconsideration shall be entertained.
SO ORDERED.
 THIRD DIVISION
[G.R. No. 172690 : March 03, 2010]
HEIRS OF JOSE LIM, REPRESENTED BY ELENITO LIM, PETITIONERS, VS. JULIET VILLA LIM,
RESPONDENT.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil
Procedure, assailing the Court of Appeals (CA) Decision[2] dated June 29, 2005, which reversed
and set aside the decision[3] of the Regional Trial Court (RTC) of Lucena City, dated April 12,
2004.
The facts of the case are as follows:
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 Damagesagainst 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. Initially, with a contribution
of P50,000.00 each, they purchased a truck to be used in the hauling and transport of lumber of
the sawmill. 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 also alleged that, at that time, Elfledo was a fresh commerce graduate serving as his
father's driver in the trucking business. He was never 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 Elfledo's
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.
On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners claimed
that respondent took over the administration of the aforementioned properties, which belonged
to the estate of Jose, without their consent and approval. Claiming that they are co-owners of the
properties, petitioners required respondent to submit an accounting of all income, profits and
rentals received from the estate of Elfledo, and to surrender the administration thereof.
Respondent refused; thus, the filing of this case.
Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of
Norberto and Jimmy. Respondent also claimed that per testimony of Cresencia, sometime in
1980, Jose gave Elfledo P50,000.00 as the latter's capital in an informal partnership with Jimmy
and Norberto. When Elfledo and respondent got married in 1981, the partnership only had one
truck; but through the efforts of Elfledo, the business flourished. Other than this trucking
business, Elfledo, together with respondent, engaged in other business ventures. Thus, they were
able to buy real properties and to put up their own car assembly and repair business. When
Norberto was ambushed and killed on July 16, 1993, the trucking business started to falter.
When Elfledo died on May 18, 1995 due to a heart attack, respondent talked to Jimmy and to the
heirs of Norberto, as she could no longer run the business. Jimmy suggested that three out of the
nine trucks be given to him as his share, while the other three trucks be given to the heirs of
Norberto. However, Norberto's wife, Paquita Uy, was not interested in the vehicles. Thus, she
sold the same to respondent, who paid for them in installments.
Respondent also alleged that when Jose died in 1981, he left no known assets, and the
partnership with Jimmy and Norberto ceased upon his demise. 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 husband's
joint efforts and hard work, and without any participation or contribution from petitioners or
from Jose. Respondent submitted that these are conjugal partnership properties; and thus, she
had the right to refuse to render an accounting for the income or profits of their own business.
Trial on the merits ensued. On April 12, 2004, the RTC rendered its decision in favor of
petitioners, thus:
WHEREFORE, premises considered, judgment is hereby rendered:
1) Ordering the partition of the above-mentioned properties equally between the plaintiffs and
heirs of Jose Lim and the defendant Juliet Villa-Lim; and
2) Ordering the defendant to submit an accounting of all incomes, profits and rentals received by
her from said properties.
SO ORDERED.
Aggrieved, respondent appealed to the CA.
On June 29, 2005, the CA reversed and set aside the RTC's decision, dismissing petitioners'
complaint for lack of merit. Undaunted, petitioners filed their Motion for
Reconsideration,[5] which the CA, however, denied in its Resolution[6] dated May 8, 2006.
Hence, this Petition, raising the sole question, viz.:
IN THE APPRECIATION BY THE COURT OF THE EVIDENCE SUBMITTED BY THE PARTIES, 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?[7]
In essence, 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.[8]
Respondent counters that the issue raised by petitioners is not proper in a petition for review
on certiorari under Rule 45 of the Rules of Civil Procedure, as it would entail the review,
evaluation, calibration, and re-weighing of the factual findings of the CA. Moreover, respondent
invokes the rationale of the CA decision that, in light of the admissions of Cresencia and Edison
and the testimony of respondent, the testimony of Jimmy was effectively refuted; accordingly, the
CA's reversal of the RTC's findings was fully justified.[9]
We resolve first the procedural matter regarding the propriety of the instant Petition.
Verily, the evaluation and calibration of the evidence necessarily involves consideration of
factual issues -- an exercise that is not appropriate for a petition for review on certiorari under
Rule 45. This rule provides that the parties may raise only questions of law, because the Supreme
Court is not a trier of facts. Generally, we are not duty-bound to analyze again and weigh the
evidence introduced in and considered by the tribunals below.[10] When supported by substantial
evidence, the findings of fact of the CA are conclusive and binding on the parties and are not
reviewable by this Court, unless the case falls under any of the following recognized exceptions:
(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are conclusions without citation of specific evidence on which they
are based;
(9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are
not disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record.[11]
We note, however, that the findings of fact of the RTC are contrary to those of the CA. Thus, our
review of such findings is warranted.
On the merits of the case, we find that the instant Petition is bereft of merit.
A partnership exists when two or more persons agree to place their money, effects, labor, and
skill in lawful commerce or business, with the understanding that there shall be a proportionate
sharing of the profits and losses among them. A contract of partnership is defined by the Civil
Code 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. [12]
Undoubtedly, the best evidence would have been the contract of partnership or the articles of
partnership. Unfortunately, there is none in this case, because the alleged partnership was never
formally organized. Nonetheless, we are asked to determine who between Jose and Elfledo was
the "partner" in the trucking business.
A careful review of the records persuades us to affirm the CA decision. The evidence presented
by petitioners falls short of the quantum of proof required to establish that: (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.
Petitioners heavily rely on Jimmy's testimony. But that testimony is just one piece of evidence
against respondent. It must be considered and weighed along with petitioners' other evidence
vis- -vis respondent's contrary evidence. In civil cases, the party having the burden of proof
must establish his case by a preponderance of evidence. "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." "Preponderance of evidence" is a phrase that, in the last analysis, means probability of
the truth. It is evidence that is more convincing to the court as worthy of belief than that which is
offered in opposition thereto.[13] Rule 133, Section 1 of the Rules of Court provides the guidelines
in determining preponderance of evidence, thus:
SECTION I. Preponderance of evidence, how determined. In civil cases, the party having burden of
proof must establish his case by a preponderance of evidence. In determining where the
preponderance or superior weight of evidence on the issues involved lies, the court may consider
all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence,
their means and opportunity of knowing the facts to which they are testifying, the nature of the
facts to which they testify, the probability or improbability of their testimony, their interest or
want of interest, and also their personal credibility so far as the same may legitimately appear
upon the trial. The court may also consider the number of witnesses, though the preponderance
is not necessarily with the greater number.
 former carries more weight.[20]
At this juncture, our ruling in Heirs of Tan Eng Kee v. Court of Appeals[14] is enlightening. Therein,
we cited Article 1769 of the Civil Code, which provides: Finally, we agree with the judicious findings of the CA, to wit:

Art. 1769. In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other are not
partners as to third persons;
(2) 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;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property from which the
returns are derived;
(4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he
is a partner in the business, but no such inference shall be drawn if such profits were received in
payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other property by installments
or otherwise.
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: 1) 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;[15] (2) Elfledo ran the affairs of the partnership, wielding
absolute control, power and authority, without any intervention or opposition whatsoever from
any of petitioners herein;[16] (3) all of the properties, particularly the nine trucks of the
partnership, were registered in the name of Elfledo; (4) Jimmy testified that Elfledo did not
receive wages or salaries from the partnership, indicating that what he actually received were
shares of the profits of the business;[17] and (5) none of the petitioners, as heirs of Jose, the
alleged partner, demanded periodic accounting from Elfledo during his lifetime. As repeatedly
stressed in Heirs of Tan Eng Kee,[18] a demand for periodic accounting is evidence of a
partnership.
The above testimonies prove that Elfledo was not just a hired help but one of the partners in the
trucking business, active and visible in the running of its affairs from day one until this ceased
operations upon his demise. The extent of his control, administration and management of the
partnership and its business, the fact that its properties were placed in his name, and that he was
not paid salary or other compensation by the partners, are indicative of the fact that Elfledo was
a partner and a controlling one at that. It is apparent that the other partners only contributed in
the initial capital but had no say thereafter on how the business was ran. Evidently it was
through Elfredo's efforts and hard work that the partnership was able to acquire more trucks
and otherwise prosper. Even the appellant participated in the affairs of the partnership by acting
as the bookkeeper sans salary.
It is notable too that Jose Lim died when the partnership was barely a year old, and the
partnership and its business not only continued but also flourished. 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.
Whatever properties appellant and her husband had acquired, this was through their own
concerted efforts and hard work. Elfledo did not limit himself to the business of their partnership
but engaged in other lines of businesses as well.
In sum, we find no cogent reason to disturb the findings and the ruling of the CA as they are
amply supported by the law and by the evidence on record.
WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals Decision dated June
29, 2005 is AFFIRMED. Costs against petitioners.
SO ORDERED.

Furthermore, petitioners failed to adduce any evidence to show that the real and personal
properties acquired and registered in the names of Elfledo and respondent formed part of the
estate of Jose, having been derived from Jose's alleged partnership with Jimmy and Norberto.
They failed to refute respondent's claim that Elfledo and respondent engaged in other
businesses. Edison even admitted that Elfledo also sold Interwood lumber as a
sideline.[19] Petitioners could not offer any credible evidence other than their bare assertions.
Thus, we apply the basic rule of evidence that between documentary and oral evidence, the
 SECOND DIVISION
[G.R. Nos. L-41182-3. April 15, 1988.]
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, Petitioners-Appellants, v. THE COURT OF
APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S. CANILAO, and SEGUNDINA
NOGUERA, Respondents-Appellees.
Roman P. Mosqueda for Petitioners-Appellants.
Felipe Magat for Respondents-Appellees.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYER-EMPLOYEE RELATIONSHIP;
TEST TO DETERMINE ITS EXISTENCE. In this jurisdiction, there has been no uniform test to
determine the existence of an employer-employee relation. In general, we have relied on the so-
called right of control test, "where the person for whom the services are performed reserves a
right to control not only the end to be achieved but also the means to be used in reaching such
end." Subsequently, however, we have considered, 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, in determining the existence of an employer-employee relationship.
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; CONSTRUED. When the petitioner,
Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.s Ermita
office, 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."cralaw virtua1aw
library
3. ID.; ID.; ID.; CASE AT BAR. In the case at bar, Sevilla solicited airline fares, but she did so for
and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of
the proceeds in the concept of commissions. And as we said, Sevilla herself, based on her letter of
November 28, 1961, presumed her principals authority as owner of the business undertaking.
We are convinced, considering the circumstances and from the respondent Courts recital of
facts, that the parties had contemplated a principal-agent relationship, rather than a joint
management or a partnership.
4. ID.; ID.; ID.; CANNOT BE REVOKED AT WILL. The 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 the mutual interest of the agent and
the principal.
5. CIVIL LAW; DAMAGES; AWARD THEREOF PROPER IN BREACH OF CONTRACT. We rule that
for its unwarranted revocation of the contract of agency, the private respondent, Tourist World
Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be
awarded for "breaches of contract where the defendant acted . . . in bad faith." We likewise
condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina
Sevilla arising from its brazen conduct subsequent to the cancellation of the power of attorney
granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10)
thereof. The Court considers the sums of P25,000.00 as and for moral damages, P10,000.00 as
exemplary damages, and P5,000.00 as nominal and/or temperate damages, to be just, fair, and
reasonable under the circumstances.
DECISION
SARMIENTO, J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal
by certiorari. The facts are beyond dispute:chanrob1es virtual 1aw library
x x x
On the strength of a contract (Exhibit A for the appellants Exhibit 2 for the appellees) entered
into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist
World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter
referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the
party of the first part at Mabini St., Manila for the formers use as a branch office. In the said
contract the party of the third part held herself solidarily liable with the party of the second part
for the prompt payment of the monthly rental agreed on. When the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service Inc. by any
airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and
3% was to be withheld by the Tourist World Service, Inc.chanrobles virtual lawlibrary
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. This was firmed up by two resolutions of the board of directors of Tourist World
Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager
and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second, authorizing
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. Both
appellees answered with counterclaims. For apparent lack of interest of the parties therein, the
trial court ordered the dismissal of the case without prejudice.
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.
On June 17, 1963, appellant Lina Sevilla refiled her case against the herein appellees and after the
issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of
appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases
dismissed for lack of merit, on the basis of which was elevated the instant appeal on the
following assignment of errors:jgc:chanrobles.com.ph
"I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLAS COMPLAINT.
"II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA O. SEVILLAS
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.
"III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-
APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.
"IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT
APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO
THEIR OWN HANDS.
"V. THE LOWER COURT ERRED IN NOT CONSIDERING AT ALL APPELLEE NOGUERAS
RESPONSIBILITY FOR APPELLANT MRS. LINA O. SEVILLAS FORCIBLE DISPOSSESSION OF THE
A. MABINI PREMISES.
"VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT MRS. LINA O. SEVILLA SIGNED
MERELY AS GUARANTOR FOR RENTALS."cralaw virtua1aw library
On the foregoing facts and in the light of the errors assigned the issues to be resolved
are:chanrob1es virtual 1aw library
1. Whether the appellee Tourist World Service unilaterally disconnected the telephone line at the
branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not;
and
3. Whether or not the lessee to the office premises belonging to the appellee Noguera was
appellee TWS or TWS and the appellant.chanroblesvirtualawlibrary
In this appeal, appellant Lina Sevilla claims that a joint business venture was entered into by and
between her and appellee TWS with offices at the Ermita branch office and that she was not an
employee of the TWS to the end that her relationship with TWS was one of a joint business
venture appellant made declarations showing:jgc:chanrobles.com.ph
"1. Appellant Mrs. Lina O. Sevilla, a prominent social figure and wife of an eminent eye, ear and
nose specialist as well as a society columnist, had been in the travel business prior to the
establishment of the joint business venture with appellee Tourist World Service, Inc. and
appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her
own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16, 1965).
"2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. "A")
covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself
solidarily liable with appellee Tourist World Service, Inc. for the prompt payment of the
monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18, 1964).
"3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc.,
which had its own separate office located at the Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor connection with said business at the Trade &
Commerce Building (pp. 16-18 tsn. id.).
"4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings, her
own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained
from the airline companies. She shared the 7% commissions given by the airline companies,
giving appellee Tourist World Service, Inc. 3% thereof and retaining 4% for herself (pp. 18 tsn.
id.)
"5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office,
paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from
designing the office furniture and supplying some office furnishings (pp. 15, 18 tsn. April 6,
1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in
consideration for the 3% split in the commissions procured by appellant Mrs. Sevilla (p. 35 tsn.
Feb. 16, 1965).
"6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of
branch manager for appearances sake only (p. 31 tsn. id.), appellee Eliseo Canilao admitting that
it was just a title for dignity (p. 36 tsn June 18, 1965 - testimony of appellee Eliseo Canilao; pp.
38-39 tsn. April 6, 1966 - testimony of corporate secretary Gabino Canilao)." (pp. 2-5, Appellants
Reply Brief)
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." 1
x x x IV.
The trial court 2 held for the private respondents 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. 3 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. 4 The respondent Court of Appeals 5 rendered an affirmance.chanrobles.com.ph :
virtual law library
The petitioners now claim that the respondent Court, in sustaining the lower court, erred.
Specifically, they state:chanrob1es virtual 1aw library
I.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD
SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA . .
. WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILLA), WHO IMMEDIATELY BEFORE THE
PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE),
IN THEIR ATTEMPT TO AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE . . . (DID NOT) ENTITLE THE LATTER TO THE
RELIEF OF DAMAGES" (ANNEX "A" PP. 7, 8 AND ANNEX "B" P. 2) - A DECISION AGAINST DUE
PROCESS WHICH ADHERES TO THE RULE OF LAW.
II.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO
WITHDRAW HER COMPLAINT PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED
BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING - IN FACT NOT PASSING AND RESOLVING - APPELLANT SEVILLAS
CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON HUMAN
RELATIONS.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT
SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT
COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between
Lina Sevilla and Tourist World Service, Inc. The respondent Court of Appeals did not see fit to
rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the
premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant
Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the
evidence for the said appellant supports the contention that the appellee Tourist World Service,
Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the
Ermita branch office of the appellee Tourist World Service, Inc." 7 Tourist World Service, Inc.,
insists, on the other hand, that Lina Sevilla was a mere employee, being "branch manager" of its
Ermita "branch" office and that inferentially, she had no say on the lease executed with the
private respondent, Segundina Noguera. The petitioners contend, however, that relation
between the parties was one of joint venture, but concede that "whatever might have been the
true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist
World Service and Canilao from taking the law into their own hands," 8 in reference to the
padlocking now questioned.chanrobles virtual lawlibrary
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, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the existence of an employer-
employee relation. In general, we have relied on the so-called right of control test, "where the
person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end." 10 Subsequently, however, we
have considered, 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, in determining
the existence of an employer-employee relationship. 11
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. In the first place, under the contract of lease covering the Tourist
Worlds Ermita office, she had bound herself in solidum as and for rental payments, an
arrangement that would belie claims of a master-servant relationship. True, the respondent
Court would later minimize her participation in the lease as one of mere guaranty, 12 that 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 employers business, or otherwise, assume any
liability thereof. In that event, the parties must be bound by some other relation, but certainly
not employment.
In the second place, and as found by the Appellate Court," [w]hen the branch office was opened,
the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina Sevilla." 13 Under these
circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc.
"as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and
capabilities.
It is further admitted that Sevilla was not in the companys payroll. For her efforts, she retained
4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.
The fact that Sevilla had been designated "branch manager" does not make her, ergo, Tourist
Worlds employee. As we said, employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.s arguments however, we are not, as a consequence,
accepting Lina Sevillas own, that is, that the parties had embarked on a joint venture or
otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly "concedes your [Tourist World
Service, Inc.s] right to stop the operation of your branch office," 14 in effect, accepting Tourist
World Service, Inc.s control over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a parity of standing between the joint co-
venturers or partners, in which each party has an equal proprietary interest in the capital or
property contributed 15 and where each party exercises equal rights in the conduct of the
business. 16 Furthermore, the parties did not hold themselves out as partners, and the building
itself was embellished with the electric sign "Tourist World Service, Inc.," 17 in lieu of a distinct
partnership name.
It is the Courts considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the
private respondent, Tourist World Service, Inc.s Ermita office, 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." 18 In the case at bar, Sevilla solicited airline fares, but
she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself, based
on her letter of November 28, 1961, presumed her principals authority as owner of the business
undertaking. We are convinced, considering the circumstances and from the respondent Courts
recital of facts, that the parties had contemplated a principal-agent relationship, rather than a
joint management or a partnership.
But unlike simple grants of a power of attorney, the 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 the mutual interest of the agent and
the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she
had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily liable for the payment of rentals.
She continued the business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not limited to the commissions she earned as a result of
her business transactions, but one that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure
of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages.chanroblesvirtualawlibrary
As we have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the
Court of Appeals that there is "no evidence showing that the Tourist World Service, Inc.
disconnected the telephone lines at the branch office." 20 Yet, what cannot be denied is the fact
that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming,
therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it,
and as owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident.
For the fact that Tourist World Service, Inc. was the lessee named in the lease contract did not
accord it any authority to terminate that contract without notice to its actual occupant, and to
padlock the premises in such blitzkrieg 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 (solidarily with Tourist
World, Inc.). She could not be ousted from possession as summarily as one would eject an
interloper.
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. To be sure, the respondent court speaks of alleged business losses to justify the
closure, 21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained
such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence
discloses, on the other hand, is that following such an information (that Sevilla was working for
another company), Tourist Worlds board of directors adopted two resolutions abolishing the
office of "manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to
effect the takeover of its branch office properties. On January 3, 1962, the private respondents
ended the lease over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was
padlocked, personally by the respondent Canilao, on the pretext that it was necessary "to protect
the interests of the Tourist World Service." 22 It is strange indeed that Tourist World Service, Inc.
did not find such a need when it cancelled the lease five months earlier. While Tourist World
Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but
surely, it was aware that after office hours, she could not have been anywhere near the premises.
Capping these series of "offensives," it cut the offices telephone lines, paralyzing completely its
business operations, and in the process, depriving Sevilla of her participation therein.
severally to indemnify the petitioner, Lina Sevilla, the sum of P25,000.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as
and for nominal and/or temperate damages.chanrobles lawlibrary : rednad
Costs against said private respondents.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevilla SO ORDERED.
for what it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary
norms of justice and fair play.

We rule, therefore, that for its unwarranted revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil
Code, moral damages may be awarded for "breaches of contract where the defendant acted . . . in
bad faith." 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury
done to Lina Sevilla arising from its brazen conduct subsequent to the cancellation of the power
of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article
2219 (10) thereof:chanrob1es virtual 1aw library

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the
damage.chanrobles.com : virtual law library

ART. 2219. Moral damages may be recovered in the following and analogous cases:chanrob1es
virtual 1aw library

x x x

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor, is likewise hereby ordered to respond for
the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has
been shown that she had connived with Tourist World Service, Inc. in the disconnection and
padlocking incidents. She cannot therefore be held liable as a co-tortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages, 24 P10,000.00 as
exemplary damages, 25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just,
fair, and reasonable under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on
July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The
private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and
 THIRD DIVISION
[G.R. No. 134559. December 9, 1999.]
ANTONIA. TORRES assisted by her husband, ANGELO TORRES; and EMETERIA
BARING, Petitioners, v. COURT OF APPEALS and MANUEL TORRES, Respondents.
DECISION
PANGANIBAN, J.:
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.chanrobles virtual lawlibrary
The Case
The Petition for Review on Certiorari before us assails the March 5, 1998 Decision 1 of the Court
of Appeals 2 (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution denying
reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of
Cebu City in Civil Case No R-21208, which disposed as follows:jgc:chanrobles.com.ph
"WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and
against the plaintiffs, orders the dismissal of the plaintiffs complaint. The counterclaims of the
defendant are likewise ordered dismissed. No pronouncement as to costs." 3
The 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. 4 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 secured the
Lapu Lapu City Councils approval of the subdivision project which he advertised in a local
newspaper. 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.chanrobles virtual lawlibrary
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. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project. 5
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 respondents
motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal,
however, the appellate court remanded the case for further proceedings. Thereafter, the RTC
issued its assailed Decision, which, as earlier stated, was affirmed by the CA.
Hence, this Petition. 6
Ruling of the Court of Appeals
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.
Disagreeing with the trial courts pronouncement that losses as well as profits in a joint venture
should be distributed equally, 7 the CA invoked Article 1797 of the Civil Code which
provides:jgc:chanrobles.com.ph
"Article 1797 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."cralaw virtua1aw library
The CA elucidated further:jgc:chanrobles.com.ph
"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, but the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner shall receive such share as may be just and
equitable under the circumstances. If besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital." chanrobles.com : virtual law library
The Issue

Petitioners impute to the Court of Appeals the following error:jgc:chanrobles.com.ph
". . . [The] Court of Appeals erred in concluding that the transaction . . . between the petitioners
and respondent was that of a joint venture/partnership, ignoring outright the provision of
Article 1769, and other related provisions of the Civil Code of the Philippines." 8
The Courts Ruling
The Petition is bereft of merit.
Main Issue:chanrob1es virtual 1aw library
Existence of a Partnership
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.
In the same breath, however, they assert that under those very same contracts, respondent is
liable for his failure to implement the project. Because the agreement entitled them to receive 60
percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay them
damages equivalent to 60 percent of the value of the property. 9
The pertinent portions of the Joint Venture Agreement read as follows:jgc:chanrobles.com.ph
"KNOW ALL MEN BY THESE PRESENTS:jgc:chanrobles.com.ph
"This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March,
1969, by and between MR. MANUEL R. TORRES, . . . the FIRST PARTY, likewise, MRS. ANTONIA B.
TORRES, and MISS EMETERIA BARING, the SECOND PARTY:chanrob1es virtual 1aw library
WITNESSETH:jgc:chanrobles.com.ph
"That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located
at Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with a total
area of 17,009 square meters, to be sub-divided by the FIRST PARTY;
"Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, upon the execution of this contract for the property
entrusted by the SECOND PARTY, for sub-division projects and development purposes;
"NOW THEREFORE, for and in consideration of the above covenants and promises herein
contained the respective parties hereto do hereby stipulate and agree as follows:chanrobles
virtual lawlibrary
"ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated March 5, 1969, in the
amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50)
Philippine Currency, for 1,700 square meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine
Currency, in favor of the FIRST PARTY, but the SECOND PARTY did not actually receive the
payment.
"SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount
of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, for their personal obligations
and this particular amount will serve as an advance payment from the FIRST PARTY for the
property mentioned to be sub-divided and to be deducted from the sales.
"THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the
principal amount involving the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, until the sub-division project is terminated and ready for sale to any interested parties,
and the amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be
deducted accordingly.
"FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should
be paid by the FIRST PARTY, exclusively and all the expenses will not be deducted from the sales
after the development of the sub-division project.
"FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for
the SECOND PARTY and FORTY PERCENTUM 40% for the FIRST PARTY, and additional profits or
whatever income deriving from the sales will be divided equally according to the . . . percentage
[agreed upon] by both parties.
"SIXTH: That the intended sub-division project of the property involved will start the work and
all improvements upon the adjacent lots will be negotiated in both parties[] favor and all sales
shall [be] decided by both parties.chanroblesvirtual|awlibrary
"SEVENTH: That the SECOND PARTIES, should be given an option to get back the property
mentioned provided the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, borrowed by the SECOND PARTY, will be paid in full to the FIRST PARTY, including all
necessary improvements spent by the FIRST PARTY, and the FIRST PARTY will be given a grace
period to turnover the property mentioned above.
"That this AGREEMENT shall be binding and obligatory to the parties who executed same freely
and voluntarily for the uses and purposes therein stated." 10
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:jgc:chanrobles.com.ph
"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."cralaw virtua1aw library
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. 11
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.chanrobles lawlibrary : rednad
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.
Petitioners Bound by
Terms of Contract
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
follows:jgc:chanrobles.com.ph
"ARTICLE 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law."cralaw virtua1aw library
It is undisputed that petitioners are educated and are thus presumed to have understood the
terms of the contract they voluntarily signed. If it was not in consonance with their expectations,
they should have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding of its terms.
Alleged Nullity of the
Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:jgc:chanrobles.com.ph
"ARTICLE 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."cralaw virtua1aw library
They contend that since the parties did not make, sign or attach to the public instrument an
inventory of the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article
1771, 12 "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.
Second, 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. 13 They cannot in one
breath deny the contract and in another recognize it, depending on what momentarily suits their
purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.chanrobles lawlibrary : rednad
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties rights and obligations to each
other may be inferred and enforced.
Partnership Agreement Not the Result
of an Earlier Illegal Contract
Petitioners also contend that the Joint Venture Agreement is void under Article 1422 14 of the
Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of the
land without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its first stipulation states
that petitioners did not actually receive payment for the parcel of land sold to Respondent.
Consideration, more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another. 15
In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but
in the expectation of profits from the subdivision project, for which the land was intended to be
used. As explained by the trial court, "the land was in effect given to the partnership as
[petitioners] participation therein. . . . There was therefore a consideration for the sale, the
[petitioners] acting in the expectation that, should the venture come into fruition, they [would]
get sixty percent of the net profits."cralaw virtua1aw library

Liability of the Parties

Claiming that respondent was solely responsible for the failure of the subdivision project,
petitioners maintain that he should be made to pay damages equivalent to 60 percent of the
value of the property, which was their share in the profits under the Joint Venture Agreement.

We are not persuaded. True, the Court of Appeals held that petitioners acts were not the cause of
the failure of the project. 16 But it also ruled that neither was respondent responsible therefor.
17 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. 18
Accordingly, we find no reversible error in the CAs ruling that petitioners are not entitled to
damages.chanroblesvirtual|awlibrary

WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED. Costs
against petitioners.

SO ORDERED.

SECOND DIVISION
[G.R. No. L-47045. November 22, 1988.]
NOBIO SARDANE, Petitioner, v. THE COURT OF APPEAL and ROMEO J. ACOJEDO
respondents.
Y .G. Villacruz & Associates for Petitioner.
Pelagio R. Lachica for Private Respondent.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; NOT APPLICABLE WHERE THE TERMS
OF THE PROMISSORY NOTES ARE NOT VAGUE NOR AMBIGUOUS. The exceptions to the parol
evidence rule do not apply as 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. It was clearly the intent of the parties to enter into a contract of loan for how could an
educated man like the private respondent be deceived to sign a promissory note yet intending to
make such a writing to be mere receipts of the petitioners supposed contribution to the alleged
partnership existing between the parties?
2. CIVIL LAW; PARTNERSHIP; MERE RECEIPT OF A SHARE OF THE PROFITS OF A PARTNER IN
THE BUSINESS. 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. Furthermore, herein petitioner had no voice
in the management of the affairs of the basnig. Under similar facts, this Court in the early case of
Fortis v. Gutierrez Hermanos, denied the claim of the plaintiff therein that he was e partner in the
business of the defendant. The same rule was reiterated in Bastida v. Menzi & Co., Inc., Et. Al.
which involved the same factual and legal milieu.
3. REMEDIAL LAW; ACTION; ACTIONABLE DOCUMENT NOT DENIED SPECIFICALLY UNDER
OATH IN THE ANSWER; GENUINENESS AND DUE EXECUTION DEEMED ADMITTED.
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. Even in the trial court, he did not at all question the fact
that he signed said promissory notes and that the same were genuine. Instead, he presented
parol evidence to vary the import of the promissory notes by alleging that they were mere
receipts of his contribution to the alleged partnership which testimony, in the light of Section 7,
Rule 130, could not be admitted to vary or alter the explicit meaning conveyed by said
promissory notes. On the other hand, the said genuineness and due execution of said promissory
notes were not affected, pursuant to the provisions of Section 8, Rule 8, since such aspects were
not at all questioned but, on the contrary, were admitted by herein petitioner.
4. ID.; ID.; IMPLIED ADMISSION OF GENUINENESS AND DUE EXECUTION OF ACTIONABLE
DOCUMENTS; WAIVER OF THE PROTECTIVE MANTLE UNDER RULE 8, SEC. 8, NOT APPLICABLE.
The doctrines in Yu Chuck, Et. Al. v. Kong Li Po, 7 which was reiterated in Central Surety &
Insurance Co. v. C. N. Hodges, Et. Al. 8 does not sustain his thesis that the herein private
respondent had "waived the mantle of protection given him by Rule 8, Sec. 8." It is true that such
implied admission of genuineness and due execution may he waived by a party but only if he acts
in a manner indicative of either an express or tacit waiver thereof. Petitioner, however, either
overlooked or ignored the fact that, as held in Yu Chuck, and the same is true in other cases of
identical factual settings, such a finding of waiver is proper where a case has been tried in
complete disregard of the rule and the plaintiff having pleaded a document by copy, presents oral
evidence to prove the due execution of the document and no objections are made to the
defendants evidence in refutation. This situation does not obtain in the present case hence said
doctrine is obviously inapplicable.
5. ID.; ID.; ID.; FAILURE TO CROSS-EXAMINE DURING SUR-REBUTAL, NOT CONSTITUTIVE OF A
WAIVER OF THE IMPLIED ADMISSION. Neither did the failure of herein private respondent to
cross-examine herein petitioner on the latters 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.
6. ID.; ID.; APPEAL TO THE COURT OF APPEALS FROM DECISIONS OF THE INFERIOR COURTS;
PROCEDURE OR MODE OF APPEAL NOT PROVIDED IN AMENDATORY LAW AND/OR
RESOLUTION. Petitioner anchors his said objection on the provisions of Section 29, Republic
Act 296 as amended by Republic Act 5433 effective September 9, 1968. Subsequently, the
procedure for appeal to the Court of Appeals from decisions of the then courts of first instance in
the exercise of their appellate jurisdiction over cases originating from the municipal courts was
provided for by Republic Act 6031, amending Section 45 of the Judiciary Act effective August 4,
1969. The requirement for affirmance in full of the inferior courts decision was not adopted or
reproduced in Republic Act 6031. Also, since Republic Act 6031 failed to provide for the
procedure or mode of appeal in the cases therein contemplated, the Court of Appeals en banc
provided thereof in its Resolution of August 12, 1971, by requiring a petition for review but
which also did not require for its availability that the judgment of the court of first instance had
affirmed in full that of the lower court. Said mode of appeal and the procedural requirements
thereof governed the appeal taken in this case from the aforesaid Court of First Instance to the
Court of Appeals in 1977. Herein petitioners plaint on this issue is, therefore devoid of merit.
DECISION
 REGALADO, J.:
The extensive discussion and exhaustive disquisition in the decision 1 of the respondent Court 2
should have written finis to this case without further recourse to Us. The assignment of errors
and arguments raised in the respondent Court by herein private respondent, as the petitioner
therein, having been correctly and justifiedly sustained by said court without any reversible
error in its conclusions, the present petition must fail.
The assailed decision details the facts and proceedings which spawned the present controversy
as follows:jgc:chanrobles.com.ph
"Petitioner brought an action in the City Court of Dipolog for collection of a sum of P5,217.26
based on promissory notes executed by the herein private respondent Nobio Sardane in favor of
the herein petitioner. Petitioner bases his right to collect on Exhibits B, C, D, E, F, and G executed
on different dates and signed by private respondent Nobio Sardane. Exhibit B is a printed
promissory note involving P1,117.25 and dated May 13, 1972. Exhibit C is likewise a printed
promissory note and denotes on its face that the sum loaned was P1,400.00. Exhibit D is also a
printed promissory note dated May 31, 1977 involving an amount of P100.00. Exhibit E is what is
commonly known to the layman as `vale which reads: `Good for: two hundred pesos (Sgd) Nobio
Sardane. Exhibit F is stated in the following tenor: `Received from Mr. Romeo Acojedo the sum
Pesos: Two Thousand Two Hundred (P2,200.00) ONLY, to be paid on or before December 25,
1975. (Sgd) Nobio Sardane. Exhibit G and H are both vales involving the same amount of one
hundred pesos, and dated August 25, 1972 and September 12, 1972 respectively.
"It has been established in the trial court that on many occasions, the petitioner demanded the
payment of the total amount of P5,217.25. The failure of the private respondent to pay the said
amount prompted the petitioner 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 the private
respondent to heed the demands extrajudicially made by the petitioner, the latter was
constrained to bring an action for collection of sum of money.
"During the scheduled day for trial, private respondent failed to appear and to file an answer. On
motion by the petitioner, the City Court of Dipolog issued an order dated May 18, 1976 declaring
the private respondent in default and allowed the petitioner to present his evidence ex-parte.
Based on petitioners evidence, the City Court of Dipolog rendered judgment by default in favor
of the petitioner.
"Private respondent filed a motion to lift the order of default which was granted by the City Court
in an order dated May 24, 1976, taking into consideration that the answer was filed within two
hours after the hearing of the evidence presented ex-parte by the petitioner.
"After the trial on the merits, the City Court of Dipolog rendered its decision on September 14,
1976, the dispositive portion of which reads:chanrob1es virtual 1aw library
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against
the defendant as follows:chanrob1es virtual 1aw library
(a) Ordering the defendant to pay unto the plaintiff the sum of Five Thousand Two Hundred
Seventeen Pesos Twenty-five centavos (P5,217.25) plus legal interest to commence from April
23, 1976 when this case was filed in court; and
(b) Ordering the defendant to pay the plaintiff the sum of P200.00 as attorneys fee and to pay
the cost of this proceeding." 3
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
damages, exemplary damages and attorneys fees, as well as the costs of suit. Plaintiff-appellee
then sought the review of said decision by petition to the respondent Court.
The assignment of errors in said petition for review can be capsulized into two decisive issues,
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.
On the first issue, the then Court of First Instance held that "the pleadings of the parties herein
put in issue the imperfection or ambiguity of the documents in question", hence "the appellant
can avail of the parol evidence rule to prove his side of the case, that is, the said amount taken by
him from appellee is or was not his personal debt to appellee, but expenses of the partnership
between him and appellee."cralaw virtua1aw library
Consequently, said trial court concluded that the promised notes involved were merely receipts
for the contributions 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.
The parol evidence rule in Rule 130 provides:jgc:chanrobles.com.ph
"Sec. 7. 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:chanrob1es virtual 1aw
library
(a) Where a mistake or imperfection of the writing or its failure to express the 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."cralaw virtua1aw library

As correctly pointed out by the respondent Court the exceptions to the rule do not apply in this
case as there is no ambiguity in the writings in question, thus:jgc:chanrobles.com.ph
"In the case at bar, Exhibits B, C, and D are printed promissory notes containing a promise to pay
a sum certain in money, payable on demand and the promise to bear the costs of litigation in the
event of the private respondents failure to pay the amount loaned when demanded
extrajudicially. Likewise, the vales denote that the private respondent is obliged to return the
sum loaned to him by the petitioner. 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. It was clearly the intent of the parties to enter into a contract of loan for how
could an educated man like the private respondent be deceived to sign a promissory note yet
intending to make such a writing to be mere receipts of the petitioners supposed contribution to
the alleged partnership existing between the parties?
It has been established in the trial court that the private respondent has been engaged in
business for quite a long period of time as owner of the Sardane Trucking Service, entering
into contracts with the government for the construction of wharfs and seawall; and a member of
the City Council of Dapitan (TSN, July 20, 1976, pp. 57-58). It indeed puzzles us how the private
respondent could have been misled into signing a document containing terms which he did not
mean them to be. . . .
x x x showing that they fall within the exceptions to the rule limiting the scope of appellate review
"The private respondent admitted during the cross-examination made by petitioners counsel
that he was the one who was responsible for the printing of Exhibits B, C, and D (TSN, July 28,
1976, p. 64). How could he purportedly rely on such a flimsy pretext that the promissory notes
were receipts of the petitioners contribution?" 4
The Court of Appeals held, and We agree, 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.
As manager of the basnig Sarcado, naturally some degree of control over the operations and
maintenance thereof had to be exercised by herein petitioner. 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.
Furthermore, herein petitioner had no voice in the management of the affairs of the basnig.
Under similar facts, this Court in the early case of Fortis v. Gutierrez Hermanos, 5 in denying the
claim of the plaintiff therein that he was e partner in the business of the defendant,
declared:jgc:chanrobles.com.ph
"This contention cannot be sustained. It was a mere contract of employment. The plaintiff had no
voice nor vote in the management of the affairs of the company. The fact that the compensation
received by him was to be determined with reference to the profits made by the defendant in
their business did not in any sense make him a partner therein. . . . ."cralaw virtua1aw library
The same rule was reiterated in Bastida v. Menzi & Co., Inc., Et. Al. 6 which involved the same
factual and legal milieu.
There are other considerations noted by respondent Court which negate herein petitioners
pretension that he was partner and not a mere employee indebted to the present
private Respondent. Thus, in an action for damages filed by herein private respondent against the
North Zamboanga Timber Co., Inc. arising from the operations of the business, herein petitioner
did not ask to be joined as a party plaintiff. Also, although he contends that herein private
respondent is the treasurer of the alleged partnership, yet it is the latter who is demanding an
accounting. The advertence of the Court of First Instance to the fact that the casco bears the
name of the herein petitioner disregards the finding of the respondent Court that it was just a
concession since it was he who obtained the engine used in the Sardaco from the Department.
Further, the use Government and Community Development. Further, the use by the parties of the
pronoun "our" in referring to "our basnig", "our catch", "our deposit", or "our boseros" was
merely indicative of the camaraderie, and not evidentiary of a partnership, between them.
The foregoing factual findings, which belie the further claim that the aforesaid promissory notes
do not express the true intent and agreement of the parties, are binding on Us since there is no
herein to questions of law.
On the second issue, the pertinent rule on actionable documents in Rule 8, for ready reference,
reads:jgc:chanrobles.com.ph
"Sec. 8. How to contest genuineness of such documents. When an action or defense is founded
upon a written instrument, copied in or attached to the corresponding pleading as provided in
the preceding section, the genuineness and due execution of the instrument shall be deemed
admitted unless the adverse party, under oath, specifically denies them, and sets forth what he
claims to be the facts; but this provision does not apply when the adverse party does not appear
to be a party to the instrument or when compliance with an order for the inspection of the
original instrument is refused."cralaw virtua1aw library
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. Even in the trial court, he did
not at all question the fact that he signed said promissory notes and that the same were genuine.
Instead, he presented parol evidence to vary the import of the promissory notes by alleging that
they were mere receipts of his contribution to the alleged partnership.
His arguments on this score reflect a misapprehension of the rule on parol evidence as
distinguished from the rule on actionable documents. As the respondent Court correctly
explained to herein petitioner, what he presented in the trial Court was testimonial evidence that
the promissory notes were receipts of his supposed contributions to the alleged partnership
which testimony, in the light of Section 7, Rule 130, could not be admitted to vary or alter the
explicit meaning conveyed by said promissory notes. On the other hand, the said genuineness
and due execution of said promissory notes were not affected, pursuant to the provisions of
Section 8, Rule 8, since such aspects were not at all questioned but, on the contrary, were
admitted by herein petitioner.
Petitioners invocation of the doctrines in Yu Chuck, Et. Al. v. Kong Li Po, 7 which was reiterated
in Central Surety & Insurance Co. v. C. N. Hodges, Et. Al. 8 does not sustain his thesis that the
herein private respondent had "waived the mantle of protection given him by Rule 8, Sec. 8." It is
true that such implied admission of genuineness and due execution may he waived by a party but
only if he acts in a manner indicative of either an express or tacit waiver thereof. Petitioner,
however, either overlooked or ignored the fact that, as held in Yu Chuck, and the same is true in
other cases of identical factual settings, such a finding of waiver is proper where a case has been
tried in complete disregard of the rule and the plaintiff having pleaded a document by copy,
presents oral evidence to prove the due execution of the document and no objections are made
to the defendants evidence in refutation. This situation does not obtain in the present case hence
said doctrine is obviously inapplicable.
Subsequently, the procedure for appeal to the Court of Appeals from decisions of the then courts
of first instance in the exercise of their appellate jurisdiction over cases originating from the
municipal courts was provided for by Republic Act 6031, amending Section 45 of the Judiciary
Act effective August 4, 1969. The requirement for affirmance in full of the inferior courts
decision was not adopted or reproduced in Republic Act 6031. Also, since Republic Act 6031
failed to provide for the procedure or mode of appeal in the cases therein contemplated, the
Court of Appeals en banc provided thereof in its Resolution of August 12, 1971, by requiring a
petition for review but which also did not require for its availability that the judgment of the
court of first instance had affirmed in full that of the lower court. Said mode of appeal and the
procedural requirements thereof governed the appeal taken in this case from the aforesaid Court
of First Instance to the Court of Appeals in 1977. 10 Herein petitioners plaint on this issue is,
therefore devoid of merit.
WHEREFORE, the judgment of the respondent Court of Appeals is AFFIRMED, with costs against
herein petitioner. SO ORDERED.

Neither did the failure of herein private respondent to cross-examine herein petitioner on the
latters 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.

On the foregoing premises and considerations, the real respondent Court correctly reversed and
set aside the appealed decision of the Court of First Instance of Zamboanga del Norte and
affirmed in full the decision of the City Court of Dipolog City in Civil Case No. A-1838, dated
September 14, 1976.

Belatedly, in his motion for reconsideration of said decision of the respondent Court, herein
petitioner, as the private respondent therein, raised a third unresolved issue that the petition for
review therein should have been dismissed for lack of jurisdiction since the lower Courts
decision did not affirm in full the judgment of the City Court of Dipolog, and which he claimed
was a sine qua non for such a petition under the law then in force. He raises the same point in his
present appeal and We will waive the procedural technicalities in order to put this issue at rest.

Parenthetically, in that same motion for reconsideration he had sought affirmative relief from the
respondent Court praying that it sustain the decision of the trial Court, thereby invoking and
submitting to its jurisdiction which he would now assail. Furthermore, the objection that he
raises is actually not one of jurisdiction but of procedure. 9

At any rate, it will be noted that petitioner anchors his said objection on the provisions of Section
29, Republic Act 296 as amended by Republic Act 5433 effective September 9, 1968.
 THIRD DIVISION
[G.R. No. 75875. December 15, 1989.]
WOLFGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM and CHARLES
CHAMSAY, Petitioners, v. SANITARY WARES MANUFACTURING CORPORATION, ERNESTO V.
LAGDAMEO, ERNESTO R. LAGDAMEO, JR., ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A.
BONCAN, BALDWIN YOUNG and AVELINO V. CRUZ, Respondents.
Belo, Abiera & Associates for petitioners in 75875.
Sycip, Salazar, Hernandez & Gatmaitan for Luciano E. Salazar.
[G.R. No. 7595. December 15, 1989]
SANITARY WARES MANUFACTURING CORPORATION, ERNESTO R. LAGDAMEO, ENRIQUE B.
LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, BALDWIN YOUNG and AVELINO V.
CRUZ, Petitioners, v. THE COURT OF APPEALS, WOLFGANG AURBACH, JOHN GRIFFIN,
DAVID P. WHITTINGHAM, CHARLES CHAMSAY and LUCIANO SALAZAR, Respondents.
[G.R. Nos. 75975-76. December 15, 1989]
LUCIANO E. SALAZAR, Petitioner, v. SANITARY WARES MANUFACTURING CORPORATION,
ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR., ENRIQUE R. LAGDAMEO, GEORGE F.
LEE, RAUL A. BONCAN, BALDWIN YOUNG, AVELINO V. CRUZ and the COURT OF
APPEALS, Respondents.
SYLLABUS
1. COMMERCIAL LAW; JOINT VENTURE; WHETHER THERE EXISTS A JOINT VENTURE DEPENDS
UPON THE PARTIES ACTUAL INTENTION WHICH IS DETERMINED IN ACCORDANCE WITH THE
RULES COVERING THE INTERPRETATION AND CONSTRUCTION OF CONTRACTS. The rule is
that whether the parties to a particular contract have thereby established among themselves a
joint venture or some other relation depends upon their actual intention which is determined in
accordance with the rules governing the interpretation and construction of contracts. (Terminal
Shares, Inc. v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678; Universal Sales Corp. v. California
Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
2. ID.; ID.; ESTABLISHED IN CASE AT BAR. 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.
The history of the organization of Saniwares and the unusual arrangements which govern its
policy making body are all consistent with a joint venture and not with an ordinary corporation.
Section 5 (a) of the agreement uses the word "designated" and not "nominated" or "elected" in
the selection of the nine directors on a six to three ratio. Each group is assured of a fixed number
of directors in the board. Moreover, ASI in its communications referred to the enterprise as joint
venture. Baldwin Young also testified that Section 16(c) of the Agreement that "Nothing herein
contained shall be construed to constitute any of the parties hereto partners or joint venturers in
respect of any transaction hereunder" was merely to obviate the possibility of the enterprise
being treated as partnership for tax purposes and liabilities to third parties.
3. ID.; ID.; CONCEPT OF JOINT VENTURE; DISTINGUISHED FROM PARTNERSHIP. The point of
query, however, is whether or not that provision is applicable to a joint venture with clearly
defined agreements: "The legal concept of a joint venture is of common law origin. It has no
precise legal definition, but it has been generally understood to mean an organization formed for
some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is in fact 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. (Blackner v.
McDermott, 176 F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P. 2d., 1043 [1939]; Buckley v.
Chadwick, 45 Cal. 2d. 183, 288 P. 2d. 12 289 P. 2d. 242 [1955]). The main distinction cited by
most opinions in common law jurisdictions 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. (Tufts v. Mann. 116 Cal. App. 170, 2 P. 2d.
500 [1931]; Harmon v. Martin, 395 Ill. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel 266 Fed. 811
[1920]). This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a
partnership may be particular or universal, and a particular partnership may have for its object a
specific undertaking. (Art. 1783, Civil Code). It would seem therefore that under Philippine law, a
joint venture is a form of partnership and should thus be governed by the law of partnerships.
The Supreme Court has however recognized a distinction between these two business forms, and
has held that although a corporation cannot enter into a partnership contract, it may however
engage in a joint venture with others. (At p. 12, Tuazon v. Bolaos, 95 Phil. 906 [1954]) (Campos
and Lopez Campos Comments, Notes and Selected Cases, Corporation Code 1981). Moreover,
the usual rules as regards the construction and operations of contracts generally apply to a
contract of joint venture. (OHara v. Harman 14 App. Dev. (167) 43 NYS 556).
4. ID.; ID.; RIGHT OF STOCKHOLDERS TO CUMULATE VOTES IN ELECTING DIRECTORS LIES IN
THE AGREEMENT OF PARTIES. Bearing these principles in mind, the correct view would be
that the resolution of the question of whether or not the ASI Group may vote their additional
equity lies in the agreement of the parties. The appellate court was correct in upholding the
agreement of the parties as regards the allocation of director seats under Section 5 (a) of the
"Agreement," and the right of each group of stockholders to cumulative voting in the process of
determining who the groups nominees would be under Section 3(a) (1) of the "Agreement." As
pointed out by SEC, Section 5(a) of the Agreement relates to the manner of nominating the
members of the board of directors while Section 3 (a) (1) relates to the manner of voting for
these nominees.
5. ID.; ANTI-DUMMY; LIMITS THE ELECTION OF ALIENS AS MEMBERS OF THE BOARD OF
DIRECTORS IN PROPORTION TO THEIR ALLOWANCE PARTICIPATION OF THE ENTITY.
Equally important as the consideration of the contractual intent of the parties is the
consideration as regards the possible domination by the foreign investors of the enterprise in
violation of the nationalization requirements enshrined in the Constitution and circumvention of
the Anti-Dummy Act. In this regard, petitioner Salazars position is that the Anti-Dummy Act
allows the ASI group to elect board directors in proportion to their share in the capital of the
entity. It is to be noted, however, that the same law also limits the election of aliens as members
of the board of directors in proportion to their allowance participation of said entity.
DECISION
GUTIERREZ, JR., J.:
These consolidated petitions seek the review of the amended decision of the Court of Appeals in
CA-G.R. SP Nos. 05604 and 05617 which set aside the earlier decision dated June 5, 1986, of the
then Intermediate Appellate Court and directed that in all subsequent elections for directors of
Sanitary Wares Manufacturing Corporation (Saniwares), American Standard Inc. (ASI) cannot
nominate more than three (3) directors; that the Filipino stockholders shall not interfere in ASIs
choice of its three (3) nominees; that, on the other hand, the Filipino stockholders can nominate
only six (6) candidates and in the event they cannot agree on the six (6) nominees, they shall vote
only among themselves to determine who the six (6) nominees will be, with cumulative voting to
be allowed but without interference from ASI.
The antecedent facts can be summarized as follows:chanrob1es virtual 1aw library
In 1961, Saniwares, a domestic corporation was incorporated for the primary purpose of
manufacturing and marketing sanitary wares. One of the incorporators, Mr. Baldwin Young went
abroad to look for foreign partners, European or American who could help in its expansion plans.
On August 15, 1962, ASI, a foreign corporation domiciled in Delaware, United States entered into
an Agreement with Saniwares and some Filipino investors whereby ASI and the Filipino
investors agreed to participate in the ownership of an enterprise which would engage primarily
in the business of manufacturing in the Philippines and selling here and abroad vitreous china
and sanitary wares. The parties agreed that the business operations in the Philippines shall be
carried on by an incorporated enterprise and that the name of the corporation shall initially be
"Sanitary Wares Manufacturing Corporation." chanrobles.com:cralaw:red
The Agreement has the following provisions relevant to the issues in these cases on the
nomination and election of the directors of the corporation:jgc:chanrobles.com.ph
"3. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation shall be substantially in the form annexed
hereto as Exhibit A and, insofar as permitted under Philippine law, shall specifically provide for.
(1) Cumulative voting for directors:chanrob1es virtual 1aw library
x x x
"5. Management
(a) The management of the Corporation shall be vested in a Board of Directors, which shall
consist of nine individuals. As long as American-Standard shall own at least 30% of the
outstanding stock of the Corporation, three of the nine directors shall be designated by
American-Standard, and the others six: shall be designated by the other stockholders of the
Corporation. (pp. 51 & 53, Rollo of 75875).
At the request of ASI, the agreement contained provisions designed to protect it as a minority
group, including the grant of veto powers over a number of corporate acts and the right to
designate certain officers, such as a member of the Executive Committee whose vote was
required for important corporate transactions.
Later, the 30% capital stock of ASI was increased to 40%. The corporation was also registered
with the Board of Investments for availment of incentives with the condition that at least 60% of
the capital stock of the corporation shall be owned by Philippine nationals.
The joint enterprise thus entered into by the Filipino investors and the American corporation
prospered. Unfortunately, with the business successes, there came a deterioration of the initially
harmonious relations between the two groups. According to the Filipino group, a basic
disagreement was due to their desire to expand the export operations of the company to which
ASI objected as it apparently had other subsidiaries of joint venture groups in the countries
where Philippine exports were contemplated. On March 8, 1983, the annual stockholders
meeting was held. The meeting was presided by Baldwin Young. The minutes were taken by the
Secretary, Avelino Cruz. After disposing of the preliminary items in the agenda, the stockholders
then proceeded to the election of the members of the board of directors. The ASI group
nominated three persons namely; Wolfgang Aurbach, John Griffin and David P. Whittingham. The
Philippine investors nominated six, namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto R.
Lagdameo, Jr., George F. Lee, and Baldwin Young. Mr. Eduardo R, Ceniza then nominated Mr.
Luciano E. Salazar, who in turn nominated Mr. Charles Chamsay. The chairman, Baldwin Young
ruled the last two nominations out of order on the basis of section 5 (a) of the Agreement, the
consistent practice of the parties during the past annual stockholders meetings to nominate only
nine persons as nominees for the nine-member board of directors, and the legal advice of
Saniwares legal counsel. The following events then, transpired:chanrob1es virtual 1aw library
. . . . There were protests against the action of the Chairman and heated arguments ensued. An
appeal was made by the ASI representative to the body of stockholders present that a vote be
taken on the ruling of the Chairman. The Chairman, Baldwin Young, declared the appeal out of
order and no vote on the ruling was taken. The Chairman then instructed the Corporate
Secretary to cast all the votes present and represented by proxy equally for the 6 nominees of the
Philippine Investors and the 3 nominees of ASI, thus effectively excluding the 2 additional
persons nominated, namely, Luciano E. Salazar and Charles Chamsay. The ASI representative, Mr.
Jaqua, protested the decision of the Chairman and announced that all votes accruing to ASI
shares, a total of 1,329,695 (p. 27, Rollo, AC-G.R. SP No. 05617) were being cumulatively voted
for the three ASI nominees and Charles Chamsay, and instructed the Secretary to so vote. Luciano
E. Salazar and other proxy holders announced that all the votes owned by and or represented by
them 467,197 shares (p. 27, Rollo, AC-G.R. SP No. 05617) were being voted cumulatively in favor
of Luciano E. Salazar. The Chairman, Baldwin Young, nevertheless instructed the Secretary to
cast all votes equally in favor of the three ASI nominees, namely, Wolfgang Aurbach, John Griffin
and David Whittingham, and the six originally nominated by Rogelio Vinluan, namely, Ernesto
Lagdameo, Sr., Raul Boncan, Ernesto Lagdameo, Jr., Enrique Lagdameo, George F. Lee, and
Baldwin Young. The Secretary then certified for the election of the following Wolfgang
Aurbach, John Griffin, David Whittingham, Ernesto Lagdameo, Sr., Ernesto Lagdameo, Jr., Enrique
Lagdameo, George F. Lee, Raul A. Boncan, Baldwin Young. The representative of ASI then moved
to recess the meeting which was duly seconded. There was also a motion to adjourn (p. 28, Rollo,
Ac-G.R. SP No. 05617). This motion to adjourn was accepted by the Chairman, Baldwin Young,
who announced that the motion was carried and declared the meeting adjourned. Protests
against the adjournment were registered and having been ignored, Mr. Jaqua, the ASI
representative, stated that the meeting was not adjourned but only recessed and that the
meeting would be reconvened in the next room. The Chairman then threatened to have the
stockholders who did not agree to the decision of the Chairman on the casting of votes bodily
thrown out. The ASI Group, Luciano E. Salazar and other stockholders, allegedly representing 53
or 54% of the shares of Saniwares, decided to continue the meeting at the elevator lobby of the
American Standard Building. The continued meeting was presided by Luciano E. Salazar, while
Andres Gatmaitan acted as Secretary. On the basis of the cumulative votes cast earlier in the
meeting, the ASI Group nominated its four nominees; Wolfgang Aurbach, John Griffin, David
Whittingham and Charles Chamsay. Luciano E. Salazar voted for himself, thus the said five
directors were certified as elected directors by the Acting Secretary, Andres Gatmaitan, with the
explanation that there was a tie among the other six (6) nominees for the four (4) remaining
positions of directors and that the body decided not to break the tie." (pp. 37-39, Rollo of 75975-
76)
These incidents triggered off the filing of separate petitions by the parties with the Securities and
Exchange Commission (SEC). The first petition filed was for preliminary injunction by Saniwares,
Ernesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique
Lagdameo and George F. Lee against Luciano Salazar and Charles Chamsay. The case was
denominated as SEC Case No. 2417. The second petition was for quo warranto and application
for receivership by Wolfgang Aurbach, John Griffin, David Whittingham, Luciano E. Salazar and
Charles Chamsay against the group of Young and Lagdameo (petitioners in SEC Case No. 2417)
and Avelino F. Cruz. The case was docketed as SEC Case No. 2718. Both sets of parties except for
Avelino Cruz claimed to be the legitimate directors of the corporation.chanrobles law library
The two petitions were consolidated and tried jointly by a hearing officer who rendered a
decision upholding the election of the Lagdameo Group and dismissing the quo warranto petition
of Salazar and Chamsay. The ASI Group and Salazar appealed the decision to the SEC en banc
which affirmed the hearing officers decision.
The SEC decision led to the filing of two separate appeals with the Intermediate Appellate Court
by Wolfgang Aurbach, John Griffin, David Whittingham and Charles Chamsay (docketed as AC-
G.R. SP No. 05604) and by Luciano E. Salazar (docketed as AC-G.R. SP No. 05617). The petitions
were consolidated and the appellate court in its decision ordered the remand of the case to the
Securities and Exchange Commission with the directive that a new stockholders meeting of
Saniwares be ordered convoked as soon as possible, under the supervision of the Commission.
Upon a motion for reconsideration filed by the appellees (Lagdameo Group) the appellate court
(Court of Appeals) rendered the questioned amended decision.
Petitioners Wolfgang Aurbach, John Griffin, David P. Whittingham and Charles Chamsay in G.R.
No. 75875 assign the following errors:chanrob1es virtual 1aw library
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE ALLEGED ELECTION OF PRIVATE
RESPONDENTS AS MEMBERS OF THE BOARD OF DIRECTORS OF SANIWARES WHEN IN FACT
THERE WAS NO ELECTION AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS FROM EXERCISING THEIR FULL
VOTING RIGHTS REPRESENTED BY THE NUMBER OF SHARES IN SANIWARES, THUS DEPRIVING
PETITIONERS AND THE CORPORATION THEY REPRESENT OF THEIR PROPERTY RIGHTS
WITHOUT DUE PROCESS OF LAW.
III. THE COURT OF APPEALS IMPOSES CONDITIONS AND READS PROVISIONS INTO THE
AGREEMENT OF THE PARTIES WHICH WERE NOT THERE, WHICH ACTION IT CANNOT
LEGALLY DO. (p. 17, Rollo 75875).
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the amended decision on the following
grounds:jgc:chanrobles.com.ph
"11.1 That Amended Decision would sanction the CAs disregard of binding contractual
agreements entered into by stockholders and the replacement of the conditions of such
agreements with terms never contemplated by the stockholders but merely dictated by the CA.
"11.2 The Amended decision would likewise sanction the unlawful deprivation of the property
rights of stockholders without due process of law in order that a favored group of stockholders
may be illegally benefited and guaranteed a continuing monopoly of the control of a
corporation." (pp. 14-15, Rollo 75975-76).
On the other hand, the petitioners in G.R. No. 75951 contend that:chanrob1es virtual 1aw library
I
"THE AMENDED DECISION OF THE RESPONDENT COURT, WHILE RECOGNIZING THAT THE
STOCKHOLDERS OF SANIWARES ARE DIVIDED INTO TWO BLOCKS, FAILS TO FULLY ENFORCE
THE BASIC INTENT OF THE AGREEMENT AND THE LAW.
II

"THE AMENDED DECISION DOES NOT CATEGORICALLY RULE THAT PRIVATE PETITIONERS
HEREIN WERE THE DULY ELECTED DIRECTORS DURING THE 8 MARCH 1983 ANNUAL
STOCKHOLDERS MEETING OF SANIWARES." (P. 24, Rollo 75951).
The issues raised in the petitions are interrelated, hence, they are discussed jointly.
The main issue hinges on who were the duly elected directors of Saniwares for the year 1983
during its annual stockholders meeting held on March 8, 1983. To answer this question the
following factors should be determined: (1) the nature of the business established by the parties
whether it was a joint venture or a corporation and (2) whether or not the ASI Group may
vote their additional 10% equity during elections of Saniwares board of directors.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
The rule is that whether the parties to a particular contract have thereby established among
themselves a joint venture or some other relation depends upon their actual intention which is
determined in accordance with the rules governing the interpretation and construction of
contracts. (Terminal Shares, Inc. v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678; Universal
Sales Corp. v. California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) 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 specifically mention number 16 under Miscellaneous Provisions which states:chanrob1es
virtual 1aw library
x x x
"(c) nothing herein contained shall be construed to constitute any of the parties hereto partners
or joint venturers in respect of any transaction hereunder." (At p. 66, Rollo G.R. No. 75875)
They object to the admission of other evidence which tends to show that the parties agreement
was to establish a joint venture presented by the Lagdameo and Young Group on the ground that
it contravenes the parol evidence rule under section 7, Rule 130 of the Revised Rules of Court.
According to them, the Lagdameo and Young Group never pleaded in their pleading that the
"Agreement" failed to express the true intent of the parties.
The parol evidence Rule under Rule 130 provides:jgc:chanrobles.com.ph
"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:chanrob1es virtual 1aw library
(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 Groups 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, to wit:chanrob1es virtual 1aw library
x x x
"4. While certain provisions of the Agreement would make it appear that the parties thereto
disclaim being partners or joint venturers such disclaimer is directed at third parties and is not
inconsistent with, and does not preclude, the existence of two distinct groups of stockholders in
Saniwares one of which (the Philippine Investors) shall constitute the majority, and the other
(ASI) shall constitute the minority stockholder. In any event, the evident intention of the
Philippine Investors and ASI in entering into the Agreement is to enter into a joint venture
enterprise, and if some words in the Agreement appear to be contrary to the evident intention of
the parties, the latter shall prevail over the former (Art. 1370, New Civil Code). The various
stipulations of a contract shall be interpreted together attributing to the doubtful ones that sense
which may result from all of them taken jointly (Art. 1374, New Civil Code). 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). (Part I, Original Records, SEC Case No.
2417).
It has been ruled:jgc:chanrobles.com.ph
"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. (Binder v. Kessler v 200 App. Div. 40, 192 NYS 653; Pyroa v. Brownfield (Tex. Civ. A.)
238 SW 725; Hoge v. George, 27 Wyo, 423, 200 P 96 33 C.J. p. 871).
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. The history of the organization of Saniwares
and the unusual arrangements which govern its policy making body are all consistent with a joint
venture and not with an ordinary corporation. As stated by the SEC:jgc:chanrobles.com.ph
"According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement with
ASI in behalf of the Philippine nationals. He testified that ASI agreed to accept the role of
minority vis-a-vis the Philippine National group of investors, on the condition that the
Agreement should contain provisions to protest ASI as the minority.
"An examination of the Agreement shows that certain provisions were included to protect the
interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in certain
enumerated corporate acts [Sec. 3 (b) (ii) (a) of the Agreement]. ASI is contractually entitled to
designate a member of the Executive Committee and the vote of this member is required for
certain transactions [Sec. 3 (b) (i)].
"The Agreement also requires a 75% super-majority vote for the amendment of the articles and
by-laws of Saniwares [Sec. 3 (a) (iv) and (b) (iii)]. ASI is also given the right to designate the
president and plant manager [Sec. 5 (6)]. The Agreement further provides that the sales policy of
Saniwares shall be that which is normally followed by ASI [Sec. 13 (a)] and that Saniwares should
not export "Standard" products otherwise than through ASIs Export Marketing Services [Sec. 13
(6)]. Under the Agreement, ASI agreed to provide technology and know-how to Saniwares and
the latter paid royalties for the same. (At p. 2).
x x x agreements regarding the exercise of their voting rights.
"It is pertinent to note that the provisions of the Agreement requiring a 7 out of 9 votes of the
board of directors for certain actions, in effect gave ASI (which designates 3 directors under the
Agreement) an effective veto power. Furthermore, the grant to ASI of the right to designate
certain officers of the corporation; the super-majority voting requirements for amendments of
the articles and by-laws; and most significantly to the issues of this case, the provision that ASI
shall designate 3 out of the 9 directors and the other stockholders shall designate the other 6,
clearly indicate that 1) there are two distinct groups in Saniwares, namely ASI, which owns
40% of the capital stock and the Philippine National stockholders who own the balance of 60%,
and that 2) ASI is given certain protections as the minority stockholder.
Premises considered, we believe that under the Agreement there are two groups of stockholders
who established a corporation with provisions for a special contractual relationship between the
parties, i.e., ASI and the other stockholders." (pp. 4-5)
Section 5 (a) of the agreement uses the word "designated" and not "nominated" or "elected" in
the selection of the nine directors on a six to three ratio. Each group is assured of a fixed number
of directors in the board.
Moreover, ASI in its communications referred to the enterprise as joint venture. Baldwin Young
also testified that Section 16(c) of the Agreement that "Nothing herein contained shall be
construed to constitute any of the parties hereto partners or joint venturers in respect of any
transaction hereunder" was merely to obviate the possibility of the enterprise being treated as
partnership for tax purposes and liabilities to third parties.
Quite often, Filipino entrepreneurs in their desire to develop the industrial and manufacturing
capacities of a local firm are constrained to seek the technology and marketing assistance of huge
multinational corporations of the developed world. Arrangements are formalized where a
foreign group becomes a minority owner of a firm in exchange for its manufacturing expertise,
use of its brand names, and other such assistance. However, there is always a danger from such
arrangements. The foreign group may, from the start, intend to establish its own sole or
monopolistic operations and merely uses the joint venture arrangement to gain a foothold or test
the Philippine waters, so to speak. Or the covetousness may come later. As the Philippine firm
enlarges its operations and becomes profitable, the foreign group undermines the local majority
ownership and actively tries to completely or predominantly take over the entire company. This
undermining of joint ventures is not consistent with fair dealing to say the least. To the extent
that such subversive actions can be lawfully prevented, the courts should extend protection
especially in industries where constitutional and legal requirements reserve controlling
ownership to Filipino citizens.chanroblesvirtualawlibrary
The Lagdameo Group stated in their appellees brief in the Court of
Appeals:jgc:chanrobles.com.ph
"In fact, the Philippine Corporation Code itself recognizes the right of stockholders to enter into
"Sec. 100. Agreements by stockholders.
x x x
"2. An agreement between two or more stockholders, if in writing and signed by the parties
thereto, may provide that in exercising any voting rights, the shares held by them shall be voted
as therein provided, or as they may agree, or as determined in accordance with a procedure
agreed upon by them.
"Appellants contend that the above provision is included in the Corporation Codes chapter on
close corporations and Saniwares cannot be a close corporation because it has 95 stockholders.
Firstly, although Saniwares had 95 stockholders at the time of the disputed stockholders
meeting, these 95 stockholders are not separate from each other but are divisible into groups
representing a single identifiable interest. For example, ASI, its nominees and lawyers count for
13 of the 95 stockholders. The Young/Yutivo family count for another 13 stockholders, the Cham
family for 8 stockholders, the Santos family for 9 stockholders, the Dy family for 7 stockholders,
etc. If the members of one family and/or business or interest group are considered as one
(which, it is respectfully submitted, they should be for purposes of determining how closely held
Saniwares is), there were as of 8 March 1983, practically only 17 stockholders of Saniwares.
(Please refer to discussion in pp. 5 to 6 of appellees Rejoinder Memorandum dated 11 December
1984 and Annex "A" thereof).
"Secondly, even assuming that Saniwares is technically not a close corporation because it has
more than 20 stockholders, the undeniable fact is that it is a close-held corporation. Surely,
appellants cannot honestly claim that Saniwares is a public issue or a widely held corporation.
"In the United States, many courts have taken a realistic approach to joint venture corporations
and have not rigidly applied principles of corporation law designed primarily for public issue
corporations. These courts have indicated that express arrangements between corporate joint
ventures should be construed with less emphasis on the ordinary rules of law usually applied to
corporate entities and with more consideration given to the nature of the agreement between
the joint venturers (Please see Wabash Ry v. American Refrigerator Transit Co., 7 F 2d 335;
Chicago, M & St. P. Ry v. Des Moines Union Ry; 254 Assn. 247 US. 490; Seaboard Airline Ry v.
Atlantic Coast Line Ry; 240 N.C. 495, 82 S.E. 2d 771; Deboy v. Harris, 207 Md., 212, 113 A 2d 903;
Hathway v. Porter Royalty Pool, Inc., 296 Mich. 90, 90, 295 N.W. 571; Beardsley v. Beardsley, 138
U.S. 262; "The Legal Status of Joint Venture Corporations", 11 Vand. Law Rev., p. 680, 1958).
These American cases dealt with legal questions as to the extent to which the requirements
arising from the corporate form of joint venture corporations should control, and the courts
ruled that substantial justice lay with those litigants who relied on the joint venture agreement
rather than the litigants who relied on the orthodox principles of corporation law.
"As correctly held by the SEC Hearing Officer:jgc:chanrobles.com.ph
"It is said that participants in a joint venture, in organizing the joint venture deviate from the
traditional pattern of corporation management. A noted authority has pointed out that just as in
close corporations, shareholders agreements in joint venture corporations often contain
provisions which do one or more of the following: (1) require greater than majority vote for
shareholder and director action; (2) give certain shareholders or groups of shareholders power
to select a specified number of directors; (3) give to the shareholders control over the selection
and retention of employees; and (4) set up a procedure for the settlement of disputes by
arbitration (See I ONeal, Close Corporations, 1971 ed., Section 1.06a, pp. 15-16) (Decision of SEC
Hearing Officer, p. 16)
"Thirdly, paragraph 2 of Sec. 100 of the Corporation Code does not necessarily imply that
agreements regarding the exercise of voting rights are allowed only in close corporations. As
Campos and Lopez-Campos explain:jgc:chanrobles.com.ph
"Paragraph 2 refers to pooling and voting agreements in particular. Does this provision
necessarily imply that these agreements can be valid only in close corporations as defined by the
Code? Suppose that a corporation has twenty five stockholders, and therefore cannot qualify as a
close corporation under section 96, can some of them enter into an agreement to vote as a unit in
the election of directors? It is submitted that there is no reason for denying stockholders of
corporations other than close ones the right to enter into voting or pooling agreements to protect
their interests, as long as they do not intend to commit any wrong, or fraud on the other
stockholders not parties to the agreement. Of course, voting or pooling agreements are perhaps
more useful and more often resorted to in close corporations. But they may also be found
necessary even in widely held corporations. Moreover, since the Code limits the legal meaning of
close corporations to those which comply with the requisites laid down by section 96, it is
entirely possible that a corporation which is in fact a close corporation will not come within the
definition. In such case, its stockholders should not be precluded from entering into contracts
like voting agreements if these are otherwise valid. (Campos & Lopez-Campos, op cit, p. 405)
"In short, even assuming that sec. 5(a) of the Agreement relating to the designation or
nomination of directors restricts the right of the Agreements signatories to vote for directors,
such contractual provision, as correctly held by the SEC, is valid and binding upon the signatories
thereto, which include appellants." (Rollo G.R. No. 75951, pp. 90-94).
In regard to the question as to whether or not the ASI group may vote their additional equity
during elections of Saniwares board of directors, the Court of Appeals correctly
stated:jgc:chanrobles.com.ph
"As in other joint venture companies, the extent of ASIs participation in the management of the
corporation is spelled out in the Agreement. Section 5(a) hereof says that three of the nine
directors shall be designated by ASI and the remaining six by the other stockholders, i.e., the
Filipino stockholders. This allocation of board seats is obviously in consonance with the minority
position of ASI.
"Having entered into a well-defined contractual relationship, it is imperative that the parties
should honor and adhere to their respective rights and obligations thereunder. Appellants seem
to contend that any allocation of board seats, even in joint venture corporations, are null and
void to the extent that such may interfere with the stockholders rights to cumulative voting as
provided in Section 24 of the Corporation Code. This Court should not be prepared to hold that
any agreement which curtails in any way cumulative voting should be struck down, even if such
agreement has been freely entered into by experienced businessmen and do not prejudice those
who are not parties thereto. It may well be that it would be more cogent to hold, as the Securities
and exchange Commission has held in the decision appealed from, that cumulative voting rights
may be voluntary waived by stockholders who enter into special relationships with each other to
pursue and implement specific purposes, as in joint venture relationships between foreign and
local stockholders, so long as such agreements do not adversely affect third parties.
"In any event, it is believed that we are not here called upon to make a general rule on this
question. Rather, all that needs to be done is to give life and effect to the particular contractual
rights and obligations which the parties have assumed for themselves.
"On the one hand, the clearly established minority position of ASI and the contractual allocation
of board seats cannot be disregarded. On the other hand, the rights of the stockholders to
cumulative voting should also be protected.
"In our decision sought to be reconsidered, we opted to uphold the second over the first. Upon
further reflection, we feel that the proper and just solution to give due consideration to both
factors suggests itself quite clearly. This Court should recognize and uphold the division of the
stockholders into two groups, and at the same time uphold the right of the stockholders within
each group to cumulative voting in the process of determining who the groups nominees would
be. In practical terms, as suggested by appellant Luciano E. Salazar himself, this means that if the
Filipino stockholders cannot agree who their six nominees will be, a vote would have to be taken
among the Filipino stockholders only. During this voting, each Filipino stockholder can cumulate
his votes. ASI, however, should not be allowed to interfere in the voting within the Filipino group.
Otherwise, ASI would be able to designate more than the three directors it is allowed to
designate under the Agreement, and may even be able to get a majority of the board seats, a
result which is clearly contrary to the contractual intent of the parties.
"Such a ruling will give effect to both the allocation of the board seats and the stockholders right
to cumulative voting. Moreover, this ruling will also give due consideration to the issue raised by
the appellees on possible violation or circumvention of the Anti-Dummy Law (Com. Act No. 108,
as amended) and the nationalization requirements of the Constitution and the laws if ASI is
allowed to nominate more than three directors." (Rollo 75875, pp. 38-39)
The ASI Group and petitioner Salazar, now reiterate their theory that the ASI Group has the right
to vote their additional equity pursuant to Section 24 of the Corporation Code which gives the
stockholders of a corporation the right to cumulate their votes in electing directors. Petitioner
Salazar adds that this right if granted to the ASI Group would not necessarily mean a violation of
the Anti-Dummy Act (Commonwealth Act 108, as amended). He cites section 2-a thereof which
provides:jgc:chanrobles.com.ph
"And provided finally that the election of aliens as members of the board of directors or
governing body of corporations or associations engaging in partially nationalized activities shall
be allowed in proportion to their allowable participation or share in the capital of such entities.
(amendments introduced by Presidential Decree 715, section 1, promulgated May 28, 1975)"
The ASI Groups argument is correct within the context of Section 24 of the Corporation Code.
The point of query, however, is whether or not that provision is applicable to a joint venture with
clearly defined agreements:jgc:chanrobles.com.ph
"The legal concept of a joint venture is of common law origin. It has no precise legal definition,
but it has been generally understood to mean an organization formed for some temporary
purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is in fact 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. (Blackner v. McDermott, 176 F. 2d. 498, [1949];
Carboneau v. Peterson, 95 P. 2d., 1043 [1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P. 2d. 12
289 P. 2d. 242 [1955]). The main distinction cited by most opinions in common law jurisdictions
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. (Tufts v. Mann. 116 Cal. App. 170, 2 P. 2d. 500 [1931]; Harmon v. Martin, 395 Ill. 595, 71
NE 2d. 74 [1947]; Gates v. Megargel 266 Fed. 811 [1920]). This observation is not entirely
accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or
universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783,
Civil Code). It would seem therefore that under Philippine law, a joint venture is a form of
partnership and should thus be governed by the law of partnerships. The Supreme Court has
however recognized a distinction between these two business forms, and has held that although
a corporation cannot enter into a partnership contract, it may however engage in a joint venture
with others. (At p. 12, Tuazon v. Bolaos, 95 Phil. 906 [1954]) (Campos and Lopez Campos
Comments, Notes and Selected Cases, Corporation Code 1981).
Moreover, the usual rules as regards the construction and operations of contracts generally
apply to a contract of joint venture. (OHara v. Harman 14 App. Dev. (167) 43 NYS 556).
Bearing these principles in mind, the correct view would be that the resolution of the question of
whether or not the ASI Group may vote their additional equity lies in the agreement of the
parties.
Necessarily, the appellate court was correct in upholding the agreement of the parties as regards
the allocation of director seats under Section 5 (a) of the "Agreement," and the right of each
group of stockholders to cumulative voting in the process of determining who the groups
nominees would be under Section 3(a) (1) of the "Agreement." As pointed out by SEC, Section
5(a) of the Agreement relates to the manner of nominating the members of the board of directors
while Section 3 (a) (1) relates to the manner of voting for these nominees.
This is the proper interpretation of the Agreement of the parties as regards the election of
members of the board of directors.
To allow the ASI Group to vote their additional equity to help elect even a Filipino director who
would be beholden to them would obliterate their minority status as agreed upon by the parties.
As aptly stated by the appellate court:jgc:chanrobles.com.ph
". . . . ASI, however, should not be allowed to interfere in the voting within the Filipino group.
Otherwise, ASI would be able to designate more than the three directors it is allowed to
designate under the Agreement, and may even be able to get a majority of the board seats, a
result which is clearly contrary to the contractual intent of the parties.
"Such a ruling will give effect to both the allocation of the board seats and the stockholders right
to cumulative voting. Moreover, this ruling will also give due consideration to the issue raised by
the appellees on possible violation or circumvention of the Anti-Dummy Law (Com. Act No. 108,
as amended) and the nationalization requirements of the Constitution and the laws if ASI is
allowed to nominate more than three directors." (At p. 39, Rollo, 75875).
Equally important as the consideration of the contractual intent of the parties is the
consideration as regards the possible domination by the foreign investors of the enterprise in
violation of the nationalization requirements enshrined in the Constitution and circumvention of
the Anti-Dummy Act. In this regard, petitioner Salazars position is that the Anti-Dummy Act
allows the ASI group to elect board directors in proportion to their share in the capital of the
entity. It is to be noted, however, that the same law also limits the election of aliens as members
of the board of directors in proportion to their allowance participation of said entity. In the
instant case, the foreign Group (ASI) was limited to designate three directors . This is the
allowable participation of the ASI Group. Hence, in future dealings, this limitation of six to three
board seats should always be maintained as long as the joint venture agreement exists
considering that in limiting 3 board seats in the 9-man board of directors there are provisions
already agreed upon and embodied in the parties Agreement to protect the interests arising
from the minority status of the foreign investors.cralawnad
With these findings, we affirm 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, Ernesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R.
Lagdameo, Jr., Enrique Lagdameo, and George F. Lee as the duly elected directors of Saniwares at
the March 8, 1983 annual stockholders meeting.

On the other hand, the Lagdameo and Young Group (petitioners in G.R. No. 75951) object to a
cumulative voting during the election of the board of directors of the enterprise as ruled by the
appellate court and submits that the six (6) directors allotted the Filipino stockholders should be
selected by consensus pursuant to section 5 (a) of the Agreement which uses the word
"designate" meaning "nominate, delegate or appoint."cralaw virtua1aw library

They also stress the possibility that the ASI Group might take control of the enterprise if the
Filipino stockholders are allowed to select their nominees separately and not as a common slot
determined by the majority of their group.

Section 5(a) of the Agreement which uses the word designates in the allocation of board
directors should not be interpreted in isolation. This should be construed in relation to section 3
(a) (1) of the Agreement. As we stated earlier, section 3(a) (1) relates to the manner of voting for
these nominees which is cumulative voting while section 5(a) relates to the manner of
nominating the members of the board of directors. The petitioners in G.R. No. 75951 agreed to
this procedure, hence, they cannot now impugn its legality.

The insinuation that the ASI Group may be able to control the enterprise under the cumulative
voting procedure cannot, however, be ignored. The validity of the cumulative voting procedure is
dependent on the directors thus elected being genuine members of the Filipino group, not voters
whose interest is to increase the ASI share in the management of Saniwares. The joint venture
character of the enterprise must always be taken into account, so long as the company exists
under its original agreement. Cumulative voting may not be used as a device to enable ASI to
achieve stealthily or indirectly what they cannot accomplish openly. There are substantial
safeguards in the Agreement which are intended to preserve the majority status of the Filipino
investors as well as to maintain the minority status of the foreign investors group as earlier
discussed. They should be maintained.chanroblesvirtualawlibrary

WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are DISMISSED and the
petition in G.R. No. 75951 is partly GRANTED. The amended decision of the Court of Appeals is
MODIFIED in that Messrs. Wolfgang Aurbach, John Griffin, David Whittingham, Ernesto V.
Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and
George F. Lee are declared as the duly elected directors of Saniwares at the March 8, 1983 annual
stockholders meeting. In all other respects, the questioned decision is AFFIRMED. Costs against
the petitioners in G.R. Nos. 75975-76 and G.R. No. 75875.

SO ORDERED.
 FIRST DIVISION
[G.R. No. 127405. October 4, 2000.]
MARJORIE TOCAO and WILLIAM T. BELO, Petitioners, v. COURT OF APPEALS and NENITA A.
ANAY, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 41616, 1
affirming the Decision of the Regional Trial Court of Makati, Branch 140, in Civil Case No. 88-509.
2 signed a letter 6 addressed to the Cubao sales office to the effect that she was no longer the vice-
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 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. 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.chanrob1es virtua1 1aw 1ibrary
Anay having secured the distributorship of cookware products from the West Bend Company
and organized the administrative staff and the sales force, the cookware business took off
successfully. They operated under the name of Geminesse Enterprise, a sole proprietorship
registered in Marjorie Tocaos name, with office at 712 Rufino Building, Ayala Avenue, Makati
City. Belo made good his monetary commitments to Anay. Thereafter, 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 to the southwestern regional convention in Pismo Beach,
California, U.S.A., July 25-26, 1987. Anay accepted the invitation with the consent of Marjorie
Tocao who, as president and general manager of Geminesse Enterprise, even wrote a letter to the
Visa Section of the U.S. Embassy in Manila on July 13, 1987. A portion of the letter
reads:jgc:chanrobles.com.ph
"Ms. Nenita D. Anay (sic), who has been patronizing and supporting West Bend Co. for twenty
(20) years now, acquired the distributorship of Royal Queen cookware for Geminesse Enterprise,
is the Vice President Sales Marketing and a business partner of our company, will attend in
response to the invitation." (Emphasis supplied.) 3
Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving
the business on account of the unsatisfactory sales record in the Makati and Cubao offices. On
August 31, 1987, she received a plaque of appreciation from the administrative and sales people
through Marjorie Tocao 4 for her excellent job performance. 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
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. 7 Anay attempted to contact Belo.
She wrote him twice to demand her overriding commission for the period of January 8, 1988 to
February 5, 1988 and the audit of the company to determine her share in the net profits. When
her letters were not answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter. Still,
that letter was not answered.chanrob1es virtua1 1aw 1ibrary
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 P 13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with
damages 8 against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati,
Branch 140.
In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the
following: (1) P32,000.00 as unpaid overriding commission from January 8, 1988 to February 5,
1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 as 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" to determine her ten percent (10%) share
in the net profits. She further prayed that she be paid the five percent (5%) "overriding
commission" on the remaining 150 West Bend cookware sets before her "dismissal."cralaw
virtua1aw library
In their answer, 9 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.
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. Hence, petitioners were the ones who suffered actual damages "including unreturned
and unaccounted stocks of Geminesse Enterprise," and "serious anxiety, besmirched reputation
in the business world, and various damages not less than P500,000.00." They also alleged that, to
"vindicate their allies," they had to hire counsel for a fee of P23,000.00.chanrob1es virtua1 1aw
1ibrary
At the pre-trial conference, the issues were limited to: (a) whether or not the plaintiff was an
employee or partner of Marjorie Tocao and Belo, and (b) whether or not the parties are entitled
to damages. 10
In their defense, Belo denied that Anay was supposed to receive a share in the profit of the
business. He, however, admitted that the two had agreed that Anay would receive a three to four
percent (3-4%) share in the gross sales of the cookware. He denied contributing capital to the
business or receiving a share in its profits as he merely served as a guarantor of Marjorie Tocao,
who was new in the business. He attended and/or presided over business meetings of the
venture in his capacity as a guarantor but he never participated in decision-making. He 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.
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: thirty-seven percent (37%) on personal sales;
five percent (5%) on gross sales; two percent (2%) on product demonstrations, and two percent
(2%) for recruitment of personnel. Marjorie denied that they agreed on a ten percent (10%)
commission on the net profits. Marjorie claimed that she got the capital for the business out of
the sale of the sewing machines used in her garments business and from Peter Lo a Singaporean
friend-financier who loaned her the funds with interest. Because she treated Anay as her "co-
equal," Marjorie received the same amounts of commissions as her. However, Anay failed to
account for stocks valued at P200,000.00.
On April 22, 1993, the trial court rendered a decision the dispositive part of which is as
follows:jgc:chanrobles.com.ph
"WHEREFORE, in view of the foregoing, judgment is hereby rendered:chanrob1es virtual 1aw
library
1. Ordering defendants to submit to the Court a formal account as to the partnership affairs for
the years 1987 and 1988 pursuant to Art. 1809 of the Civil Code in order to determine the ten
percent (10%) share of plaintiff in the net profits of the cookware business;chanrob1es virtua1
1aw 1ibrary
2. Ordering defendants to pay five percent (5%) overriding commission for the one hundred and
fifty (150) cookware sets available for disposition when plaintiff was wrongfully excluded from
the partnership by defendants;
3. Ordering defendants to pay plaintiff overriding commission on the total production which for
the period covering January 8, 1988 to February 5, 1988 amounted to P32,000.00;
4. Ordering defendants to pay P100,000.00 as moral damages and P 100,000.00 as exemplary
damages, and
5. Ordering defendants to pay P50,000.00 as attorneys fees and P20,000.00 as costs of suit.
SO ORDERED."cralaw virtua1aw library
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, Anays 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 Marjories
financial contribution and Anays experience, the combination of the two would be invaluable to
the partnership, also supported that conclusion. Belos claim that he was merely a "guarantor"
has no basis since there was no written evidence thereof as required by Article 2055 of the Civil
Code. Moreover, his acts of attending and/or presiding over meetings of Geminesse Enterprise
plus his issuance of a memo giving Anay 37% commission on personal sales belied this. On the
contrary, it demonstrated his involvement as a partner in the business.chanrob1es virtua1 1aw
1ibrary
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. 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."cralaw virtua1aw library
Petitioners appeal to the Court of Appeals 11 was dismissed, but the amount of damages
awarded by the trial court were reduced to P50,000.00 for moral damages and P50,000.00 as
exemplary damages. Their motion for Reconsideration was denied by the Court of Appeals for
lack of merit. 12 Petitioners Belo and Marjorie Tocao are now before this Court on a petition for
review on certiorari, asserting that there was no business partnership between them and herein
private respondent Nenita A. Anay who is, therefore, not entitled to the damages awarded to her
by the Court of Appeals.
Petitioners Tocao and Belo contend that the Court of Appeals erroneously held that a partnership
existed between them and private respondent Anay because Geminesse Enterprise "came into
being" exactly a year before the "alleged partnership" was formed, and that it was very unlikely
that petitioner Belo would invest the sum of P2,500,000.00 with petitioner Tocao contributing
nothing, without any "memorandum whatsoever regarding the alleged partnership." 13
The issue of whether or not a partnership exists is a factual matter which are within the exclusive
domain of both the trial and appellate courts. This Court cannot set aside factual findings of such
courts absent any showing that there is no evidence to support the conclusion drawn by the
court a quo. 14 In this case, both the trial court and the Court of Appeals are one in ruling that
petitioners and private respondent established a business partnership. This Court finds no
reason to rule otherwise.
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. 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 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.chanrob1es virtua1 1aw 1ibrary
Petitioners admit that private respondent had the expertise to engage in the business of
distributorship of cookware. Private respondent contributed such expertise to the partnership
and hence, under the law, she was the industrial or managing partner. It was through her
reputation with the West Bend Company that the partnership was able to open the business of
distributorship of that companys cookware products; it was through the same efforts that the
business was propelled to financial success. Petitioner Tocao herself admitted private
respondents indispensable role in putting up the business when, upon being asked if private
respondent held the positions of marketing manager and vice-president for sales, she testified
thus:jgc:chanrobles.com.ph
"A: No, sir at the start she was the marketing manager because there were no one to sell yet, its
only me there then her and then two (2) people, so about four (4). Now, after that when she
recruited already Oscar Abella and Lina Torda-Cruz these two (2) people were given the
designation of marketing managers of which definitely Nita as superior to them would be the
Vice President." 18
By the set-up of the business, third persons were made to believe that a partnership had indeed
been forged between petitioners and private respondents. Thus, the communication dated June
4, 1986 of Missy Jagler of West Bend Company to Roger Muencheberg of the same company
states:jgc:chanrobles.com.ph
"Marge Tocao is president of Geminesse Enterprises. Geminesse will finance the operations.
Marge does not have cookware experience. Nita Anay has started to gather former managers,
Lina Torda and Dory Vista. She has also gathered former demonstrators, Betty Bantilan, Eloisa
Lamela, Menchu Javier. They will continue to gather other key people and build up the
organization. All they need is the finance and the products to sell." 19
On the other hand, petitioner Belos denial that he financed the partnership rings hollow in the
face of the established fact that he presided over meetings regarding matters affecting the
operation of the business. Moreover, his having authorized in writing on October 7, 1987, on a
stationery of his own business firm, Wilcon Builders Supply, that private respondent should
receive thirty-seven (37%) of the proceeds of her personal sales, could not be interpreted
otherwise than that he had a proprietary interest in the business. His claim that he was merely a
guarantor is belied by that personal act of proprietorship in the business. Moreover, if he was
indeed a guarantor of future debts of petitioner Tocao under Article 2053 of the Civil Code, 20 he
should have presented documentary evidence therefor. 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.
21
Petitioner Tocao, a former ramp model, 22 was also a capitalist in the partnership. She claimed
that she herself financed the business. Her and petitioner Belos roles as both capitalists to the
partnership with private respondent are buttressed by petitioner Tocaos admissions that
petitioner Belo was her boyfriend and that the partnership was not their only business venture
together. They also established a firm that they called "Wiji," the combination of petitioner Belos
first name, William, and her nickname, Jiji. 23 The special relationship between them dovetails
with petitioner Belos claim that he was acting in behalf of petitioner Tocao. Significantly, in the
early stage of the business operation, petitioners requested West Bend Company to allow them
to "utilize their banking and trading facilities in Singapore" in the matter of importation and
payment of the cookware products. 24 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.chanrob1es virtua1 1aw 1ibrary
The business venture operated under Geminesse Enterprise did not result in an employer-
employee relationship between petitioners and private Respondent. While it is true that the
receipt of a percentage of net profits constitutes only prima facie evidence that the recipient is a
partner in the business, 25 the evidence in the case at bar controverts an employer-employee
relationship between the parties. In the first place, private respondent had a voice in the
management of the affairs of the cookware distributorship, 26 including selection of people who
would constitute the administrative staff and the sales force. Secondly, petitioner Tocaos
admissions militate against an employer-employee relationship. She admitted that, like her who
owned Geminesse Enterprise, 27 private respondent received only commissions and
transportation and representation allowances 28 and not a fixed salary. 29 Petitioner Tocao
testified:jgc:chanrobles.com.ph
"Q: Of course. Now, I am showing to you certain documents already marked as Exhs.X and Y.
Please go over this. Exh.Y is denominated Cubao overrides 8-21-87 with ending August 21,
1987, will you please go over this and tell the Honorable Court whether you ever came across
this document and know of your own knowledge the amount
A: Yes, sir this is what I am talking about earlier. Thats the one I am telling you earlier a certain
percentage for promotions, advertising, incentive.
Q: I see. Now, this promotion, advertising, incentive, there is a figure here and words which I
quote: Overrides Marjorie Ann Tocao P21,410.50 this means that you have received this
amount?
A: Oh yes, sir.
Q: I see. And, by way of amplification this is what you are saying as one representing commission,
representation, advertising and promotion?
A: Yes, sir.
Q: I see. Below your name is the words and figure and I quote Nita D. Anay P21,410.50, what is
this?
A: Thats her overriding commission.
Q: Overriding commission, I see. Of course, you are telling this Honorable Court that there being
the same P21,410.50 is merely by coincidence?
A: No, sir, I made it a point that we were equal because the way I look at her kasi, you know in a
sense because of her expertise in the business she is vital to my business. So, as part of the
incentive I offer her the same thing.chanrob1es virtua1 1aw 1ibrary
Q: So, in short you are saying that this you have shared together, I mean having gotten from the
company P21,140.50 is your way of indicating that you were treating her as an equal?
A: As an equal.
Q: As an equal, I see. You were treating her as an equal?
A: Yes, sir.
Q: I am calling again your attention to Exh.Y "Overrides Makati the other one is
A: That is the same thing, sir.
Q: With ending August 21, words and figure Overrides Marjorie Ann Tocao P15,314.25 the
amount there you will acknowledge you have received that?
A: Yes, sir.
Q: Again in concept of commission, representation, promotion, etc.?
A: Yes, sir.
Q: Okey. Below your name is the name of Nita Anay P15,314.25 that is also an indication that she
received the same amount?
A: Yes, sir.
Q: And, as in your previous statement it is not by coincidence that these two (2) are the same?
A: No, sir.
Q: It is again in concept of you treating Miss Anay as your equal?
A: Yes, sir." (Emphasis supplied.) 30
If indeed petitioner Tocao was private respondents employer, it is difficult to believe that they
shall receive the same income in the business. In a partnership, each partner must share in the
profits and losses of the venture, except that the industrial partner shall not be liable for the
losses. 31 As an industrial partner, private respondent had the right to demand for a formal
accounting of the business and to receive her share in the net profit. 32
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. 33 While it is true
that in her undated application for renewal of registration of that firm name, petitioner Tocao
indicated that it would be engaged in retail of "kitchenwares, cookwares, utensils, skillet," 34 she
also admitted that the enterprise was only "60% to 70% for the cookware business," while 20%
to 30% of its business activity was devoted to the sale of water sterilizer or purifier. 35
Indubitably then, the business name Geminesse Enterprise was used only for practical reasons
 it was utilized as the common name for petitioner Tocaos various business activities, which
included the distributorship of cookware.chanrob1es virtua1 1aw 1ibrary
Petitioners underscore the fact that the Court of Appeals did not return the "unaccounted and
unremitted stocks of Geminesse Enterprise amounting to P208,250.00." 36 Obviously a ploy to
offset the damages awarded to private respondent, that claim, more than anything else, proves
the existence of a partnership between them. In Idos v. Court of Appeals, this Court
said:jgc:chanrobles.com.ph
"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. . . ." 37
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.
Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to
reap for herself and/or for petitioner Belo financial gains resulting from private respondents
efforts to make the business venture a success. Thus, as petitioner Tocao became adept in the
business operation, she started to assert herself to the extent that she would even shout at
private respondent in front of other people. 38 Her instruction to Lina Torda Cruz, marketing
manager, not to allow private respondent to hold office in both the Makati and Cubao sales
offices concretely spoke of her perception that private respondent was no longer necessary in
the business operation, 39 and resulted in a falling out between the two. However, a mere falling
out or misunderstanding between partners does not convert the partnership into a sham
organization. 40 The partnership exists until dissolved under the law. 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.
Thus:jgc:chanrobles.com.ph
". . . The right to choose with whom a person wishes to associate himself is the very foundation
and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of
that mutual resolve, along with each partners capability to give it, and the absence of cause for
dissolution provided by the law itself. 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." 41chanrob1es virtua1 law library
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. 42
In this case, petitioner Tocaos unilateral exclusion of private respondent from the partnership is
shown by her memo to the Cubao office plainly stating that private respondent was, as of
October 9, 1987, no longer the vice-president for sales of Geminesse Enterprise. 43 By that
memo, petitioner Tocao effected !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. 44
The winding up of partnership affairs has not yet been undertaken by the partnership. This is
manifest in petitioners claim for stocks that had been entrusted to private respondent in the
pursuit of the partnership business.
The determination of the amount of damages commensurate with the factual findings upon
which it is based is primarily the task of the trial court. 45 The Court of Appeals may modify that
amount only when its factual findings are diametrically opposed to that of the lower court, 46 or
the award is palpably or scandalously and unreasonably excessive. 47 However, exemplary
damages that are awarded "by way of example or correction for the public good," 48 should be
reduced to P50,000.00, the amount correctly awarded by the Court of Appeals. Concomitantly,
the award of moral damages of P100,000.00 was excessive and should be likewise reduced to
P50,000.00. Similarly, attorneys fees that should be granted on account of the award of
exemplary damages and petitioners evident bad faith in refusing to satisfy private respondents
plainly valid, just and demandable claims, 49 appear to have been excessively granted by the trial
court and should therefore be reduced to P25,000.00.chanrob1es virtua1 1aw 1ibrary
WHEREFORE, the instant petition for review on certiorari is DENIED. 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. This case is remanded to the Regional Trial Court for proper proceedings relative to said
dissolution. The appealed decisions of the Regional Trial Court and the Court of Appeals are
AFFIRMED with MODIFICATIONS, as follows
1. Petitioners are ordered to submit to the Regional Trial Court a formal account of the
partnership affairs for the years 1987 and 1988, pursuant to Article 1809 of the Civil Code, in
order to determine private respondents ten percent (10%) share in the net profits of the
partnership;
2. Petitioners are ordered, jointly and severally, to pay private respondent five percent (5%)
overriding commission for the one hundred and fifty (150) cookware sets available for
disposition since the time private respondent was wrongfully excluded from the partnership by
petitioners;
3. Petitioners are ordered, jointly and severally, to pay private respondent overriding
commission on the total production which, for the period covering January 8, 1988 to February
5, 1988, amounted to P32,000.00;
4. Petitioners are ordered, jointly and severally, to pay private respondent moral damages in the
amount of P50,000.00, exemplary damages in the amount of P50,000.00 and attorneys fees in
the amount of P25,000.00. SO ORDERED.
 THIRD DIVISION
[G.R. No. 135813. October 25, 2001.]
FERNANDO SANTOS, Petitioner, v. Spouses ARSENIO and NIEVES REYES, Respondents.
DECISION
PANGANIBAN, J.:
As a general rule, the factual findings of the Court of Appeals affirming those of the trial court are
binding on the Supreme Court. However, there are several exceptions to this principle. In the
present case, we find occasion to apply both the rule and one of the exceptions.
The Case
Before us is a Petition for Review on Certiorari assailing the November 28, 1997 Decision, 1 as
well as the August 17, 1998 and the October 9, 1998 Resolutions, 2 issued by the Court of
Appeals (CA) in CA-GR CV No. 34742. The Assailed Decision disposed as
follows:jgc:chanrobles.com.ph
"WHEREFORE, the decision appealed from is AFFIRMED save as for the counterclaim which is
hereby DISMISSED. Costs against [petitioner]." 3
Resolving respondents Motion for Reconsideration, the August 17, 1998 Resolution ruled as
follows:chanrob1es virtua1 1aw 1ibrary
"WHEREFORE, [respondents] motion for reconsideration is GRANTED. Accordingly, the courts
decision dated November 28, 1997 is hereby MODIFIED in that the decision appealed from is
AFFIRMED in toto, with costs against [petitioner]." 4
The October 9, 1998 Resolution denied "for lack of merit" petitioners Motion for
Reconsideration of the August 17, 1998 Resolution. 5
The Facts
The events that led to this case are summarized by the CA as follows:jgc:chanrobles.com.ph
"Sometime in June, 1986, [Petitioner] Fernando Santos and [Respondent] Nieves Reyes were
introduced to each other by one Meliton Zabat regarding a lending business venture proposed by
Nieves. It was verbally agreed that [petitioner would] act as financier while [Nieves] and Zabat
[would] take charge of solicitation of members and collection of loan payments. The venture was
launched on June 13, 1986, with the understanding that [petitioner] would receive 70% of the
profits while . . . Nieves and Zabat would earn 15% each.
"In July, 1986, . . . Nieves introduced Cesar Gragera to [petitioner]. Gragera, as chairman of the
Monte Maria Development Corporation 6 (Monte Maria, for brevity), sought short-term loans for
members of the corporation. [Petitioner] and Gragera executed an agreement providing funds for
Monte Marias members. Under the agreement, Monte Maria, represented by Gragera, was
entitled to P1.31 commission per thousand paid daily to [petitioner] (Exh.A). . . . Nieves kept the
books as representative of [petitioner] while [Respondent] Arsenio, husband of Nieves, acted as
credit investigator.
"On August 6, 1986, [petitioner], . . . [Nieves] and Zabat executed the Article of Agreement which
formalized their earlier verbal arrangement.
" [Petitioner] and [Nieves] later discovered that their partner Zabat engaged in the same lending
business in competition with their partnership[.] Zabat was thereby expelled from the
partnership. The operations with Monte Maria continued.
"On June 5, 1987, [petitioner] filed a complaint for recovery of sum of money and damages.
[Petitioner] charged [respondents], allegedly in their capacities as employees of [petitioner],
with having misappropriated funds intended for Gragera for the period July 8, 1986 up to March
31, 1987. Upon Grageras complaint that his commissions were inadequately remitted,
[petitioner] entrusted P200,000.00 to . . . Nieves to be given to Gragera. . . . Nieves allegedly failed
to account for the amount. [Petitioner] asserted that after examination of the records, he found
that of the total amount of P4,623,201.90 entrusted to [respondents], only P3,068,133.20 was
remitted to Gragera, thereby leaving the balance of P1,555,065.70 unaccounted for.
"In their answer, [respondents] asserted that they were partners and not mere employees of
[petitioner]. The complaint, they alleged, was filed to preempt and prevent them from claiming
their rightful share to the profits of the partnership.
". . . Arsenio alleged that he was enticed by [petitioner] to take the place of Zabat after
[petitioner] learned of Zabats activities. Arsenio resigned from his job at the Asian Development
Bank to join the partnership.
"For her part, . . . Nieves claimed that she participated in the business as a partner, as the lending
activity with Monte Maria originated from her initiative. Except for the limited period of July 8,
1986 through August 20, 1986, she did not handle sums intended for Gragera. Collections were
turned over to Gragera because he guaranteed 100% payment of all sums loaned by Monte
Maria. Entries she made on worksheets were based on this assumptive 100% collection of all
loans. The loan releases were made less Grageras agreed commission. Because of this
arrangement, she neither received payments from borrowers nor remitted any amount to
Gragera. Her job was merely to make worksheets (Exhs.15 to 15-DDDDDDDDDD) to convey to
[petitioner] how much he would earn if all the sums guaranteed by Gragera were collected.
" [Petitioner] on the other hand insisted that [respondents] were his mere employees and not
partners with respect to the agreement with Gragera. He claimed that after he discovered Zabats
activities, he ceased infusing funds, thereby causing the extinguishment of the partnership. The 39.2.4. P10,000.00 - As exemplary damages
agreement with Gragera was a distinct partnership [from] that of [respondent] and Zabat.
[Petitioner] asserted that [respondents] were hired as salaried employees with respect to the 39.3. The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondent] ARSENIO REYES,
partnership between [petitioner] and Gragera. the following:chanrob1es virtual 1aw library

" [Petitioner] further asserted that in Nieves capacity as bookkeeper, she received all payments 39.3.1. P2,899,739.50 - The balance of the 15 percent
from which Nieves deducted Grageras commission. The commission would then be remitted to
Gragera. She likewise determined loan releases. share of the [respondent]

"During the pre-trial, the parties narrowed the issues to the following points: whether ARSENIO REYES in the profits
[respondents] were employees or partners of [petitioner], whether [petitioner] entrusted money
to [respondents] for delivery to Gragera, whether the P1,555,068.70 claimed under the of his joint venture with the
complaint was actually remitted to Gragera and whether [respondents] were entitled to their
counterclaim for share in the profits." 7 [petitioner].

Ruling of the Trial Court 39.3.2. Six(6) percent of - As damages from August 3,

In its August 13, 1991 Decision, the trial court held that respondents were partners, not mere P2,899,739.50 1987 until the P2,899,739.50 is
employees, of petitioner. It further ruled that Gragera was only a commission agent of petitioner,
not his partner. Petitioner moreover failed to prove that he had entrusted any money to Nieves. fully paid.
Thus, respondents counterclaim for their share in the partnership and for damages was granted.
The trial court disposed as follows:jgc:chanrobles.com.ph 39.3.3. P25,000.00 - As moral damages

"39. WHEREFORE, the Court hereby renders judgment as follows:chanrob1es virtual 1aw library 39.3.4. P10,000.00 - As exemplary damages

39.1. THE SECOND AMENDED COMPLAINT dated July 26, 1989 is DISMISSED. 39.4. The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondents]:chanrob1es
virtual 1aw library
39.2. The [Petitioner] FERNANDO J. SANTOS is ordered to pay the [Respondent] NIEVES S.
REYES, the following:chanrob1es virtual 1aw library 39.4.1. P50,000.00 - As attorneys fees; and

39.2.1. P3,064,428.00 - The 15 percent share of the 39.4.2. The cost of the suit." 8

[respondent] NIEVES S. REYES Ruling of the Court of Appeals

in the profits of her joint venture

On appeal, the Decision of the trial court was upheld, and the counterclaim of respondents was
with the [petitioner]. dismissed. Upon the latters Motion for Reconsideration, however, the trial courts Decision was
reinstated in toto. Subsequently, petitioners own Motion for Reconsideration was denied in the
39.2.2. Six(6) percent of - As damages from August 3, CA Resolution of October 9, 1998.

P3,064,428.00 1987 until the P3,064,428.00 The CA ruled that the following circumstances indicated the existence of a partnership among
the parties: (1) it was Nieves who broached to petitioner the idea of starting a money-lending
is fully paid. business and introduced him to Gragera; (2) Arsenio received "dividends" or "profit-shares"
covering the period July 15 to August 7, 1986 (Exh. "6"); and (3) the partnership contract was
39.2.3. P50,000.00 - As moral damages executed after the Agreement with Gragera and petitioner and thus showed the parties intention
to consider it as a transaction of the partnership. In their common venture, petitioner invested
capital while respondents contributed industry or services, with the intention of sharing in the
profits of the business.
The CA disbelieved petitioners claim that Nieves had misappropriated a total of P200,000 which
was supposed to be delivered to Gragera to cover unpaid commissions. It was his task to collect
the amounts due, while hers was merely to prepare the daily cash flow reports (Exhs. "15-
15DDDDDDDDDD") to keep track of his collections.
Hence, this Petition. 9
Issue
Petitioner asks this Court to rule on the following issues: 10
"Whether or not Respondent Court of Appeals acted with grave abuse of discretion tantamount
to excess or lack of jurisdiction in:chanrob1es virtual 1aw library
1. Holding that private respondents were partners/joint venturers and not employees of Santos
in connection with the agreement between Santos and Monte Maria/Gragera;
2. Affirming the findings of the trial court that the phrase Received by on documents signed by
Nieves Reyes signified receipt of copies of the documents and not of the sums shown thereon;
3. Affirming that the signature of Nieves Reyes on Exhibit E was a forgery;
4. Finding that Exhibit H [did] not establish receipt by Nieves Reyes of P200,000.00 for delivery
to Gragera;
5 Affirming the dismissal of Santos [Second] Amended Complaint;
6. Affirming the decision of the trial court, upholding private respondents counterclaim;
7. Denying Santos motion for reconsideration dated September 11, 1998."cralaw virtua1aw
library
Succinctly put, the following were the issues raised by petitioner: (1) whether the parties
relationship was one of partnership or of employer employee; (2) whether Nieves
misappropriated the sums of money allegedly entrusted to her for delivery to Gragera as his
commissions; and (3) whether respondents were entitled to the partnership profits as
determined by the trial court.
The Courts Ruling
The Petition is partly meritorious.
First Issue:chanrob1es virtual 1aw library
Business Relationship
Petitioner maintains that he employed the services of respondent spouses in the money-lending
venture with Gragera, with Nieves as bookkeeper and Arsenio as credit investigator. That Nieves
introduced Gragera to Santos did not make her a partner. She was only a witness to the
Agreement between the two. Separate from the partnership between petitioner and Gragera was
that which existed among petitioner, Nieves and Zabat, a partnership that was dissolved when
Zabat was expelled.
On the other hand, both the CA and the trial court rejected petitioners contentions and ruled that
the business relationship was one of partnership. We quote from the CA Decision, as
follows:jgc:chanrobles.com.ph
" [Respondents] were industrial partners of [petitioner]. . . . Nieves herself provided the initiative
in the lending activities with Monte Maria. In consonance with the agreement between appellant,
Nieves and Zabat (later replaced by Arsenio), [respondents] contributed industry to the common
fund with the intention of sharing in the profits of the partnership. [Respondents] provided
services without which the partnership would not have [had] the wherewithal to carry on the
purpose for which it was organized and as such [were] considered industrial partners
(Evangelista v. Abad Santos, 51 SCRA 416 [1973]).
"While concededly, the partnership between [petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom, the remaining partners simply continued the
business of the partnership without undergoing the procedure relative to dissolution. Instead,
they invited Arsenio to participate as a partner in their operations. There was therefore, no
intent to dissolve the earlier partnership. The partnership between [petitioner,] Nieves and
Arsenio simply took over and continued the business of the former partnership with Zabat, one
of the incidents of which was the lending operations with Monte Maria.
x x x
"Gragera and [petitioner] were not partners. The money-lending activities undertaken with
Monte Maria was done in pursuit of the business for which the partnership between [petitioner],
Nieves and Zabat (later Arsenio) was organized. Gragera who represented Monte Maria was
merely paid commissions in exchange for the collection of loans. The commissions were fixed on
gross returns, regardless of the expenses incurred in the operation of the business. The sharing
of gross returns does not in itself establish a partnership." 11
We agree with both courts on this point. 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. 12 The "Articles of Agreement" stipulated that the
signatories shall share the profits of the business in a 70-15-15 manner, with petitioner getting
the lions share. 13 This stipulation clearly proved the establishment of a partnership.
We find no cogent reason to disagree with the lower courts that the partnership continued
lending money to the members of the Monte Maria Community Development Group, Inc., which
later on changed its business name to Private Association for Community Development, Inc.
(PACDI). Nieves was not merely petitioners employee. She discharged her bookkeeping duties in
accordance with paragraphs 2 and 3 of the Agreement, which states as
follows:jgc:chanrobles.com.ph
"2. That the SECOND PARTY and THIRD PARTY shall handle the solicitation and screening of
prospective borrowers, and shall . . . each be responsible in handling the collection of the loan
payments of the borrowers that they each solicited.
"3. That the bookkeeping and daily balancing of account of the business operation shall be
handled by the SECOND PARTY." 14
The "Second Party" named in the Agreement was none other than Nieves Reyes. On the other
hand, Arsenios duties as credit investigator are subsumed under the phrase "screening of
prospective borrowers." Because of this Agreement and the disbursement of monthly
"allowances" and "profit shares" or "dividends" (Exh. "6") to Arsenio, we uphold the factual
finding of both courts that he replaced Zabat in the partnership.
Indeed, the partnership was established to engage in a money-lending business, despite the fact
that it was formalized only after the Memorandum of Agreement had been signed by petitioner
and Gragera. Contrary to petitioners contention, there is no evidence to show that a different
business venture is referred to in this Agreement, which was executed on August 6, 1986, or
about a month after the Memorandum had been signed by petitioner and Gragera on July 14,
1986. The Agreement itself attests to this fact:jgc:chanrobles.com.ph
"WHEREAS, the parties have decided to formalize the terms of their business relationship in
order that their respective interests may be properly defined and established for their mutual
benefit and understanding." 15
Second Issue:chanrob1es virtual 1aw library
No Proof of Misappropriation of
Grageras Unpaid Commission
Petitioner faults the CA finding that Nieves did not misappropriate money intended for Grageras
commission. According to him, Gragera remitted his daily collection to Nieves. This is shown by
Exhibit "B." (the "Schedule of Daily Payments"), which bears her signature under the words
"received by." For the period July 1986 to March 1987, Gragera should have earned a total
commission of P4,282,429.30. However, only P3,068,133.20 was received by him. Thus,
petitioner infers that she misappropriated the difference of P1,214,296.10, which represented
the unpaid commissions. Exhibit "H." is an untitled tabulation which, according to him, shows
that Gragera was also entitled to a commission of P200,000, an amount that was never delivered
by Nieves. 16
On this point, the CA ruled that Exhibits "B," "F," "E" and "H" did not show that Nieves received
for delivery to Gragera any amount from which the P1,214,296.10 unpaid commission was
supposed to come, and that such exhibits were insufficient proof that she had embezzled
P200,000. Said the CA:jgc:chanrobles.com.ph
"The presentation of Exhibit "D" vaguely denominated as members ledger does not clearly
establish that Nieves received amounts from Monte Marias members. The document does not
clearly state what amounts the entries thereon represent. More importantly, Nieves made the
entries for the limited period of January 11, 1987 to February 17, 1987 only while the rest were
made by Grageras own staff.
"Neither can we give probative value to Exhibit E which allegedly shows acknowledgment of the
remittance of commissions to Verona Gonzales. The document is a private one and its due
execution and authenticity have not been duly proved as required in [S]ection 20, Rule 132 of the
Rules of Court which states:chanrob1es virtual 1aw library
SECTION 20. Proof of Private Document Before any private document offered as authentic is
received in evidence, its due execution and authenticity must be proved either:chanrob1es
virtual 1aw library
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of the maker.
Any other private document need only be identified as that which it is claimed to be.
"The court a quo even ruled that the signature thereon was a forgery, as it found that:chanrob1es
virtual 1aw library
. . . . But NIEVES denied that Exh. E-1 is her signature; she claimed that it is a forgery. The initial
stroke of Exh. E-1 starts from up and goes downward. The initial stroke of the genuine signatures
of NIEVES (Exhs. A-3, B-1, F-1, among others) starts from below and goes upward. This
difference in the start of the initial stroke of the signatures Exhs. E-1 and of the genuine
signatures lends credence to Nieves claim that the signature Exh. E-1 is a forgery.
x x x
"Nieves testimony that the schedules of daily payment (Exhs.B and F) were based on the
predetermined 100% collection as guaranteed by Gragera is credible and clearly in accord with
the evidence. A perusal of Exhs. "B" and "F" as well as Exhs.15 to 15-DDDDDDDDDD reveal that
the entries were indeed based on the 100% assumptive collection guaranteed by Gragera. Thus,
the total amount recorded on Exh.B is exactly the number of borrowers multiplied by the
projected collection of P150.00 per borrower. This holds true for Exh.F.
"Corollarily, Nieves explanation that the documents were pro forma and that she signed them
not to signify that she collected the amounts but that she received the documents themselves is
more believable than [petitioners] assertion that she actually handled the amounts.
"Contrary to [petitioners] assertion, Exhibit H does not unequivocally establish that . . . Nieves
received P200,000.00 as commission for Gragera. As correctly stated by the court a quo, the
document showed a liquidation of P240.000 00 and not P200,000.00.
"Accordingly, we find Nieves testimony that after August 20, 1986, all collections were made by
Gragera believable and worthy of credence. Since Gragera guaranteed a daily 100% payment of
the loans, he took charge of the collections. As [petitioners] representative,
Nieves merely prepared the daily cash flow reports (Exh.15 to 15 DDDDDDDDDD) to enable
[petitioner] to keep track of Grageras operations. Gragera on the other hand devised the
schedule of daily payment (Exhs.B and F) to record the projected gross daily collections.
"As aptly observed by the court a quo:chanrob1es virtual 1aw library
26.1. As between the versions of SANTOS and NIEVES on how the commissions of GRAGERA
[were] paid to him[,] that of NIEVES is more logical and practical and therefore, more believable.
SANTOS version would have given rise to this improbable situation: GRAGERA would collect the
daily amortizations and then give them to NIEVES; NIEVES would get GRAGERAs commissions
from the amortizations and then give such commission to GRAGERA." 17
These findings are in harmony with the trial courts ruling, which we quote
below:jgc:chanrobles.com.ph
"21. Exh. H does not prove that SANTOS gave to NIEVES and the latter received P200,000.00 for
delivery to GRAGERA. Exh. H shows under its sixth column ADDITIONAL CASH that the
additional cash was P240,000.00. If Exh. H were the liquidation of the P200,000.00 as alleged by
SANTOS, then his claim is not true. This is so because it is a liquidation of the sum of
P240,000.00.
"21.1. SANTOS claimed that he learned of NIEVES failure to give the P200,000.00 to GRAGERA
when he received the latters letter complaining of its delayed release. Assuming as true SANTOS
claim that he gave P200,000.00 to GRAGERA, there is no competent evidence that NIEVES did not
give it to GRAGERA. The only proof that NIEVES did not give it is the letter. But SANTOS did not
even present the letter in evidence. He did not explain why he did not.
"21.2. The evidence shows that all money transactions of the money-lending business of SANTOS
were covered by petty cash vouchers. It is therefore strange why SANTOS did not present any
voucher or receipt covering the P200,000.00." 18
In sum, the lower courts found it unbelievable that Nieves had embezzled P1,555,068.70 from
the partnership. She did not remit P1,214,296.10 to Gragera, because he had deducted his
commissions before remitting his collections. Exhibits "B" and "F" are merely computations of
what Gragera should collect for the day; they do not show that Nieves received the amounts
stated therein. Neither is there sufficient proof that she misappropriated P200,000, because
Exhibit "H." does not indicate that such amount was received by her; in fact, it shows a different
figure.
Petitioner has utterly failed to demonstrate why a review of these factual findings is warranted.
Well-entrenched is the basic rule that factual findings of the Court of Appeals affirming those of
the trial court are binding and conclusive on the Supreme Court. 19 Although there are
exceptions to this rule, petitioner has not satisfactorily shown that any of them is applicable to
this issue.
Third Issue:chanrob1es virtual 1aw library
Accounting of Partnership
Petitioner refuses any liability for respondents claims on the profits of the partnership. He
maintains that "both business propositions were flops," as his investments were "consumed and
eaten up by the commissions orchestrated to be due Gragera" a situation that "could not have
been rendered possible without complicity between Nieves and Gragera."cralaw virtua1aw
library
Respondent spouses, on the other hand, postulate that petitioner instituted the action below to
avoid payment of the demands of Nieves, because sometime in March 1987, she "signified to
petitioner that it was about time to get her share of the profits which had already accumulated to
some P3 million." Respondents add that while the partnership has not declared dividends or
liquidated its earnings, the profits are already reflected on paper. To prove the counterclaim of
Nieves, the spouses show that from June 13, 1986 up to April 19, 1987, the profit totaled
P20,429,520 (Exhs. "10" et seq. and "15" et seq.). Based on that income, her 15 percent share
under the joint venture amounts to P3,064,428 (Exh. "10-I-3"); and Arsenios, P2,026,000 minus
the P30,000 which was already advanced to him (Petty Cash Vouchers, Exhs. "6, 6-A to 6-B").
The CA originally held that respondents counterclaim was premature, pending an accounting of
the partnership. However, in its assailed Resolution of August 17, 1998, it turned volte face.
Affirming the trial courts ruling on the counterclaim, it held as follows:jgc:chanrobles.com.ph
"We earlier ruled that there is still need for an accounting of the profits and losses of the
partnership before we can rule with certainty as to the respective shares of the partners. Upon a
further review of the records of this case, however, there appears to be sufficient basis to
determine the amount of shares of the parties and damages incurred by [respondents]. The fact
is that the court a quo already made such a determination [in its] decision dated August 13, 1991
on the basis of the facts on record." 20
The trial courts ruling alluded to above is quoted below:jgc:chanrobles.com.ph
"27. The defendants counterclaim for the payment of their share in the profits of their joint
venture with SANTOS is supported by the evidence.
"27.1. NIEVES testified that: Her claim to a share in the profits is based on the agreement (Exhs.
5, 5-A and 5-B). The profits are shown in the working papers (Exhs. 10 to 10-I, inclusive) which
she prepared. Exhs. 10 to 10-I (inclusive) were based on the daily cash flow reports of which Exh.
3 is a sample. The originals of the daily cash flow reports (Exhs. 3 and 15 to 15-D(10) were given
to SANTOS. The joint venture had a net profit of P20,429,520.00 (Exh. 10-I-1), from its
operations from June 13, 1986 to April 19, 1987 (Exh. 1-I-4). She had a share of P3,064,428.00
(Exh. 10-I-3) and ARSENIO, about P2,926,000.00, in the profits.
"27.1.1 SANTOS never denied NIEVES testimony that the money-lending business he was
engaged in netted a profit and that the originals of the daily case flow reports were furnished to
him. SANTOS however alleged that the money-lending operation of his joint venture with NIEVES
and ZABAT resulted in a loss of about half a million pesos to him. But such loss, even if true, does
not negate NIEVES claim that overall, the joint venture among them SANTOS, NIEVES and
ARSENIO netted a profit. There is no reason for the Court to doubt the veracity of [the
testimony of] NIEVES.
"27.2 The P26,260.50 which ARSENIO received as part of his share in the profits (Exhs. 6, 6-A
and 6-B) should be deducted from his total share." 21
After a close examination of respondents exhibits, we find reason to disagree with the CA.
Exhibit "10-I" 22 shows that the partnership earned a "total income" of P20,429,520 for the
period June 13, 1986 until April 19, 1987. This entry is derived from the sum of the amounts
under the following column headings: "2-Day Advance Collection," "Service Fee," "Notarial Fee,"
"Application Fee," "Net Interest Income" and "Interest Income on Investment." Such entries
represent the collections of the money-lending business or its gross income.chanrob1es virtua1
1aw 1ibrary
The "total income" shown on Exhibit "10-I" did not consider the expenses sustained by the
partnership. For instance, it did not factor in the "gross loan releases" representing the money
loaned to clients. Since the business is money-lending, such releases are comparable with the
inventory or supplies in other business enterprises.
Noticeably missing from the computation of the "total income" is the deduction of the weekly
allowance disbursed to respondents. Exhibits "I" et seq. and "J" et seq. 23 show that Arsenio
received allowances from July 19, 1986 to March 27, 1987 in the aggregate amount of P25,500;
and Nieves, from July 12, 1986 to March 27, 1987, in the total amount of P25,600. These
allowances are different from the profit already received by Arsenio. They represent expenses
that should have been deducted from the business profits. The point is that all expenses incurred
by the money-lending enterprise of the parties must first be deducted from the "total income" in
order to arrive at the "net profit" of the partnership. The share of each one of them should be
based on this "net profit" and not from the "gross income" or "total income" reflected in Exhibit
"10-I," which the two courts invariably referred to as "cash flow" sheets.
Similarly, Exhibits "15" et seq., 24 which are the "Daily Cashflow Reports," do not reflect the
business expenses incurred by the parties, because they show only the daily cash collections.
Contrary to the rulings of both the trial and the appellate courts, respondents exhibits do not
reflect the complete financial condition of the money-lending business. The lower courts
obviously labored over a mistaken notion that Exhibit" 10-I-1" represented the "net profits"
earned by the partnership.
For the purpose of determining the profit that should go to an industrial partner (who shares in
the profits but is not liable for the losses), the gross income from all the transactions carried on
by the firm must be added together, and from this sum must be subtracted the expenses or the
losses sustained in the business. Only in the difference representing the net profits does the
industrial partner share. But if, on the contrary, the losses exceed the income, the industrial
partner does not share in the losses.25cralaw:red
When the judgment of the CA is premised on a misapprehension of facts or a failure to notice
certain relevant facts that would otherwise justify a different conclusion, as in this particular
issue, a review of its factual findings may be conducted, as an exception to the general rule
applied to the first two issues. 26
The trial court has the advantage of observing the witnesses while they are testifying, an
opportunity not available to appellate courts. Thus, its assessment of the credibility of witnesses
and their testimonies are accorded great weight, even finality, when supported by substantial
evidence; more so when such assessment is affirmed by the CA. But when the issue involves the
evaluation of exhibits or documents that are attached to the case records, as in the third issue,
the rule may be relaxed. Under that situation, this Court has a similar opportunity to inspect,
examine and evaluate those records, independently of the lower courts. Hence, we deem the
award of the partnership share, as computed by the trial court and adopted by the CA, to be
incomplete and not binding on this Court.
WHEREFORE, the Petition is partly GRANTED. The assailed November 28, 1997 Decision is
AFFIRMED, but the challenged Resolutions dated August 17, 1998 and October 9, 1998 are
REVERSED and SET ASIDE. No costs.
SO ORDERED.