TOCAO VS COURT OF APPEALS managers that Anay was no longer a part of the

company. Anay then demanded that the company be

FACTS: William Belo introduced Nenita Anay to his
girlfriend, Marjorie Tocao. The three agreed to form a
joint venture for the sale of cooking wares. Belo was
to contribute P2.5 million; Tocao also contributed
some cash and she shall also act as president and
general manager; and Anay shall be in charge of
marketing. Belo and Tocao specifically asked Anay
because of her experience and connections as a
marketer. They agreed further that Anay shall
receive the following:
10% share of annual net profits
6% overriding commission for weekly sales
30% of sales Anay will make herself
2% share for her demo services
They operated under the name Geminesse
Enterprise, this name was however registered as a
sole proprietorship with the Bureau of Domestic
Trade under Tocao. The joint venture agreement
was not reduced to writing because Anay trusted
Belo’s assurances.
The venture succeeded under Anay’s marketing
prowess.
But then the relationship between Anay and Tocao
soured. One day, Tocao advised one of the branch
audited and her shares be given to her.
ISSUE: Whether or not there is a partnership.
HELD: Yes, even though it was not reduced to
writing, for a partnership can be instituted in any
form. The fact that it was registered as a sole
proprietorship is of no moment for such registration
was only for the company’s trade name.
Anay was not even an employee because when they
ventured into the agreement, they explicitly agreed to
profit sharing this is even though Anay was receiving
commissions because this is only incidental to her
efforts as a head marketer.
The Supreme Court also noted that a partner who is
excluded wrongfully from a partnership is an
innocent partner. Hence, the guilty partner must give
him his due upon the dissolution of the partnership
as well as damages or share in the profits “realized
from the appropriation of the partnership business
and goodwill.” An innocent partner thus possesses
“pecuniary interest in every existing contract that was
incomplete and in the trade name of the co-
partnership and assets at the time he was wrongfully
expelled.”
An unjustified dissolution by a partner can subject
him to action for damages because by the mutual
agency that arises in a partnership, the doctrine
of delectus personae allows the partners to have
the power, although not necessarily the right to
dissolve the partnership.
Tocao’s unilateral exclusion of Anay from the
partnership is shown by her memo to the Cubao
office plainly stating that Anay was, as of October 9,
1987, no longer the vice-president for sales of
Geminesse Enterprise. By that memo, petitioner
Tocao 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.
HEIRS OF TAN ENG KEE VS COURT OF
APPEALS
Facts: The heirs of Tan Eng Kee, composed of his
children and his wife, claims that their father was a
partner of Tan Eng Lay in Benguet Lumber
Company. Tan Eng Lay is the brother of the
petitioners' father who accordung to them entered
into a partnership with the former after the WWII
were they both pooled in their money in order to
recapitalize the business. Petitioners wants to
account, liquidate and wind up the partnership as
well as the equal division of the net assets of the
company. They alleged that since Tan Eng Kee was
conducting the affairs of the company/business with
his brother, Gave orders to the employees, prepared
orders for the suppliers, their families beind
employed in the business and that their families lived
in the same compound where the Benguet Lumber
Company is found then these establishes the
existence of a partnership. They also allege that their
father was a co-owner of some 80 pieces of G.I.
Sheets and that their father was also receiving
money from the company.
Benguet Lumber Company, represented by Tan Eng
Lay, answered by stating that Tan Eng Kee was
merely an employee of the said company evidenced
by payrolls and the SSS coverage of petitioners'
father. They also showed the registration of the
business as that of a proprietorship.
The RTC of Baguio ruled that there was a
partnership between the two brothers in the form of a
joint-venture. The CA reversed the decision of the
RTC.
Issue: WON Tan Eng Kee and Tan Eng Lay were
partners in Benguet Lumber?
Held: No partnership was established as the
evidence presented was insufficient. Tan Eng Kee
was merely an employee receiving wages. The
partnership contract is required to be in writing the
capital of which exceeds P3,000 and the findings of
the lower courts reveals the absence of such
contract. Co-ownership or co-possession is not an
indicium of the existence of a partnership. A demand
for a periodic accounting is evidence of a partnership
which was not done by Tan Eng Kee during his
lifetime being his right if ever he was a partner. The
documents presented, not validly declared falsified
by another court, further proves the non-existence of
a partnership relation between the two brothers but
an employer-employee relationship. Furthermore,
petitioners did not offer or present evidence that their
father received amounts pertaining to his share in
the profits of the company. The allegations of
petitioners merely shows that their father was merely
involved in the operations of Benguet Lumber but
does not establish in what capacity.
ONA VS CIR
Facts: Julia Buñales died leaving as heirs her
surviving spouse, Lorenzo Oña and her five children.
A civil case was instituted for the settlement of her
state, in which Oña was appointed administrator and
later on the guardian of the three heirs who were still
minors when the project for partition was approved.
This shows that the heirs have undivided ½ interest
in 10 parcels of land, 6 houses and money from the
War Damage Commission.
Although the project of partition was approved by the
Court, no attempt was made to divide the properties
and they remained under the management of Oña
who used said properties in business by leasing or
selling them and investing the income derived
therefrom and the proceeds from the sales thereof in
real properties and securities. As a result, petitioners’
properties and investments gradually increased.
Petitioners returned for income tax purposes their
shares in the net income but they did not actually
receive their shares because this left with Oña who
invested them.
Based on these facts, CIR decided that petitioners
formed an unregistered partnership and therefore,
subject to the corporate income tax, particularly for
years 1955 and 1956. Petitioners asked for
reconsideration, which was denied hence this
petition for review from CTA’s decision.
Issue:
W/N there was a co-ownership or an unregistered
partnership
W/N the petitioners are liable for the deficiency
corporate income tax
Held:
Unregistered partnership. The Tax Court found that
instead of actually distributing the estate of the
deceased among themselves pursuant to the project
of partition, the heirs allowed their properties to
remain under the management of Oña and let him
use their shares as part of the common fund for their
ventures, even as they paid corresponding income
taxes on their respective shares.
Yes. For tax purposes, the co-ownership of inherited
properties is automatically converted into an
unregistered partnership the moment the said
common properties and/or the incomes derived
therefrom are used as a common fund with intent to
produce profits for the heirs in proportion to their
respective shares in the inheritance as determined in
a project partition either duly executed in an
extrajudicial settlement or approved by the court in
the corresponding testate or intestate proceeding.
The reason is simple. From the moment of such
partition, the heirs are entitled already to their
respective definite shares of the estate and the
incomes thereof, for each of them to manage and
dispose of as exclusively his own without the
intervention of the other heirs, and, accordingly, he
becomes liable individually for all taxes in connection
therewith. If after such partition, he allows his share
to be held in common with his co-heirs under a
single management to be used with the intent of
making profit thereby in proportion to his share, there
can be no doubt that, even if no document or
instrument were executed, for the purpose, for tax
purposes, at least, an unregistered partnership is
formed.
For purposes of the tax on corporations, our National
Internal Revenue Code includes these
partnerships —
The term “partnership” includes a syndicate, group,
pool, joint venture or other unincorporated
organization, through or by means of which any
business, financial operation, or venture is carried
on… (8 Merten’s Law of Federal Income Taxation, p.
562 Note 63; emphasis ours.)
with the exception only of duly registered general
copartnerships — within the purview of the term
“corporation.” It is, therefore, clear to our mind that
petitioners herein constitute a partnership, insofar as
said Code is concerned, and are subject to the
income tax for corporations. Judgment affirmed.
GATCHALIAN VS CIR
Facts: Plaintiffs purchased, in the ordinary course of
business, from one of the duly authorized agents of
the National Charity Sweepstakes Office one ticket
for the sum of two pesos (P2), said ticket
was registered in the name of Jose Gatchalian and
Company. The ticket won one of the third-prizes in
the amount of P50,000.
Jose Gatchalian was required to file the
corresponding income taxreturn covering the prize
won. Defendant-Collector made
anassessment against Jose Gatchalian and Co.
requesting the payment of the sum of P1,499.94
to the deputy provincial treasurer of Pulilan,
Bulacan. Plaintiffs, however through counsel made a
request for exemption. It was denied.
Plaintiffs failed to pay the amount due, hence a
warrant of distraint and levy was
issued. Plaintiffs paid under protest a part of the tax
and penalties to avoid the effects of the warrant. A
request that the balance be paid by plaintiffs in
installments was made. This was granted on the
condition that a bond be filed.
Plaintiffs failed in their installment payments. Hence
a request for execution of the warrant of distraint and
levy was made. Plaintiffs paid under protest to avoid
the execution.
A claim for refund was made by the plaintiffs, which
was dismissed, hence the appeal.
Issue: Whether the plaintiffs formed a partnership
hence liable for income tax.
Held: Yes. According to the stipulation facts
the plaintiffs organized a partnership of a civil nature
because each of them put up money to buy a
sweepstakes ticket for the sole purpose of dividing
equally the prize which they may win, as they did in
fact in the amount of P50,000. The partnership was
not only formed, but upon the organization thereof
and the winning of the prize, Jose Gatchalian
personally appeared in the office of the Philippines
Charity Sweepstakes, in his capacity as co-partner,
as such collection the prize, the office issued the
check for P50,000 in favor of Jose Gatchalian and
company, and the said partner, in the same capacity,
collected the said check. All these circumstances
repel the idea that the plaintiffs organized and
formed a community of property only.

LIWANAG VS COURT OF APPEALS
Facts: Liwanag asked Isidora Rosales to join her
and Thelma Tagbilaran in the business of buying and
selling cigarettes. Under their agreement, Rosales
would give the money needed to
buy the cigarettes while Liwanag and Tabligan would
act as her agents, with acorresponding 40%
commission to her if the goods are sold; otherwise
the money wouldbe returned to Rosales. Rosales
gave several cash advances amounting to 633,650.
Money was misappropriated. Rosales files a
complaint of estafa against them.
Issue:
1. WON the parties entered into a partnership
agreement;
2. If in the negative, WON the transaction is a simple
loan
Held:
1. No. Even assuming that a contract of partnership
was indeed entered into by and between the parties,
when money or property have been received by a
partner for a specific purpose and he later
misappropriated it, such partner is guilty of estafa.
2. No. In a contract of loan once the money is
received by the debtor, ownership over the same is
transferred. Being the owner, the borrower can
dispose of it for whatever purpose he may deem
proper
EVANGELISTA & CO v. ABAD SANTOS
Doctrine: It is not disputed that the provision
against the industrial partner engaging in business
for himself seeks to prevent any conflict of interest
between the industrial partner and the partnership,
and to insure faithful compliance by said partner with
this prestation.
Facts: On Octorber 09, 1954, a co-partnership was
formed named “Evangelista and Co.” On June 07,
1955, the Articles of the Co-partnership was
amended in order to include herein respondent
Estrella Abad Santos as an industrial partner.
Furthermore, in the said amended article, it was
agreed upon that the profits and losses shall be
divided as follows: (1) 70% for the first three (3)
partners; and (2) 30% for respondent Estrella Abad
Santos.
On December 17, 1963, herein respondent filed suit
against the three other partners in the Court of First
Instance of Manila, alleging that the partnership,
which was also made a party-defendant, had been
paying dividends to the partners except to her; and
that notwithstanding her demands the defendants
had refused and continued to refuse and let her
examine the partnership books or to give her
information regarding the partnership affairs to pay
her any share in the dividends declared by the
partnership. She therefore prayed that the
defendants be ordered to render accounting to her of
the partnership business and to pay her
corresponding share in the partnership profits after
such accounting, plus attorney's fees and costs.
The defendants, in their answer, alleged the
following: (1) the amended Articles of Co-partnership
did not express the true agreement of the parties,
which was that the plaintiff was not an industrial
partner; (2) that she did not in fact contribute industry
to the partnership; and (3) that her share of 30% was
to be based on the profits which might be realized by
the partnership only until full payment of the loan
which it had obtained in December, 1955 from the
Rehabilitation Finance Corporation in the sum of
P30,000, for which the plaintiff had signed a
promissory note as co-maker and mortgaged her
property as security; and (4) that in any event the
respondent (as a Judge of the City Court of
Manila)was lawfully (See Article 1789) excluded
from, and deprived of, her alleged share, interests
and participation, as an alleged industrial partner, in
the partnership Evangelista & Co., and its profits or
net income.
Issue:
1.) Whether or not the respondent Estrella Abad
Santos is an industrial partner or merely a profit
sharer (as alleged by petitioners) entitled to 30% of
the net profits that may be realized by the
partnership from June 07, 1955 until her mortgage
loan shall be fully paid?
2.) Whether or not respondent as a Judge of the
City Court of Manila is engaged in business and
thereby lawfully excluded and deprived of, her
alleged share, interests and participation, as an
alleged industrial partner, in the partnership
Evangelista & Co., and its profits or net income
pursuant to Article 1789.
Ruling:
1.) The Supreme Court affirmed the facts
concluded by the Court of Appeals that respondent
Estrella Santos is an industrial partner because the
Articles of the co-partnership indubitably show the
respondent is an industrial partner. Also by the fact
that from June 7, 1955 up to the filing of their answer
to the complaint on February 8, 1964 — or a period
of over eight (8) years — appellants did nothing to
correct the alleged false agreement of the parties
contained in the same.
2.) It is not disputed that the provision
against the industrial partner engaging in business
for himself seeks to prevent any conflict of interest
between the industrial partner and the partnership,
and to insure faithful compliance by said partner with
this prestation. There is no pretense, however, even
on the part of the appellee is engaged in any
business antagonistic to that of appellant
company, since being a Judge of one of the
branches of the City Court of Manila can hardly be
characterized as a business.
The Supreme Court further held:
“What has gone before persuades us to hold with the
lower Court that appellee is an industrial partner of
appellant company, with the right to demand for a
formal accounting and to receive her share in the net
profit that may result from such an accounting, which
right appellants take exception under their second
assigned error. Our said holding is based on the
following article of the New Civil Code:
'ART. 1899. Any partner shall have the right to a
formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership
business or possession of its property by his co-
partners;
(2) If the right exists under the terms of any
agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and
reasonable.
We find no reason in this case to depart from the rule
which limits this Court's appellate jurisdiction to
reviewing only errors of law, accepting as conclusive
the factual findings of the lower court upon its own
assessment of the evidence.”
RAMNANI VS COURT OF APPEALS
FACTS: Ishwar Jethmal Ramnani and his wife
Sonya had their main business based in New York.
Ishwar received US $150,000.00 from his father-in-
law in Switzerland.
In 1965, Ishwar Jethmal Ramnani sent the amount of
US $150,000.00 to Choithram in two bank drafts of
US$65,000.00 and US$85,000.00 for the purpose of
investing the same in real estate in the Philippines.
Subsequently, spouses Ishwar executed a general spouses in favor of Nirmla Ramnani, the wife of
power of attorney appointing Ishwar’s full blood Choitram’s son, Moti.
brothers Choithram and Navalrai as attorneys-in-fact,
Ortigas also executed the corresponding deeds of
empowering them to manage and conduct their
sale in favor of Nirmla and the TCT ISSUEd in her
business concerns in the Philippines.
favour..
Choithram, as attorney-in-factr, entered into two
Thus, spouses Ishwar filed a complaint in the Court
agreements for the purchase of two parcels of land
of First Instance of Rizal against Choithram and
located in Pasig Rizal from Ortigas & Company, Ltd.
spouses Nirmla and Moti (Choithram et al.) and
Partnership (Ortigas Ltd.) with a total area of
Ortigas Ltd. for reconveyance of said properties or
approximately 10,048 square meters.
payment of its value and damages.
Three buildings were constructed thereon and were
Trial court dismissed the complaint ruling that the
leased out by Choithram as attorney-in-fact of
lone testimony of Ishwar regarding the cash
spouses Ishwar. Two of these buildings were later
remittance is unworthy of faith and credit because
burned.
the cash remittance was made before the execution
In 1970 Ishwar asked Choithram to account for the of the general power of attorney. Ishwar also failed to
income and expenses relative to these properties corroborate this lone testimony and did not exhibit
during the period 1967 to 1970. any commercial document as regard to the alleged
remittances.
Choithram failed and refused to render such
accounting which prompted Ishwar to revoke the It believed the claim of Choitram that he and Ishwar
general power of attorney. entered into a temporary arrangement in order to
enable Choithram, then a British citizen, to purchase
Choithram and Ortigas Ltd. were duly notified by
the properties in the name of Ishwar who was an
notice in writing of such revocation. It was also
American citizen and who was then qualified to
registered with the Securities and Exchange
purchase property in the Philippines under the then
Commission and published in The Manila Times.
Parity Amendment.
Nevertheless, Choithram as such attorney-in-fact of
Ishwar, transferred all rights and interests of Ishwar
Upon appeal, the CA reversed the decision and gave of donation and also mortgaged the properties under
credence to Ishwar. litigation for 3 million USD to a shell partnership with
a mere capital of 100 USD.
It upheld the validity of Ishwar’s testimony and gave
cognizance to a letter written by Choihtram imploring The Supreme Court affirms the findings of the Court
Ishwar to renew the power of attorney after it was of Appeals.
revoked. It states therein that Choithram reassures
ISSUE: Whether or not there was a partnership
his brother that he is not after his money and that the
between the brothers Ishwar and Choithram
revocation is hurting the reputation of Ishwar.
Choithram also made no mention of his claimed HELD: Yes, Even without a written agreement, the
temporary arrangement in the letter.. scenario is clear. Spouses Ishwar supplied the
capital of $150,000.00 for the business. They
The CA ruled that Choithram is also estopped in pais
entrusted the money to Choithram to invest in a
or by deed from claiming an interest over the
profitable business venture in the Philippines. For
properties. Because of Choitram’s admissions from
this purpose they appointed Choithram as their
(1) power of attorney, (2) the Agreements, and (3)
attorney-in-fact.
the Contract of Lease
Choithram in turn decided to invest in the real estate
It furthermore HELD that Choithram's 'temporary
business. He bought the two (2) parcels of land in
arrangement, by which he claimed purchasing the
question from Ortigas as attorney-in-fact of Ishwar-
two (2) parcels in question in 1966 and placing them
Instead of paying for the lots in cash, he paid in
in the name of Ishwar who is an American citizen
installments and used the balance of the capital
circumvents the disqualification provision of aliens
entrusted to him, plus a loan, to build two buildings.
acquiring real properties in the Philippines.
Although the buildings were burned later, Choithram
Upholding the supposed "temporary arrangement"
was able to build two other buildings on the property.
with Ishwar would be sanctioning the perpetration of
He rented them out and collected the rentals.
an illegal act and culpable violation of the
Through the industry and genius of Choithram,
Constitution.
Ishwar's property was developed and improved into
During the pendency of the case, Choithram made what it is now—a valuable asset worth millions of
several attempts to dispose of his properties by way pesos.
We have a situation where two brothers engaged in
a business venture. One furnished the capital, the
other contributed his industry and talent. Justice and
equity dictate that the two share equally the fruit of
their joint investment and efforts. Perhaps this
Solomonic solution may pave the way towards their
reconciliation. Both would stand to gain. No one
would end up the loser. After all, blood is thicker than
water.
However, because of the devious machinations and
schemes that Choithram employed he should pay
moral and exemplary damages as well as attorney's
fees to spouses Ishwar.
ISSUE: Whether or not Ortigas Ltd. is liable.
HELD: Yes, because Ortigas had several notices
of the revocation. Despite said notices, Ortigas
nevertheless acceded to the representation of
Choithram, as alleged attorney-in-fact of Ishwar, to
assign the rights of petitioner Ishwar to Nirmla. While
the primary blame should be laid at the doorstep of
Choithram, Ortigas is not entirely without fault. It
should have required Choithram to secure another
power of attorney from Ishwar. For recklessly
believing the pretension of Choithram that his power
of attorney was still good, it must, therefore, share in
the latter's liability to Ishwar.
PNB VS LO
Facts:
1916 – Severo Eugenio Lo and Ng Khey Ling
together with J.A. Say Lian Ping, Ko Tiao Hun, On
Yem Ke Lam and Co Sieng Peng formed a
commercial partnership under the name of “Tai Sing
Co.,” with a capital of P40,000 contributed by said
partners.
Articles of Copartnership states that:
Partnership was to last for 5 years from after the
date of its organization
Purpose: to do business in the City of Iloilo or in any
other part of the Philippines the partners might
desire; purchase and sale of merchandise, goods,
and native, as well as Chinese and Japanese
products
J.A. Say Lian Ping was appointed general manager
A. Say Lian Ping executed a power of attorney in
favor of A. Y. Kelam, authorizing him to act in his
stead as manager and administrator of “Tai Sing &
Co.” and to obtain a loan of P8,000 in current
account from PNB.
Kelam mortgaged certain personal property of the
partnership.
The credit was renewed several times and Kelam, as by the board nor was the person who subscribed
attorney-in-fact of “Tai Sing & Co., executed a chattel said contract authorized under the articles of
mortgage in favor of PNB as security as security for copartnership
a loan P20,000.
Trial Court: in favor of PNB
This mortgage was again renewed and Kelam as
ISSUE:
attorney-in-fact of “Tai Sing & Co.” executed another
chattel mortgage for the said sum of P20,000. Whether or not “Tai Sing & Co.” is a general
partnership in that the appellants can be held liable
1920 – Yap Seng, Severo Lo, Kelam and Ng Khey
to pay PNB
Ling, the latter represented by M. Pineda Tayenko,
executed a power of attorney in favor of Sy Tit. HELD: Yes. “Tai Sing & Co.” is a general partnership
By virtue of the power of attorney, Sy Tit RATIO:
representing “Tai Sing & Co.” obtained a credit of
Appellants admit and it appears from the articles of
P20,000 from PNB in 1921 and executed a chattel
copartnership that “Tai Sing & Co.” is a general
mortgage on certain personal property belonging to
partnership and it was registered in the mercantile
the partnership.
register of Iloilo.
Defendants had been using this commercial credit in
The fact that the partners opt to use “Tai Sing & Co.”
a current account with the plaintiff bank from 1918 –
as the firm name does not affect the liability of the
1922 and as of December 31, 1924 the debit
general partners to third parties under Article127 of
balance of this account P 20, 239.
the Code of Commerce. Jurisprudence states that:
PNB claims in the complaint this amount and an
The object of article 126 of the Code of Commerce in
interest of P16, 518.74.
requiring a general partnership to transact business
Eugenio Lo’s defense: under the name of all its members, of several of
them, or of one only, is to protect the public from
“Tai Sing & Co.” was not a general partnership.
imposition and fraud
Commercial credit in current account which Tai Sing
& Co. obtained from PNB had not been authorized
It is for the protection of the creditors rather than of
the partners themselves.
The law must be unlawful and unenforceable only as
between the partners and at the instance of the
violating party, but not in the sense of depriving
innocent parties of their rights who may have dealt
with the offenders in ignorance of the latter having
violated the law.
Contracts entered into by commercial associations
defectively organized are valid when voluntarily
executed by the parties, and the only question is
whether or not they complied with the agreement.
Therefore, the defendants cannot invoke in their
defense the anomaly in the firm name which they
themselves adopted.
As to the alleged death of the manager, Say Lian
Ping before Kelam executed the contracts of
mortgage with PNB, this would not affect the liability
of the partnership
Kelam was a partner who contracted in the name of
the partnership and the other partners did not object
Lo, Khey Ling, and Yap Seng appointed Sy Tit as
manager, and he obtained from PNB the credit in
current account
Trial Court correctly held defendants to be jointly and
severally liable to PNB
This is in accordance with Article 127 of the Code of
Commerce “all the members of a general
partnership, be they managing partners thereof or
not, shall be personally and solidarily liable with all
their property, for the results of the transactions
made in the name and for the account of the
partnership, under the signature of the latter, and by
a person authorized to use it.”
COMPANIA MARITAMA VS MUNOZ
FACTS: In 1905, Francisco Muñoz, Emilio Muñoz,
and Rafael Naval formed an ordinary general
mercantile partnership in accordance with the Code
of Commerce. They named the partnership
“Francisco Muñoz & Sons”. Francisco was the
capitalist partner while the other two were industrial
partners. In the articles of partnership, it was agreed
upon by the three that for profits, Francisco shall
have a 3/4th share while the other two would have
1/8th each. For losses, only Francisco shall bear it.
Later, the partnership was sued by La Compañia
Martitama for collection of sum of money amounting
to P26,828.30. The partnership lost the case and
was ordered to make said payment; that in case the
partnership can’t pay the debt, all the partners
should be liable for it.
The ruling is in accordance with Article 127 of the
Code of Commerce which states:
All the members of the general copartnership, be
they or be they not managing partners of the same,
are liable personally and in solidum with all their
property for the results of the transactions made in
the name and for the account of the partnership,
under the signature of the latter, and by a person
authorized to make use thereof. (emphasis supplied)
Francisco now argues that the industrial partners
should NOT be liable pursuant to Article 141 of the
Code of Commerce which states:
Losses shall be charged in the same
proportion among the partners who have contributed
capital, without including those who have not, unless
by special agreement the latter have been
constituted as participants therein. (emphasis
supplied)
ISSUE: Whether or not the industrial partners are
liable to third parties like La Compañia Martitama.
HELD: Yes. The controlling law is Article 127. There
is no injustice in imposing this liability upon the
industrial partners. They have a voice in the
management of the business, if no manager has
been named in the articles; they share in the profits
and as to third persons it is no more than right that
they should share in the obligations. It is admitted
that if in this case there had been a capitalist partner
who had contributed only P100 he would be liable for
this entire debt of P26,000.
Article 141 relates exclusively to the settlement of
the partnership affairs among the partners
themselves and has nothing to do with the liability of
the partners to third persons; that each one of the
industrial partners is liable to third persons for the
debts of the firm; that if he has paid such debts out of
his private property during the life of the partnership,
when its affairs are settled he is entitled to credit for
the amount so paid, and if it results that there is not
enough property in the partnership to pay him, then
the capitalist partners must pay him.
In relation to this, the Supreme Court noted that
partnerships under the Civil Code provides for a
scenario where all partners are industrial partners
(like when it is a partnership for the exercise of a
profession). In such case, if it is permitted that
industrial partners are not liable to third persons then
such third persons would get practically nothing from
such partnerships if the latter is indebted.
SANTIAGO SYJUCO VS CASTRO
FACTS: Eugenio Lim, along with his brothers, all
hereinafter collectively called the Lims, borrowed
from petitioner Santiago Syjuco, Inc. (hereinafter,
Syjuco only) the sum of 800,000.00. The loan was
given on the security of a first mortgage on property
registered in the names of said borrowers as owners
in common. Thereafter, additional loans on the
same security were obtained by the Lims from
Syjuco, so that the aggregate of the loans stood at
2,460,000.00, exclusive of interest. When the
obligation
matured,the Lims failed to pay it despite demands th
erefor and consequently, Syjuco caused extra-
judicialproceedings for the foreclosure of the
mortgage and for the Sheriff of Manila to execute the
scheduled auction sale. The attempt to foreclose
triggered off a legal battle that has dragged on for 20
years, through 5 cases in the courts, one of which
the respondents advocated the theory that the
mortgage, which they had individually constituted,
in fact no longer belonged to them, having
been earlier deeded over by them to the partnership,
“Heirs of Hugo Lim”, making the said mortgage void
because it was executed by them without authority
from the partnership. Judgment was rendered by the
trial court declaring void the mortgage in question
because it was executed by the Lims without
authority from the partnership which was and had
been the exclusive owner of the mortgaged property,
and making permanent an injunction against the
foreclosure sale. Syjuco filed an instant petition for
certiorari, prohibition and mandamus. It prays in its
petition that the default judgment rendered against it
by Judge Castro be annuled on the ground of,
among others, estoppel, res judicata, and Article
1819 of the Civil Code.
ISSUE:
Whether or not the lower court erred in deciding the
case.
HELD:
Yes. The court holds that the respondent partnership
was inescapably chargeable with knowledge of the
mortgage executed by all the partners thereof, and
therefore its silence and failure to impugn said
mortgage within a reasonable time, let alone a space
of more than 17 years, brought into play the doctrine
of estoppel to preclude any attempt to avoid the
mortgage as allegedly unauthorized. Equally or even
more preclusive of the respondent partnership’s
claim to the mortgaged
propertyis the last paragraph of Art. 1819 of the Civil
Code, which contemplates a situation similar to the
case at bar. It states that ‘where the title to real
property is in the names of all the partners, a
conveyance executed by all the partners passes all
their rights in such property.’ Consequently, those
members' acts, declarations and omissions cannot
be deemed to be simply the individual acts of said
members, but in fact and in law, those of the
partnership. Finally, the Court emphasizes that the
right of the Lims to assert the existence of the
partnership could have been stressed at the time
they instituted their first action, considering that the
actions involved property supposedly belonging to it,
and therefore, the partnership was the real party in
interest. What was done by them was to split their
cause of action in violation of the well known rule
that only one suit may be instituted for a single cause
of action. Hence, the court orders that the assailed
judgment be declared null and void and the
complaint be dismissed from being barred by prior
judgment and estoppel, and for lack of merit.
MUNASQUE VS COURT OF APPEALS
FACTS:
Elmo Muñasque, in behalf of “Galan and Muñasque”
partnership as Contractor,entered into a written
contract with Tropical Commercial Co., through its
branch
manager Ramon Pons, for remodelling of Tropical’s
building in Cebu. The consideration for the entire
services is P25,000 to be paid: 30% upon signing
of contract, and balance on 3 equal instalments of
P6,000 every 15working days. First payment of
check worth P7,000 was payable to Muñasque,
who indorsed it to Galan for purposes of depositing
the amount and paying the materials already used.
But since Galan allegedly misappropriated
P6,183.37 of the check for personal use, Muñasque
refused to indorse the second check worth
P6,000. Galan then informed Tropical
of the “misunderstanding” between him and Muñasq
ue and this prompted Tropical to change the payee o
f the second check from Muñasque to “Galan andAs
sociates” (the duly registered name of Galan and Mu
ñasque partnership).Despite the misappropriation,
Muñasque alone was able to finish the project. The
two remaining checks were properly issued to
Muñasque. Muñasque filed a complaint for payment
of sum of money plus damages against Galan,
Tropical and Pons for the amount covered by the first
and second checks.
Cebu Southern Hardware Co and Blue Diamond Gla
ss Palace were allowed as intervenors having legal
interest claiming against Muñasue and Galan for
material sused.
TC:-Muñasque and Pons jointly and severally liable
to intervenors-Tropical and Pons absolved
CA affirmed with modification:-Muñasque and Pons
jointly liable to intervenors
Issue:
1.W/N Muñasque and Galan are partners?
2.W/N payment made by Tropical to Galan was
“good payment”?
3.W/N Galan should shoulder exclusively the amount
s payable to theintervenors (granting he
misappropriated the amount from the two checks)?
HELD:
1.YES. Tropical had every right to presume the
existence of the partnership:
a.Contract states that agreement was entered into by
“Galan andMuñasque”
b.The first check issue in the name of Muñasque
was indorsed to Galan The relationship was made to
appear as a partnership.
2.YES. Muñasque and Galan were partners when
the debts to the intervenors were incurred, hence,
they are also liable to third persons who extended
credit to their partnership.
DELUAO VS CASTEEL
FACTS: Casteel was the original occupant and
applicant of a fishpond area since before the last
World War. He wanted to preclude subsequent
applicants from entering and spreading themselves
within the area by expanding his occupation thereof
by the construction of dikes and the cultivation of
marketable fishes.-Thus, he borrowed P27, 000 from
the Deluaos to finance needed improvements for the
fishpond, and was compelled by force of this
circumstance to enter into the contract of
partnership, with an agreement to divide the fishpond
after the award. Eventually, Casteel administered the
said property and single-handedly opposed rival
applicants who occupied portions of the fishpond
area. He relentlessly pursued his claim to the said
area up to the Office of the DANR Secretary, until it
was finally awarded to him.
Issue: WON the parties can now validly divide the
said fishpond as agreed upon by them? NO.
Ruling:
Spouses Deluaos’ statement that the beneficial right
over the fishpond in question is the "specific
partnership property" contemplated by art. 1811 of
the Civil Code is incorrect. A reading of the said
provision will show that what is meant is tangible
property, such as a car, truck or a piece of land, but
not an intangible thing such as the beneficial right to
a fishpond. If what they have in mind is the fishpond
itself, they are grossly in error. A fishpond of the
public domain can neve rbe considered a specific
partnership property because only its use and
enjoyment — never its title or ownership — is
granted to specific private persons.-Since we held as
illegal the second part of the contract of partnership
between the parties to divide the fishpond between
them after the award, a fortiori, no rights or
obligations could have arisen therefrom.
Inescapably, no trust could have resulted because
trust is founded on equity and can never result from
an act violative of the law. Art. 1452 of the Civil Code
does not support the appellees' stand because it
contemplates an agreement between two or more
persons to purchase property — capable of private
ownership — the legal title of which is to be taken
in the name of one of them for the benefitof all. In the
case at bar, the parties did not agree to purchase the
fishpond, and even if they did, such is prohibited by
law, a fishpond of the public domain not being
susceptible of private ownership.-It must be
observed that, despite the decisions of the DANR
Secretary in DANR cases 353 and 353-B awarding
the area to Casteel, and despite the latter's proposal
that they divide the fishpond between them,
the Deluaos unequivocally expressed in their
aforequoted letter their decision not to share the
fishpond with Casteel. This produced the dissolution
of the entire contract of partnership (to jointly
administer and to divide the fishpond after the
award) between the parties, not to mention its
automatic dissolution for being contrary to law.
PetItioner’s final proposition that only by giving effect
to the confirmed intention of the parties may the
cause of equity and justice be served, we must
state that since the contract of service is contrary to
law and, therefore, null and void, it is not and can
never be considered as the law between the parties.
LIM TANHU VS RAMOLETE
FACTS:
Private respondent Tan Put alleged that she is the
widow of Tee Hoon Lim Po Chuan, who was a
partner and practically the owner who has controlling
interest of Glory Commercial Company and a
Chinese Citizen until his death. Defendant Antonio
Lim Tanhu and Alfonso Leonardo Ng Sua were
partners in name but they were mere employees of
Po Chuan and were naturalized Filipino
Citizens. Tan Put filed complaint against spouses-
petitoner Lim Tanhu and Dy Ochay including their
son Tech Chuan and the other spouses-petitoner Ng
Sua and Co Oyo including also their son Eng Chong
Leonardo, that through fraud and machination took
actual and active management of the partnership
and that she alleged entitlement to share not only in
the capital and profits of the partnership but also in
the other assets, both real and personal, acquired by
the partnership with funds of the latter during its
lifetime."
According to the petitioners, Ang Siok Tin is the
legitimate wife, still living, and with whom Tee Hoon
had four legitimate children, a twin born in 1942, and
two others born in 1949 and 1965, all presently
residing in Hong Kong. Tee Hoon died in 1966 and
as a result of which the partnership was dissolved
and what corresponded to him were all given to his
legitimate wife and children.
Tan Put prior of her alleged marriage with Tee Hoon
on 1949, was engaged in the drugstore business;
that not long after her marriage, upon the suggestion
of the latter sold her drugstore for P125,000.00
which amount she gave to her husband as
investment in Glory Commercial Co. sometime in
1950; that after the investment of the above-stated
amount in the partnership its business flourished and
it embarked in the import business and also engaged
in the wholesale and retail trade of cement and GI
sheets and under huge profits.
Defendants interpose that Tan Put knew and was
are that she was merely the common-law wife of Tee
Hoon. Tan Put and Tee Hoon were childless but the
former had a foster child, Antonio Nunez.
ISSUE: Whether Tan Put, as she alleged being
married with Tee Hoon, can claim from the company
of the latter’s share.
HELD:
Under Article 55 of the Civil Code, “the declaration of
the contracting parties that they take each other as
husband and wife "shall be set forth in an instrument"
signed by the parties as well as by their witnesses and
the person solemnizing the marriage. Accordingly, the
primary evidence of a marriage must be an authentic
copy of the marriage contract”. While a marriage may had also settled property interests in the payment of
also be proved by other competent evidence, the P40,000.
absence of the contract must first be satisfactorily
IN VIEW OF ALL THE FOREGOING, the petition is
explained. Surely, the certification of the person who
granted. All proceedings held in respondent court in
allegedly solemnized a marriage is not admissible
its Civil Case No. 12328 subsequent to the order of
evidence of such marriage unless proof of loss of the
dismissal of October 21, 1974 are hereby annulled
contract or of any other satisfactory reason for its non-
and set aside, particularly the ex-parteproceedings
production is first presented to the court. In the case
against petitioners and the decision on December 20,
at bar, the purported certification issued by a Mons.
1974. Respondent court is hereby ordered to enter an
Jose M. Recoleto, Bishop, Philippine Independent
order extending the effects of its order of dismissal of
Church, Cebu City, is not, therefore, competent
the action dated October 21, 1974 to herein
evidence, there being absolutely no showing as to
petitioners Antonio Lim Tanhu, Dy Ochay, Alfonso
unavailability of the marriage contract and, indeed, as
Leonardo Ng Sua and Co Oyo. And respondent court
to the authenticity of the signature of said certifier, the
is hereby permanently enjoined from taking any
jurat allegedly signed by a second assistant provincial
further action in said civil case gave and except as
fiscal not being authorized by law, since it is not part
herein indicated. Costs against private respondent.
of the functions of his office. Besides, inasmuch as the
bishop did not testify, the same is hearsay.
An agreement with Tee Hoon was shown and signed EUROTECH INDUSTRIAL VS CUIZON
by Tan Put that she received P40,000 for her FACTS: Eurotech is engaged in the business of
subsistence when they terminated their relationship of importation and distribution of various European
common-law marriage and promised not to interfere industrial equipment. It has as one of its customers
with each other’s affairs since they are incompatible Impact Systems Sales which is a sole proprietorship
owned by Erwin Cuizon.
and not in the position to keep living together
permanently. Hence, this document not only proves Eurotech
that her relation was that of a common-law wife but sold to Impact Systems various products allegedly a
mounting to P91,338.00. Cuizonssought to buy from
Eurotech 1 unit of sludge pump valued at
P250,000.00 with Cuizons making a down payment
of P50,000.00. When the sludge pump arrived from
the United Kingdom, Eurotech refused to deliver the
same to Cuizons
without their having fully settled their indebtedness to
Eurotech. Thus, Edwin Cuizon and Alberto de Jesus,
general manager of Eurotech, executed a Deed of
Assignment of receivables in favor of Eurotech.
Cuizons, despite the existence of the Deed of
Assignment, proceeded to collect from Toledo Power
Company the amount of P365,135.29. Eurotech
made several demands upon Cuizons to pay their
obligations. As a result, Cuizons were able to make
partial payments to Eurotech. Cuizons’ total
obligations stood at P295,000.00 excluding interests
and attorney’s fees.
Edwin Cuizon alleged that he is not a real party in
interest in this case. According to him, he was acting
as mere agent of his principal, which was the Impact
Systems, in his transaction with Eurotech and the
latter was very much aware of this fact.
ISSUE:
WON Edwin exceeded his authority when he signed
the Deed of Assignment thereby binding himself
personally to pay the obligations to Eurotech
HELD:
No.
Edwin insists that he was a mere agent of Impact
Systems which is owned by Erwin and that his status
as such is known even to Eurotech as it is alleged in
the Complaint that he is being sued in his capacity
as the sales manager of the said business venture.
Likewise, Edwin points to the Deed of Assignment
which clearly states that he was acting as a
representative of Impact Systems in said transaction.
Art. 1897. The agent who acts as such is not
personally liable to the party with whom he contracts,
unless he expressly binds himself or exceeds the
limits of his authority without giving such party
sufficient notice of his powers.
In a contract of agency , a person binds himself to
render some service or to do something in
representation or on behalf of another with
the latter’s consent. Its purpose is to extend the
personality of the principal or the party for whom
another acts and from whom he or she derives the
authority to act. The basis of agency is
representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of
his authority and said acts have the same legal effect
as if they were personally executed by the principal.
Elements of the contract of agency: (1) consent,
express or implied, of the parties to establish the
relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority
An agent, who acts as such, is not personally liable
to the party with whom he contracts. There are
2instances when an agent becomes personally liable
to a third person. The first is when he expressly
binds himself to the obligation and the second is
when he exceeds his authority. In the last instance,
the agent can be held liable if he does not give the
third party sufficient notice of his powers. Edwin does
not fall within any of the exceptions contained in Art.
1897.
In the absence of an agreement to the contrary, a
managing agent may enter into any contracts that
he deems reasonably necessary or requisite for
the protection of the interests of his principal
entrusted to his management.
Edwin Cuizon acted well-within his authority when he
signed the Deed of Assignment. Eurotech refused to
deliver the 1 unit of sludge pump unless it received,
in full, the payment for Impact Systems’
indebtedness. Impact Systems desperately needed
the sludge pump for its business since after it paid
the amount of P50,000.00 as down payment it still
persisted in negotiating with Eurotech which
culminated in the execution of the Deed of
Assignment of its receivables from Toledo Power
Company. The significant amount of time spent on
the negotiation for the sale of the sludge pump
underscores Impact Systems’ perseverance to get
hold of the said equipment. Edwin’s participation in
the Deed of Assignment was “reasonably necessary”
or was required in order for him to protect the
business of his principal
BALATAZAR VS OMBUDSMAN
FACTS: Paciencia Regala owns a seven (7)-hectare
fishpond located at Sasmuan, Pampanga. Her
Attorney-in-Fact Faustino R. Mercado leased the
fishpond to Eduardo Lapid for a three (3)-year
period. Lessee Eduardo Lapid in turn sub-leased the
fishpond to Rafael Lopez during the last seven
(7) months of the original lease. Ernesto Salenga
was hired by EduardoLapid as fishpond watchman
(bante-encargado). In the sub-lease, Rafael Lopez
rehired respondent Salenga. Ernesto Salenga, sent
the demand letter to Rafael Lopez and Lourdes
Lapid for unpaid salaries and non-payment of the
10% share in the harvest. Salenga was promted to as Provincial Agrarian Adjudicator has no jurisdiction
file a Complaint over a complaint where there exist no tenancy
before the Provincial Agrarian Reform Adjudication relationship?
Board (PARAB), Region III, San Fernando,
HELD: The "real-party-in interest" is "the party who
Pampanga docketed as DARAB Case No. 552-P’93
stands to be benefited or injured by the judgment in
entitled Ernesto R. Salenga v. Rafael L. Lopez and
the suit or the party entitled to the avails of the suit.
Lourdes L. Lapid for Maintenance of Peaceful
The Complaint-Affidavit filed before the Office of the
Possession, Collection of Sum of Money and
Ombudsman, there is no question on his authority
Supervision of Harvest. Pending resolution of the
and legal standing. The Ombudsman can act on
agrarian case, the instant case was instituted by
anonymous complaints and motu proprio inquire into
petitioner Antonio Baltazar, an alleged
alleged improper official acts or omissions from
nephew of Faustino Mercado, through a Complaint-
whatever source, e.g., a newspaper. Faustino
Affidavit against private respondents
Mercado, is an agent himself and as such cannot
before the Office of theOmbudsman which was
further delegate his agency to another. An agent
docketed as OMB-1-94-3425 entitled Antonio B.
cannot delegate to another the same agency. Re-
Baltazar v. Eulogio Mariano, Jose Jimenez,
delegation of the agency would be detrimental to the
Jr.,Toribio Ilao, Jr. and Ernesto Salenga for violation
principal as the second agent has no privity of
of RA 3019.
contract with the former. In the instant case,
Petitioner maintains that respondent Ilao, Jr. had petitioner has no privity of contract with Paciencia
no jurisdiction to hear and act on DARAB Case No. Regala, owner of the fishpond and principal of
552-P’93 filed by respondent Salenga as there was Faustino Mercado. The facts clearly show that it was
no tenancy relation between respondent Salenga not the Ombudsman through the OSP who allowed
and Rafael L. Lopez, and thus, the complaint was respondent Ilao, Jr. to submit his Counter-Affidavit. It
dismissible on its face. was the Sandiganbayan who granted the prayed for
re-investigation and ordered the OSP to conduct
ISSUE: Whether or not the petitioner has legal
the re investigation . The OSP simply followed the
standing to pursue the instant petition? Whether or
graft court’s directive to conduct the re-investigation
not the Ombudsman likewise erred in reversing his
after the Counter-Affidavit of respondent Ilao, Jr. was
own resolution where it was resolved that accused
filed. Indeed, petitioner did not contest nor question
the August 29,1997 Order of the graft court.
Moreover, petitioner did not file any reply-affidavit in
the re-investigation despite notice.
The nature of the case is determined by the settled
rule that jurisdiction over the subject matter is
determined by the allegations of the complaint. The
nature of an action is determined by the material
averments in the complaint and the character of the
relief sought not by the defenses asserted in the
answer or motion to dismiss. Respondent Salenga’s
complaint and its attachment clearly spells out the
jurisdictional allegations that he is an agricultural
tenant in possession of the fishpond and is about to
be ejected from it, clearly, respondent Ilao, Jr. could
not be faulted in assuming jurisdiction as said
allegations characterize an agricultural dispute.
Besides, whatever defense asserted in an answer or
motion to dismiss is not to be considered in resolving
the issue on jurisdiction as it cannot be made
dependent upon the allegations of the defendant.
ONG VS COURT OF APPEALS
Facts: Petitioner Jaime Ong and Respondent
spouses Robles an “Agreement of Purchase and
Sale” (Nota Bene: Contract to Sell) with regards two
parcels of land with a rice mill and piggery situated at
Quezon for P2M. As part of the terms and
conditions, petitioner shall advance downpayment of
300K, shall pay the loan of the spouses of the bank,
and will pay the balance of the purchase price
quarterly.
Petitioner was able to pay the downpayment and
subsequently occupied the property. However, he
gave the spouses postdated checks which were
dishonored due to insufficient funds. To make it
worse, he was not able to fully pay the loan of the
spouses in the bank.
The bank threatened to foreclose the mortgage, so
what the spouses did was to sell three of the
transformers of the rice mill in order to satisfy the
loan obligation.
Respondents now want to rescind the contract on
account of Ong’s non-fulfillment of obligation and
seek to recover the property with damages.
RTC upheld the rescission and ordered mutual
restitution as well as awarded exemplary damages.
The CA deleted the award of exemplary damages.
Issue:
1. WON the respondent spouses may rescind the
contract? YES, but rescind through 1191 and not
1381.
2. WON there was novation of obligation? NO. (But
we won’t tackle it here yet.)
Held: The Robles spouses bound themselves to
deliver a deed of absolute sale and clean title
covering the two parcels of land upon full payment
by the buyer of the purchase price of P2,000,000.00
(since it is a contract to sell diba?) This promise to
sell was subject to the fulfillment of the suspensive
condition of full payment of the purchase price by the
petitioner. Petitioner, however, failed to complete
payment of the purchase price. The non-fulfillment of
the condition of full payment rendered the contract to
sell ineffective and without force and effect.
It must be stressed that the breach contemplated in
Article 1191 of the New Civil Code is the obligor’s
failure to comply with an obligation. Failure to pay, in
this instance, is not even a breach but merely an
event which prevents the vendor’s obligation to
convey title from acquiring binding force. Hence, the
agreement of the parties in the case at bench may
be set aside, but not because of a breach on the part
of petitioner for failure to complete payment of the
purchase price. Rather, his failure to do so brought
about a situation which prevented the obligation of
respondent spouses to convey title from acquiring an
obligatory force.
1191 vs. 1381
Although both presuppose contracts validly entered
into and subsisting and both require mutual
restitution when proper, they are not entirely
identical. Articles 1380 is a remedy granted by law to
the contracting parties and even to third persons, to
secure the reparation of damages caused to them by
a contract, even if this should be valid, by restoration
of things to their condition at the moment prior to the
celebration of the contract. It implies a contract,
which even if initially valid, produces a lesion or a
pecuniary damage to someone. Article 1191 of the
New Civil Code refers to rescission applicable to
reciprocal obligations. Rescission under Article 1191
is a principal action which is based on breach of a
party, while rescission under Article 1381 is a
subsidiary action limited to cases of rescissible
contracts.
SUNANCE INTERNATIONAL VS NLRC
FACTS: There is an implied revocation of an agency
relationship when after the termination of the
original employment contract, the foreign principal
directly negotiated with the employee and entered into
a new and separate employment contract.
Respondent Divina Montehermozo is a domestic
helper deployed to Taiwan by Sunace
International Management Services (Sunace) under a
12-month contract. Such employment was made with
the assistance of Taiwanese broker Edmund Wang.
After the expiration of the contract, Montehermozo
continued her employment with her Taiwanese
employer for another 2 years.
When Montehermozo returned to the Philippines, she
filed a complaint against Sunace, Wang, and her
Taiwanese employer before the National Labor
Relations Commission (NLRC). She alleges that she
was underpaid and was jailed for three months in
Taiwan. She further alleges that the 2-
year extension of her employment contract was with
the consent and knowledge of Sunace. Sunace, on
the other hand, denied all the allegations.
The Labor Arbiter ruled in favor of Montehermozo and
found Sunace liable thereof. The National Labor
Relations Commission and Court of Appeals affirmed
the labor arbiter’s decision. Hence, the filing of this
appeal.
ISSUE:
Whether or not the 2-year extension of
Montehermozo’s employment was made with the
knowledge and consent of Sunace
HELD:
Contrary to the Court of Appeals finding, the alleged
continuous communication was with the Taiwanese
broker Wang, not with the foreign employer.
The finding of the Court of Appeals solely on the basis
of the telefax message written by Wang to Sunace,
that Sunace continually communicated with the
foreign “principal” (sic) and therefore was aware of
and had consented to the execution of
the extension of the contract is misplaced. The
message does not provide evidence that Sunace was
privy to the new contract executed after the expiration
on February 1, 1998 of the original contract. That
Sunace and the Taiwanese broker communicated
regarding Montehermozo’s allegedly withheld savings
does not necessarily mean that Sunace ratified
the extension of the contract.
As can be seen from that letter communication, it was
just an information given to Sunace that
Montehermozo had taken already her savings from
her foreign employer and that no deduction was made
on her salary. It contains nothing about
the extension or Sunace’s consent thereto.
Parenthetically, since the telefax message is dated
February 21, 2000, it is safe to assume that it was sent
to enlighten Sunace who had been directed, by
Summons issued on February 15, 2000, to appear on
February 28, 2000 for a mandatory conference
following Montehermozo’s filing of the complaint on
February 14, 2000.
Respecting the decision of Court of Appeals following
as agent of its foreign principal, [Sunace] cannot
profess ignorance of such an extension as obviously,
the act of its
principal extending [Montehermozo’s] employment
contract necessarily bound it, it too is a
misapplication, a misapplication of the theory of
imputed knowledge.
The theory of imputed knowledge ascribes
the knowledge of the agent, Sunace, to the principal,
employer, not the other way around. The knowledge
of the principal-foreign employer cannot, therefore, be
imputed to its agent Sunace.
There being no substantial proof that Sunace knew of
and consented to be bound under the 2-
year employment contract extension, it cannot be said
to be privy thereto. As such, it and its “owner” cannot
be held solidarily liable for any of Montehermozo’s
claims arising from the 2-year employment extension.
As the New Civil Code provides, Contracts take effect
only between the parties, their assigns, and heirs,
except in case where the rights and obligations arising
from the contract are not transmissible by their nature,
or by stipulation or by provision of law.
Furthermore, as Sunace correctly points out, there
was an implied revocation of its agency relationship
with its foreign principal when, after
the termination of the originalemployment contract,
the foreign principal directly negotiated with
Montehermozo and entered into a new and
separate employment contract in Taiwan. Article
1924 of the New Civil Code states that the agency is
revoked if the principal directly manages the
business entrusted to the agent, dealing directly with
third persons.
SEVILLA VS CA
Facts: The petitioners invoke the provisions on
human relations of the Civil Code in this appeal by
certiorari. 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
former-s use as a branch office. In the said contract
the party of the third part held herself solidarily liable
with the party of the 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 Una 0. 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.
On November 24, 1961 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.
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 ordered both cases dismiss for lack
of merit.
In her appeal, Lina Sevilla claims that a joint
bussiness 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.

Issue:
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.?
Held:
The trial court held for the private respondent on the
premise that the private respondent, Tourist World
Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the
premises. It likewise found the petitioner, Lina
Sevilla, to be a mere employee of said Tourist World
Service, Inc. and as such, she was bound by the
acts of her employer. The respondent Court of
Appeal rendered an affirmance.
In this jurisdiction, there has been no uniform test to
determine the evidence 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.
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 severally to
indemnify the petitioner, Lina Sevilla, the sum of
25,00.00 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.
HAHN VS COURT OF APPEALS
Facts:
1.Alfred Hahn is a Filipino citizen
doing business under the name and style "Hahn-
Manila."
2.Bayerische Motoren Werke Aktiengesellschaft (BM
W) is a nonresident foreign corporation existing
under the laws of the former Federal Republic of
Germany, with principal office at Munich, Germany.
3.In 1963, Hahn executed in favor of BMW a Deed of
Assignment with Special Power of Attorney which
essentially, makes Hahn as the exclusive dealer
of BMW in the Philippines. Moreover, it stated there
that Hahn and BMW “shall continue business
relations as has been usual in the past without a
formal contract."
4.In 1993, BMW and Columbia Motors Corp (CMC)
had a meeting which would grant CMC exclusive
dealership of BMW cars.
5.Hahn was informed later that BMW was
dissatisfied with how it carrying its business.
However, BMW expressed willingness to continue
business relations with the petitioner on the basis of
a "standard BMW importer" contract, otherwise, it
said, if this was not acceptable to petitioner, BMW
would have no alternative but to terminate
petitioner's exclusive dealership effective June 30,
1993.
6.Hahn protested alleging that such termination is a
breach of the Deed of Assignment. Hahn insisted
that as long as the assignment of its trademark and
device subsisted, he remained BMW's exclusive
dealer in the Philippines because the assignment
was made inconsideration of the exclusive
dealership.
7.BMW, however, went on to terminate its dealership
with Hahn.
8.Hahn filed a complaint for
specific performance and damages in the RTC. RTC
issued a writ preliminary injunction.
9.BMW appealed to the CA. CA reversed on the
ground that Hahn is not an agent of BMW and that
BMW is “not doing business in the Phils.” By virtue of
the latter, the writ of preliminary injunction should not
have been issued since RTC did not have jurisdiction
over it.
Issue
W/N Hahn is agent or a distributor (or broker) in the
Philippines of BMW.
HELD:
There is nothing to support the appellate
court's finding that Hahn solicited orders alone and
for his own account and without "interference from,
let alone direction of, BMW. To the contrary, Hahn
claimed he took orders for BMW cars
and transmitted them to BMW.
Upon receipt of the orders, BMW fixed the down
payment and pricing charges, notified Hahn of the
scheduled production month for the orders, and
reconfirmed the orders by signing and returning to
Hahn the acceptance sheets. Payment was made by
the buyer directly to BMW. Title to cars purchased
passed directly to the buyer and Hahn never paid for
the purchase price of BMW cars sold in the
Philippines. Hahn was credited with a commission
equal to 14% of the purchase price upon the
invoicing of a vehicle order by BMW.
Upon confirmation in writing that the vehicles had
been registered in the Philippines and serviced by
him, Hahn received an additional 3% of the full
purchase price. Hahn performed after-sale services,
including, warranty services, for which he received
reimbursement from BMW. All orders were on
invoices and forms of BMW.
UYTENGU VS BADUEL
FACTS: Complainant is one of the heirs of Tirso
Uytengsu, Jr. He and his co-heirs had a pending
patent application. He alleges that sometime in
December 1998 respondent requested him to sign a
special power of attorney (SPA) authorizing Luis
Wee (Wee) and/or Thomas Jacobo (Jacobo) to
claim, demand, acknowledge and receive on his
behalf the certificates of title from the Register of
Deeds, General Santos City, Department of
Environment and Natural Resources and from any
government office or agency due to complainant and
his co-heirs by reason of their application for
Homestead Patent. Complainant refused to sign the
SPA as he wanted to obtain the documents
personally. The respondent argues that the
allegations of complainant are purely hearsay. He
stresses that complaint was instituted to harass him
because he was the counsel of an opposing litigant
against complainant’s corporation in an ejectment
case entitled “General Milling Corporation v.
Cebu Autometic Motors, Inc. and Tirso Uytengsu III.
Complainant charges that respondent committed an
act meriting disbarment when the latter caused to
have a special power of attorney, which the former
reused to sign earlier, executed by Mrs. Connie
Kokseng, former guardian of complainant and his co-
heirs, authorizing certain individuals to secure the
release from the Register of Deeds and other
government offices in General Santos City, titles and
other documents pertaining to complainant’s and his
co-heirs’ homestead application.
ISSUE: Whether or not the respondent has the
authority to represent the complainant in
their homestead patent application.
HELD: The relation of attorney and client is in many
respects one of agency and the general rules of
ordinary agency apply to such relation. The extent of
authority of a lawyer, when acting on behalf of his
client outside of court, is measured by the same test
as that which is applied to an ordinary agent. Such
being the case, even respondent himself can acquire
the certificates of title and other documents without
need of an SPA from complainant and his co-heirs.
In addition, the Court agrees with the investigating
commissioner that the allegations of complainant
constitutes mere hearsay evidence and may not be
admissible in any proceeding. It was proven that the
case at bar is without merit and that evidences are
weak and proved to be just hearsay
J-PHIL MARINE VS NLRC
FACTS: Worked as a cook on aboard vessels plying
overseas, Warlito E. Dumalaog was employed as a
cook on board vessels plying overseas. He filed a pro-
forma complaint on March 4,2002 before the National
Labor Relations Commission (NLRC) against J-Phil
Marine, Inc., its then president Jesus Candava, and
its foreign principal Norman Shipping Services.
The Labor Arbiter dismissed the complaint for lack of
merit. On appeal, the NLRC reversed the decision of
the Labor Arbiter. The Court of Appeals affirmed the
dismissal for failure to attach to the petition all material
documents and for defective verification and
certification. Consequently, a petition was filed before
the Court of Appeals.
While the case was pending in the Supreme Court,
the respondent entered into a compromise agreement
and signed Quitclaims and Release. The same has
been subscribed and sworn to before the Labor
Arbiter. Accordingly, the case was dismissed.
ISSUES: Whether or not the compromise agreement
entered into by the respondent, without his counsel, is
valid
HELD: A compromise agreement is valid as long as
the consideration is reasonable and the employee
signed the waiver voluntarily, with a full understanding
of what he was entering into.
A compromise agreement is valid as long as the
consideration is reasonable and the employee signed
the waiver voluntarily, with a full understanding of
what he was entering into. All that is required for the
compromise to be deemed voluntarily entered into is
personal and specific individual consent. Thus,
contrary to Dumalaoag's contention, the employee's
counsel need not be present at the time of the signing
of the compromise agreement.
The relation of attorney and client is in many respects
one of agency, and the general rules of agency apply
to such relation. The acts of an agent are deemed the
acts of the principal only if the agent acts within the
scope of his authority. The circumstances of this case
indicate that Dumalaoag's counsel is acting beyond
the scope of his authority in questioning the
compromise agreement.
LIM VS SABAN
Facts: Ybñez, owner of a lot entered into an Agency
agreement with Saban authorizing the latter to look
for a buyer of the Lot, with 200k as selling price
which he can mark up to cover commission and
transfer expenses. Saban sold the lot to Lim in the
amount of 600k. Lim issued four checks to Saban
but Ybañez asked Lim to cancel said checks and pay
the remaining amount directly to Ybañez. Saban filed
a case against Ybañez and Lim. Pending case,
Ybañez died without being substituted. RTC
dismissed Saban’s complaint, the four checks issued
by Lim were stale and non-negotiable and the Latter
was absolved. CA reversed the decision.
ISSUE:
Whether or not as agent, Saban is entitled to receive
his commission and Lim should pay the same.
RULING:
The court affirms the CA’s finding that agency was
not revoked since Ybañez requested that Lim stop
payment of the checks payable to Saban only after
the consummation of the sale. At that time, Saban
had already performed his obligation as agent when
the Deed of Absolute Sale was executed. To deprive
Saban of his commission subsequent to the sale
which was consummated through his efforts would
be a breach of his contract of agency.
The logical conclusion of Court is that Lim changed
her mind in agreeing to purchase the lot at 600k after
talking to Ybañez and realizing that Saban’s
commission was higher than the share of the owner.
It was sufficient to conclude Ybañez and Lim
connived to deprive Saban of his commission by
dealing with each other directly and reducing the
price and leaving nothing to compensate Saban for
his effort.
VELOSO VS COURT OF APPEALS
Applicable Provision: Art. 1878
Facts: Petitioner Francisco Veloso was the sole
owner of a registered parcel of land in Tondo,
Manila, which he acquired in 1957. His wife Irma,
armed with a general power of attorney, sold said lot
to the respondent spouses Escario in 1987.
Petitioner filed an action for annulment of the deed of
sale and reconveyance of property
Issue: Whether a general power of attorney may
authorize an agent to sell real property.
Held/Ratio: Yes. Although sale of real property
requires a special power of attorney, if a general
power of attorney expressly grants the power to sell
to the agent, there is no need to execute a separate
special power of attorney. The assailed power of
attorney had the following provision: “To buy or sell
land, more specifically TCT No. 49138” Thus, said
power of attorney sufficiently authorized the wife to
sell the property. Therefore, the sale is valid