JD 701: AGENCY, TRUST AND PARTNERSHIP
HEIRS OF TAN ENG KEE V. COURT OF APPEALS, G.R. NO. 126881,
[OCTOBER 3, 2000], 396 PHIL 68-86
FACTS:
During the World War II, Tan Eng Kee and Tan Eng Lay, pooling their resources
and industry together, entered into a partnership engaged in the business of selling
lumber and hardware and construction supplies. They named their enterprise
"Benguet Lumber" which they jointly managed until Tan Eng Kee's death. However,
petitioners claimed that Tan Eng Lay and his children caused the conversion of
the partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan Eng Kee and his
heirs of their rightful participation in the profits of the business. Petitioners prayed for
accounting of the partnership assets, and the dissolution, winding up and liquidation
thereof, and the equal division of the net assets of Benguet Lumber.
ISSUE:
Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet
Lumber.
RULING:
No, Tan Eng Kee and Tan Eng Lay were not partners in Benguet Lumber. The
Court has emphasized that in determining whether a partnership exists, these rules
shall apply: that persons who are not partners as to each other are not partners as to
third persons; that 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; that 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 which the returns are derived; that 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. In the light of the legal provision, the Court conclude that
Tan Eng Kee was only an employee, not a partner. Petitioners failed to show how
much their father, Tan Eng Kee, received, if any, as his share in the profits of Benguet
Lumber Company for any particular period. Hence, they failed to prove that Tan Eng
Kee and Tan Eng Lay intended to divide the profits of the business between
themselves, which is one of the essential features of a partnership. Thus, there being
no partnership, it follows that there is no dissolution, winding up or liquidation to speak
of.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
TOCAO V. COURT OF APPEALS, G.R. NO. 127405, [OCTOBER 4, 2000], 396
PHIL 166-186
FACTS:
Belo, Tocao and Anay entered into a joint venture for the importation and local
distribution of kitchen cookwares. Belo acted as capitalist, Tocao as president and
general manager, and Anay as head of the marketing department (considering her
experience and established relationship with West Bend Company, a manufacturer of
kitchen wares in Wisconsin, U.S.A) and later, vice-president for sales. They operated
a business under the name of Geminesse Enterprise, a sole proprietorship registered
in Marjorie Tocao's name. The parties agreed further that Anay would be entitled to a
certain percentage with regards to the annual net profits of the business, overriding
commission of the overall weekly production, the sales she would make; and for her
demonstration services. However, after undertaking the task of saving the business
on account of the unsatisfactory sales record in the US, Anay was illegally dismissed
from the joint venture. When Anay filed a complaint as to the damages incurred for the
illegal dismissal, Belo and Tocao asserted that their "alleged agreement" that was
"neither reduced in writing, nor ratified," was "either unenforceable or void or
inexistent, and that Anay admitted that Geminesse Enterprise was the sole
proprietorship of Marjorie Tocao.
ISSUE:
Whether or not a partnership exists between the respondent and petitioners.
RULING:
Yes, there exist a partnership between the respondent and petitioners. For an
entity 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. It may be constituted in any form. This implies that since a
contract of partnership is consensual, an oral contract of partnership is as good as a
written one. It is only when immovable property or real rights are involved that a public
instrument is necessary. In this case, private respondent contributed expertise in
engaging in the business of distributorship of cookware to the partnership and hence,
under the law, she was the industrial or managing partner. On the other hand,
petitioner Belo's 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. While Petitioner Tocao, a former ramp model, was also a
capitalist in the partnership. She claimed that she herself financed the business.
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. 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.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
SANTOS V. SPS. REYES, G.R. NO. 135813, [OCTOBER 25, 2001], 420 PHIL 313332
FACTS:
In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat
(15%) orally instituted a partnership with them as partners. Their venture is to set up
a lending business where it was agreed that Santos shall be financier and that Nieves
and Zabat shall contribute their industry. The percentages after their names denote
their share in the profit. Later, Nieves introduced Cesar Gragera to Santos. Gragera
was the chairman of a corporation. It was agreed that the partnership shall provide
loans to the employees of Gragera’s corporation and Gragera shall earn commission
from loan payments. In August 1986, the three partners put into writing their verbal
agreement to form the partnership. As earlier agreed, Santos shall finance and Nieves
shall do the daily cash flow more particularly from their dealings with Gragera, Zabat
on the other hand shall be a loan investigator. But then later, Nieves and Santos found
out that Zabat was engaged in another lending business which competes with their
partnership hence Zabat was expelled. The two continued with the partnership and
they took with them Nieves’ husband, Arsenio, who became their loan investigator.
Later, Santos accused the spouses of not remitting Gragera’s commissions to the
latter. He sued them for collection of sum of money. The spouses countered that
Santos merely filed the complaint because he did not want the spouses to get their
shares in the profits. Santos argued that the spouses, insofar as the dealing with
Gragera is concerned, are merely his employees. Santos alleged that there is a distinct
partnership between him and Gragera which is separate from the partnership formed
between him, Zabat and Nieves. The trial court as well as the Court of Appeals ruled
against Santos and ordered the latter to pay the shares of the spouses.
ISSUE:
Whether or not private respondents were partners/joint venturers and not
employees of Santos in connection with the agreement between Santos and Monte
Maria/Gragera.||
RULING:
Yes. The private respondents were partners/joint venturers with the petitioner
and not just mere employees. The Court emphasized that 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. 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 lion's share.
This stipulation clearly proved the establishment of a partnership. Nieves was not
merely petitioner's employee. She discharged her bookkeeping duties in accordance
with paragraphs 2 and 3 of the Agreement. The "Second Party" named in the
Agreement was none other than Nieves Reyes. The Court added that Arsenio's 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" to Arsenio, a factual finding of both courts was upheld
that Arsenio 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.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
VILLAREAL V. RAMIREZ, G.R. NO. 144214, [JULY 14, 2003], 453 PHIL 999-1013
FACTS:
On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose
formed a partnership with a capital of P750,000 for the operation of a restaurant and
catering business under the name "Aquarius Food House and Catering Services. On
September 5, 1984, Respondent Donaldo Efren C. Ramirez joined as a partner in the
business with a capital contribution of P250,000 paid by his parents. After Jesus Jose
withdrew from the partnership in January 1987, his capital contribution of P250,000
was refunded to him in cash by agreement of the partners. In the same month, without
prior knowledge of respondents, petitioners closed down the restaurant, allegedly
because of increased rental. The restaurant furniture and equipment were deposited
in the respondents' house for storage. Thereafter, respondent spouses wrote
petitioners, saying that they were no longer interested in continuing their partnership or
in reopening the restaurant, and that they were accepting the latter's offer to return
their capital contribution. In her another letter she informed the petitioners of the
deterioration of the restaurant furniture and equipment stored in their house and
reiterated the request for the return of their one-third share in the equity of
the partnership. When her written requests were left unheeded, respondents
subsequently filed a Complaint. Petitioners contended that respondents had been
paid, upon the turnover to them of furniture and equipment; and that the latter had no
right to demand a return of their equity because their share, together with the rest of
the capital of the partnership, had been spent as a result of irreversible business
losses.
ISSUE:
Whether petitioners are liable to respondents for the latter's share in
the partnership.
RULING:
No, petitioners are not liable to respondents for the latter's share in
the partnership. The court ruled that petitioners did not personally hold its equity or
assets except as managers of the partnership. "The partnership has a juridical
personality separate and distinct from that of each of the partners." Since the capital
was contributed to the partnership, not to petitioners, it is the partnership that must
refund the equity of the retiring partners, and the amount to be refunded is necessarily
limited to its total resources. In other words, it can only pay out what it has in its coffers,
which consists of all its assets. However, before the partners can be paid their shares,
the creditors of the partnership must first be compensated. After all the creditors have
been paid, whatever is left of the partnership assets becomes available for the
payment of the partners' shares. In the present case, the exact amount of refund
equivalent to respondents' one-third share in the partnership cannot be determined
until all the partnership assets will have been liquidated — in other words, sold and
converted to cash — and all partnership creditors, if any, must be paid.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
LITONJUA, JR. V. LITONJUA, SR., G.R. NOS. 166299-300, [DECEMBER 13,
2005], 513 PHIL 707-730
FACTS:
On or about 22 June 1973, Aurelio and Eduardo entered into a joint
venture/partnership for the continuation of their family business and common family
funds. This joint venture/partnership agreement was contained in a
memorandum addressed by Eduardo to his siblings, parents and other relatives. It
was then agreed upon between Aurelio and Eduardo that in consideration of Aurelio
retaining his share in the remaining family businesses (movie theater, shipping and
land development) and contributing his industry to the continued operation of these
businesses, Aurelio will be given P1 Million or 10% equity in all these businesses and
those to be subsequently acquired by them whichever is greater. In a span of 28 years,
Aurelio and Eduardo had accumulated in their joint venture/partnership various assets
including but not limited to the corporate defendants and their respective assets
consisting of real properties. But sometime in 1992, the relations between Aurelio and
Eduardo became sour so that Aurelio requested for an accounting and liquidation of
his share in the joint venture/partnership but these demands for complete accounting
and liquidation were not heeded. Aurelio filed a suit against his brother Eduardo and
several corporations for specific performance and accounting. Eduardo and the
corporate respondents, as defendants a quo, filed a joint ANSWER With Compulsory
Counterclaim denying under oath the material allegations of the complaint, more
particularly that portion thereof depicting petitioner and Eduardo as having entered
into a contract of partnership.
ISSUE:
Whether or not the CA erred on its decision that there was
no partnership created by the actionable document because this was not a public
instrument and immovable properties were contributed to the partnership.
RULING:
No, the CA did not err on its decision. The Court ruled that no valid partnership
existed between Aurelio and Eduardo because the said "memorandum" is null and
void for purposes of establishing the existence of a valid contract of partnership. The
memorandum on its face, contains typewritten entries, personal in tone, but is
unsigned and undated. As an unsigned document, there can be no quibbling that the
said memorandum does not meet the public instrumentation requirements exacted
under Article 1771 of the Civil Code. In context, the more important consideration is
that real property was contributed, in which case an inventory of the contributed
property duly signed by the parties should be attached to the public instrument, or
else there is legally no partnership to speak of. Indeed, because of the failure to
comply with the essential formalities of a valid contract, the purported
"partnership/joint venture" is legally inexistent and it produces no effect
whatsoever. Necessarily, a void or legally inexistent contract cannot be the source
of any contractual or legal right. Accordingly, the allegations in the complaint,
including the actionable document attached thereto, clearly demonstrates that
petitioner has NO valid contractual or legal right which could be violated by the
respondent.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
HEIRS OF LIM V. LIM, G.R. NO. 172690, [MARCH 3, 2010], 628 PHIL 40-51
FACTS:
A complaint for partition, accounting and damages was filed by the Heirs of
Jose Lim against Juliet Villa Lim, widow of the Elfedo Lim, who was the eldest son of
Jose and Cresencia Lim. The Petitioners alleged that the deceased Jose Lim and his
friends, Jimmy Yu and Norberto Uy, formed a partnership in 1980 to engage in the
trucking business with an initial contribution of ₱ 50,000.00 each. Also in the same
year, Jose gave his eldest son, Elfedo, ₱ 50,000.00 as the latter’s capital in the said
partnership. Upon Jose’s death, the heirs and partners agreed to continue the
business under the Management of Elfedo. Further, the shares of the partnership
profits and income formed part of the estate of Jose, held in trust by Elfedo. The
Petitioners’ gave Elfedo the authority to use, purchase, and acquire properties using
the said funds. Thus, he was never a partner thereof, but merely supervised and
managed the trucking business of the partners. On the other hand, the Respondent
claimed that Elfedo was a partner, stating that Jose gave him ₱ 50,000.00 as his
capital to the partnership. He managed the trucking business, which flourished through
his effort. Further, the partnership was able to engage in other business ventures and
acquire real properties. Thus, he was a partner separate and distinct from Jose,
especially after the latter died. His assets arising from the now-ceased partnership
must not be subject of the complaint. The Regional Trial Court (RTC) rendered its
decision in favor of the Petitioners to which the CA reversed upon appeal of the
respondent. Hence, this Petition.
ISSUE:
Whether or not Elfedo was a partner of the partnership formed by Jose and his
friends.
RULING:
Yes, Elfedo was a partner of the partnership formed by Jose and his friends.
The Court ruled that 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. In determining whether a partnership exists, Article 1769 of the Civil
Code particularly Paragraph 4 provides the rules to be applied which specifically
provides that the receipts 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 not such inference shall be
drawn if such profits were received in payment: (a) as a debt by installment 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; and, (e) as the consideration
for the sale of a goodwill of a business or other property by installments or otherwise.
Applying the legal provision above-mentioned, it was clearly established that Elfedo
himself was the partner of Jimmy and Norberto through the following circumstances:
(1) Jose gave Elfedo ₱ 50,000.00 as share in the partnership; (2) Elfedeo ran the
affairs of the partnership, having absolute control, power, and authority without any
intervention from the Petitioners; (3) all of the properties of the partnership were
registered under the name of Elfedo; (4) Elfedo did not receive wages or salaries from
the partnership, indicating that he was actually receiving shares of the profits of the
business; and (5) none of the Petitioners demanded periodic accounting accounting
from Elfedo during his lifetime. Thus, there is no denying that Elfedo was a partner
and not merely hired in the partnership of the trucking business.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
BENDECIO V. BAUTISTA, G.R. NO. 242087, [DECEMBER 7, 2021]
FACTS:
Ma. Julieta B. Bendecio and Merlyn Mascariñas are business partners who
borrowed from Virginia B. Bautista a total of P1,100,000.00 loan, with monthly
interest at 8%. According to Bautista, Bendecio informed her that Mascariñas would
be paying the loans by depositing a manager's check in her BDO account, but the
same never materialized. Instead, Mascariñas executed a promissory note in her
favor promising to pay her the total amount of the loan on August 23, 2013, with the
same interest rate. Still, neither Bendecio nor Mascariñas paid despite her oral
demands and demand letter. This led her to file a complaint before the RTC. On the
other hand, Bendencio countered that she was no longer obligated to pay Bautista
as she was already substituted by Mascariñas. As for Mascariñas, she claimed that
it was Bautista who proposed that the loan be assumed by her in order to relieve
Bendecio from her obligation with a promise to return Bendecio's checks.
Accordingly, she agreed to the arrangement on the condition that the loan be less
than three months. To show her good faith, she issued checks and executed a
promissory note indicating that her loan will mature in not less than 3 months but she
stopped her payment because Bautista was calling her banks to ask about her
financial status. However, both the RTC and CA decided in favor of Bautista for their
solidary liability is justified as evidence which shows that the loan was actually
obtained not by Bendecio alone, but by both parties in furtherance of their
business partnership.
ISSUE:
Whether or not the CA erred on its decision as to the solidary liability of the
petitioners.
RULING:
No, the CA did not err on their decision. The Court explained that pursuant to
Article 1816 of the Civil Code, the general rule is that a partner's obligation to third
persons with respect to the partnership liability is pro rata or joint which means that
a debtor is liable for the payment only of a proportionate part of the debt. The
exception to this is found in Article 1207, which states that there is solidary liability
when the obligation expressly so states, or when the law or the nature of the
obligation requires solidarity. Accordingly, a partner shall be solidarily liable to third
persons for the entire debt in the cases under Articles 1822, 1823 and 1824 of the
Civil Code. In this case, records show that the loss or injury endured by Bautista was
not only due to Bendecio's non-payment of the loan on the initial due date, but also
Mascariñas' failure to pay the same loan on the extended due date despite several
demands from Bautista. As such, both petitioners should be held solidarily liable for
the loan, the proceeds of which were used as capital for their lending business.
\
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
BUENVIAJE V. SPOUSES SALONGA, G.R. NO. 216023, [OCTOBER 5, 2016],
796 PHIL 775-799
FACTS:
Jebson, an entity engaged in the real estate business, entered into a Joint
Venture Agreemen (JVA) with Sps. Salonga through Bañez. Under the JVA, Sps.
Salonga, who owned 3 parcels of land, agreed for Jebson to construct 10 residential
units named as Brentwoods Project. Out of 10 units, 7 will belong to Jebson while the
remaining 3 units will be for Sps. Salonga's share. He is also allowed to sell its
allocated units under such terms as it may deem fit, subject to the condition that the
price agreed upon was with the conformity of Sps. Salonga. Later, Jebson entered into
a Contract to Sell (subject CTS) with Buenviaje over 1 unit without the conformity of
Sps. Salonga. Out of the purchase price, an amount was paid through a "swapping
arrangement," whereby Buenviaje conveyed to Jebson a house and lot in Garden
Villas, Tagaytay and a share in Tagaytay Highlands Golf. However, despite full
payment of the contract price, Jebson was unable to complete the unit within 12
months from the date of issuance of the building permit as per contractual stipulation.
Thus, Buenviaje filed before the HLURB a Complaint for Specific Performance with
Damages and Attorney's Fees, against Jebson, Bañez, and Sps. Salonga. In their
defense, Jebson and Bañez claimed that they were ready to comply with all their
contractual obligations but were not able to secure the necessary government permits
because Sps. Salonga stubbornly refused to cause the consolidation of the parcels of
land. For their part, Sps. Salonga averred that they were not liable to the complainants
since there was no privity of contract between them, adding that the contracts to sell
were unenforceable against them as they were entered into by Jebson without their
conformity, in violation of the JVA.
ISSUE:
Whether or not Sps. Salonga are not solidarily liable with Jebson and Bañez
to Buenviaje for the completion of the construction and delivery of the unit.
RULING:
Yes, Sps. Salonga are not solidarily liable. The Court held that there is no
basis for Sps. Salonga to be solidarily liable under Articles 1822 and 1824 of the
Civil Code. The said Articles pertain to the obligations of a co-partner in the event
that the partnership to which he belongs is held liable. In this case, Buenviaje never
dealt with any partnership constituted by and between Jebson and Sps. Salonga. It
was pointed out that the JVA between Jebson and Sps. Salonga was limited to the
construction of the residential units under the Brentwoods Project and that Jebson
had the sole hand in marketing the units allocated to it to third persons, such as
Buenviaje. In fact, under the express terms of the JVA, Jebson, as the developer,
had even stipulated to hold Sps. Salonga free from any liability to third parties for
non-compliance with HLURB rules and regulations. As things stand, only Jebson
should be held liable for its obligations to Buenviaje under the subject CTS.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
MARSMAN DRYSDALE LAND, INC. V. PHILIPPINE GEOANALYTICS,
INC., G.R. NOS. 183374 & 183376, [JUNE 29, 2010], 636 PHIL 284-296
FACTS:
Marsman Drysdale Land, Inc. (Marsman Drysdale) and Gotesco Properties,
Inc. (Gotesco) entered into a Joint Venture Agreement (JVA) for the construction and
development of an office building on a land owned by Marsman Drysdale in Makati
City. Via Technical Services Contract (TSC), the joint venture engaged the services
of Philippine Geoanalytics, Inc. (PGI) to provide subsurface soil exploration,
laboratory testing, seismic study and geotechnical engineering for the project. PGI,
was, however, able to drill only four of five boreholes needed to conduct its
subsurface soil exploration and laboratory testing, justifying its failure to drill the
remaining borehole to the failure on the part of the joint venture partners to clear the
area where the drilling was to be made. PGI was able to complete its seismic study
though. PGI then billed the joint venture but the latter failed to pay its obligations
despite repeated demands. PGI subsequently filed a complaint for collection of sum
of money and damages against the petitioners. In its Answer with Counterclaim and
Cross-claim, Marsman Drysdale passed the responsibility of paying PGI to Gotesco
which, under the JVA, was solely liable for the monetary expenses of the
project. Gotesco, on the other hand, countered that PGI has no cause of action
against them as PGI had yet to complete the services enumerated in the contract;
and that Marsman Drysdale failed to clear the property of debris which prevented
PGI from completing its work.
ISSUE:
Whether or not the joint venturers are jointly liable to pay PGI its unpaid
claims.
RULING:
Yes, Marsman Drysdale and Gotesco are jointly liable to PGI. The Court
emphasized that a joint venture being a form of partnership, it is to be governed by
the laws on partnership. Article 1797 of the Civil Code provides that, “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.” Thus, in the absence of stipulation, the share of each in the
profits and losses shall be in proportion to what he may have contributed. In the JVA,
Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the proceeds of the
project. They did not provide for the splitting of losses, however. Applying the abovequoted provision of Article 1797 then, the same ratio applies in splitting the
obligation-loss of the joint venture.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
PRIMELINK PROPERTIES & DEVELOPMENT CORP. V. LAZATIN-MAGAT, G.R.
NO. 167379, [JUNE 27, 2006], 526 PHIL 394-418
FACTS:
In 1994, Primelink Properties and the Lazatin siblings entered into a joint
venture agreement whereby the Lazatins shall contribute a huge parcel of land and
Primelink shall develop the same into a subdivision. For 4 years however, Primelink
failed to develop the said land. So in 1998, the Lazatins filed a complaint to rescind
the joint venture agreement with prayer for preliminary injunction. In said case,
Primelink was declared in default or failing to file an answer and for asking multiple
motions for extension. The trial court eventually ruled in favor of the Lazatins and it
ordered Primelink to return the possession of said land to the Lazatins as well as some
improvements which Primelink had so far over the property without the Lazatins paying
for said improvements. This decision was affirmed by the Court of Appeals. Primelink
is now assailing the order; that turning over improvements to the Lazatins without
reimbursement is unjust; that the Lazatins did not ask the properties to be placed under
their possession but they merely asked for rescission.
ISSUE:
Whether or not petitioners are entitled to reimbursement for the value of the
improvements on the parcels of land.
RULING:
No, petitioners are not yet entitled to reimbursement for the value of the
improvements on the parcels of land. The Court explained that with the rescission of
the JVA on account of petitioners' fraudulent acts, all authority of any partner to act for
the partnership is terminated except so far as may be necessary to wind up
the partnership affairs or to complete transactions begun but not yet finished. On
dissolution, the partnership is not terminated but continues until the winding up
of partnership affairs is completed. The transfer of the possession of the parcels of
land and the improvements thereon to respondents was only for a specific purpose:
the winding up of partnership affairs, and the partition and distribution of the
net partnership assets as provided by law. After all, Article 1836 of the New Civil
Code provides that unless otherwise agreed by the parties in their JVA, respondents
have the right to wind up the partnership affairs. It was also stressed out that although
respondents acquired possession of the lands and the improvements thereon, the said
lands and improvements remained partnership property, subject to the rights and
obligations of the parties, of the creditors and of third parties under Articles 1837 and
1838 of the New Civil Code, and subject to the outcome of the settlement of the
accounts between the parties as provided in Article 1839 of the New Civil Code,
absent any agreement of the parties in their JVA to the contrary. Until
the partnership accounts are determined, it cannot be ascertained how much any of
the parties is entitled to, if at all. Thus, it is still considered premature for petitioner
Primelink to be demanding that it be indemnified for the value of the improvements on
the parcels of land owned by the joint venture/partnership.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
SANTIAGO V. SPOUSES GARCIA, G.R. NO. 228356, [MARCH 9, 2020]
FACTS:
Petitioner Merian B. Santiago (Merian) was enticed by respondent Edna L.
Garcia (Edna) to invest money in the latter's lending business with a promise of a high
return in terms of monthly interest ranging from 5% to 8%. The parties agreed that
monthly interest shall be remitted by Edna to Merian and that the principal amount
invested shall be returned to Merian upon demand.4 Neither of the parties, however,
presented evidence to show that such agreement was reduced in writing. Merian
began investing several amounts from November 15, 2000 to June 30, 2003, reaching
an aggregate amount of P1,569,000.00.5 Edna had remitted to Merian the amount of
P877,000.00 as interest on said amounts. However, in December 2003, Edna
defaulted in remitting to Merian the interest due from said investments. Despite
demands, Edna failed to remit the interest to Merian.
ISSUE:
Whether or not the contractual relations of the parties is that of a partnership
RULING:
No.The facts demonstrate that Edna was engaged in the business of lending
and that she solicited funds from Merian which Edna then used to grant loans to other
persons. The parties' contemporaneous and subsequent acts reveal their intent to
enter into an investment contract in a lending business. The Court cannot subscribe
to the view that Merian and Edna formed a partnership. 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. Partnership
is essentially a result of an agreement or a contract, either express or implied, oral or
in writing, between two or more persons. Here, there was neither allegation nor proof
that Merian and Edna agreed to enter into a partnership for purposes of carrying out
the lending business.
There was likewise no agreement for the sharing of profits, only that Merian
expects to receive remittance of monthly interest from the amount she invested. At
any rate, the receipt by a person of a share of the profits, or of a payment of a
contingent amount in case of profits earned, is not a conclusive evidence of
partnership. Article (Art.) 1769(3) of the Civil Code provides that "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". There must be an unmistakable intention to form a partnership which is
lacking in this case. Most importantly, the facts do not disclose that there is mutual
agency between Merian and Edna, that is, neither party alleged that she can bind by
her acts the other, and can be bound by the acts of the other in the ordinary course of
business.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
SALUDO, JR. V. PHILIPPINE NATIONAL BANK, G.R. NO. 193138, [AUGUST 20,
2018]
FACTS:
SAFA Law Office entered into a Contract of Lease with PNB, whereby the latter
agreed to lease 632 square meters of the second floor of the PNB Financial Center
Building in Quezon City for a period of three years and for a monthly rental fee of
₱l89,600.00. The rental fee is subject to a yearly escalation rate of 10%. SAFA Law
Office then occupied the leased premises and paid advance rental fees and security
deposit in the total amount of ₱l,137,600.00.
Subsequently, the Contract of Lease expired. As alleged by the PNB, SAFA
Law Office continued to occupy the leased premises until February 2005, but
discontinued paying its monthly rental obligations after December 2002.
Consequently, PNB sent a demand letter dated July 17, 2003 for SAFA Law Office to
pay its outstanding unpaid rents in the amount of ₱4,648,086.34. PNB sent another
letter demanding the payment of unpaid rents in the amount of ₱5,856,803.53 which
was received by SAFA Law Office on November 10, 2003.
ISSUE:
Whether SAFA Law Office is a partnership or a single proprietorship
RULING:
SAFA Law Office is a partnership and not a single proprietorship.
Article 1767 of the Civil Code provides that 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. Two or more persons
may also form a partnership for the exercise of a profession. Under Article 1771, a
partnership may be constituted in any form, except where immovable property or real
rights are contributed thereto, in which case a public instrument shall be necessary.
Article 1784, on the other hand, provides that a partnership begins from the moment
of the execution of the contract, unless it is otherwise stipulated.
Here, absent evidence of an earlier agreement, SAFA Law Office was
constituted as a partnership at the time its partners signed the Articles of Partnership
wherein they bound themselves to establish a partnership for the practice of law,
contribute capital and industry for the purpose, and receive compensation and benefits
in the course of its operation.
The other provisions of the Articles of Partnership also positively identify SAFA
Law Office as a partnership. It constantly used the words "partners" and "partnership."
It designated petitioner Saludo as managing partner, and Attys. Ruben E. Agpalo,
Filemon L. Fernandez, and Amado D. Aquino as industrial partners. It also provided
for the term of the partnership, distribution of net profits and losses, and management
of the firm in which "the partners shall have equal interest in the conduct of [its] affairs.
"Moreover, it provided for the cause and manner of dissolution of the partnership.
These provisions would not have been necessary if what had been established was a
sole proprietorship. Indeed, it may only be concluded from the circumstances that, for
all intents and purposes, SAFA Law Office is a partnership created and organized in
accordance with the Civil Code provisions on partnership.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
GUY V. GACOTT, G.R. NO. 206147, [JANUARY 13, 2016], 778 PHIL 308-326
FACTS:
Atty. Gacott purchased two (2) brand new transreceivers from Quantech
Systems Corporation (QSC) in Manila through its employee. Due to major defects, he
personally returned the transreceivers to QSC and requested that they be replaced.
Time passed and Gacott did not receive the replacement units as promised, he filed a
complaint for damages.
Subsequently, he obtained a favourable judgement from the RTC and was able
to obtain a Writ of execution. During the execution stage, Gacott learned that QSC
was not a corporation, but was in fact a general partnership registered with the SEC.
In the articles of partnership, Guy was appointed as General Manager of QSC. Upon
learning that Guy had vehicles registered in his name, Gacott instructed the sheriff to
proceed with the attachment of one of the motor vehicles of Guy based on the
certification issued by the DOTC-LTO. Thereafter, Guy filed his Motion to Lift
Attachment upon Personality, arguing that he was not a judgment debtor and,
therefore, his vehicle could not be attached.
ISSUE:
Whether or not Guy is solidarily liable with the partnership for damages arising
from the breach of the contract of sale with respondent Gacott.
RULING:
No. Article 1816 of the Civil Code clearly states that, first, the partners'
obligation with respect to the partnership liabilities is subsidiary in nature. It provides
that the partners shall only be liable with their property after all the partnership assets
have been exhausted. The partners' obligation to third persons with respect to the
partnership liability is pro rata or joint. In this case, had he been properly impleaded,
Guy's liability would only arise after the properties of QSC would have been exhausted.
The records, however, miserably failed to show that the partnership's properties were
exhausted.
In contrast, a solidary liability makes a debtor liable for the payment of the entire
debt. In the same vein, Article 1207 does not presume solidary liability unless: 1)
the obligation expressly so states; or 2) the law or nature requires solidarity. With
regard to partnerships, ordinarily, the liability of the partners is not solidary. The joint
liability of the partners is a defense that can be raised by a partner impleaded in a
complaint against the partnership. In other words, only in exceptional circumstances
shall the partners' liability be solidary in nature.
In the case at bench, it was not shown that Guy or the other partners did a
wrongful act or misapplied the money or property he or the partnership received from
Gacott. A third person who transacted with said partnership can hold the partners
solidarity liable for the whole obligation if the case of the third person falls under
Articles 1822 or 1823. Gacott's claim stemmed from the alleged defective
transreceivers he bought from QSC, through the latter's employee, Medestomas. It
was for a breach of warranty in a contractual obligation entered into in the name and
for the account of QSC, not due to the acts of any of the partners. For said reason, it
is the general rule under Article 1816 that governs the joint liability of such breach, and
not the exceptions under Articles 1822 to 1824. Thus, it was improper to hold Guy
solidarity liable for the obligation of the partnership.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
REALUBIT V. SPOUSES JASO, G.R. NO. 178782, [SEPTEMBER 21, 2011], 673
PHIL 618-629
FACTS:
Petitioner Josefina Realubit (Josefina) entered into a Joint Venture Agreement
with Francis Eric Amaury Biondo (Biondo), a French national, for the operation of an
ice manufacturing business. With Josefina as the industrial partner and Biondo as the
capitalist partner, the parties agreed that they would each receive 40% of the net profit,
with the remaining 20% to be used for the payment of the ice making machine which
was purchased for the business. For and in consideration of the sum of ₱500,000.00,
however, Biondo subsequently executed a Deed of Assignment dated 27 June 1997,
transferring all his rights and interests in the business in favor of respondent Eden
Jaso (Eden), the wife of respondent Prosencio Jaso. With Biondo’s eventual departure
from the country, the Spouses Jaso caused their lawyer to send Josefina a letter dated
19 February 1998, apprising her of their acquisition of said Frenchman’s share in the
business and formally demanding an accounting and inventory thereof as well as the
remittance of their portion of its profits. Faulting Josefina with unjustified failure to heed
their demand, the Spouses Jaso commenced the instant suit
ISSUE:
Whether the court may order petitioner (Josefina Realubit) as partner in the joint
venture to render an accounting to one who is not a partner in said joint venture
RULING:
No, petition is denied. Generally understood to mean an organization formed
for some temporary purpose, a joint venture is likened to a particular partnership or
one which "has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation." The rule is settled that joint
ventures are governed by the law on partnerships which are, in turn, based on mutual
agency or delectus personae. Insofar as a partner’s conveyance of the entirety of his
interest in the partnership is concerned, Article 1813 of the Civil Code provides that in
the case of a dissolution of the partnership, the assignee is entitled to receive his
assignor’s interest and may require an account from the date only of the last account
agreed to by all the partners.
From the foregoing provision, it is evident that "(t)he transfer by a partner of his
partnership interest does not make the assignee of such interest a partner of the firm,
nor entitle the assignee to interfere in the management of the partnership business or
to receive anything except the assignee’s profits. The assignment does not purport to
transfer an interest in the partnership, but only a future contingent right to a portion of
the ultimate residue as the assignor may become entitled to receive by virtue of his
proportionate interest in the capital." Since a partner’s interest in the partnership
includes his share in the profits, we find that the CA committed no reversible error in
ruling that the Spouses Jaso are entitled to Biondo’s share in the profits, despite
Juanita’s lack of consent to the assignment of said Frenchman’s interest in the joint
venture. Although Eden did not, moreover, become a partner as a consequence of the
assignment and/or acquire the right to require an accounting of the partnership
business, the CA correctly granted her prayer for dissolution of the joint venture
conformably with the right granted to the purchaser of a partner’s interest under Article
1831 of the Civil Code.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
VILLAREAL V. RAMIREZ, G.R. NO. 144214, [JULY 14, 2003], 453 PHIL 999-1013
FACTS:
Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership
for the operation of a restaurant and catering business under the name “Aquarius Food
House and Catering Services.” Villareal was appointed general manager and
Carmelito Jose, operations manager. Respondent Donaldo Ramirez joined as a
partner with a capital contribution of P250,000 which was paid by his parents,
Respondents Cesar and Carmelita Ramirez. Jose withdrew from the partnership and
his capital contribution was refunded to him in cash by agreement of the partners.
In the same month, without prior knowledge of respondents, petitioners closed
down the restaurant, allegedly because of increased rental. The restaurant furniture
and equipment were deposited in the respondents’ house for storage. On March 1,
1987, respondent spouses wrote petitioners, saying that they were no longer
interested in continuing their partnership or in reopening the restaurant, and that they
were accepting the latter’s offer to return their capital contribution. Respondent wrote
another letter informing petitioners of the deterioration of the restaurant furniture and
equipment stored in their house. She also reiterated the request for the return of their
one-third share in the equity of the partnership. The repeated oral and written requests
were, however, left unheeded.
Respondents filed before the RTC for the collection of a sum of money from
petitioners.
ISSUE:
Whether or not petitioners are liable to respondents for the latter’s share in the
partnership
RULING:
NO. The court holds that respondents have no right to demand from petitioners
the return of their equity share. the exact amount of refund equivalent to respondents’
one-third share in the partnership cannot be determined until all the partnership assets
will have been liquidated. Except as managers of the partnership, petitioners did not
personally hold its equity or assets. Both the trial and the appellate courts found that
a partnership had indeed existed, and that it was dissolved on March 1, 1987. They
found that the dissolution took place when respondents informed petitioners of the
intention to discontinue. Respondents consequently demanded from petitioners the
return of their one-third equity in the partnership. “The partnership has a juridical
personality separate and distinct from that of each of the partners.” Since the capital
was contributed to the partnership, not to petitioners, it is the partnership that must
refund the equity of the retiring partners.
The amount to be refunded is necessarily limited to its total resources. In other
words, it can only pay out what it has in its coffers, which consists of all its assets.
However, before the partners can be paid their shares, the creditors of the partnership
must first be compensated. After all the creditors have been paid, whatever is left of
the partnership assets becomes available for the payment of the partners’ shares.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
DUSOL V. LAZO, G.R. NO. 200555, [JANUARY 20, 2021]
FACTS:
This case arose from a complaint for illegal dismissal, underpayment of
benefits, claim for damages, and attorney's fees filed by petitioners against respondent
Emmarck A. Lazo as the owner of Ralco Beach. Pedro started working as the
caretaker of the Ralco Beach. As caretaker and the only employee, Pedro cleaned,
watched, and secured the beach area, cottages, rest house, store, and other
properties in the resort. He also entertained guests and occupants of the cottages. He
worked from 5 a.m. to 9 p.m. every day, including weekends and holidays, and was
given an allowance of P100.00 per week, which was later increased to P239.00 in
2001.
Pedro later on got married to Maricel, who then was employed by Emmarck to
manage the store in the resort. For her services, she was paid P1,000 a month and
entitled to 15% commission on the rentals collected from the cottages and rest house.
Like Pedro, she also worked from 5 a.m. to 9 p.m. every day. Sometime in 2008,
Emmarck notified Pedro and Maricel that he will be leasing out Ralco Beach because
the business was not profitable. Thus, their services are no longer needed. Due to
this, Pedro and Maricel no longer reported for work. Subsequently, they filed a
complaint asserting that they were illegally dismissed and deprived of procedural due
process. For his part, Emmarck denied the employment relationship with Pedro and
Maricel, and asserted that they were his industrial partners.
ISSUE:
Whether Pedro and Maricel are employees or partners of Emmarck
RULING:
Based on record, there is no proof that a partnership existed between Pedro or
Maricel, and Emmarck in relation to the beach resort. No documentary evidence was
submitted by Emmarck to even suggest a partnership. Emmarck relied solely on his
own statements that Pedro and Maricel did not receive wages, but merely allowances
and commission from the profits of their partnership. However, it is beyond dispute
that receipt by a person of share in the profits of a business does not by itself establish
the existence of a partnership, if the amounts are received as wages of an employee.
Neither does the sharing of gross returns establish partnership, most especially, in
light of the absence of the any other evidence to establish the existence of the
partnership. The records show that all the elements of an employer-employee
relationship are present.
Undoubtedly, the best evidence to prove the existence of a partnership is the
contract or articles of partnership. Nevertheless, in its absence, its existence can be
established by circumstantial evidence. Under Article 1769 of the Civil Code, "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 as wages of an employee [or rent to a landlord]." In
addition, "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."
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
PHILEX MINING CORP. V. COMMISSIONER OF INTERNAL REVENUE, G.R. NO.
148187, [APRIL 16, 2008], 574 PHIL 571-586
FACTS:
Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for
the former to manage and operate the latter’s mining claim, known as the Sto. Nino
Mine. The parties’ agreement was denominated as “Power of Attorney” which provides
among
others
that within three (3) years from date thereof, the principal (Baguio Gold) shall make a
vailable to the managers (Philex Mining) up to P11.00 Million, in such amounts as from
time to time may be required by the managers within the said 3-year period, for use in
the management of the Sto. Nino Mine. The said P11.00 Million shall be deemed, for
internal audit purposes, as the owner’s account in the Sto. Nino PROJECT. Any part
of any income of the principal from the Sto. Nino Mine, which is left with the Sto. Nino
Project
shall
be
added
to
such
owner’s
account.
Whenever the managers shall deem it necessary and convenient in connection with t
he management of the Sto. Nino Mine, they may transfer their own funds or property
to
the
Sto.
Niño
Project,
Philex Mining
made advances of cash and property in accordance with paragraph 5 of the
agreement.
ISSUE:
Whether or not the parties entered into a contract of agency coupled with an
interest which is not revocable at will
RULING:
No. An examination of the “Power of Attorney” reveals that a partnership or joint
venture was indeed intended by the parties.
Neither can paragraph 16 of the agreement be taken as an indication that the
relationship of the parties was one of agency and not a partnership. Although the
said provision states that “this Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS’
account,” it does not necessarily follow that the parties entered into an agency contract
coupled with an interest that cannot be withdrawn by Baguio Gold.
The main object of the “Power of Attorney” was not to confer a power in favor
of petitioner to contract with third persons on behalf of Baguio Gold but to create a
business relationship between petitioner and Baguio Gold, in which the former was to
manage and operate the latter’s mine through the parties’ mutual contribution
of material resources and industry. The essence of an agency, even one that is
coupled with interest, is the agent’s ability to represent his principal and bring about
business relations between the latter and third persons. The strongest indication that
petitioner was a partner in the Sto. Nino Mine is the fact that it would receive 50% of
the net profits as “compensation” under paragraph 12 of the agreement. The
entirety of the parties’ contractual stipulations simply leads to no other conclusion tha
n that petitioner’s “compensation” is actually its share in the income of the joint
venture. Article 1769 (4) of the Civil Code explicitly provides that the “receipt by a
person of a share in the profits of a business is prima facie evidence that he is a partner
in the business.”
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
SY V. COURT OF APPEALS, G.R. NO. 142293, [FEBRUARY 27, 2003], 446
PHIL 404-420
FACTS:
Sometime in 1958, private respondent Jaime Sahot[5] started working as a
truck helper for petitioners' family-owned trucking business named Vicente Sy
Trucking. In 1965, he became a truck driver of the same family business, renamed T.
Paulino Trucking Service, later 6B's Trucking Corporation in 1985, and thereafter
known as SBT Trucking Corporation since 1994. Throughout all these changes in
names and for 36 years, private respondent continuously served the trucking business
of petitioners. In April 1994, Sahot was already 59 years old. He had been incurring
absences as he was suffering from various ailments. He inquired about his medical
and retirement... benefits with the Social Security System (SSS), but discovered that
his premium payments had not been remitted by his employer. Sahot had filed a weeklong leave sometime in May 1994. Sahot applied for extension of his leave for the
whole month of June, 1994. It was at this time when petitioners allegedly threatened
to terminate his employment should he refuse to go back to work. Sahot found himself
in a dilemma. He was facing dismissal if he refused to work, but he could not retire on
pension because petitioners never paid his correct SSS premiums. On September 13,
1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal
dismissal. He prayed for the recovery of separation pay and attorney’s fees against
herein petitioners. Or their part, petitioners admitted they had a trucking business in
the 1950s but denied employing helpers and drivers. They contend that private
respondent was not illegally dismissed as a driver because he was in fact petitioner's
industrial partner.
ISSUE:
Whether or not respondent Sahot is an industrial partner
RULING:
No. Article 1767 of the Civil Code states that in 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. Not one of these
circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is
no proof that he was receiving a share in the profits as a matter of course, during the
period when the trucking business was under operation. Neither is there any proof that
he had actively participated in the management, administration and adoption of
policies of the business.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
MENDIOLA V. COURT OF APPEALS, G.R. NO. 159333, [JULY 31, 2006], 529
PHIL 339-355
FACTS:
Petitioner Mendiola entered into a Side Agreement with Pacfor (USA) who will
set up a representative office in the Philippines. They named said office as Pacfor
Phils in which petitioner is president. In the agreement, petitioner’s base salary and
the company’s overhead expenditures shall be borne by the representative office and
shall be funded by Pacfor/ATM being equally owned on 50-50 equity by ATM and
Pacfor-USA. The Side Agreement was later amended through a Revised Operating
and Profit Sharing Agreement where petitioner’s salary was increased. However, both
agreements show that the operational expenses will be borne by the representative
office and funded by all parties “as equal partners,” while the profits and commissions
will be shared among them.
ISSUE:
Whether or not a partnership or co-ownership exists between the parties.
RULING:
Petitioner is an employee of Pacfor and no partnership or co-ownership exists
between the parties. In a partnership, the members become co-owners of what is
contributed to the firm capital and of all property that may be acquired thereby and
through the efforts of the members. The property or stock of the partnership forms a
community of goods, a common fund, in which each party has a proprietary interest.
In fact, the New Civil Code regards a partner as a co-owner of specific partnership
property. Each partner possesses a joint interest in the whole of partnership property.
If the relation does not have this feature, it is not one of partnership. This essential
element, the community of interest, or co-ownership of, or joint interest in partnership
property is absent in the relations between petitioner and private respondent Pacfor.
Petitioner is not a part-owner of Pacfor Phils. Pacfor's President established this fact
when he said that Pacfor Phils. Is simply a "theoretical company" for the purpose of
dividing the income 50-50.
He stressed that petitioner knew of this arrangement from the very start, having
been the one to propose to private respondent Pacfor the setting up of a representative
office, and "not a branch office" in the Philippines to save on taxes. Thus, the parties
in this case, merely shared profits. This alone does not make a partnership. Besides,
a corporation cannot become a member of a partnership in the absence of express
authorization by statute or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the partners, whereby the
corporation would be bound by the acts of persons who are not its duly appointed and
authorized agents and officers, would be inconsistent with the policy of the law that
the corporation shall manage its own affairs separately and exclusively; and, (2) that
such an arrangement would improperly allow corporate property to become subject to
risks not contemplated by the stockholders when they originally invested in the
corporation. No such authorization has been proved in the case at bar.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
JARANTILLA, JR. V. JARANTILLA, G.R. NO. 154486, [DECEMBER 1, 2010], 651
PHIL 13-36
FACTS:
Petitioner Jarantilla filed a complaint against Buenaventura Remotigue, Cynthia
Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla, for the
accounting of the assets and income of the co-ownership, for its partition and the
delivery of her share corresponding to eight percent (8%), and for
damages. Antonieta claimed that in 1946, she had entered into an agreement with th
e defendants toengage in business through the execution of a document denominated
as "Acknowledgement of Participating Capital”. Antonieta also alleged that she had
helped in the management of the business they co-owned without receiving any
salary. Antonieta further claimed co-ownership of certain properties (the subject real
properties) in the name of the defendants since the only way the defendants could
have purchased these properties were through the partnership as they had no other
source of income.
ISSUE:
Whether or not the partnership subject of the Acknowledgement of Participating
Capital funded the subject real properties
RULING:
There is no evidence that the subject real properties were assets of the
partnership referred to in the Acknowledgement of Participating Capital.
Article 1767 of the Civil Code provides two essential elements in a contract
of partnership: (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, all
the parties in this case 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. It is not
denied that all the parties in this case have agreed to contribute capital to a common
fund to be able to later on share its profits. They have admitted this fact, agreed to its
veracity, and even submitted one common documentary evidence to prove such
partnership - the Acknowledgement of Participating Capital. The petitioner himself
claims his share to be 6%, as stated in the Acknowledgement of Participating Capital.
However, petitioner fails to realize that this document specifically enumerated the
businesses covered by the partnership: Manila Athletic Supply, Remotigue Trading in
Iloilo City and Remotigue Trading in Cotabato City. Since there was a clear agreement
that the capital the partners contributed went to the three businesses, then there is no
reason to deviate from such agreement and go beyond the stipulations in the
document. Petition denied.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
DELUAO V. CASTEEL, G.R. NO. L-21906, [DECEMBER 24, 1968], 135 PHIL 433458
FACTS:
In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of
swampy land, 178.76 hectares, in the then sitio of Malalag, municipality of Padada,
Davao for 3 consecutive times because the Bureau of Fisheries did not act upon his
previous applications. Despite the said rejection, Casteel did not lose interest.
Because of the threat poised upon his position by the other applicants who entered
upon and spread themselves within the area, Casteel realized the urgent necessity of
expanding his occupation thereof by constructing dikes and cultivating marketable
fishes. But lacking financial resources at that time, he sought financial aid from his
uncle Felipe Deluao. Moreover, upon learning that portions of the area applied for by
him were already occupied by rival applicants, Casteel immediately filed a protest.
Consequently, two administrative cases ensued involving the area in question.
However, despite the finding made in the investigation of the above administrative
cases, the Director of Fisheries nevertheless rejected Casteel's application on October
25, 1949, required him to remove all the improvements which he had introduced on
the land, and ordered that the land be leased through public auction. On November
25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor
Casteel as party of the second part, executed a contract — denominated a "contract
of service". On the same date the above contract was entered into, Inocencia Deluao
executed a special power of attorney in favor of Jesus Donesa. On November 29,
1949 the Director of Fisheries rejected the application filed by Felipe Deluao on
November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the
same area in the two administrative cases and asked for reinvestigation of the
application of Nicanor Casteel over the subject fishpond.The Secretary of Agriculture
and Natural Resources rendered a decision ordering Casteel to be reinstated in the
area and that he shall pay for the improvement made thereupon.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further
administering the fishpond, and ejected the latter's representative (encargado), Jesus
Donesa, from the premises.
ISSUE:
Whether the reinstatement of Casteel over the subject land constitute a
dissolution of the partnership between him and Deluao
HELD:
Yes, the reinstatement of Casteel dissolved his partnership with Deluao. The
Supreme Court ruled that the arrangement under the so-called "contract of service"
continued until the decision both dated Sept. 15, 1950 were issued by the Secretary
of Agriculture and Natural. This development, by itself, brought about the dissolution
of the partnership. Since the partnership had for its object the division into two equal
parts of the fishpond between the appellees and the appellant after it shall have been
awarded to the latter, and therefore it envisaged the unauthorized transfer of one half
thereof to parties other than the applicant Casteel, it was dissolved by the approval of
his application and the award to him of the fishpond. The approval was an event which
made it unlawful for the members to carry it on in partnership. Moreover, subsequent
events likewise reveal the intent of both parties to terminate the partnership because
each refused to share the fishpond with the other.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
TORRES V. COURT OF APPEALS, G.R. NO. 134559, [DECEMBER 9, 1999], 378
PHIL 170-182
FACTS:
Petitioners Torres and Baring entered into a “joint venture agreement” with
Respondent Torres for the development of a parcel of land into a subdivision. They
executed a Deed of Sale covering the said parcel of land in favor of respondent Manual
Torres, who then had it registered in his name. By mortgaging the property,
respondent Manuel Torres obtained from Equitable Bank a loan of P40,000, which
was supposed to be used for the development of subdivision as per the JVA. However,
the project did not push through and the land was subsequently foreclosed by the
bank. Petitioners Antonia Torres alleged that it was due to respondent’s lack of
funds/skills that caused the project to fail, and that respondent use the loan in the
furtherance of his own company. On the other hand, respondent Manuel Torres
alleged that he used the loan to implement the JVA – surveying and subdivision of
lots, approval of the project, advertisement, and construction of roads and the likes,
and that he did all of these for a total of P85,000. Petitioners filed a case for estafa
against respondent but failed. They then instituted a civil case. CA held that the two
parties formed a partnership for the development of subdivision and as such, they
must bear the loss suffered by the partnership in the same proportion as their share in
profits. Hence, the petition.
ISSUE:
Whether or not the transaction between petitioner and respondent was that of
joint venture/partnership.
RULING:
Yes. There formed a partnership between the two on the basis of joint-venture
agreement and deed of sale. A reading of the terms of agreement shows the existence
of partnership pursuant to Art 1767 of Civil Code, which states “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.” In the agreement, petitioners would contribute property to the partnership
in the form of land which was to be developed into a subdivision; while respondent
would give, in addition to his industry, the amount needed for general expenses and
other costs. Furthermore, the income from the said project would be divided according
to the stipulated percentage. Clearly, the contract manifested the intention of the
parties to form a partnership.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
COMMISSIONER OF INTERNAL REVENUE V. SUTER, G.R. NO. L-25532,
[FEBRUARY 28, 1969], 136 PHIL 538-548
FACTS:
A limited partnership named William J. Suter 'Morcoin' Co., Ltd was
formed 30September 1947 by William J. Suter as the general partner, and Julia Spirig
and
Gustav
Carlson.
They
contributed,
respectively,
P20,000.00, P18,000.00 andP2,000.00. it was also duly registered with the SEC. On
1948 Suter and Spirig got married and in effect Carlson sold his share to the couple,
the same was also registered with the SEC. The limited partnership had been filing its
income tax returns as a corporation, without objection by the herein petitioner,
Commissioner of Internal Revenue, until in1959 when the latter, in an assessment,
consolidated the income of the firm and the individual incomes of the partners-spouses
Suter and Spirig resulting in a determination of a deficiency income tax against
respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.
ISSUE:
Whether or not the limited partnership has been dissolved after the marriage of
Suter and Spirig and buying the interest of limited partner Carlson.
RULING:
No, the limited partnership was not dissolved. “A husband and a wife may not
enter into a contract of general co partnership, because under the Civil Code, which
applies in the absence of express provision in the Code of Commerce, persons
prohibited from making donations to each other are prohibited from entering into
universal partnerships. (2Echaverri 196) It follows that the marriage of partners
necessarily brings about the dissolution of a pre-existing partnership. “What the law
prohibits
was
when
the
spouses
enter ed into a generalpartnership. In the case at bar, the partnership waslimited
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
ORTEGA V. COURT OF APPEALS, G.R. NO. 109248, [JULY 3, 1995], 315 PHIL
573-583
FACTS:
On December 19, 1980, respondent Misa associated himself together, as
senior partner with petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners.
On Feb. 17, 1988, respondent Misa wrote a letter stating that he is withdrawing and
retiring from the firm and asking for a meeting with the petitioners to discuss the
mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to the
Commission’s Securities Investigation and Clearing Department for the formal
dissolution and liquidation of the partnership. On March 31, 1989, the hearing officer
rendered a decision ruling that the withdrawal of the petitioner has not dissolved the
partnership. On appeal, the SEC en banc reversed the decision and was affirmed by
the Court of Appeals. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals has erred in holding that the partnership
is a partnership at will and whether or not the Court of Appeals has erred in holding
that the withdrawal of private respondent dissolved the partnership regardless of his
good or bad faith
RULING:
No. The SC upheld the ruling of the CA regarding the nature of the partnership.
The SC further stated that a partnership that does not fix its term is a partnership at
will. The birth and life of a partnership at will is predicated on the mutual desire and
consent of the partners. 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
partner's capability to give it, and the absence of a 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.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
JO V. NATIONAL LABOR RELATIONS COMMISSION, G.R. NO. 121605,
[FEBRUARY 2, 2000], 381 PHIL 428-438
FACTS:
Private respondent working as a barber on piece-rate basis was designated by
petitioners as caretaker of their barbershop. Private respondent’s duties as caretaker,
in addition to his being a barber, were: 1) to report to the owners of the barbershop
whenever the air condition units malfunction and/or whenever water or electric power
supply was interrupted; 2) to call the laundry woman to wash dirty linen; 3) to
recommend applicants for interview and hiring; 4) to attend to other needs of the shop.
For this additional job, he was given an honorarium equivalent to1/3 of the net income
of the shop.
Private respondent left his job voluntarily because of his misunderstanding with
his co-worker and demanded separation pay and other monetary benefits. Petitioner’s
contends that respondent was not their employee but their “partner in trade” whose
compensation was based on a sharing arrangement per haircut or shaving job done.
ISSUE:
Whether or not respondent is a Partner in Trade or an Employee?
RULING:
Absent a clear showing that petitioners and private respondent had intended to
pursue a relationship of industrial partnership, we entertain no doubt that private
respondent was employed by petitioners as caretaker-barber. Initially, petitioners, as
new owners of the barbershop, hired private respondent as barber by absorbing the
latter in their employ. Undoubtedly, the services performed by private respondent as
barber is related to, and in the pursuit of the principal business activity of petitioners.
Later on, petitioners tapped private respondent to serve concurrently as caretaker of
the shop. Certainly, petitioners had the power to dismiss private respondent being the
ones who engaged the services of the latter. In fact, private respondent sued
petitioners for illegal dismissal, albeit contested by the latter. Furthermore, the
following facts indubitably reveal that petitioners controlled private respondent's work
performance, in that: (1) private respondent had to inform petitioners of the things
needed in the shop; (2) he could only recommend the hiring of barbers and
masseuses, with petitioners having the final decision; (3) he had to be at the shop at
9:00 a.m. and could leave only at 9:00 p.m. because he was the one who opened and
closed it, being the one entrusted with the key. These duties were complied with by
private respondent upon instructions of petitioners. Moreover, such task was far from
being negligible as claimed by petitioners. Hence, there was enough basis to declare
private respondent an employee of petitioners.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
PINLAC V. COURT OF APPEALS, G.R. NO. 91486, [JANUARY 19, 2001], 402
PHIL 684-709
FACTS:
Petitioners herein are World War II veterans, their dependents and successorsin-interest filed a class suit primarily for Quieting of Title before the Regional Trial Court
of Quezon City, petitioners claimed that the real property, which has an aggregate
area of 502 hectares, were part of forest lands belonging to the government; that they
and their predecessors-in-interest have occupied said property continuously and
exclusively for more than thirty (30) years and that they have accordingly filed
applications for land titling in their respective names with the appropriate government
agency. Petitioners claim that the land in dispute was part of the public domain, they
named as respondents several persons and corporations who are titled owners of
subdivided parcels of land within the subject property. One of those so impleaded as
a party-respondent was the Vil-Ma Maloles Subdivision. Individual lot owners of the
said subdivision, however, were not specifically named. Since personal service of
summons could not be effected on Vil-Ma and some of the other named respondents,
petitioners moved for leave of court to serve summons by publication which was
granted and published in the "Metropolitan Newsweek", a periodical edited and
published in the City of Caloocan and Malolos, Some of the named respondents filed
their respective responsive pleadings, while the others, including Vil-Ma, failed to
answer, and were thus declared in default. One (1) year and fifty-seven (57) days after
the above-quoted judgment by default was rendered, a Petition for Annulment of
Judgment with Certiorari, Prohibition and Mandamus was brought before the Court of
Appeals by the titled owners of the subdivided lots within Vil-Ma. They assailed the
default judgment which nullified all their titles, arguing that the court a quo had no
jurisdiction over them and their respective titled properties. Court of Appeals rendered
a Decision granting the petition and annulling the Partial Decision, the assailed Partial
Decision cannot bind Vilar-Maloles (VILMA), the umbrella name, for the simple reason
that said PARTNERSHIP was dissolved on January 26, 1976, for it can no longer be
sued as it had no more juridical personality.
ISSUE:
Whether or not a Dissolve Partnership could be sued?
RULING:
No. At the time the complaint for Quieting of Title was filed on November 2,
1983, Vilma Maloles Subdivision no longer existed as a juridical entity. Vilma Maloles
Subdivision, a partnership, was dissolved more than six (6) years earlier, as evidenced
by a Certificate of Dissolution issued by the SEC dated January 26, 1976.
Consequently, it could no longer be sued having lost its juridical personality.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
JG SUMMIT HOLDINGS, INC. V. COURT OF APPEALS, G.R. NO. 124293,
[NOVEMBER 20, 2000], 398 PHIL 955-985
FACTS:
The National Investment and Development Corporation (NIDC), a government
corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy
Industries, Ltd. for the construction, operation and management of the Subic National
Shipyard, Inc., later became the Philippine Shipyard and Engineering Corporation
(PHILSECO). Under the JVA, NIDC and Kawasaki would maintain a shareholding
proportion of 60%-40% and that the parties have the right of first refusal in case of a
sale. Through a series of transfers, NIDC’s rights, title and interest in PHILSECO
eventually went to the National Government. In the interest of national economy, it
was decided that PHILSECO should be privatized by selling 87.67% of its total
outstanding capital stock to private entities. After negotiations, it was agreed that
Kawasaki’s right of first refusal under the JVA be “exchanged” for the right to top by
five percent the highest bid for said shares. Kawasaki that Philyards Holdings, Inc.
(PHI), in which it was a stockholder, would exercise this right in its stead. During
bidding, Kawasaki/PHI Consortium is the losing bidder. Even so, because of the right
to top by 5% percent the highest bid, it was able to top JG Summit’s bid. JG Summit
protested, contending that PHILSECO, as a shipyard is a public utility and, hence,
must observe the 60%-40% Filipino-foreign capitalization. By buying 87.67% of
PHILSECO’s capital stock at bidding, Kawasaki/PHI in effect now owns more than
40% of the stock.
ISSUE:
Whether or not Foreign Partnership can purchase beyond 40% of stocks share
in the Philippines.
RULING: The joint venture between the Philippine Government and KAWASAKI is in
the nature of a partnership which, unlike an ordinary corporation, is based on delectus
personae. No one can become a member of the partnership association without the
consent of all the other associates. The parties likewise agreed to arm themselves
with protective mechanisms to preserve their respective interests in the partnership in
the event that (a) one party decides to sell its shares to third parties; and (b) new
Philseco shares are issued. The nonselling party is given the right of first refusal under
Section 1.4 to have a preferential right to buy or to refuse the selling party's shares.
The right of first refusal is meant to protect the original or remaining joint venturer(s)
or shareholder(s) from the entry of third persons who are not acceptable to it as
coventurer(s) or co-shareholder(s). The right of first refusal thus ensures that the
parties are given control over who may become a new partner in substitution of or in
addition to the original partners. Should the selling partner decide to dispose all its
shares, the nonselling partner may acquire all these shares and terminate the
partnership.
The limitation of 40% as maximum share of Foreign Corporation is correct only
if the shipyard is a public utility. In such instance, the non-selling partner who is an
alien can acquire only a maximum of 40% of the total capitalization of a public utility
despite the grant of first refusal. The partners cannot, by mere agreement, avoid the
constitutional proscription. But PHILSECO is not a public utility and no other restriction
is present that would limit the right of KAWASAKI to purchase the Government's share
to 40% of Philseco's total capitalization.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
ANGELES V. SECRETARY OF JUSTICE, G.R. NO. 142612, [JULY 29, 2005], 503
PHIL 93-103
FACTS:
In November 1982, Private Respondent Felino Mercado convinced Petitioners
Oscar and Emerita Angeles to enter into a contract of antichresis covering eight parcel
of land planted with fruit-bearing lanzones trees owned by Juana Suazo, which to last
for five years with ₱ 210,000 as consideration. After three years, the Petitioners asked
for an accounting from the Private Respondent. However, when no accounting was
given in 1995, the Petitioners discovered that the Private Respondent had put the
contract of antichresis over the subject land under his and his spouse’s name. Thus,
they filed a criminal complaint for estafa against the Private Respondent. The Private
Respondent denied the allegations by claiming that there is already an existing
industrial partnership between him and his spouse and the Petitioners.
In a resolution, the Provincial Prosecution Office recommended the filing of a
criminal information for estafa against the Private Respondent, although the latter’s
counter-affidavit was not considered. When the Private Respondent moved for its
reconsideration, the said office issued an amended resolution dismissing the
complaint. On appeal, the Secretary of Justice dismissed the appeal of the Petitioners,
stating that they failed to show that the Private Respondent deliberately deceived them
into entering in the contract of antichresis. The Private Respondent satisfactorily
explained that the Petitioners did not want to be revealed as the financiers. Further, it
found that a partnership truly existed between them considering that they contributed
money to a common fund with the intention of dividing the profits among themselves.
These were evidenced by deposits representing their share in the profits of their
business venture. Thus, there was no estafa where the money is delivered by a partner
to his co-partner on the latter’s representation that the amount shall be applied to the
business of their partnership.
ISSUE:
Whether or not a partnership between the Petitioners and the Private
Respondents exists.
RULING:
The Supreme Court ruled in the affirmative. Indeed, Article 1771 of the Civil
Code provides that a partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary. Further, Article 1772 provides that every contract of
partnership having a capital of three thousand pesos or more, in money or property,
shall appear in a public instrument, which must be recorded in the Office of the
Securities and Exchange Commission. However, the Court ruled that mere failure to
register the contract of partnership with the SEC or putting the same in a public
instrument does not invalidate a contract that has the essential requisites of a
partnership. The purpose of registration of the contract of partnership is merely to give
notice to third parties. Failure thereof does not even affect the liability of the partnership
and of the partners to third persons, neither does such failure affect the partnership’s
juridical personality. It is clear that the Petitioners contributed money and industry to a
common fund, and the profits thereof shall be divided between them and the Private
Respondent. Hence, there is an existence of a partnership between them.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
SUNGA-CHAN V. CHUA, G.R. NO. 143340, [AUGUST 15, 2001], 415 PHIL 477492
FACTS:
Respondent alleged that in 1977, he verbally entered into a partnership with
Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila. For
business convenience, respondent and Jacinto allegedly agreed to register the
business name of their partnership, SHELLITE GAS APPLIANCE CENTER
(hereafter Shellite), under the name of Jacinto as a sole proprietorship. Respondent
allegedly delivered his initial capital contribution of P100,000.00 to Jacinto while the
latter in turn produced P100,000.00 as his counterpart contribution, with the intention
that the profits would be equally divided between them.
Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner
Cecilia and particularly his daughter, petitioner Lilibeth, took over the operations,
control, custody, disposition and management of Shellite without respondent's
consent. Despite respondent's repeated demands upon petitioners for accounting,
inventory, appraisal, winding up and restitution of his net shares in the partnership,
petitioners failed to comply. Petitioner Lilibeth allegedly continued the operations of
Shellite, converting to her own use and advantage its properties.
On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out
the alibis and reasons to evade respondent's demands, she disbursed out of the
partnership funds the amount of P200,000.00 and partially paid the same to
respondent with a promise that the former would make the complete inventory and
winding up of the properties of the business establishment. Despite such
commitment, petitioners allegedly failed to comply with their duty to account, and
continued to benefit from the assets and income of Shellite to the damage and
prejudice of respondent. The trial court rendered its Decision ruling for respondent
which the CA affirmed.
ISSUE:
Whether or not verbal contract of partnership is valid although not registered
with SEC.
RULING:
A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall
be necessary. Hence, based on the intention of the parties, as gathered from the facts
and ascertained from their language and conduct, a verbal contract of partnership may
arise. The essential points that must be proven to show that a partnership was agreed
upon are (1) mutual contribution to a common stock, and (2) a joint interest in the
profits. Understandably so, in view of the absence of a written contract of partnership
between respondent and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said partnership.
The failure to register the contract of partnership does not invalidate the same
as among the partners, so long as the contract has the essential requisites, because
the main purpose of registration is to give notice to third parties, and it can be
assumed that the members themselves knew of the contents of their contract.
RUTH N. ROBLE
JD-2
JD 701: AGENCY, TRUST AND PARTNERSHIP
SPS. REYES V. COURT OF APPEALS, G.R. NO. 147758, [JUNE 26, 2002], 432
PHIL 1052-1072
FACTS:
This petition arose from a civil case for collection of a sum of money with
preliminary attachment filed by respondent Pablo V. Reyes against his first cousin
petitioner Arsenio R. Reyes and spouse Nieves S. Reyes. According to private
respondent, petitioner-spouses borrowed from him P600,000.00 with interest at five
percent (5%) per month, the loan was to be used supposedly to buy a lot in Parañaque.
It was evidenced by an acknowledgment receipt signed by the petitioner-spouses
Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.
Petitioners also turned over to private respondent their Nissan pickup truck
worth P400,000.00 in partial payment of the loan, and on 30 January 1993 petitioner
Arsenio executed a deed of absolute sale over the vehicle in favor of respondent.
Respondent's wife Araceli Reyes issued an acknowledgment receipt. Subsequently,
petitioners failed to make any further payments despite written demand for payment.
In their Answer petitioners admitted their loan from respondent but averred that
there was a novation so that the amount loaned was actually converted into
respondent's contribution to a partnership formed between them, According to
petitioner Nieves, sometime in 1989 respondent Pablo went to their house and
proposed to petitioner Arsenio the formation of a partnership to develop the property
petitioners planned to buy. They executed their Articles of Partnership of Feliz Casa
Realty Development, Ltd. Each partner was to contribute a capital of P2,000,000.00.
Arsenio's contribution was his P1,000,000.00 investment with the owner of the real
property to be purchased. Respondent Pablo contributed only P500,000.00.
Petitioners failed to convince the court that the loan obligation was novated into
respondent's contribution to a partnership formed between them, later converted into
a non-interest-bearing loan. The trial court ordered petitioners to pay respondent the
amount of P1,472.85, with legal interest from the filing of the complainant plus
attorney's fees. The CA affirmed the trial court's decision but ordered petitioners to
pay the amount of P500,000.00, plus interest.
ISSUE:
Whether or not loan obligation was novated into respondent's contribution to a
partnership formed between them.
RULING:
The Court is defined as the extinguishment of an obligation by a subsequent
one which terminates it, either by changing its object or principal conditions, by
substituting a new debtor in place of the old one, or by subrogating a third person to
the rights of the creditor. For novation to take place, the following requisites must
concur: (a) there must be a previous valid obligation; (b) there must be an agreement
of the parties concerned to a new contract; (c) there must be the extinguishment of the
old contract; and, (d) there must be the validity of the new contract. In the case at bar,
the third requisite is not present. The parties did agree that the amount loaned would
be converted into respondent's contribution to the partnership, but this conversion did
not extinguish the loan obligation. The date when the acknowledgment
receipt/promissory note was made negates the claim that the loan agreement was
extinguished through novation since the note was made while the partnership was in
existence.
RUTH N. ROBLE
JD-2