Partnership,

Agency and Trust

Case Digests

December 5, 2024
 #1 EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA,
petitioners, vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, respondents.

G.R. No. L-9996 October 15, 1957

Facts: The petitioners purchased several real estate properties. Among these properties are: a lot
bought in the year 1943, twenty-one (21) parcels of land in the year 1944, and additional lots
purchased in the same year. Petitioners rented out these properties to various tenants, hence,
generating significant rental income over the years.

On December 8, 1954, the Collector of Internal Revenue (CIR) issued a demand for payment of
taxes. This lead to the filing of the petitioners a case before the Court of Tax Appeals (CTA). The
petitioners sought the reversal of the tax assessments. The CTA affirmed the tax liabilities of the
petitioners.

Issue: Whether or not the petitioners were merely co-owners of the properties and not a partnership
or corporation, thus exempting them from the corporate tax liabilities.

Ruling: No. The Supreme Court (SC) upheld the decision of the CTA. The Court concluded that the
petitioners constituted a partnership for tax purposes and the essential elements of a partnership
were present, that is, an agreement to contribute money and the intent to divide profits. The Court
emphasized the several factors indicating the intent of the petitioner to engage in business, which
are: (a) The substantial amount borrowed to create a common fund for real estate transactions; (b)
The series of property acquisitions over a short period, indicating habitual business activity; (c) The
leasing of properties to generate income, which was not for personal use; and (d) The management
of the properties by a designated individual, suggesting a business-like operation. In addition, the
Court explicate the definition of "corporation" under the tax code which includes partnerships,
regardless of their formal structure. It is important to take note that the law does not require a legal
personality distinct from its members for tax purposes. Thus, in this case, the petitioners were subject
to the corporate income tax, residence tax, and real estate dealer's tax.

#2 GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T.

BACORRO, petitioners, vs. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION and JOAQUIN L. MISA, respondents.

G.R. No. 109248 July 3, 1995

Facts: Bito, Misa & Lozada formed a partnership (law firm) duly registered with the Securities and
Exchange Commission (SEC). The articles of partnership of this law firm underwent several
amendments. The said firm was structured as a partnership at will, therefore, it has no fixed term and
can be dissolved at any time by any partner. Thereafter, Atty. Joaquin L. Misa, one of the partners,
submitted a letter of withdrawal from the firm effective at the end of that month. Following his
withdrawal, he filed a petition with the SEC seeking the formal dissolution and liquidation of the
partnership, as well as his claims for his share of the partnership assets and damages.

Initially, the SEC ruled that the withdrawal did not dissolve the partnership. This decision was
reversed by SEC en banc, holding that the partnership was dissolved upon Misa's withdrawal. The
case was remanded for the determination of the parties' rights and obligations. The parties appealed
to the Court of Appeals (CA). The CA affirmed the SEC's decision emphasizing that the withdrawal
changed the relationship among the partners, hence, the dissolution of the partnership. The appellate
court also noted that the withdrawal was not made in bad faith and that the liquidation of his interest
should follow the partnership agreement.

Issue: Whether or not the partnership was a partnership at will and that Misa's withdrawal resulted in
the dissolution of the partnership.

Ruling: Yes. The Supreme Court agreed that the partnership was a partnership at will. The Court
stressed that when a partnership is without a fixed term it can be dissolved by any partner at their
discretion. In the case, the partnership agreement did not specify a duration, which supports the
classification as a partnership at will. Furthermore, Misa's withdrawal constituted a legitimate cause
for dissolution, regardless of the motivations behind it. The Court underscores that while a partner's
withdrawal could be made in bad faith, that bad faith would not prevent dissolution but could expose
the withdrawing partner to liability for damages. It is important to note that the partnership's legal
personality continues until the winding up of its affairs, and the liquidation of assets should follow the
provisions of the partnership agreement, which takes precedence over general provisions of the Civil
Code.

#3 MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs. COURT OF APPEALS and NENITA
A. ANAY, respondents.

G.R. No. 127405 October 4, 2000

Facts: Private respondent Anay is a marketing adviser. She was introduced to petitioner Belo, the
vice-president for operations of Ultra Clean Water Purifier. Anay, Belo along with Tocao, agreed to
form a joint venture for the importation and distribution of kitchen cookware. Belo was to provide the
capital, Tocao was to manage the business, and Anay was to handle marketing. The agreement was
not formalize in writing. The business was named Geminesse Enterprise and was registered under
the name of Tocao. Subsequently, Anay successfully secured a distributorship with West Bend
Company. Eventually, tensions arose in the partnership when Anay was barred from her roles in the
business. This lead to the filing a complaint for unpaid commissions and damages against her two
partners, Tocao and Belo. The trial court found there is the existence of an oral partnership among
the three, thus making Anay entitled to her share of the profits and commissions. Accounting for the
partnership’s finances was ordered by the court, and Anay was awarded damages.

Issue: Whether or not a partnership existed based on the contributions and shared profits.

Ruling: The Supreme Court affirmed the existence of a partnership and it is a factual matter.The
Court underscores that the contributions of Anay as an industrial partner were significant, making her
exclusion from the partnership unjustified. Though the business operated under the name of a sole
proprietorship it did not negate the existence of their partnership. In the case, the existence of an oral
partnership is evident and it was based on the intention to create a partnership, the contributions
made by each party, and the sharing of profits. Under the law on partnership, the lack of a written
agreement did not invalidate the partnership, as partnerships can be formed orally unless immovable
property is involved. Moreover, Anay was a partner right from the very beginning, hence, entitled to
her share of the profits and commissions. Again, it is important to note that an oral partnership
agreement is valid and enforceable as long as all the essential elements of a partnership are present.
The absence of a written agreement does not invalidate a partnership unless immovable property is
involved. A partner wrongfully excluded from a partnership is entitled to damages and their share of
the profits upon dissolution of the partnership.

#4 FEDERICO JARANTILLA, JR., petitioner, VS. ANTONIETA JARANTILLA, BUENAVENTURA

REMOTIGUE, SUBSTITUTED BY CYNTHIA REMOTIGUE, DOROTEO JARANTILLA AND TOMAS
JARANTILLA, respondents.

G.R. No. 154486 December 01, 2010

Facts: In 1948, spouses Rosita Jarantilla and Vivencio Deocampo, as well as Buenaventura
Remotigue and Conchita Jarantilla, established a business partnership that resulted in the purchase
of numerous enterprises and assets. In 1957, an "Acknowledgement of Participating Capital," was
executed by the Remotigue spouses, acknowledging the contributions made by various family
members, including Antonieta and Federico, to the capital of their businesses. In 1987, aconflict
arose when an amended complaint was filed by Antonieta against several family members including
Federico seeking for an accounting of the assets and income of the co-ownership, partition of
properties, and damages. Federico and several members of the family denied the existence of a
partnership with Antonieta; that she had been compensated for her contributions; and that Antonieta's
share was limited to the businesses listed in the "Acknowledgement of Participating Capital".

During the trial, a compromise agreement was entered into by Federico and Antonieta, supporting
and asserting each other’s claims and entitlement in the partnership. The Regional Trial Court (RTC)
ruled in favor of Antonieta. Both parties appealed but the RTC’s decision was modified by the Court of
Appeals (CA) limiting Antonieta's and Federico's shares to the businesses specified in the
Acknowledgement of Participating Capital.
Issue: Whether or not a mere contributions to a common fund establishes a partnership.

Ruling: No. The Supreme Court held that the Acknowledgement of Participating Capital clearly
defined the scope of the partnership and the businesses involved. It ruled that the petitioner’s claim to
a share in the real properties was unfounded, as there was no evidence that these properties were
acquired using partnership funds. The Court emphasized the distinction between co-ownership and
partnership, stating that mere contributions to a common fund do not automatically establish a
partnership. In the case, the existence of a trust was not proven, as the petitioner failed to provide
sufficient evidence that the real properties were purchased with partnership income. The Court
reiterated that a certificate of title is strong evidence of ownership and cannot be collaterally attacked
in a separate action.

#5 LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

G.R. No. 136448 November 3, 1999

Facts: Lim Tong Lim, Antonio Chua, and Peter Yao, formed a partnership for commercial fishing
under the name "Ocean Quest Fishing Corporation." In 1990, Chua and Yao entered into a contract
with the respondent Philippine Fishing Gear Industries, Inc. for the purchase of fishing nets valued at
and additional floats. In the said contract, Lim was not a signatory but a partner in the business. Upon
failure to pay for the fishing nets and floats, the Philippine Fishing Gear Industries filed a collection
suit against Chua, Yao, and Lim. The Regional Trial Court (RTC) of Quezon City issued a writ of
preliminary attachment, leading to the seizure of the fishing nets. Chua requested time to pay, while
Yao and Lim filed their answer. The RTC maintained the writ and ordered the sale of the fishing nets
at public auction, which was won by the Philippine Fishing Gear Industries for P900,000. The RTC
concluded that there is the existence of a partnership among Lim, Chua, and Yao, a compromise
agreement executed in a separate case involving the three. This, according to the RTC is an
indication of a shared intention to divide profits and losses, hence, a strong evidence of a partnership.

Issue: Whether or not a partnership existed based solely on the compromise agreement.

Ruling: Yes. The Supreme Court found that a partnership existed among Lim, Chua, and Yao. The
Court emphasized that a partnership can exist even without formal documentation, as long as there is
an agreement to share profits and losses. In the case, the actions of the parties, including their
agreement to acquire fishing boats and the shared financial responsibilities, indicated a partnership.
Therefore, all partners are jointly liable for the debts incurred by the partnership. Partners are jointly
liable for the debts of the partnership, and this liability extends to those who benefit from the
partnership's transactions, regardless of their direct involvement in the contracts. The Court ruled that
the writ of attachment was properly issued, as the nets were essential to the partnership's business.
The ownership of the nets remained with the respondent until full payment was made, justifying the
attachment to secure the debt.

#6 JOSE FERNANDEZ, plaintiff-appellant, vs. FRANCISCO DE LA ROSA, defendant-appellee.

G.R. No. 413 February 2, 1903

Facts: In 1900, the plaintiff Jose Fernandez claims he entered into a verbal agreement with the
defendant Francisco De La Rosa to form a partnership for the purchase and rental of cascoes in
Manila. The Fernandez asserts that he contributed 300 pesos and 825 pesos for the purchase of
casco No. 1515 and casco No. 2089, respectively. However, De La Rosa took title of the two cascoes
under his name and later denied the existence of the partnership with Fernandez. De La Rosa
claimed that the funds received from Fernandez were loans or payments for his own purchases. De
La Rosa admits that there is discussion as to partnership but denies any formal agreement was
reached. According to him, Fernandez did not contribute any funds for the purchase of both cascoes.
The trial court ruled in favor of the De La Rosa. Fernandez appealed the decision.

Issue: Whether or not a partnership exist between the parties based on the mutual contributions
made by the plaintiff and the intention to share profits from the cascoes.

Ruling: Yes. Partnership did exist between the parties. This is based on the mutual contributions
made by Fernandez and the intention to share profits from the cascoes. The Court holds that “a
partnership can be formed without a written agreement, as long as the essential elements of mutual
contribution and shared profits are present.” In the case, the contributions of Fernandez in the
purchase and repair of the cascoes established the mutual contribution necessary to form a
partnership. In addition, as stated in the case, both parties have the intention to share profits which
was inferred from the nature of the transactions and the prior discussions of both parties to form a
partnership. Again, a partnership can be formed through verbal agreements and mutual contributions
without the necessity of a written contract, provided the essential elements of partnership are present.
Furthermore, the partnership does not always end/terminated when one partner accepts money that
has been returned, particularly if a reservation of rights is included.

#7 LORENZO T. OÑA and HEIRS OF JULIA BUÑALES, namely: RODOLFO B. OÑA, MARIANO
B. OÑA, LUZ B. OÑA, VIRGINIA B. OÑA and LORENZO B. OÑA, JR., petitioners, vs. THE
COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. L-19342 May 25, 1972

Facts: In 1948, a settlement case of Julia Bunales’ estate was initiated, and her husband, Lorenzo
was appointed as the administrator. In 1949, a project partition was submitted by Lorenzo and was
approved by the court. In the said partition, the heirs had undivided interests in several parcels of land
and houses, as well as an amount to be collected from the War Damage Commission, which later
provided approximately P50,000 for property rehabilitation. The properties remained under Lorenzo's
management. Lorenzo engaged in various business activities, including leasing and selling the
properties, and reinvesting the income into real estate and securities. The value of the properties and
investments grew significantly. The income was retained by Lorenzo for further investments. In 1958,
the Commissioner of Internal Revenue (CIR) assessed the heirs as having formed an unregistered
partnership, subjecting them to corporate income taxes plus surcharges and interest. The petitioner
heirs challenged this assessment, and argued that they were only co-owners of the inherited
properties and not partners.

Issue: Whether or not the CIR correctly maintained that the petitioners had formed an unregistered
partnership.

Ruling: Yes. The Court upheld the conclusion of CIR that petitioners had indeed formed an
unregistered partnership. In the case, the Court noted that the petitioners allowed their inherited
properties and the income derived from them to be managed collectively by Lorenzo T. Ona with the
intent to generate profits. Under the National Internal Revenue Code, this collective management and
reinvestment of income constituted the formation of an unregistered partnership. Furthermore, the
court underscores that the status of co-ownership does not persist indefinitely after a partition is
approved. It is important to note that once the heirs decided to manage their shares collectively for
profit, they effectively formed a partnership for tax purposes. In addition, the court dismissed the
petitioners' claim that income from inherited assets should be segregated, ruling that corporation tax
applied to all income from the common fund, including that from inherited properties. The Court
decided that the partnership's profits should be deducted by the taxes imposed on it, not the other
way around, in response to the petitioners' claim for tax credits based on their individual income tax
payments. The Court observed that petitioners overpaid their individual income taxes, but the time for
collecting those overpayments had probably closed because of prescription.

#8 NOBIO SARDANE, petitioner, vs. THE COURT OF APPEALS and ROMEO J.

ACOJEDO, respondents.

G.R. No. L-47045 November 22, 1988

Facts: Petitioner Romeo J. Acojedo initiated a collection action against private respondent Nobio
Sardane, for the recovery of a sum of money amounting P5,217.25. This amount was based on
several promissory notes executed by Sardane in favor of Acojedo. Despite multiple demands for
payment, Sardane failed to settle the debt, prompting Acojedo to seek legal recourse. After a full trial,
the City court ruled in favor of Acojedo, ordering Sardane to pay the claimed amount along with legal
interest and attorney's fees. On appeal, the CFI of Zamboanga del Norte reversed the City court’s
ruling. Acojedo's complaint was dismissed by the appellate court and awarded damages to Sardane.
Hence, this petition for review.

Issue: Whether or not the claim of partnership was unfounded and that the notes were valid and
enforceable.
Ruling: Yes. The Court of Appeals upheld the decision of the City Court, emphasizing that the
promissory notes were clear and unambiguous. The court ruled that the parol evidence rule did not
apply in this case, as there was no intrinsic ambiguity in the written documents. The promissory notes
explicitly indicated a loan agreement, and Sardane's claims of a partnership did not sufficiently alter
their meaning. This Court held and agreed that evidence alone (promissory notes/receipts) would not
be adequate to establish the existence of a partnership between the private parties. The foregoing
factual findings, which belie the further claim that the aforesaid promissory notes do not express the
true intent and agreement of the parties, are binding since there is no showing that they fall within the
exceptions to the rule limiting the scope of appellate review herein to questions of law. The mere
receipt of profits does not automatically establish a partnership, especially if the recipient's role can
be characterized as that of an employee rather than a partner.

#9 MAURICIO AGAD, plaintiff-appellant, vs. SEVERINO MABATO and AGAD COMPANY,

defendants-appellees.

G.R. No. L-24193 June 28, 1968

Facts: In 1964, plaintiff-appellant Mauricio Agad filed a complaint seeking P14,000 as his share of
the profits for the years 1957 to 1963, P1,000 for attorney's fees, and the dissolution of the
partnership with a request for a receiver to wind up its affairs. In his answer, defendants-appellees
Severino Mabato along with Mabato & Agad Company admitted the formal allegations but denied the
existence of the partnership, arguing that it was not perfected because Agad did not provide his
P1,000 contribution. Mabato sought the dismissal of the complaint, declaring the partnership contract
void ab initio, and claimed damages and attorney's fees. Subsequently, a motion to dismiss was filed
by Mabato. Since the partnership concerned immovable property, the lower court allowed the move to
dismiss, ruling that the partnership contract was defective under Article 1773 of the Civil Code since
there was no inventory of the fishpond, which was considered necessary.

Issue: Whether or not the partnership was void because it involved immovable property (the
fishpond) and that an inventory was required but not provided.

Ruling: No. According to the Supreme Court, Article 1773 of the Civil Code was not applicable in the
case. The Court reasoned that the partnership was established to operate a fishpond, and neither
Agad nor Mabato contributed a fishpond or any real rights to the partnership. Their contributions were
strictly monetary, amounting to P1,000 each, which did not constitute immovable property. The Court
reasoned that neither Agad nor Mabato donated a fishpond or any actual rights to the partnership,
Therefore, the requirement for an inventory under Article 1773 was not triggered. The Court set aside
the lower court's order of dismissal and remanded the case for further proceedings, ruling that the
partnership was valid and that Agad had a cause of action.

#10 WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM and CHARLES

CHAMSAY, petitioners, vs. SANITARY WARES MANUFACTURING CORPORATOIN, ERNESTO
V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR., ENRIQUE R. LAGDAMEO, GEORGE F. LEE,
RAUL A. BONCAN, BALDWIN YOUNG and AVELINO V. CRUZ, respondents.

G.R. No. 75875, 75951, 75975-76 December 15, 1989

Facts: The case concerns a disagreement over the choice of directors for Sanitary Wares
Manufacturing Corporation (Saniwares), a domestic company founded in 1961 with the purpose of
producing and selling sanitary products. Saniwares and American Standard Inc. (ASI), a foreign firm,
signed a contract in 1962 that permitted ASI to share in Saniwares' ownership and administration.
According to the agreement, the board of directors would have nine members. ASI may appoint three
of them as long as it held at least 30% of the outstanding stock, which was ultimately raised to 40%.
The Filipino stockholders were to appoint the remaining six directors. During the annual stockholders'
meeting, the election of directors became contentious. Following the meeting, separate petitions were
filed with the Securities and Exchange Commission (SEC) by both groups asserting their legitimacy
as the board of directors. The SEC hearing officer ruled in favor of the Lagdameo Group. On appeal,
the appellate court ordered a new stockholders' meeting under SEC supervision, to impose specific
conditions on the nominations and voting process.
Issue: Whether or not the agreement established a joint venture, which allowed for specific
provisions regarding the designation of directors and the voting rights of stockholders.
Ruling: The Supreme Court affirmed the decision of the SEC and the appellate court, declaring that
the above-named respondents are the elected directors. The Court reasoned that the agreement
between the parties established a joint venture with specific provisions for the allocation of board
seats and voting rights. According to the Court, the parties intended to establish a contractual
arrangement that would safeguard the interests of Filipino investors while acknowledging ASI's
minority status. It decided that the clauses pertaining to the appointment of directors and the
cumulative voting power were legitimate and need to be upheld. The Court underlined that for ASI to
vote its increased equity would violate the Anti-Dummy Law and nationalization criteria, as well as
jeopardize the agreed-upon minority position.

The Court also clarified that the cumulative voting rights of the Filipino stockholders should be
respected, allowing them to determine their nominees without interference from ASI. This ruling
balanced the contractual rights of both groups while ensuring compliance with legal requirements
regarding foreign ownership in corporations. This case underscores the importance of contractual
agreements in determining the rights and obligations of stockholders in joint ventures and
corporations.

#11 MAURO LOZANA, plaintiff-appellee, vs. SERAFIN DEPAKAKIBO, defendant-appellant.

G.R. No. L-13680 April 27, 1960

Facts: In order to manage, run, and distribute electricity and power in Dumangas, Iloilo, Mauro
Lozana (plaintiff) and Serafin Depakakibo (defendant) signed a cooperation agreement on November
16, 1954. Mrs. Piadosa Buenaflor was granted a franchise. Lozana contributed 60% (P18,000) while
Depakakibo contributed 40% of the partnership's P30,000 capital. However, on May 15, 1955, the
Public Service Commission withdrew the franchise, which prompted Buenaflor to file an appeal. In
1955, Lozana sold Olimpia D. Decolongon a 75-hp Buda Diesel generator, and in 1956, Depakakibo
sold a Crossly Diesel Engine to Felix Jimenea and Felina Harder, who were married. Lozana filed a
case against Depakakibo on November 15, 1955, alleging that the defendant had illegally detained 70
wooden posts and the generator that he owned. Lozana demanded damages and the return of these
goods. After Lozana posted a bond, the court gave the sheriff permission to seize the generator and
posts. Depakakibo refuted Lozana's allegations, claiming that Lozana had broken their partnership
agreement by selling the generator and that the equipment were contributions to the partnership.
Depakakibo filed a complaint for damages and requested that the partnership be dissolved.

Issue: Whether the generator and wooden posts were considered partnership property and if Lozana
had the right to sell them without the consent of Depakakibo.

Ruling: Yes. The generator and wooden poles were determined by the court to be contributions to
the partnership and, as such, partnership property. It decided that as partnership property cannot be
disposed of unilaterally, Lozana's sale of the generator without Depakakibo's approval was improper.
The legitimacy of the partnership agreement was also discussed by the court. Since both parties were
Filipino citizens, and the Anti-Dummy Law solely applied to foreigners, it was determined that the
partnership was not void ab initio. The partnership agreement was declared to be free of any
illegalities by the court. The court decided that liquidating the partnership's assets rather than
requiring each member to return their contributions was the appropriate course of action in the event
of the partnership's dissolution. In order to handle the dissolution and liquidation of the partnership,
the court remanded the matter for additional proceedings and overturned the lower court's decision.

#12 WILLIAM UY, plaintiff-appellee, vs. BARTOLOME PUZON, substituted by FRANCO PUZON,
defendant-appellant.

G.R. No. L-19819 October 26, 1977

Facts: William Uy and Bartolome Puzon, established the "U.P. Construction Company". Puzon, the
prime contractor requested Uy's financial support because he was having trouble overseeing the
projects. They decided to establish a firm with a P100,000 starting capital. Puzon asked Uy to
advance money to meet his responsibilities in order to obtain a loan from the Philippine National
Bank. As a partial contribution to the partnership, Uy sent Puzon P10,000 and P30,000, which were
to be utilized to pay off Puzon's debt. Thereafter, Puzon obtained a P150,000 loan, of which he gave
P20,000 to the partnership and returned P40,000 to Uy. Without Uy's knowledge, Puzon transferred
all of the Bureau of Public Highways' payments to the Philippine National Bank, resulting in a
substantial misappropriation of partnership funds. Dut to this, the majority of the money was utilized to
settle Puzon's personal debts. Uy insisted that Puzon complete his capital contribution duties as
financial troubles grew, but Puzon did not comply. Uy then initiated a lawsuit, alleging Puzon had
breached their agreement and requesting damages and the dissolution of the partnership.

Issue: Whether or not there is a breach of partnership agreement which entitles Uy awards including
his share of unrealized profits.

Ruling: Yes. The court determined that Puzon had, in fact, violated the partnership agreement by
embezzling partnership funds and neglecting to contribute his capital share. The conditions of the
partnership must be followed, and it is a violation if capital is not contributed or money is embezzled.
According to the court, Puzon's decision to assign payments to the Philippine National Bank without
Uy's approval hurt the partnership by depriving it of money that it needed to stay in business. The
court granted Uy P200,000 as his share of unrealized gains and upheld his claims for reimbursement
of his contributions, citing the possibility of substantial earnings for the partnership if Puzon had
complied with his duties. The court stressed that Uy was entitled to compensation for both losses
incurred and profits not realized as a result of Puzon's violation under Article 2200 of the Civil Code.
The court dismissed Puzon’s counterclaims, affirming that the evidence supported Uy’s position and
that Puzon’s actions directly led to the partnership’s dissolution and financial losses.

#13 VARGAS and COMPANY, plaintiff-appellee, vs. CHAN HANG CHIU, ET AL., defendants-
appellants.

G.R. No. L-8576 February 11, 1915

Facts: The plaintiff is a merchant organization that is properly constituted under Philippine Island law
and is most likely registered as required by law. In order to recover a certain amount of money, Chan
Hang Chiu filed a lawsuit against the plaintiff in this case on August 19, 1911. As the managing agent
of Vargas & Co. at the time of the summons and complaint, the sheriff certified that he served the
company on August 19, 1911, by personally delivering and departing with one Jose Macapinlac true
copies of the summons and complaint. July 2. Vargas & Co. was ordered to pay 372.28 by the
justice's court in 1912. Following that, a legal execution was issued, and Vargas & Co.'s property was
seized to cover the cost. Vargas & Co. then paid the judgment and expenses under protest, stating
that it will file a lawsuit to recoup the money. After the execution was deemed satisfactory, the case
was put on hold until the current action was taken.

Issue: Whether or not Vargas & Co. as a partnership, in order to file a lawsuit against it, the
summons must be served on each partner and a copy must be personally delivered to each of them.

Ruling: No. Since American occupation of the Philippine Islands, it has been the standard practice to
treat businesses of the plaintiff's class as legal or juridical entities and to allow them to sue and be
sued in the company's name. The summons is only served to the managing agent or other official of
the business designated by the relevant section of the Code of Civil Procedure.
Instead of using the names of the firm's members, the plaintiff is bringing this case under the
company's name. It has been a consistent practice to bring lawsuits against businesses in the
plaintiff's class using their corporate names rather than against the individual partners who make up
the firm.

#14 NGO TIAN TEK and NGO HAY, petitioner, vs. PHILIPPINE EDUCATION CO.,
INC., respondent.

G.R. No. L-48113 April 7, 1947

Facts: In order to recover the P16,070.14 unpaid cost of merchandise that Lee Guan Box Factory
had purchased from Philippine Education Co., Inc., as well as five other corporate entities that had
previously assigned their credits to the latter, Philippine Education Co., Inc. filed a lawsuit in the Court
of First Instance of Manila against Vicente Tan, also known as Chan SY, and the partnership of Ngo
Tian Tek and Ngo Hay. The Modern Box Factory was first owned by Ngo Hay, who was joined as a
junior partner by Ngo Tien Tek three years later. The Philippines Education Co., Inc. and its assignors
supplied items to the contemporary Box Factory, which dealt in boxes and related commodities. The
Lee Guan Box Factory, run by Vicente Ta, was then founded in 1930 or so. Through Vicente Tan,
Lee Guan Box Factory requested credit from the plaintiff and its assignors. Ngo Hay claimed to be the
factory's major owner and that Lee Guan Box Factory was a division of Modern Box Factory.
Evidence suggests that, at Vicente Tan's specific request, staff members of the Philippine Education
Co., Inc. and its assignors sent a large number of items acquired under the name of the Lee Guan
Box Factory to the Modern Box Factory. Additionally, there is proof that Vicente Tan asked the sellers'
collectors to pick up the bills against Lee Guan Box Factory from Modern Box Factory. The record
reveals numerous checks made payable to the Lee Guan Box Factory's accounts that were signed by
Ngo Hay or Ngo Tian Tek. The petitioners, Ngo Tian Tek and Ngo Hay, argue that the Court of
Appeals erred in concluding that Lee Guan Box Factory was a subsidiary of the Modern Box Factory
and in ignoring the fact that Vicente Tan, also known as Chan Sy, signed the contract proving the
debts in question without any indication that she or the petitioner were involved.

Issue: Whether or not Ngo Tan Tek and Ngo Haycan be held liable for the credit contracted be
Vicente Tan.

Ruling: According to the plaintiff and the assignors, Ngo Hay, the Modern Box Factory, and Ngo Hay
and Co. are all the same because of the partners' actions, and the evidence supporting Ngo Hay's
claims to be the owner of Lee Guan Box Factory must be interpreted in that light. Despite the fact that
Vicente Tan, also known as Chan Sy, acted in his own name, the petitioner cannot be saved. The
circumstances that Vicente Tan alias Chan Sy acted in his own name cannot save the petitioner. Due
to this ownership, contracts made by a factor of a commercial establishment that is known to be a
part of a reputable company or associations will be interpreted as being made for the benefit of the
owner of that company or association, even if the factor did not say so at the time of execution, as
long as the contracts include items that are part of the establishment's line of work. (Article 286.Code
of Commerce) Vicente Tan's lack of a record power of attorney signed by the petitioner will not harm
other parties, such as the respondent Philippine Education Co., Inc. and its assignors.

#15 ANG PUE & COMPANY, ET AL., plaintiffs-appellants, vs. SECRETARY OF COMMERCE AND
INDUSTRY, defendant-appellee.

G.R. No. L-17295 July 30, 1962

Facts: Tan Siong and Ang Pue, both Chinese nationals, established a five-year partnership.
According to their agreement, they can mutually agree to continue the partnership for an additional
five years. RA 1180 was passed in 1954 with the purpose of regulating the retail industry. Since the
aforementioned law allowed a partnership that was not entirely composed of Filipinos to continue
operating a retail business after it was enacted until the end of its term, Ang's registration was denied
on the grounds that the extension violated the aforementioned Act.
The plaintiff company filed a petition for declaratory relief, arguing that their original articles of
partnership allowed them to extend the partnership's term, that it is a property right that cannot be
taken away from partners without their consent or due process, and that RA 1180's provisions cannot
negatively impact them. Their petition was denied by the lower court. An appeal was interposed by
Plaintiff Co.

Issue: Whether or not Ang Pue & Co. can extend its term of partnership.

Ruling: No. It is not an absolute right to form a corporation or partnership that can do business as
such and assert its own legal personality; rather, it is a privilege that can only be exercised within
restrictions that the state may decide to apply. It is indisputable that the State, via Congress, and in
accordance with the law, had the authority to pass Republic Act No. 1180, which stipulated that only
Filipinos and solely Filipino-owned businesses could operate in the retail industry. Given that it grants
them the right to continue operating their retail business until the end of their term or life, it is evident
that this clause was meant to apply to partnerships that were already in place at the time the law was
passed. The terms of the agreement must be interpreted in light of the laws in effect at the time the
partners decided to extend. As previously mentioned, the provisions of Republic Act 1180 were
already in effect when the partners in this case amended their articles of partnership, and it is obvious
that the appellants' claimed right to extend the partnership's original term by an additional five years
would be against the law's stated intent and purpose.
#16 MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners, vs. THE COMMISSIONER OF
INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.

G.R. No. 78133 October 18, 1988

Facts: After purchasing two (2) land parcels and three (3) more the following year, Pascual and
Dragon sold the aforementioned lots in 1968 and 1970, realized net profits, and paid the associated
capital gains taxes in 1973 and 1974 by taking advantage of the tax amnesties granted in those
years.
Pascual and Dragon objected to the Acting BIR Commissioner's assessment, claiming they had taken
advantage of tax amnesties back in 1974, and were ordered to pay a total of P107,101.70 in alleged
deficient corporate income taxes for the years 1968 and 1970.

As co-owners in the real estate transactions, the respondent commissioner notified Pascual and
Dragon that they had established an unregistered partnership or joint venture, which was taxable as a
corporation under Section 20(b) and whose income was subject to the taxes outlined in Section 24 of
the National Internal Revenue Code. Moreover, this unregistered partnership was subject to
corporate income tax as distinguished from profits derived from the partnership by them which is
subject to individual income tax; and that the availment of tax amnesty under P.D. No. 23, as
amended, by Pascual and Dragon, relieved them of their individual income tax liabilities but did not
relieve them from the tax liability of the unregistered partnership. Hence, Pascual and Dragon were
required to pay the deficiency income tax assessed.

Issue: Whether there exists an unregistered partnership between petitioners.

Ruling: No. Common ownership of property does not automatically establish a partnership between
its owners, even though they may use it to their advantage. They can also agree on how to manage,
use, and allocate the property's profits without actually becoming partners. Whether or not the
individuals involved have a joint or common right or interest in the property, the sharing of returns
does not create a partnership. A distinct legal personality from the individual partners, the ability of
each party to transfer or assign the entire property, and a clear intention to form a partnership are all
necessary. In this instance, the petitioners' co-ownership is amply demonstrated. The idea that they
thus established an unregistered partnership is not sufficiently supported by the evidence. They were
not partners as a result of the two separate transactions in which they bought properties and then
sold them a few years later. They paid their capital gains taxes on their net profits and took advantage
of the tax amnesty by sharing in the gross profits as co-owners. As the respondent commissioner
suggests, they cannot be deemed to have established an unregistered partnership under the
circumstances, making them subject to corporate income tax.

#17 JOSE GATCHALIAN, ET AL., plaintiffs-appellants, vs. THE COLLECTOR OF INTERNAL

REVENUE, defendant-appellee.

G.R. No. L-45425 April 29, 1939

Facts: In order to purchase a single sweepstakes ticket worth two pesos (P2) from one of the
National Charity Sweepstakes Office's duly authorized agents, Gatchalian and company contributed
money, and the ticket was registered under the same name. Because of this, the ticket was awarded
P50,000, one of the third prizes. The Philippine National Bank was then used to cash the prize check
by Gatchalian and company. In order to claim the prize, Gatchalian had to submit the relevant income
tax return. In an assessment against Gatchalian and company, the defendant demanded P1,499 be
paid to the deputy provincial treasurer in Bulacan. Through the representation of their respective
attorneys, the plaintiffs asked for an exemption from paying the income tax but were turned down.
When the tax demanded was not paid, a levy and distraint warrant was issued against the plaintiffs'
property. In order to save face, the plaintiffs paid P601 in protest to the municipal treasurer for taxes
and penalties, and they asked to be permitted to pay the remaining amount in monthly installments.
With the stipulation that the plaintiffs submit the customary bond secured by two solvent individuals to
ensure timely payment of each installment as it becomes due, the defendant granted the request. The
defendant rejected the plaintiff's formal protest against the payment of P601 prior to the first
installment's due date, and the plaintiff was not given a refund. The defendant ordered the municipal
treasurer to execute the warrant of distraint and levy against the plaintiffs within five days because the
plaintiffs had not paid the installments in accordance with the bond they had filed. The plaintiffs paid
P1,260 under protest, which represents the remaining balance of the income tax and penalties that
the defendant had demanded, in order to prevent additional humiliation and annoyance. They filed a
claim to have the entire P1,863.44 paid under protest refunded, but the defendant rejected their
request and continues to do so despite the plaintiffs' demands, which is why they are appealing.

Issue: Whether or not Jose Gatchalian & Company formed a partnership and should pay income tax
returns accordingly.

Ruling: Yes. In accordance with the facts as stated, the plaintiffs established a civil partnership since
each of them contributed P50,000 to purchase a sweepstakes ticket with the express intent of
splitting any winnings equally (Article 1665, Civil Code). In addition to forming the partnership, Jose
Gatchalian personally visited the Philippine Charity Sweepstakes office in his capacity as a co-partner
and collected the prize. The office also issued a P50,000 check made payable to Jose Gatchalian
and company, which the aforementioned partner also picked up in the same capacity. The notion that
the plaintiffs—Jose Gatchalian and the other 14 individuals—organized and created a community of
property exclusively is refuted by all of these facts. They should therefore make the appropriate
income return tax payment.

#18 INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees, vs. NICANOR CASTEEL and
JUAN DEPRA, defendants, NICANOR CASTEEL, defendant-appellant.

G.R. No. L-21906 December 24, 1968

Facts: Nicanor Casteel attempted three times in 1940 to register a fishpond in the then-sitio of
Malalag, municipality of Padada, Davao, on a large area of swampy land (178.76 hectares) but was
unsuccessful because the Bureau of Fisheries did not take action on his earlier applications. Even
after being rejected, Casteel remained interested. Casteel saw the need to expand his occupation by
building dikes and raising marketable fish because the other applicants were posing a threat to his
position and had already spread out into the area. However, because he was short on funds at the
time, he turned to his uncle Felipe Deluao for assistance. Furthermore, Casteel promptly filed a
protest after discovering that parts of the area he had applied for were already occupied by competing
applicants. As a result, the area in question became involved in two administrative cases. In spite of
the conclusions drawn from the examination of the aforementioned administrative cases, Casteel's
application was denied by the Director of Fisheries on October 25, 1949, who also mandated that he
remove all improvements he had made to the property and lease it through a public auction.

On November 25, 1949, Inocencia Deluao, Felipe Deluao's wife, and Nicanor Casteel, the parties to
the first and second parts of the contract, respectively, signed what is known as a "contract of
service." On November 29, 1949, the Director of Fisheries denied Felipe Deluao's November 17,
1948, application, and Inocencia Deluao signed a special power of attorney in favor of Jesus Donesa
on the same day as the aforementioned contract. Undeterred by this denial, Deluao requested that
Nicanor Casteel's application for the subject fishpond be reexamined and restated his claim over the
same area in the two administrative cases. The Secretary of Agriculture and Natural Resources
issued a ruling mandating Casteel's return to the region and his payment for the resulting
improvements. Inocencia Deluao was prohibited from continuing to manage the fishpond by Nicanor
Casteel at some point in January 1951, and Jesus Donesa, the latter's encargado, was expelled from
the property.

Issue: Whether the reinstatement of Casteel over the subject land constitute a dissolution of the
partnership between him and Deluao.

Ruling: Yes. His partnership with Deluao ended when Casteel was reinstated. The arrangement
under the so-called "contract of service" was upheld by the Supreme Court until the Secretary of
Agriculture and Natural Resources issued two decisions in DANR Cases 353 and 353-B on
September 15, 1950. On its own, this development led to the partnership's breakdown. The
partnership envisions the unapproved transfer of half of the fishpond to parties other than the
applicant because its goal was to divide it into two equal portions between the appellees and the
appellant once it was awarded to the latter. When Casteel's application was accepted and he was
given the fishpond, it was dissolved. Because of the approval, it was illegal for the members to
continue their partnership. Furthermore, later events also show that both parties intended to end the
partnership because they refused to share the fishpond.
 #19 ALBERT F. KIEL, plaintiff-appellee, vs. ESTATE OF P. S. SABERT, defendant-appellant.

G.R. No. 21639 September 25, 1924

Facts: Albert F. Kiel established the Parang Plantation Company to work on a few public lands in the
Parang, Cotabato municipality. Kiel, in 1910, and P. To develop the plantation, S. Sabert signed a
contract. Kiel was to oversee the capital, while Sabert was to supply it. Since Sabert Kiel is a German
national and is not considered eligible to purchase public lands in the Philippines, it appears that this
partnership was established in order to purchase the land in his name. Kiel had to leave the
Philippines during World War I. There are five people, including P.S Sabert. After establishing the
Nituan Plantation Company, P. S. Sabert gave the Parang Plantation Company all of its rights and
interests. Kiel apparently attempted to negotiate a settlement with Sabert. However, Sabert passed
away before a friendly agreement could be made or Kiel resolved to take action against him. This is
why the Sabert estate is being sued.

Issue: Whether or not there is existence of a co-partnership between Kiel and Sabert.

Ruling: Yes. The Court is aware of the fact that a partnership cannot be established by hearsay,
rumor, or general reputation, and that a partner's statements made outside of the presence of his
copartner are insufficient to prove the partnership's existence. This Court’s strongly led to believe that
Kiel and Sabert did form a partnership and agreed to share equally based on the plaintiff's witnesses'
testimony and the documentary evidence. We believe that there is sufficient evidence to support the
partnership, based on the tests for partnership existence. The requirement to ascertain the parties'
intention based on the facts and their language and behavior, and then to put that intention into effect,
is even more important than any of the partnership rules mentioned above.

#20 TECK SEING AND CO., LTD., petitioner-appellee. SANTIAGO JO CHUNG, ET AL., partners,
vs. PACIFIC COMMERCIAL COMPANY, ET AL., creditors-appellants.

G.R. No. 19892 September 6, 1923

Facts: After "Sociedad Mercantil, Teck Seing & Co., Ltd." presented an application to be declared
insolvent, the creditors—Pacific Commercial Company, Piñol & Company, Riu Hermanos, and W.
"(A) Declaring the individual partners as described in paragraph 5 parties to this proceeding; (B) to
require each of said partners to file an inventory of his property in the manner required by section 51
of Act No. 1956; and (C) that each of said partners be adjudicated insolvent debtors in this
proceeding," petitioned the court in a motion filed by H. Anderson & Company. The trial judge initially
granted the motion but later denied it after renewed opposition. An appeal was filed against this most
recent order in line with section 82 of the Insolvency Law.

Issue: Whether or not the fact that the firm name "Teck Seing & Co., Ltd." does not contain the name
of all or any of the partners as prescribed by the Code of Commerce prevents the creation of a
general partnership.

Ruling: No. The existence of a partnership is determined by the legal intent inferred from the parties'
actions. Even though their goal was to prevent the formation of a partnership, they are partners if they
intend to do something that legally qualifies as such. In this case, Teck Seing & Co., Ltd.'s members
intended to form a partnership, which they mistakenly called a limited partnership. If this was their
intention, then all deceptions used to avoid responsibility for potential losses while assuming they
would benefit from the relationship must be ignored. The creditors who have presumably dealt with
the partnership in good faith should not be punished; rather, it should be the partners who have
concealed their identities under a designation different from any of the firm's members. This Court
concludes that the partnership agreement contained in the previously quoted document created a
general partnership, or more precisely, a partnership as defined by the Insolvency Law.

#21 MAXIMILIANO SANCHO, plaintiff-appellant, vs. SEVERIANO LIZARRAGA, defendant-appellee.

G.R. No. L-33580 February 6, 1931

Facts: Sancho and Lizarraga signed a partnership agreement. After that, Sancho filed a lawsuit to
dissolve the partnership and asked Lizarraga to return the P50,000 he had invested, plus interest at a
rate of 12% annually. Lizarraga refuted the accusations and requested that their partnership be
dissolved, with him receiving P500 per month as manager and administrator from October 15, 1920,
until the partnership's final dissolution. The CFI Manila proceedings demonstrated that Sancho had
demanded that Lizarraga liquidate the partnership and that Lizarraga had not contributed all of the
capital he had committed to investing.

Issue: Whether or not Lizarrada is liable to the capital he failed to contribute in the partnership .

Ruling: Yes. As a debtor to the partnership, Lizarrada is responsible for the capital he promised to
contribute but didn't. This is stated in said Civil Code Articles 1786 and 1788:

Article 1786. Each partner is liable to the partnership for any contributions they may have pledged to
make.

Article 1788. A partner who has committed to making a financial contribution and doesn't fulfill it is
liable for interest and damages from the moment he should have fulfilled his end of the bargain.

#22 WILLIAM UY, plaintiff-appellee, vs. BARTOLOME PUZON, substituted by FRANCO

PUZON, defendant-appellant.

G.R. No. L-19819 October 26, 1977

Facts: Puzon and the Republic of the Philippines had an agreement for the building of bridges and a
road. But because Puzon was having trouble funding all of its projects, he partnered with Uy to look
for financial support. They were to split the profits equally, according to the partnership agreement.
Uy put a substantial sum of money into the partnership, but Puzon misappropriated partnership funds
and neglected to contribute his share.

Issue: Whether or not Bartolome Puzon had violated the terms of their partnership agreement,
instituted shall be liable for Uy’s unrealized profits.

Ruling: Yes. Puzon had violated the terms of their partnership agreement, instituted shall be liable for
Uy’s unrealized profits. As specifically laid down in: ARTICLE 1788. A partner who has undertaken to
contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the
time he should have complied with his obligation.

Here, Puzon's failure to contribute his agreed-upon share to the partnership was demonstrated by
substantial evidence. Additionally, after removing Uy from management and misusing partnership
funds, Puzon damaged the partnership by taking out a loan from the Philippine National Bank and
giving the bank payments from the Bureau of Public Highways without Uy's approval. If not for
Puzon's actions, the partnership would have been profitable, which supports the P200,000.00 award
for Uy's portion of unrealized profits.

#22 THE UNITED STATES, plaintiff-appellee, vs. EUSEBIO CLARIN, defendant-appellant.

G.R. No. 5840 September 17, 1910

Facts: Pedro Tarug received P172 from Pedro Larin and was to trade mangoes with Carlos de
Guzman and Eusebio Clarin. According to the agreement, Larin and the three partners were to share
profits equally. Larin accused the partnership of estafa; the provincial fiscal filed an information
against Clarin alone. Clarin was accused of stealing P172 and Larin's portion of the profits, which
came to P15.50. The partnership made P203 but failed to deliver Larin's share of the profits and
failed to account for the capital. As witnesses, Tarug and Guzman implicated the three partners.

Issue: Whether or not Clarin is guilty of estafa or should be civilly liable arising for partnership
contract.

Ruling: No. Clarin should be held civilly liable for partnership even though he is not guilty of estafa.
The Supreme Court reasoned that when two or more people contribute money, property, or industry
to a common fund with the goal of sharing the profits, a partnership is established under Article 1665
of the Civil Code. Money received for a partnership is exempt from the Penal Code's definition of
estafa, found in Article 535 (5). In this case, Larin accepted the risks and rewards of the mango
trading business by investing P172 into the partnership. The partnership as a whole, not any one
partner, was responsible for repaying the capital. If there was only one partner who would be held
accountable, it would be Tarug, who got the money straight from Larin. A civil action resulting from
the partnership contract for the liquidation of the partnership and a levy on its assets, if any, was the
proper course of action for Larin to recoup his money. The Court stressed that the partnership could
not be held criminally responsible for estafa for neglecting to return the capitalist partner's share if it
experienced losses rather than profits.

#23 PEOPLE OF THE PHILIPPINES, Appellee, vs. BINGKY CAMPOS and DANNY "BOY"
ACABO, Appellants.

G.R. No. 176061 July 4, 2011

Facts: The 47-hectare plot of land was leased by Bonifacio Guzman from Juan Alonzo in exchange
for 75 palay cavans. Guzman was notified by landworker Leoncio Campos that the palay that had
been harvested was prepared for threshing. While Campos's share was placed in his home,
Guzman's share was placed in the warehouse. Following Guzman's instructions, Manuel Mantias
brought the 75 cavans of palay that were reserved for rentals to Campos or to deliver to the Juan.
The 75 palay cavans were stolen rather than delivered. In order to stop Campos from stealing and
transforming the goods he received in trust, commission, or for administration, Guzman filed an
estafa complaint against him. Campos maintained that a balance of more than P1,000.00 was still
owed to him from the partnership and that no accounting or liquidation had been done between
partners.

Issue: Whether Campos is guilty of estafa for misappropriating and converting goods received by him
in trust or commission or for administration.

Ruling: Yes. Campos is guilty of estafa for stealing and altering items that were given to him for
administration, commission, or trust. Estafa is committed when a partner fraudulently takes
partnership property that has been given to him with instructions to use it for partnership purposes. In
this case, even if we accept the argument that the partnership had not been liquidated, we still
maintain Guzman's estafa liability. The 75 palay cavans were given to Guzman specifically to deliver
or pay for Alonso, and they were separated from the partnership. The partnership no longer owned
the aforementioned palay. Rather than carrying out his obligation, Campos altered and appropriated
the aforementioned products for his own advantage.

#24 PEDRO MARTINEZ, plaintiff-appellee, vs. ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.

G.R. No. L-5236 January 10, 1910

Facts: Pedro Martinez gave Ong Pong Co and Ong Lay Php 1,500.00. This sum was represented in
a private document in which the plaintiff and defendants agreed to invest the money in a store, with
the former receiving an equal share of any profits or losses. Due to the failure of the store, the plaintiff
demanded that the defendants either return the Php 1,500.00 or provide an accounting of the
partnership as agreed upon. In his defense, Ong Pong Co claimed that the company was run by his
now-deceased co-defendant Ong Lay. Additionally, he claimed that the business venture had
produced no results other than the plaintiff's agreement to lose Php 1,500.00 in capital.

Issue: Whether or not the partners are liable.

Ruling: Yes. The partners are liable jointly. The partnership is accountable to each partner for the
money he may have paid out as a result of the partnership and for the appropriate interest. The
defendants were required to provide an accounting of the business because they were acting as
administrators. They must return the capital because they both failed in this regard. The case does
not fall under Article 1796 of the New Civil Code, which states that "the partnership is liable to every
partner for the amounts he may have disbursed on account of the same and for the proper interest."
This is because the plaintiff's contribution was the only money involved. The court decided that Ong
Pong Co., being jointly liable, should pay Pedro Martinez Php. 750.00 plus the legal interest on that
amount.
 # 25 CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI and MOTI G.
RAMNANI, petitioners, vs. COURT OF APPEALS, SPOUSES ISHWAR JETHMAL RAMNANI,
SONYA JETHMAL RAMNANI and OVERSEAS HOLDING CO., LTD., respondents.

G.R. No. 85494 May 7, 1991

Facts: Ishwar and Choithram are brothers. Ishwar designated Choithram as his attorney-in-fact to
oversee their properties in the Philippines because he lives in New York. Choithram used the funds
that Ishwar sent to construct a building and purchase two parcels of land from Ortigas & Co., Ltd.
Through Choithram's efforts, the properties are now valued at a minimum of P22,304,000.00. Ishwar
later revoked Choithram's general power of attorney. Infuriated, the latter gave his daughter-in-law
Nirmla Ramnani his power of attorney without telling Ortigas. As a result, Nirmla was given the title
after the land was fully paid for.

Issue: Whether there is a partnership formed.

Ruling: Yes. There is a partnership formed. Where one provided the funds, the other gave his hard
work and skill. According to justice and equity, the two must split the rewards of their combined
investment and labor equally. According to the Court, a partnership was established. In the absence
of a formal contract, the situation is obvious. Ishwar's spouses provided the company's funding. They
gave Choithram the funds so that he could invest them in a successful Philippine business venture.
They designated Choithram as their attorney-in-fact for this reason. Here is an example of a business
venture involving two brothers. One contributed his industry and talent, while the other provided the
capital. According to justice and equity, the two must split the rewards of their combined investment
and labor equally.

#26 ISABELO MORAN, JR., petitioner, vs. THE HON. COURT OF APPEALS and MARIANO E.
PECSON, respondents.

G.R. No. L-59956 October 31, 1984

Facts: Isabelo Moran and Mariano Pecson signed a partnership agreement in February 1971,
agreeing to each contribute P15k toward the printing of 95k posters featuring the delegates to the
Constitutional Commission in 1971. The task of overseeing the poster printing will fall to Moran.
Additionally, it was decided that Pecson would receive P1,000 per month from April 1971 to
December 1971, and that the partnership would be liquidated on December 15, 1971. Pecson issued
P10,000 in the partnership's favor, partially fulfilling his duty to the partnership. As the managing
partner, he gave Moran the P10,000. Moran, on the other hand, printed 2,000 posters using just P4k
of the P10k and made no additions. Due to the COMELEC's tardiness in announcing the full
delegates, he only printed 2,000 posters because he believed that printing all 95k posters would be a
losing endeavor. The total price of all the posters sold was P10,000. Moran was sued by Pecson.
Moran was ordered by the trial court to compensate Pecson for his losses. The Court of Appeals
upheld the trial court's ruling, but with some modifications. It mandated that Moran pay P47.5k for
unrealized profit, P8k for Pecson's monthly commissions, P7k as payment for the investment since
the venture failed, and interest.

Issue: Whether or not the CA judgment is correct.

Ruling: No. The award of P47.5k for unrealized profit is speculative. There is no evidence
whatsoever that the partnership between Moran and Pecson would have been a profitable venture
(because base on the circumstances then i.e. the delay of the COMELEC in proclaiming the
candidates, profit is highly unlikely). In fact, it was a failure from the start. There is therefore no basis
for the award of speculative damages in favor of Pecson. Further, there is mutual breach in this case,
Pecson only gave P10k instead of P15k while Moran gave nothing at all.

As for the P8k monthly commission, this is without basis. The agreement does not state the basis of
the commission. The payment of the commission could only have been predicated on relatively
extravagant profits. The parties could not have intended the giving of a commission inspite of loss or
failure of the venture. Since the venture was a failure, Pecson is not entitled to the P8k commission.

As for the P7k award as return for Pecson’s investment, the CA erred in this ruling too. Though the
venture failed, it did took off the ground as evidenced by the 2,000 posters printed. Hence, return of
investment is not proper in this case. There are risks in any business venture and the failure of the
undertaking cannot entirely be blamed on the managing partner alone, specially if the latter exercised
his best business judgment, which seems to be true in this case.

Moran must however return the unused P6k of Pecson’s contribution to the partnership plus P3k
representing Pecson’s profit share in the sale of the printed posters. Computation of P3k profit share
is as follows: (P10k profit from the sale of the 2,000 posters printed) – (P4k expense in printing the 2k
posters) = (P6k profit); Profit ÷ 2 = P3k each.

#27 Ng Ya vs. Sugbu Commercial Co., [C.A.] 50 O.G. 4913

Facts: A Chinese businessman from Surigao named Ng Ya placed an order for 1,000 sheets of
aluminum and galvanized iron from Sugbu Commercial, which is based in Cebu. It was agreed that
the goods would be delivered on or before January 5, 1950, or within a week. These items cost
P5,400, which Ng Ya seems to have paid in full. However, on the specified date, the aforementioned
goods were not delivered. Furthermore, when Ng Ya continued to ask Sugbu Commercial Co. about
the status of the goods, the company failed to deliver them but continued to guarantee that they
would be delivered at a later date. Later, Sugbu Commercial discovered that Ng Ya also needs
cigarettes, which she plans to resell in Surigao. Then the former offered cigarettes to the latter. After
being seduced by the offer, Ng Ya and Sugbu signed a second sales agreement. With the assistance
of Lana Bakery, with whom she had an agreement to divide the profits she hoped to make from the
purchase and sale of cigarettes, she paid P4,000 for the cigarettes. But in July, a few months later,
neither the cigarettes nor the sheets of aluminum and galvanized iron made it to Ng Ya. She received
the P4,000 from Tan Chun Pia of Lana Bakery, who became irate with her as a result, and Ng Ya was
compelled to pay him back. Then she returned to Sugbu repeatedly to demand P 9,400 or the
delivery of the items she had ordered. Poor Ng Ya had to seek the assistance of the Chinese
Chamber of Commerce in order to settle her claim because Shih Tiong Chu always challenged her to
file a complaint whenever she dropped by. Ng Ya eventually complained to the CFI Cebu.
Subsequently, Sugbu Commercial filed a third-party complaint against Pow Sun Gee, claiming that
the latter received P5,400 and P4,000 in his capacity as Sugbu Commercial manager when only his
co-partner Shih Tiong Chu, who was frequently in Manila, was authorized to issue official receipts.
Sugbu Commercial requested that Pow Sun Gee be ordered to reimburse Sugbu Commercial for any
judgment rendered against the latter in favor of plaintiff Ng Ya. The TC ruled in favor of Ng Ya,
condemning Pow Sun Gee to reimburse Sugbu Commercial Company and ordering Sugbu to pay the
plaintiff P9,400. Sugbu Business filed an appeal.

Issue: Whether or not Sugbu Commercial should not be held liable because Pow Sun Gee, as the
one who received the payments and issued receipts to Ng Ya, is not authorized to do so.

Ruling: No. Sugbu Commercial was unable to produce articles of co-partnership that would
demonstrate any restrictions on the manager's authority, indicating that none existed. Because of this,
we maintain and declare that the manager's general powers include the minor authority to issue an
official receipt. That only his co-partner Shih Tiong Chu, who spent the majority of his time in Manila,
could issue official receipts for amounts delivered to the entity through the manager of any juridical
entity would be rather strange. Because it is slow and inconvenient for those who transact with the
company, this is not in line with modern business dealings.

#28 M. TEAGUE, plaintiff-appellant, vs. H. MARTIN, J. T. MADDY and L.H. GOLUCKE, defendants-
appellees.

G.R. No. 30286 September 12, 1929

Facts: According to the allegations, it would be in the best interests of the parties to appoint a
receiver to take possession of the properties while this litigation is ongoing. He prays for the
Philippine Trust Company to be named receiver and for a judgment that dissolves the partnership
along with costs. Every defendant submitted a different response, but they were all similar. Then,
among other things, it is claimed that Martin will be in charge of the southern station, cold stores,
commissary, and fish procurement, Martin will be in charge of the Barracuda and its navigation, and
Teague will be in charge of selling fish in Manila and buying supplies. No salary until business is on
paying basis. The CFI issued a decision: (1) dissolving the partnership and liquidating its assets; (2)
that the barge Lapu-Lapu as well as the Ford truck and adding machine belong exclusively to
Teague, but he must return to and reimburse the partnership the amount which was taken from its
funds for the purchase of the Lapu-Lapu and the Ford truck. Upon appeal, the plaintiff further
contended that he is the managing partner of the partnership and the three properties (Lapu-Lapu,
Barracuda & Ford truck) are properties of the partnership since they were paid from the profits of the
partnership thus do not belong to him.

Issue: Whether or not the three properties are owned by the partnership.

Ruling: Yes, the powers and duties of the three partners are specifically defined, and that each of
them was more or less the general manager in his particular part of the business. The plaintiff’s
powers and duties were confined and limited to "selling fish in Manila and the purchase of supplies."
No, the Lapu-Lapu, Barracuda, and the adding machine, although paid for by the partnership funds,
are owned by petitioner for it was registered in his own name. He is estopped from claiming
otherwise. The purchase of the properties in question are not within the scope of plaintiff’s authority. It
is but right that the plaintiff reimburse the partnership for the use of its funds. However, it noted that
the partnership also made use of the Lapu-Lapu. In the interest of justice, the plaintiff should be
compensated for such use.

#29 Gavino Santos vs. Cenon Villanueva, [C.A.] 50 O.G. 175

Facts: Under the name Esquire, Gavino Santos, Luisito del Rosario, and Emiliano del Rosario
established a partnership to run a tailoring shop. The partnership's manager is Emiliano. Until an
action was filed, the partnership had not been dissolved or liquidated. Emiliano then sold the tailoring
shop to defendant Cenon Villanueva and/or Corazon del Rosario without the other partners'
knowledge or approval. This prompted Gavino Santos to file a claim for the sale's revocation in CFI
Manila. The trial court ruled in the plaintiff's favor, declaring the aforementioned sail to be void. In his
appeal, the defendant claimed to have been a buyer acting in good faith.

Issue: Whether or not the sale of the tailoring shop was valid.

Ruling: No. Villanueva was also discovered by the Supreme Court to have been a buyer acting in
bad faith. The Code of Commerce's Article 143 states that no partner may lawfully sell or transfer
partnership property without the approval of every other partner. Since the vendor lacks the authority
and right to sell the partnership business or even his stake in it without the other partners' approval,
the sale agreement is void and has no legal force behind it. Clearly, the tailoring business is a
partnership property.

#30 E. M. BACHRACH, plaintiff-appellee, vs. "LA PROTECTORA", ET AL., defendants-appellants.

G.R. No. L-11624 January 21, 1918

Facts: The defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano
established a civil partnership known as "La Protectora" with the intention of conducting passenger
and freight transportation in Laoag, Ilocos Norte. Marcelo Barba, in his capacity as manager,
negotiated with E to buy two car trucks. M. Bachrach ($16,500). Barba paid P3,000 in cash and for
the balance executed promissory notes. One of these promissory notes was signed in the following
manner: “P.P La Protectora, By Marcelo Barba Marcelo Barba” The other 2 notes were signed in the
same way but the word “by” was omitted. It was obvious that in signing the notes, Barba intended to
bind both the partnership and himself. The defendants signed a document stating that they were La
Protectora members and that they had given the organization's president complete authority to enter
into a contract for the acquisition of the two cars. Bachrach received the document from Barba at the
time the cars were bought. The balance remained after Bachrach foreclosed on a chattel mortgage
on the trucks and Barba accrued a debt of P2,617.57. Action was taken against the defendants in
order to regain the balance. The defendants received a judgment against them.

Issues:
a.Whether or not the defendants are liable for the firm debts.
b.Whether or not Barba had authority to incur expenses for the partnership

Ruling:
a. Yes. Promissory notes constitute the obligation exclusively of La Protectora and Barba. They do
not constitute an obligation directly binding the defendants. Their liability is based on the principles of
partnership liability. A member is not liable in solidum with his fellows for the entire indebtedness but
is liable with them or his aliquot part.

SC obiter: the document was intended merely as an authority to enable Barba to bind the partnership
and that the parties to the instrument did not intend to confer upon Barba an authority to bind them
personally.

b. Yes. Under Art 1804, every partner may associate another person with him in his share. All
partners are considered agents of the partnership. Barba must be held to have authority to incur
these expenses. He is shown to have been in fact the president/manager, and there can be no doubt
that he had actual authority to incur obligation.

#31 JOSE MACHUCA, Plaintiff-Appellee, v. CHUIDIAN, BUENAVENTURA & CO., Defendants-

Appellants. Simplicio del Rosario for Appellants. Joaquin Rodriguez Serra for Appellee.

G.R. No. 1011 May 13, 1903

Facts: Chuidian Buenaventura & Co. is regular general partnership, organized in Manila, December
29,1882, as a continuation of a prior partnership of the same name. The original partners constituting
the partnership of 1882 were D. Telesforo Chuidian, Doña Raymunda Chuidian, Doña Candelaria
Chuidian,and D. Mariano Buenaventura. Doña Raymunda Chuidian retired from the partnership
November 4, 1885. On January 1, 1888, the partnership went into liquidation, and it does not appear
that the liquidation had been terminated when this action was brought.On January 1, 1894, D.
Mariano Buenaventura died, his estate passing by will to his children, amongwhom was D. Vicente
Buenaventura. Upon the partition of the estate the amount of the interest of D.Vicente Buenaventura
in his father's account-current and in the capital was ascertained and recorded in the books of the
firm. On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which for a
valuable consideration he "assigns to D. Jose Gervasio Garcia. . . a 25 per cent share in all that may
be obtained by whatever right in whatever form from the liquidation of the partnership of Chuidian,
Buenaventura & Co., in the part pertaining to him in said partnership. A subsequent assignment was
made by D. Jose Gervasio Garcia in favour of Jose Machuca (Plaintiff-Appellee), which has been
notified to the liquidator of the partnership.

Brought by Jose Machuca against Chuidian Buenaventura & Co.. Action was for specific performance
to compel the liquidator of the partnership to record in the books Machuca’s claim under the
assignment as a credit due, and the he further asks that he be adjudicated to be a creditor of the
partnership in an amount equal to 25 per cent of D. Vicente Buenaventura's share in his father's
account-current. That the necessary liquidation being first had, the partnership pay to the plaintiff the
balance which may be found to be due him; and that if the partnership has no funds with which to
discharge this obligation an adjudication of bankruptcy be made. He also asks to recover the
damages caused by reason of the failure of the liquidator to record his credit in the books of
partnership. Court ruled in favor of the plaintiff.

Issue: Whether or not Machuca is entitled for the relief prayed pending the liquidation of the
partnership.

Ruling: The plaintiff having acquired no rights under the assignment which are now enforceable
against the defendant, this action cannot be maintained. The liquidator of the defendant having been
notified of the assignment, the plaintiff will be entitled to receive from the assets of the partnership, if
any remain, at the termination of the liquidation, 25 per cent of D. Vicente's resulting interest, both as
partner and creditor. The judgment in this case should not affect the plaintiff's right to bring another
action against the partnership when the affairs of the same are finally wound up. The proper judgment
will be that the action be dismissed. The judgment of the court below is reversed and the case is
remanded to that court with directions to enter a judgment of dismissal.

#32 DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and LEUNG
YIU, respondents.

G.R. No. 70926 January 31, 1989

Facts: Dan Fue Leung.The Sun Wah Panciteria was registered as a single proprietorship and its
licenses and permits were issued to and in favor of petitioner Dan Fue Leung as the sole proprietor.
Respondent Leung Yiu adduced evidence during the trial of the case to show that Sun Wah
Panciteria was actually a partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment. Lower court ruled in favor of the private respondent. Petitioner
appealed the trial court's amended decision. However, the questioned decision was further modified
and affirmed by the appellate court.

Both the trial court and the appellate court declared that the private petitioner is a partner and is
entitled to a share of the annual profits of the restaurant. Hence, an appeal to the SC. The petitioner
argues that private respondent extended 'financial assistance' to herein petitioner at the time of the
establishment of the Sun Wah Panciteria, in return of which private respondent allegedly will receive
a share in the profits of the restaurant. It was, therefore, error for the Appellate Court to interpreter
construe 'financial assistance' to mean the contribution of capital by a partner to a partnership.

Issue: Whether or not the private respondent is a partner of the petitioner in the establishment of Sun
Wah Panciteria.

Ruling: In essence, the private respondent alleged that when Sun Wah Panciteria was established,
he gave P4,000.00 to the petitioner with the understanding that he would be entitled to twenty-two
percent (22%) of the annual profit derived from the operation of the said panciteria. These allegations,
which were proved, make the private respondent and the petitioner partners in the establishment of
Sun Wah Panciteria because Article 1767 of the Civil Code provides 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". Therefore, the lower
courts did not err in construing the complaint as one wherein the private respondent asserted his
rights as partner of the petitioner in the establishment of the Sun Wah Panciteria, notwithstanding the
use of the term financial assistance therein.SC affirmed appellate court's decision and ordered the
dissolution of the partnership.

#33 SERGIO V. SISON, plaintiff-appellant, vs. HELEN J. MCQUAID, defendant-appellee.

G.R. No. L-6304 December 29, 1953

Facts: In the year 1938, McQuaid loaned money amounting to Php 2,210.00 from Sergio Sison, to be
used to pay her obligations to the Bureau of Forestry and to add to her capital in her lumber business.
That same year, due to McQuaid’s inability to pay the loan, Sison proposed to take McQuaid as a
partner in her business. The Php 2,210 which McQuaid borrowed would serve as her contribution.
They agreed to share in the profits of the business and render services without compensation. Before
the last World War, the partnership sold 230,000‐board ft. of lumber to the US Army for P 13,800.00.
However, McQuaid refused to deliver ½ of it or P 6,900.00 to Sison despite his repeated demands.
McQuaid used the money for her own benefit which prompted Sison to file an action to compel
defendant to pay him his half of the profit from the partnership. The Court of First Instance dismissed
the case upon the defendant’s filing of a Motion to Dismiss on the ground of prescription.

Issue: Whether or not Sison is entitled to the claim of the specific sum as his share in the profits?

Ruling: No. Although the reason given for the order of dismissal is untenable, the Supreme Court
held that the said order should be upheld on the ground that the complaint states no cause of action,
which is also one of the grounds on which defendant's motion to dismiss was based. The plaintiff
seeks to recover from defendant one-half of the purchase price of lumber sold by the partnership to
the United States Army. But his complaint does not show why he should be entitled to the sum he
claims. It does not allege that there has been a liquidation of the partnership business and the said
sum has been found to be due him as his share of the profits. The proceeds from the sale of a certain
amount of lumber cannot be considered profits until costs and expenses have been deducted.
Moreover, the profits of a business cannot be determined by taking into account the result of one
particular transaction instead of all the transactions had. Hence, the need f or a general liquidation
before a member of a partnership may claim a specific sum as his share of the profits.
 #34 ENRIQUE CLEMENTE, plaintiff-appellee, vs. DIONISIO GALVAN, defendant-appellee. JOSE
ECHEVARRIA, intervenor-appellant.

G.R. No. L-45662 April 26, 1939

Facts: Enrique Clemente and Dionisio Galvan organized a civil partnership which they named Galvan
y Compania to engage in the manufacture and sale of paper and other stationery. They contributed
equal amounts of money. Galvan was entrusted with management. In less than a year, Clemente
asked for the dissolution of the partnership which Galvan agreed, with a condition that Clemente
reimburse him for half the amount of a deficit incurred by the partnership which he had covered with
his own money. Before final liquidation of its affairs, Clemente filed a petition asking the court to order
the delivery of certain machines to him and to charge their value against his portion in the
partnership. This was granted by the court. However, before Clemente could take actual possession
of said machines, and upon strong opposition of Galvan, the court suspended the effects of its
previous order. In the meantime, judgments for money- recovery cases against the partnership were
rendered. To avoid the attachment and subsequent sale of the machines by the sheriff for the
satisfaction of said judgments, Clemente mortgaged the machines with his nephew, the intervenor
(plaintiff in the herein case) When the terms in the mortgage expired, the intervenor commenced a
case to collect his mortgage credit.

Issue: Whether or not the court a quo erred in deciding the present case against the intervenor-
appellant, on the ground, among others, that plaintiff has not adduced any evidence nor has he
testified to show that the machines mortgaged by him to the intervenor have ever belonged to him,
notwithstanding that said intervenor is his close relative.

Ruling: No. Here, the error attributed to the lower court is baseless. The evidence of record shows
that the machines in contention originally belonged to the defendant and from him were transferred
to the partnership Galvan y Compañia. This being the case, said machines belong to the partnership
and not to him, and shall belong to it until partition is effected according to the result thereof after
the liquidation.

#35 THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI, petitioners, vs. SULPICIO V.
CEA, in his capacity as Judge of the Court of First Instance of Leyte and OLEGARIO
LASTRILLA, respondents.

G.R. No. L-5963 May 20, 1953

Facts: Leyte-Samar Sales Co. (LESSCO) and Raymundo Tomassi are the petitioners in the case
"Leyte-Samar Sales Co. v. Cea" against Judge Sulpicio V. Cea and Olegario Lastrilla, who are the
respondents. Originated from Civil Case No. 193 of the Court of First Instance of Leyte, in which
Tomassi and LESSCO filed a damages lawsuit against Arnold Hall, Fred Brown, Jean Roxas, and the
Far Eastern Lumber & Commercial Co. (FELCO). The defendants were found liable by the court on
October 29, 1948, for P31,589.14 plus costs. In November 1950, the Court of Appeals upheld this
award, deducting P2,000 for legal fees. The sheriff sold the FELCO properties to Robert Dorfe and
Pepito Asturias for P8,100 on June 9, 1951, after the judgment was finalized. Olegario Lastrilla
asserted ownership of Fred Brown's FELCO shares, which he had acquired on September 29, 1949,
on June 4, 1951, and asked the sheriff to keep 17% of the auction proceeds. Judge Cea granted
Lastrilla's motion in spite of the plaintiffs' objections, stating that he was entitled to 17% of the sold
properties. By claiming that the orders lacked jurisdiction and that the required parties were not
present in the proceedings, the petitioners sought relief by certiorari.

Issue: Whether or not Lastrilla have any proper claim to the proceeds of the sale.

Ruling: No. If he was a creditor of the FELCO, perhaps or maybe. But he was not. The partner of a
partnership is not a creditor ofsuch partnership for the amount of his shares. Granting that the auction
sale and not included the interest or portion of the FELCO properties corresponding to the shares
ofLastrilla in the same partnership (17%), the resulting situation would be at most that the purchasers
Dorfe and Austrias will have to recognized dominion of Lastrillas over 17% of the properties awarded
to them. So Lastrilla acquired no right to demand any part of the money paid by Dorfe and Austrias to
he sheriff any part of the money paid byDorfe and Austrias to the sheriff for the benefit of FELCO and
Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares (acquired from Brown)
could not have been and were not auctioned off to Dorfe and Austrias.
 #36 PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. SEVERO EUGENIO LO, ET
AL., defendants. SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.

G.R. No. L-26937 October 5, 1927

Facts: The appellants 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.,". 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." A. Y.
Kelam, acting under such power of attorney, applied for, and obtained a loan of P8,000 in current
account from the plaintiff. As security for said loan, he mortgaged certain personal property of Tai
Sing & Co.This credit was renewed several times. This mortgage was again renewed on April 16,
1920, and A. Y. Kelam, as attorney-in-fact of Tai Sing & Co., executed another chattel mortgage for
the said sum of P20,000 in favor of the plaintiff bank. On April 20, 1920, Yap Seng, Severo Eugenio
Lo, A. Y. Kelam and Ng Khey Ling, the latter represented by M. Pineda Tayenko, executed a power
of attorney in favor of Sy Tit by virtue of which Sy Tit, representing Tai Sing & Co. obtained a credit of
P20,000 from plaintiff bank on January 7, 1921, executing a chattel mortgage on certain personal
property belonging to Tai Sing & Co. Defendant Eugenio Lo sets up, as a general defense, that Tai
Sing & Co., was not a general partnership, and that the commercial credit in current account which
Tai Sing & Co. obtained from the plaintiff bank had not been authorized by the board of directors of
the company, nor was the person who subscribed said contract authorized to make the same, under
the articles of copartnership.

Issue: Whether or not the anomalous firm name affects liability of the partner.

Ruling: No. An anomalous adoption of a firm name does not affect the liability of the general partners
to third persons. The Supreme Court held that the object of the Code of Commerce in requiring a
general partnership to transact business under the name of all its members, of several of them, or of
one only, is to protect the public from imposition and fraud; it is for the protection of the creditors
rather than of the partners themselves. It is unenforceable as between the partners and at the
instance of the violating party, but not in the sense of depriving innocent parties of their rights who
may have dealt with the offenders in ignorance of the latter having violated the law; and that contracts
entered into by a partnership firm defectively organized are valid when voluntarily executed by the
parties, and the only question is whether or not they complied with the agreement. Therefore, Lo
cannot invoke in his defense the anomaly in the firm name which they themselves adopted.

#37 NICOLAS CO-PITCO, plaintiff-appellee, vs. PEDRO YULO, defendant-appellant.

G.R. No. L-3146 September 14, 1907

Facts: Florencio Yulo and Jaime Palacios were partners in the operation of a sugar estate in
Victorias, Island of Negros, and had commercial dealings with a Chinaman named Dy-Sianco, who
furnished them with money and goods, and used to buy their crop of sugar. Defendant, Pedro Yulo,
father of Florencio, took charge of the latter's interest inthe above-mentioned partnership, and he
became a general partner with the Jaime Palacios in the same business, and he continued as such
partner until about the end of 1904, dealing with Dy-Sianco in the same manner as the old
partnership had dealt with the latter.

Issue: Whether or not Pedro Yulo is liable for the entire amount

Ruling: The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in
Negros. It was, therefore a civil partnership, as distinguished from a mercantile partnership. Being a
civil partnership, the partners are not liable each for the whole debt of the partnership. The liability is
pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the debt. The fact
that the other partner, Jaime Palacios, had left the country can not increase the liability of Pedro Yulo.
#38 ISLAND SALES, INC., plaintiff-appellee, vs. UNITED PIONEERS GENERAL CONSTRUCTION
COMPANY, ET. AL defendants. BENJAMIN C. DACO, defendant-appellant.

G.R. No. L-22493 July 31, 1975

Facts: Defendant company, a general partnership duly registered under the laws of the Philippines,
purchased from the plaintiff a motor vehicle on the installment basis and for this purpose executed a
promissory note, with the condition that failure to pay any of said installments as they fall due would
render the whole unpaid balance immediately due and demandable. Having failed to receive the
installment due plaintiff sued the defendant company for the unpaid balance. Benjamin C. Daco,
Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-
defendants in their capacity as general partners of the defendant company. Subsequently, on motion
of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B. Lumauig is
concerned. When the case was called for hearing, the defendants and their counsels failed to appear
notwithstanding the notices sent to them. Consequently, the trial court authorized the plaintiff to
present its evidence ex-parte after which the trial court rendered the decision appealed from.
Defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since
there are five (5) general partners, the joint and subsidiary liability of each partner should not exceed
one-fifth (1/5) of the obligations of the defendant company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit the liability of the defendants Daco and Sim to
only one-fifth (1/5) of the obligations of the defendant company.

Issue: Whether the dismissal of the complaint to favor one of the general partners of a partnership
increases the joint and subsidiary liability of each of the remaining partners for the obligations of the
partnership.

Ruling: No. Under Article 1816 of the NCC, the liability of the partners, including the industrial ones,
to the partnership’s creditor, is pro rata (joint) and subsidiary. In the present case, there were 5
general partners and since their liability is pro rata (joint), each partner is liable to only 1/5 of the
partnership’s obligation to the plaintiff. The fact that the complaint against Lumauig was dismissed,
upon plaintiff’s motion, does not unmake Lumauig a general partner in the defendant company.
Therefore, each partner is only liable to 1/5 of the partnership’s obligation and it will not increasein
view of the condonation of Lumauig’s liability.

#39 LA COMPAÑIA MARITIMA, plaintiff-appellant, vs. FRANCISCO MUÑOZ, ET AL., defendants-

appellees.

G.R. No. L-3704 December 12, 1907

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,. 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. Francisco now argues
that the industrial partners should NOT Â be liable.

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

Ruling: Yes. 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.
 #40 GEORGE O. DIETRICH, Plaintiff-Appellee, v. O.K. FREEMAN, JAMES L. PIERCE, and
BURTON WHITCOMB, Defendants. BURTON WHITCOMB, Appellant.

G.R. No. L-6252 January 28, 1911

Facts: Plaintiff Dietrich was employed by defendants Freeman, and Whitcomb as owners and
operators of Manila Steam Laundry (Whitcomb obtained his interest in the business from Pierce who
sold his interests to him). He filed the action to collect from defendants the balance due to him for the
services he performed.The trial court held Freeman and Whitcomb jointly and severally liable to
Dietrich. Whitcomb appealed the decision insisting that he should not be held jointly and severally
liable with Freeman. (Note; Freeman was the managing partner of the laundry and Whitcomb barely
had a hand on the operations of the business). To avoid liability it appears that the theory of
Whitcomb here is two layered. First, that the partnership was a commercial partnership. Second that
it is a partnership of cuentas en participacion.

Issue: Whether or not Whitcomb is liable to Freeman.

Ruling: Yes. Whitcomb is liable to Freeman pro-rata based on his interest in the business. In
determining the liability of Freeman, the Court first identified the nature of the business. Art 17 and
119 of the Code of Commerce then applicable, provide the requirements for the constitution of a
commercial partnership (i.e. recording of the business agreements in the commercial registry.) The
requirements were not complied with. The Court therefore held that no formal partnership was
entered into between Freeman and Whitcomb. As such, the Civil Code and not the Code of
Commerce must govern in determining the liability of the partners.

Insisting that he is not liable, Whitcomb posits that the association was one of cuentas en
participation. A partnership of cuentas en participacion is constituted in such a manner that its
existence was only known to those who had an interest in the same, there being no mutual
agreement between the partners, and without a corporate name indicating to the public in some way
that there were other people besides the one who ostensibly managed and conducted the business,
under the provisions of article 242 of the Code of Commerce, those who contract with the person in
whose name the business of such a partnership was conducted shall have only the right of action
against such person and not against other persons interestedHowever, a partnership of cuentas en
participacion does not have a corporate name. Here, the business is knownas Manila Steam Laundry
and Dietrich was employed by Manila steam Laundry and not Freeman alone.

#41 SANTIAGO SYJUCO, INC., petitioner, vs. HON. JOSE P. CASTRO, AS PRESIDING JUDGE
OF THE REGIONAL TRIAL COURT OF THE NATIONAL CAPITAL JUDICIAL REGION, BRANCH
LXXXV, QUEZON CITY, THE CITY SHERIFF OF THE CITY OF MANILA, THE CITY REGISTER OF
DEEDS OF THE CITY OF MANILA, EUGENIO LIM, ARAMIS LIM, MARIO LIM, PAULINO LIM,
LORENZO LIM, NILA LIM and/ or THE PARTNERSHIP OF THE HEIRS OF HUGO LIM and
ATTORNEY PATERNO P. CANLAS, respondents.

G.R. No. 70403 July 7, 1989

Facts: The Lims borrowed from petitioner Santiago Syjuco, Inc., the sum of P800,000.00. The loan
was given on the security of a first mortgage on property registered in the names of said borrowers as
owners in common. Thereafter additional loans on the same security were obtained by the Lims from
Syjuco, the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the security had
been augmented by bringing into the mortgage other property, also registered as owned pro indiviso
by the Lims. The Lims failed to pay it despite demands therefore; that Syjuco consequently caused
extra-judicial proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of
Manila; and that the latter scheduled the auction sale of the mortgaged property. The attempt to
foreclose triggered off a legal battle that has dragged on for more than twenty years now, fought
through five (5) cases in the trial courts, two (2) in the Court of Appeals, and three (3) more in the
Supreme Court. One of the complaints filed by the Lims was filed not in their individual names, but in
the name of a partnership of which they themselves were the only partners: "Heirs of Hugo Lim." The
complaint advocated the theory that the mortgage which they, together with their mother, had
individually constituted over lands standing in their names in the Property Registry as owners pro
indiviso, in fact no longer belonged to them at that time, having been earlier deeded over by them to
the partnership, "Heirs of Hugo Lim," more precisely, hence, said mortgage was void because
executed by them without authority from the partnership.

Issue: Whether the mortgage executed by the Lims be attributable to their partnership.

Ruling: Yes, the mortgage executed by the Lims is attributable to their partnership. The Supreme
Court held that the legal fiction of a separate juridical personality and existence will not shield it from
the conclusion of having such knowledge which naturally and irresistibly flows from the undenied
facts. It would violate all precepts of reason, ordinary experience and common sense to propose that
a partnership, as such, cannot be held accountable with knowledge of matters commonly known to all
the partners or of acts in which all of the latter, without exception, have taken part, where such
matters or acts affect property claimed as its own by said partnership. The silence and failure of the
partnership to impugn said mortgage within a reasonable time, let alone a space of more than
seventeen years, brought into play the doctrine of estoppel to preclude any attempt to avoid the
mortgage as allegedly unauthorized. There is no reason to distinguish between the Lims, as
individuals, and the partnership itself, since the former constituted the entire membership of the latter.
In other words, despite the concealment of the existence of the partnership, for all intents and
purposes and consistently with the Lims' own theory, it was that partnership which was the real party
in interest in all the actions; it was actually represented in said actions by all the individual members
thereof, and 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.

#42 BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants, vs. WORKMEN'S
COMPENSATION COMMISSION, ET AL., respondents-appellees.

G.R. No. L-12164 May 22, 1959

Facts: Appellants Liwanag and Reyes are co-owners of Liwanag Auto supply. They employed
Balderama as a a security guard who, while in the line of duty, was killed by criminal hands. His
widow, Ciriaca Balderama & his children filed claim for compensation with the Workmen’s
Compensation Commission, which granted the award of 3,494.40 to be paid by the appellants jointly
and severally. Appellants appealed the case and claimed that under the Workmen’s Compensation
Act, the compensation should be divisible & not paid jointly and severally.

Issue: Whether or not the liability of the partners are jointly and severally despite the absence of a
clear provision stating such liability in the Compensation Act.

Ruling: Under the Workmens' Compensation, business partners are considered solidary liable.
Although the Workmen's Compensation Act does not contain any provision expressly declaring that
the obligation of business partners arising from compensable injury or death of an employee should
be solidary, however, there are other provisions of law from which it could be gathered that their
liability must be solidary. Arts. 1711 and 1712 of the New Civil Code and Section 2 of the Workmen's
Compensation Act, reasonably indicate that in compensation cases, the liability of business partners
should be solidary. If the responsibility of the partners were to be merely joint and not solidary, and
one of them happens to be insolvent, the amount awarded to the dependents of the deceased
employee would only be partially satisfied, which is evidently contrary to the intent and purpose of the
law to give full protection to the employee.

#43 PAUL MACDONALD, ET AL., Petitioners, vs. THE NATIONAL CITY BANK OF NEW
YORK, Respondent.
G.R. No. L-7991 May 21, 1956

Facts: Stasikinocey is a partnership doing business in San Juan, Rizal, and formed by Alan W.
Gorcey, Louis F. da Costa, Jr., William Kusik and Emma Badong Gavino. The partnership was denied
registration in the Securities and Exchange Commission, and while it is confusing to see in this case
that the Cardinal Rattan, sometimes called the Cardinal Rattan Factory, is treated as a co-
partnership, of which Defendants Gorcey and da Costa are considered general partners. Defendant
Stasikinocey had an overdraft account with The National City Bank of New York, a foreign banking
association duly licensed to do business in the Philippines. The overdraft was due to the failure of the
partnership to make the required payment and was converted into an ordinary loan for which the
corresponding promissory ‘joint note non-negotiable’ was executed by Louis F. da Costa for and in
the name of the Cardinal Rattan, Louis F. da Costa and Alan Gorcey. This promissory note was
secured by a chattel mortgage executed by Louis F. da Costa, Jr., General Partner for and in the
name of Stasikinocey, alleged to be a duly registered Philippine partnership, doing business under
the name and style of Cardinal Rattan. During the subsistence of the loan, the vehicles were sold to
MacDonald and later on, MacDonald sold 2 of the 3 vehicles to Gonzales. The bank brought an
action for recovery of its credit and foreclosure of the chattel mortgage upon learning of these
transactions.
Issue: Whether or not the partnership, Stasikinocey is estopped from asserting that it does not have
juridical personality since it is an unregistered commercial partnership.
Ruling: Yes. In ruling that an unregistered commercial partnership which has no independent juridical
personality can have a domicile so that a chattel mortgage registered in that domicile would bind third
persons who are innocent purchasers for value. Da Costa and Gorcey cannot deny that they are
partners of the partnership Stasikinocey, because in all their transactions with the National City Bank
they represented themselves as such. McDonald cannot disclaim knowledge of the partnership
Stasikinocey because he dealt with said entity in purchasing two of the vehicles in question through
Gorcey and Da Costa. The sale of the vehicles to MacDonald being void, the sale to Gonzales is also
void since a buyer cannot have a better right than the seller.

#44 PIONEER INSURANCE & SURETY CORPORATION, petitioner, vs. THE HON. COURT OF
APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO
M. MAGLANA and JACOB S. LIM, respondents.

G.R. No. 84197 July 28, 1989

Facts: Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim
convinced Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery
and Heavy Equipment Company (BORMAHECO) to contribute funds and to buy two aircrafts which
would form part a corporation which will be the expansion of Southern Air Lines. Maglana et al then
contributed and delivered money to Lim. But instead of using the money given to him to pay in full the
aircrafts, Lim, without the knowledge of Maglana et al, made an agreement with Pioneer Insurance for
the latter to insure the two aircrafts which were brought in installment from Japan Domestic Airlines
(JDA) using said aircrafts as security. So when Lim defaulted from paying JDA, the two aircrafts were
foreclosed by Pioneer Insurance. It was established that no corporation was formally formed between
Lim and Maglana et al.
Issue: Whether or not Maglana et al must share in the loss as general partners.

Ruling: No. There was no de facto partnership. Ordinarily, when co-investors agreed to do business
through a corporation but failed to incorporate, a de facto partnership would have been formed, and
as such, all must share in the losses and/or gains of the venture in proportion to their contribution. But
in this case, it was shown that Lim did not have the intent to form a corporation with Maglana et al.
This can be inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not using
the funds he got from Maglana et al. The record shows that Lim was acting on his own and not in
behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.

#45 DOMINGO BEARNEZA, plaintiff-appelle, vs. BALBINO DEQUILLA, defendant-appellant.

G.R. No. 17024 March 24, 1922

Facts: Herein plaintiff is the heir of Perpetua Berneza who was the former partner of Balbino.
Domingo brought an action for the recovery of the fishpond belonging to his decedent and one-half of
the profits received by the defendant from the fishpond from the year 1913 to 1919, as damages.

Issue: Whether or not the plaintiff has any right to maintain an action for the recovery of said fish
pond and damages.

Ruling: None. The partnership having been dissolved by the death of Perpetua Bearneza, its
subsequent legal status was that of a partnership in liquidation, and the only rights inherited by the
testamentary heir were those resulting from the said liquidation. However, liquidation has not been
done making it impossible to determine what rights or interests, if any, the deceased had, the
partnership bond having been dissolved.
 #46 JOSUE SONCUYA, plaintiff-appellant, vs. CARMEN DE LUNA, defendant-appellee.

G.R. No. L-45464 April 28, 1939

Facts: Plaintiff Josue Soncuya filed an amended complaint against Carmen De Luna, praying that the
latter be sentenced to pay him damages in the sum of 700,432 as a result of the administration, said
to be fraudulent, of the partnership of which the plaintiff, defendant and the deceased Librada Avelino
were members.

Issue: Whether or not the plaintiff can claim damages from the defendant who is a managing partner
of the partnership.

Ruling: According to the Supreme Court the complaint is not sufficient to constitute a cause of action
on the part of the plaintiff as member of the partnership to collect damages from defendant as
managing partner thereof, without previous liquidation. Thus, for a partner to be able to claim from
another partner who manages the general co-partnership, allegedly suffered by him by reason of the
fraudulent administration of the latter, a previous liquidation of said partnership is necessary.

#47 LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG NAW) appellee, vs. JOSE S. Y. PENG,
assignee, appellant.

G.R. No. L-29182 October 24, 1928

Facts: San Miguel Brewery, Porta Pueca & Co., and Ruiz & Rementia S. en C. instituted insolvency
proceedings against Leoncia Vda. De Cahn Diaco (alias Lao Liong Naw), on the ground that Leoncia
was indebted to them in the sum of 26,234.47 which was incurred within 30 days prior to the filing of
said petition. It further appeared that other creditors have filed claims against the estate to the amount
of 50,000. However, attorney of the insolvent filed a motion for dismissal of the proceedings against
her on the ground that it should have been brought against the partnership “Lao Liong Naw & Co” of
which she was only a member.

Issue: Whether or not Leoncia should be declared insolvent.

Ruling: It is to be observed that conceding for the sake of the argument that the debts in question
were incurred by the alleged partnership, it clearly appears from the record that said partnership has
no assets that, therefore, the partners individually must, jointly and severally respond for its debts. As
the appellee is one of the partners, and admits that she is insolvent, the court sees no reason for the
dismissal of the proceedings against her. The evidence also shows that the business, alleged to have
been of that partnership was carried under the name “Leoncia Vda. De Chan Diaco” or “La Vda” de
G.G. Chan Diaco” both of which are names of the appellee. A partner may be adjudged bankrupt in
the name of an ostensible partner when such name under which the partnership did business.

#48 HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners, vs. COURT OF APPEALS and
HEIRS OF MARIA DE LA CRUZ Y GUEVARRA, respondents.

G.R. No. 76590 February 26, 1990

Facts: From 1921 until her death in 1951, Maria dela Cruz Y Guttierez resided in lot 1488 in the
concept of an owner. Later, she entrusted the administration of the said lot to her niece Maria de la
Cruz Y Guevarra. After having learned that the lot of their mother Maria Dela Cruz y Guttierez had
been included in the title of the then deceased Maria de la Cruz Y Guevarra, Daniel and Isidro, herein
petitioners, filed a complaint for reconveyance on October 1,1974. Respondents claimed that the
petitioners have lost their cause of action through prescription.

Issue: Whether or not petitioners’ action for reconveyance has already prescribed.

Ruling: No. it has been held that the action to compel the trustee to convey the property registered in
his name for the benefit of the cestui for trust does not prescribed.
 #49 FLORENTINO RALLOS, ET AL., plaintiff-appellee, vs. TEODORO R. YANGCO, defendant-
appellant.

G.R. No. 6906 September 27, 1911

Facts: Accepting the invitation, the plaintiffs proceeded to do a considerable business with the
defendant through Collantes, as an agent for the defendant. Plaintiffs then sent to Collantes bundles
of tobacco leaved to be sold. Unfortunately, Colantes converted the sales to his own use. Prior to the
said sending of tobacco leaves, unknown to the plaintiffs, the defendant had severed his relations
with Collantes. No notice of any kind was given by the defendant to the plaintiffs. Plaintiffs brought an
action to recover the sales.

Issue: Whether or not the plaintiffs, acting in good faith, and without the knowledge, can recover the
sales from the defendant.

Ruling: Yes. Having advertised that Collantes was his agent and having given them an incitation to
deal with such agent, it was the duty of the defendant on the termination of the relationship of
principal and agent to give due and timely notice thereof to the plaintiffs. Failing to do so, he is
responsible to them for whatever goods may have been in good faith and without negligence sent to
the agent without knowledge, actual or constructive, of the termination of such relationship.

#50 Estate of the deceased Gabina Labitoria. ENRIQUE M. PASNO, petitioner-appellee, vs.
FORTUNATA RAVINA and PONCIANA RAVINA, oppositors-appellants. PHILIPPINE NATIONAL
BANK, appellant.

G.R. No. L-31581 February 3, 1930

Facts: This case involves 2 appeals. First is the validity of Gabina Labitoria’a, will which the court
affirmed and ruled that will without date is valid. Second is the foreclosure of the mortgage by the
PNB. Gabina Labitoria during her lifetime mortgaged 3 parcels of land to PNB. When she died and
during the pendency of these proceedings, a special administrator was appointed by the lower court
who took possession of the estate including the 3 parcels of the land. The estate having failed to
comply with the conditions of the mortgage, the PNB, pursuant to the conditions contained in the
same, asked the sheriff of Tayabas to proceed with the sale of the parcels of the land. However, the
counsel of the special administrator filed motion requiring the sheriff to vacate the attachment over
the mortgaged properties and to abstain from selling the same, which the lower court granted.

Issue: Whether or not PNB has the right to foreclose the mortage in its favor now that the mortgaged
property is in the hands of an administrator.

Ruling: None. A creditor holding a claim against a deceased secured by mortgage or other collateral
security may abandon the security and prosecute his claim before the committee, and share in the
general distribution of the assets of the estate. That would safeguard the interests of the estate by
putting the estate on notice while it would nor jeopardize any rights of the mortgagee.

#51 SPOUSES RUTH DIZON DEVISFRUTO AND ALLAN DEVISFRUTO, petitioners, V. MAXIMA L.
GREENFELL, respondent.

G.R. No. 227725 July 01, 2020

Facts: Maxima Greenfell financed the purchase of a house and 2 lots from spouses Magisa which
were registered in the name of her niece, Ruth Dizon Devisfruto. When Magisa demanded the
transfer of the properties under her name, Ruth refused to comply. Maxima then filed a complaint for
reconveyance which the MTC, RTC and CA favored. The CA ruled that a trust has been created and
the execution of the deeds of sale in Ruth’s name did not weaken the trust, as what was crucial was
the intention to create a trust which derives its strength from the confidence reposed on another.

Issue: Whether or not the CA erred in finding that an implied trust had been created by the parties.

Ruling: No. The Civil Code provides that a trust is created when a property is sold to one party but
paid for by another for the purpose of having beneficial interest in said property. The former is the
trustee while the latter is the beneficiary. Although Article 1457 of the Civil Coe allows an implies trust
to be proven by oral evidence, trustworthy oral evidence is required to prove an implies trust. In this
case, petitioners have not sufficiently explained why the court should make an exception and
consider this issue for the first time on appeal.

#52 RODOLFO TIGNO AND SPOUSES EDUALINO and EVELYN CASIPIT, petitioners, vs. COURT
OF APPEALS AND EDUARDO TIGNO, respondents.

G.R. No. 110115 October 8, 1997

Facts: Sometime in January 1980, Bienvenido, Remedios and the heirs of Isaac Sison-Manuel,
Gerardo and Adelaida appointed Dominador Cruz as agent to sell the 3 parcels of land. Upon Rodolfo
Tigno’s prodding, appellant was convinced to buy the land. In all the deeds of sale, Rodolfo Tigno
was named as vendee pursuant to the verbal instruction of herein appellant. In 1989, Rodlfo Tigno,
without the knowledge of the herein appellant, sold to spouses Edualino Casipit and Avelina Casipit
508.56 square meters of the land. At the time of the sale, the spouses know that the land they bought
are owned by appellant and not Rodolfo Tigno. On May 24,1989, Eduardo Tigno filed for
reconveyance, annulment of document, recovery of possession and damages against Rodolfo and
spouses Casipit and Avelina Estrada. The trial court dismissed the complaint, but the respondent
court reversed it. Hence, this petition for review.

Issue: Whether or not there was an implied trust created between Rodolfo Tigno and Eduardo Tigno.

Ruling: Yes. Article 1448 of the Civil Code provides that there is an implied trust when property is
sold, and the legal estate is granted to one party but the price is paid by another for the purpose of
having beneficial interest of the property. An implied trust may be proved by oral evidence. It was
established thru plaintiff’s testimony that plaintiff paid 5,000.00 each as first installment and
subsequently issued a check to Cruz, the agent, in the amount of 26,000.00. Although the deeds of
sale were in the name of Rodolfo, the purchase price was paid by private respondent who was the
real owner of the property. Petitioner Rodolfo was the trustee and private respondent was the
beneficiary.

#53 RESURRECCION DE LEON, ET AL., Plaintiffs-Appellees, v. EMILIANA MOLO-PECKSON ET

AL., Respondents-Appellants.

G.R. No. L-17809 December 29, 1962

Facts: In 1941, Mariano Molo y Legaspi died leaving a will wherein he bequeathed his entire estate
to his wife Juana Juan. On June 7, 1948, Juana Juan executed a donation inter vivos in favor of
Emiliana Molo-Peckson and Pilar Perez Nable to include the 10 parcels of land subject of the present
action. Emiliana and Pilar executed a document called “Mutual Agreement” stating that the lots be
sold at one peso each to Justa De Leon and Resurreccion de Leon, pursuant to the verbal wish of the
late Don Mariano Molo y Legaspi and the late Dona Juana Francisca Juan y Molo. However, the
same defendants executed another document in which the revoked the so called mutual agreement.
Resurreccion De Leon, et al. then filed a complaint seeking to compel Emiliana et. Al. to convey to
the former the 10 parcel of land. The court a quo held that trust has been constituted by the late
spouses Mariano Molo and Juana Juan over the 10 parcels of land in favor of the plaintiffs as
beneficiaries.

Issue: Whether or not the spouses Mariano Molo and Juana Juan constituted a trust over the
properties in question with plaintiffs as beneficiaries.

Ruling: Yes. The mutual agreement executed by the appellants represents a recognition of pre-
existing trust or a declaration of an expressed trust impressed on the 10 parcels of land in question.
The attempted revocation of the declaration of trust did not have any legal effect. The rule is that in
the absence of any reservation of the power to revoke, a voluntary trust is irrevocable without the
consent of the beneficiary. It cannot be revoked by the creator alone, nor by the trustee.
 #54 LAGUNA TRANSPORTATION CO., INC., petitioner-appellant, vs. SOCIAL SECURITY
SYSTEM, respondent-appellee.

G.R. No. L-14606 April 28, 1960

Facts: In 1949, the Biñan Transportation Co., sold part of the lines and equipment it operates to
Gonzalo Mercado, et al. After the sale, the vendees formed an unregistered partnership named
Laguna Transportation Company which continued to operate the lines and equipment bought from
the Biñan Transportation Co.,The original partners forming the Laguna Transportation Company,
together with two new members, organized a corporation known as the Laguna Transportation
Company, Inc., registered with the SEC on June 20, 1956. Petitioner Laguna Transportation Co., Inc.
was required by the SSS to register as member of the System and to remit the premiums due from all
the employees of the petitioner and the contribution of the latter to the System beginning the month of
September, 1957. As a response, petitioner filed a petition seeking a declaration that it is not required
to register as a member of the SSS and is not obliged to pay contributions under the Social Security
Act. The SSS moved for the dismissal of the petition due its failure to exhaust administrative
remedies.

Issue: Whether or not petitioner is compulsory covered under the Social Security Act.

Ruling: Yes. The Supreme Court held that Laguna Transportation Co., Inc. was indeed an employer
engaged in business as a common carrier that had been in operation for at least two years prior to
the enactment of the Social Security Act, hence was subject to compulsory coverage under the Act.
The Court explains that although a corporation is generally considered a separate juridical entity from
its members, this legal fiction is intended for convenience and to serve the ends of justice. When this
concept is used to subvert justice, it will be disregarded. The unregistered partnership, which later
became Laguna Transportation Co., Inc., had been operating since 1949. The conversion to a
corporation did not alter the business operations, indicating a mere change in the form of organization
rather than the creation of a new entity. The corporation continued the same business with the same
assets, and there was no evidence of a transfer of interest from the partnership to the corporation.
Thus, the corporation was deemed a continuation of the partnership and liable for its obligations,
including compulsory coverage under the Social Security Act.

#55 SERGIO V. SISON, plaintiff-appellant, vs. HELEN J. MCQUAID, defendant-appellee.

G.R. No. L-6304 December 29, 1953

Facts: In 1938, the defendant borrowed sums of money from the plaintiff totaling P2,210 for her
lumber business. The plaintiff and defendant agreed to form a partnership whereby the plaintiff would
contribute the loan amount and work without compensation from June 15, 1938, to December 1941.
After selling lumber to the United States Army during World War II, the partnership received payment
of P13,800, which the plaintiff alleged the defendant failed to share. The plaintiff filed a complaint in
the CFI Manila, seeking recognition of the partnership and claiming his share. The defendant moved
to dismiss the case, citing grounds including prescription and failure to state a cause of action. The
court dismissed the case, leading the plaintiff to appeal to the Court of Appeals which eventually
certified the case to the Supreme Court due to legal questions.

Issue: Whether or not plaintiff has no cause of action and the action had already prescribed.

Ruling: It is not clear from the allegations of the complaint just when plaintiff's cause of action
accrued. Therefore, it cannot be determined with certainty whether that action has already prescribed
or not. Such being the case, the defense of prescription cannot be sustained on a mere motion to
dismiss based on what appears on the face of the complaint. The order should be upheld on the
ground that the complaint states no cause of action, which is also one of the grounds on which
defendant's motion to dismiss was based. Plaintiff seeks to recover from defendant one-half of the
purchase price of lumber sold by the partnership to the United States Army. But his complaint does
not show why he should be entitled to the sum he claims. It does not allege that there has been a
liquidation of the partnership business and the said sum has been found to be due him as his share of
the profits. The proceeds from the sale of a certain amount of lumber cannot be considered profits
until costs and expenses have been deducted. Moreover, the profits of the business cannot be
determined by taking into account the result of one particular transaction instead of all the
transactions had. Hence, the need for a general liquidation before a member of a partnership may
claim a specific sum as his share of the profits.

#56 IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM
NAME "OZAETA, ROMULO, DE LEON, MABANTA & REYES." RICARDO J. ROMULO,
BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE MA, REYES, JESUS S. J. SAYOC,
EDUARDO DE LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners.

July 30, 1979

Facts: Petitions were filed by the surviving partners of Atty. Sycip, who died May 5, 1975 and by the
surviving partners of Atty. Herminio Ozaeta, who dies on February 14, 1976, praying that they be
allowed to continue using, in the name of their firms, the names of partners who has passed away.
Petitioners contend that that continued use of the name of the deceased or former partner when
permissible by local custom is not unethical but care should be taken that no imposition or deception
is practice through this use. They also contend that no local custom prohibits the continued use of a
deceased partner’s name in a professional firm’s name; there is no custom or unsafe in the
Philippines or at least in the Greater Manila Area, which recognizes that the name of a law firm
necessarily identifies the individual members of the firm.

Issue: Whether or not the surviving partners may be allowed by the court to retain the name of the
partners who already passed away in the name of the firm.

Ruling: No. The Court finds that the use in their partnership names of the names of deceased
partners will run counter to Article 1815 of the Civil Code which provides: “Art. 1815. Every
partnership shall operate under a firm name, which may or may not include the name of one or more
of the partners. Those who, not being members of the partnership, include their names in the firm
name, shall be subject to the liability, of a partner.” Under this provision, it is clear that names in a firm
of a partnership must either be those of living partners and in the case of non-partners, should be
living persons who can be subjected to liability. In the Philippines, no local custom permits or allows
the continued use of a deceased or former partner's name in the firm names of law partnerships. The
possibility of deception upon the public, real or consequential, where the name of a deceased partner
continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the
familiar ring of a distinguished name appearing in a firm title.

#57 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. WILLIAM J. SUTER and THE
COURT OF TAX APPEALS, respondents.

G.R. No. L-25532 February 28, 1969

Facts: In 1947, a limited partnership was formed by Respondent William Suter as general partner,
Julia Spirig, and Gustav Carlson as limited partners, each having their respective contributions to the
partnership in sum of money. In 1948, William and Julia got married. Thereafter, Gustav sold his
share to the partnership to William and Julia. This was duly recorded with the Securities and
Exchange Commission (SEC). The limited partnership had been filing income tax returns as
corporation. However, in 1959, the Petitioner Commissioner of Internal Revenue (CIR) consolidated
through an assessment the income of the partnership and the individual incomes of William and Julia,
resulting to a deficiency income tax against William. William protested the assessment, and
requested its cancellation and withdrawal, but his request was denied. On appeal, the Court of Tax
Appeals (CTA) reversed the decision of the CIR. Hence, this Petition whereby the CIR theorizes that
the marriage of William and Julia, and the subsequent acquisition of interests of Gustav in the
partnership dissolved the limited partnership. Thus, the fiction of the partnership should be
disregarded for income tax purposes.

Issue: Whether or not the marriage of William Suter and Julia Spirig effectively dissolved the
partnership, thus rendering them liable for deficiency in income taxes as single taxable unit.

Ruling: The Court ruled in the negative. Under the Spanish Civil Code, which was the law in force
when the subject partnership was organized, a universal partnership requires either that the object of
the association be all the present property of the partners as contributed by them to the common
fund, or all that the partners may acquire by their industry or work during the existence of the
partnership. In relation, the Court ruled that subsequent marriage of the partners does not operate to
dissolve the partnership because such marriage is not one of the causes of dissolution provided in
the law. In the present case, the partnership between William and Julia was not a universal
partnership, but a particular partnership considering that their contribution were fixed sums of money,
and neither of them was an industrial partner. Their partnership was already in existence even before
their marriage. In fact, their capital contributions as partners were separately owned and contributed
before their marriage, and remained their respective separate property after the marriage. Further,
the Court ruled a partnership has a juridical personality of its own, which is distinct and separate from
that of its partners. In the present case, the limited partnership is not a mere business conduit of the
partner-spouses. It was organized for legitimate business purposes, conducted its own dealings with
customers prior their marriage, and filed its own income tax returns as such independent entity. Thus,
William and Julia cannot be considered as a single taxable unit with the partnership.

#58 RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner, vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.

G.R. No. L-24332 January 31, 1978

Facts: An SPA was executed by sisters Concepcion and Gerundia in favor of their brother Simeon for
the sale of a parcel of land co-owned by the two. Months after Conception died, Simeon sold the
undivided shares of his sisters to herein respondent Felix Go Chan & Realty Corp. Petitioner Ramon
Rallos, administrator of the late Concepcion’s estate, prayed that the sale of the undivided share of
the deceased be invalidated and a new certificate be issued in the name of respondent corporation
and Concepion’s intestate estate, plus damages. CFI ruled in favor of petitioner and granted the
payers but CA reversed the decision. Respondent’s MR was further denied.

Issue: Whether the sale entered into by an agent is valid although executed after death of the
principal.

Ruling: No. The sale is void because Simeon’s authority as an agent of Concepcion was
extinguished upon her death. Article 1317 provides that no one may contract in the name of another
without being authorized or unless he has, by law, a right to represent him. Article 1919 furthers that
the death of the principal terminates the agency. The case at bar is also not among the exceptions
whereby an agent’s acts bind the principal even after the latter’s death because of Simeon’s
knowledge of Concepion’s death is material. Hence, the sale was null and void.

#59 ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, vs. COURT OF APPEALS
and AMERICAN AIR-LINES INCORPORATED, respondents.

G.R. No. 76931 May 29, 1991

Facts: American Air, an air carrier offering passenger and air cargo transportation, entered into a
General Sales Agency Agreement with Orient Air, authorizing the latter to act as its exclusive general
sales agent for the sale of air passenger transportation. Orient air failed to remit the net proceeds of
sales for several months prompting American Air to undertake the collection of the proceeds of tickets
sold originally by Orient Air and terminating their agreement. American air instituted suit against
Orient Air for the settlement of past outstanding funds in possession of the latter. Orient Air
contended that because of the unpaid overriding commissions it retained the sales proceeds before
remitting the balance to American Air. American Air contended that the sale must be made by Orient
Air and the sale must be done with the use of American Air’s ticket stocks in order for it to be entitled
to the overriding commission. On the other hand, Orient Air contends that the contractual stipulation
of a 3% overriding commission covers the total revenue of American Air and not merely that derived
from ticketed sales undertaken by Orient Air because it was an exclusive General Sales Agent. CA
held that Orient Air is entitled to commissions and ordered American Air to reinstate Orient Air as its
General Sales Agent.

Issue: Whether CA is correct in ordering reinstatement of Orient Air as an agent.

Ruling: No. CA in effect compels American Air to extend its personality to Orient Air. Such would be
violative of the principles and essence of agency, defined by law as a contract whereby “a person
binds himself to render some service or to do something in representation or on behalf of another,
WITH THE CONSENT OR AUTHORITY OF THE LATTER. In an agent-principal relationship, the
personality of the principal is extended through the facility of the agent. In so doing, the agent, by
legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do.
Such a relationship can only be effected with the consent of the principal, which must not, in any way,
be compelled by law or by any court.

#60 JOSE UY and his Spouse GLENDA J. UY and GILDA L. JARDELEZA, petitioners, vs.
COURT OF APPEALS and TEODORO L. JARDELEZA, respondents.

G.R. No. 109557 November 29, 2000

Facts: Ernesto Jardeleza Sr. suffered stroke, his wife Gilda seeks to dispose property of her husband
in favor of co-petitioners daughter Glenda Jardaleza-Uy and her husband Jose Uy. Teodoro
Jardeleza, son of Gilda and Ernesto Jr., filed a petition to the Iloilo RTC upon knowledge of the
pending sale of his father’s real property contending that there shall be a court-appointed guardian in
administering his father’s property while Ernesto is incapacitated to do so. The sale of property will be
use to cover costs of Ernesto hospitalization. The petitioner Gilda L. Jardeleza has sold the said
property to her co-petitioners daughter and son-in-law. Teodoro appealed the said sale to the Court of
Appeals which has likewise reversed the order of the RTC Iloilo. Petitioner submitted an appeal via
certiorari of the decision to the Supreme Court.

Issue: Whether or not petitioner Gilda may assume sole powers of administration of the conjugal
property and dispose of a parcel of land with its improvements.

Ruling: The court ruled in favor of respondent Teodoro, further specifying that petitioner only holds
the power of administration and not the power of disposition and encumbrance of property as these
powers require consent of the other spouse or court authority. Furthermore, petitioner only sought
guardianship of property and has failed to allege that Ernesto Jardaleza Sr., would have consented
on the said sale of property.

#61 PRUDENTIAL BANK, petitioner, vs. THE COURT OF APPEALS, AURORA CRUZ,
respondents.

G.R. No. 108957 June 14, 1993

Facts: Aurora F. Cruz and her sister invested P200,000 in Central Bank bills through Prudential Bank
in Quezon City. Transaction evidenced by a Confirmation of Sale and a Debit Memo issued by bank
employee Susan Quimbo. Upon maturity, Cruz sought to “roll-over” her investment. Quimbo prepared
a Credit Memo crediting P200,000 to Cruz’s savings account. Also prepared a Debit Memo of
P196,122.88 for reinvestment. Cruz signed a Withdrawal Slip for P196,122.98, under the new bank
requirement for re-investment, as explained by Quimbo. Cruz received a new Confirmation of Sale
and Debit Memo days later. Cruz attempted to withdraw her investment but was informed it had been
withdrawn on August 25, 1986. No records of the Confirmation of Sale and Debit Memo she received.
Bank employee Quimbo was unavailable for questioning. Cruz made daily inquiries and wrote a letter
to Roman Santos, the branch manager. Eventually, the bank denied her request, claiming she had
already withdrawn the amount. Cruz filed a complaint for breach of contract demanding the return of
her investment plus damages and attorney’s fees. Bank denied liability, asserted Cruz had withdrawn
the investment, and filed a third-party complaint against Quimbo who was declared in default but
presented no evidence. Judge Rodolfo A. Ortiz ruled in favor of Cruz, awarding her P200,000 plus
13.75% interest, P30,000 moral damages, P20,000 exemplary damages, and P25,000 attorney’s
fees. CA affirmed the trial court’s decision.

Issue: Whether Prudential Bank is liable for the actions of its employee Quimbo.

Ruling: Under Civil Code Art. 1910 and 1911, the principal (bank) is liable for its agents’ actions
within the scope of their authority. The bank held liable for Quimbo’s actions, as she had apparent
authority. A principal must comply with obligations contracted by an agent within their authority, even
if the agent exceeded authority with apparent full powers. Banks have a fiduciary relationship and
must exercise strict care in the selection and supervision of employees, as banks hold out their
employees as worthy of confidence.
 #62 EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners, vs. ETERNIT
CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A.
and FAR EAST BANK & TRUST COMPANY, Respondents.

G.R. No. 144805 June 8, 2006

Facts: Eternit Corporation (EC) owned eight parcels of land in Mandaluyong City, Metro Manila.
Eteroutremer S.A. Corporation (ESAC), a Belgian corporation, held 90% of EC's shares. In 1986, due
to political instability in the Philippines, ESAC decided to cease operations and instructed Michael
Adams, a member of EC's Board of Directors, to sell the properties. Adams enlisted realtor Lauro G.
Marquez, who offered the properties to Eduardo B. Litonjua, Jr. for P27,000,000.00. Marquez
conferred with Jack Glanville, the General Manager and President of EC, confirming that the Litonjua
siblings had accepted the counter-proposal of Delsaux. The Litonjua brothers counter-offered
P20,000,000.00, which was communicated to Claude Frederick Delsaux, ESAC's Regional Director
for Asia. Delsaux countered with a final offer of US$1,000,000.00 plus P2,500,000.00, which the
Litonjua brothers accepted and deposited in an escrow account. Following political stabilization,
ESAC decided not to proceed with the sale. The Litonjua brothers filed a complaint for specific
performance and damages, which the RTC of Pasig City dismissed, ruling the sale void due to lack of
written authority from EC's Board of Directors. The Court of Appeals affirmed the RTC's decision,
leading to the present petition for review.

Issue: Whether or not Glanville and Delsaux have the necessary authority to sell the subject
properties, or were they acting within the scope of apparent authority.

Ruling: The Court found that Glanville and Delsaux did not have the necessary authority to sell the
subject properties and were not acting within the scope of apparent authority. The Supreme Court
emphasized that under Section 23 of the Corporation Code, the corporate powers of a corporation
are exercised by its Board of Directors. The sale of real property by a corporation requires a board
resolution or specific authorization from the board. There was no evidence of such authorization from
EC's Board of Directors empowering Marquez, Glanville, or Delsaux to sell the properties. The
authority to sell real property must be in writing, as required by Article 1874 of the New Civil Code.
The actions of Glanville and Delsaux were on behalf of ESAC, not EC, and thus did not bind EC.
There was no agency by estoppel, as the Litonjua brothers failed to prove that EC knowingly allowed
Marquez, Glanville, or Delsaux to assume authority to sell the properties. The Court concluded that
the Litonjua brothers were not entitled to specific performance or damages, as there was no valid and
binding sale.

#63 SPOUSES FERNANDO and LOURDES VILORIA, Petitioners, vs. CONTINENTAL AIRLINES,
INC., Respondent.

G.R. No. 188288 January 16, 2012

Facts: In 1997, while the spouses Viloria were in the United States, they approached Holiday Travel,
a travel agency working for Continental Airlines, to purchase tickets from Newark to San Diego. The
travel agent, Margaret Mager, advised the couple that they cannot travel by train because it is fully
booked. So they must purchase plane tickets for Continental Airlines because if they won't purchase
plane tickets they'll never reach their destination in time. The couple believed Mager's representations
and so they purchased two plane tickets worth $800.00. Later however, the spouses found out that
the train trip isn't fully booked and so they purchased train tickets and went to their destination by train
instead. Then they called up Mager to request for a refund for the plane tickets. Mager referred the
couple to Continental Airlines. As the couple are now in the Philippines, they filed their request with
Continental Airline's office in Ayala. The spouses Viloria alleged that Mager misled them into believing
that the only way to travel was by plane and so they were fooled into buying expensive tickets.
Continental Airlines refused to refund the amount of the ticket and so the spouses sued the airline
company. In its defense, Continental Airlines claimed that the ticket sold to them by Mager is non-
refundable; that, if any, they are not bound by the misrepresentations of Mager because there's no
agency existing between Continental Airlines and Mager. The trial court ruled in favor of spouses
Viloria but the Court of Appeals reversed the ruling ofthe RTC.

Issue: Whether or not a contract of agency exists between Continental Airlines and Mager.
Ruling: Yes. All the elements of agency are present, to wit: 1. there is 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, and 4. the agent acts within the
scope of his authority. The first and second elements are present as Continental Airlines does not
deny that it concluded an agreement with Holiday Travel to which Mager is part of, whereby Holiday
Travel would enter into contracts of carriage with third persons on the airlines' behalf. The third
element is also present as it is undisputed that Holiday Travel merely acted in a representative
capacity and it is Continental Airlines and not Holiday Travel who is bound by the contracts of
carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering
that Continental Airlines has not made any allegation that Holiday Travel exceeded the authority that
was granted to it. Continental Airlines also never questioned the validity of the transaction between
Mager and the spouses. Continental Airlines is therefore in estoppels. Continental Airlines cannot be
allowed to take an altogether different position and deny that Holiday Travel is its agent without
condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or
retraction to Spouses Viloria, who relied on good faith on Continental Airlines' acts in recognition of
Holiday Travel's authority. Estoppel is primarily based on the doctrine of good faith and the avoidance
of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case
would result in gross travesty of justice.

#64 LAUREANO T. ANGELES, Petitioner, vs. PHILIPPINE NATIONAL RAILWAYS (PNR) AND
RODOLFO FLORES, Respondents.

G.R. No. 150128 August 31, 2006

Facts: On May 5, 1980, the Philippine National Railways (PNR) accepted Gaudencio Romualdez's
offer to purchase scrap rails for a total of P96,600. On May 26, 1980, Romualdez authorized Lizette
R. Wijanco (the petitioner’s deceased wife) to act as his representative for the withdrawal of the rails.
After Lizette requested a change in the withdrawal site due to the rails not being ready, PNR allowed
her to withdraw from a different location. However, PNR later suspended this withdrawal, citing
documentary issues and theft concerns.
Subsequently, the Angeles spouses sought a refund of P96,000, but PNR claimed that Lizette had
already withdrawn 54.658 metric tons of rails, which exceeded the refund amount.
On August 10, 1988, the Angeles spouses filed a lawsuit against PNR for specific performance and
damages, requesting the delivery of 46 metric tons of rails and other damages. Following Lizette's
death, her heirs, including Laureno T. Angeles (the petitioner), continued the case.
On April 16, 1996, the trial court dismissed the case, stating that the Angeles were not the real
parties-in-interest, as Lizette was merely a representative of Romualdez and not an assignee of his
rights. The petitioner appealed, but the CA upheld the trial court’s decision, prompting the current
petition claiming that the CA incorrectly concluded that the petitioners lacked standing.

Issue: Whether or not the letter of Romualdez to Atty. Dizon of the PNR was meant to designate
Lizette W. Angeles as an agent.

Ruling: Yes. It was meant to designate Angeles as a mere agent, not as an assignee. The Supreme
Court confirmed that Lizette W. Angeles was designated as an agent rather than an assignee in a
letter from Romualdez concerning the withdrawal of scrap rails. The appellate court supported the
trial court's conclusion that Lizette did not have the legal standing to sue, as agents generally lack
rights or liabilities against third parties. The court noted that Romualdez's choice of the word
""authorized"" indicated his intention to retain his interests, limiting Lizette's role to that of a
representative. Although the petitioner argued that Lizette was an assignee, the court determined that
the overall context of the letter and subsequent actions established her status as an agent. It
emphasized that a power of attorney can be valid in various forms and does not require notarization.
Allowing Lizette to sue in her own name would misinterpret Romualdez's intent. Additionally, the claim
that Lizette paid P96,000 to the PNR was dismissed as inconsistent, given that the petitioner had
previously stated that Romualdez made that payment. Ultimately, the Court of Appeals' decision is
upheld, with costs assigned to the petitioner.
 #65 GREGORIO JIMENEZ, plaintiff-appellee, vs. PEDRO RABOT, NICOLASA JIMENEZ and her
husband EMILIO RODRIGUEZ, defendants. PEDRO RABOT, appellant.
G.R. No. L-12579 July 27, 1918

Facts: Gregorio Jimenez initiated legal action against Pedro Rabot to reclaim a three-hectare parcel
of land in Alaminos, Pangasinan, which was part of their father's estate. While Gregorio was living in
Vigan, he had entrusted the property to his sister, Nicolasa Jimenez, asking her to sell one of the
parcels for financial help. Nicolasa then sold the land to Rabot for P500, but there was no proof that
she sent any of the money to Gregorio. When Gregorio later sought to reclaim the land, Nicolasa
refused, leading him and his siblings to file a lawsuit against her. They won the case in 1913, and
during the litigation, Nicolasa had executed a deed of sale to Rabot, who was aware of the ongoing
legal issues. The court observed that although a power of attorney for real estate transactions should
ideally be documented publicly, a private document can still create valid rights. Even if Nicolasa's sale
was irregular because she didn't disclose her authority, it could still be binding on Gregorio. If her
authority was adequate, he could be compelled to finalize the sale through a court process, thereby
enforcing the contract made by his sister.

Issue: Whether or not the authority of the agent must be in a public document.

Ruling: No. A power of attorney for the conveyance of real property should ideally be documented
publicly, but a private document can still effectively establish, modify, or terminate rights in real
property. In this instance, although Nicolasa acted irregularly by conveying the property under her
name without disclosing her capacity, the deed is binding on her brother as a contract, provided she
had sufficient authority. It was argued that the authorization must include a specific description of the
property; however, the law does not mandate this for the authority itself, only for the contract. The
authority stated in the letter was adequate, and Nicolasa’s deed correctly described the property.
Generally, a power of attorney can permit the sale of all land owned by the principal. Therefore, since
she was authorized to sell any of the parcels, her actions should bind the plaintiff as if he had
authorized the sale of any or all of them. These principles emphasize that a clear mandate allows the
agent to act within defined limits, and the principal cannot dispute the agent’s valid actions taken
within that scope.

#66 CITY-LITE REALTY CORPORATION, petitioner, vs. COURT OF APPEALS and F.P.
HOLDINGS & REALTY CORP., METRO DRUG INC., MELDIN AL G. ROY, VIEWMASTER
CONSTRUCTION CORP., and the REGISTER OF DEEDS OF QUEZON CITY, respondent.

G.R. No. 138639 February 10, 2000

Facts: City-Lite Realty Corporation has filed a petition for review to annul a decision by the Court of
Appeals that overturned a ruling from the Regional Trial Court in favor of City-Lite regarding a
property sale. The property in question, known as the Violago Property, was owned by F.P. Holdings
and initially advertised for sale. City-Lite showed interest in purchasing part of the property, and after
negotiations, an agreement was reached with Metro Drug Inc., which represented F.P. Holdings.
However, F.P. Holdings later declined to execute the deed of sale, prompting City-Lite to file an
adverse claim against the property. The Regional Trial Court dismissed F.P. Holdings' petition to
cancel City-Lite's claim, supporting City-Lite's position. City-Lite then sued for specific performance
and damages. The court ruled in favor of City-Lite, ordering the deed of sale to be executed and the
cancellation of subsequent property titles. F.P. Holdings and the buyer, Viewmaster Construction
Corp., appealed, arguing that a valid contract of sale did not exist due to unclear payment terms.
Ultimately, the Court of Appeals reversed the lower court's decision, and City-Lite's motion for
reconsideration was denied.

Issue: Whether or not Roy of Metro Drug Inc. is an authorized agent and thus had the authority to sell
the property.

Ruling: Yes, he is an agent of Metro Drug Inc., but not duly authorized to perfect the sale. The court
affirmed the decision of the Court of Appeals against City-Lite Realty Corporation, focusing on
whether a valid contract of sale existed between City-Lite and F.P. Holdings, represented by its
agent, Meldin Al G. Roy of Metro Drug. A crucial point in the case was Article 1874 of the Civil Code,
which stipulates that any sale of land conducted through an agent must have written authority;
otherwise, the sale is deemed void. City-Lite presented several pieces of evidence to support its claim
that Roy had the authority to sell the property. This included testimonies from three witnesses,
statements from Roy and Metro Drug's attorney, a sales brochure listing Roy as the contact person,
and comments from a guard asserting that Metro Drug was the authorized agent. However, the court
stressed that the law clearly requires written authority for any real estate transactions. A key piece of
evidence was a memorandum from the president of F.P. Holdings, which requested Metro Drug’s
assistance in identifying potential buyers. This memorandum indicated that Metro Drug’s role was
limited to facilitating initial negotiations and referring interested parties to F.P. Holdings for
assessment and approval. The wording of the memorandum made it evident that F.P. Holdings
retained the final authority to evaluate and accept offers, meaning that Roy and Metro Drug were
acting solely as intermediaries or brokers without the power to complete any sale.
Additionally, a witness for City-Lite acknowledged that Roy was essentially serving as broker, tasked
only with connecting interested buyers to F.P. Holdings. Consequently, the court concluded that since
there was no written authority provided to Roy or Metro Drug to sell the Violago Property, the
attempted sale was null and void. In light of these findings, the court upheld the Court of Appeals'
ruling, emphasizing that the absence of proper authorization rendered the sale ineffective and
confirmed that the property remained with its rightful owner, F.P. Holdings. City-Lite was also ordered
to cover the costs associated with the case.

#67 COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEAL and ISIDRO
PEREZ, respondents.

G.R. No. 114311 November 29, 1996

Facts: Cosmic Corporation, through its General Manager, appointed Paz G. Villamil-Estrada as
attorney-in-fact to initiate court actions for the ejectment of squatters from lots 9127 and 443. Villamil-
Estrada filed an ejectment case against Isidro Perez to recover possession of a portion of lot 443.
Subsequently, Estrada and Perez reached a Compromise Agreement, wherein Perez agreed to pay
P26,640 for the portion of the lot he occupied, with all related expenses to be covered by him. The
agreement recognized Perez’s ownership of 333 square meters of lot 443.

Although the trial court approved the agreement, it was not executed within the required five-year
period due to Cosmic Lumber's inability to produce the necessary owner's duplicate copy of Title No.
37649 for the segregation of the sold portion. Upon discovering this fraudulent transaction, Cosmic
Corporation sought to annul the trial court's decision in the Court of Appeals, arguing that the
compromise agreement was void.

Issue: Whether or not Villami-Estrada is duly authorized as an agent to cause the sale and
compromise agreement.

Ruling: No. The court concurred with the petitioner, noting that Villamil-Estrada's authority under the
special power of attorney was explicit and restricted to initiating legal actions to eject occupants from
Lots 9127 and 443, thereby allowing the petitioner to take possession of the property. Villamil-Estrada
was neither expressly nor implicitly authorized to sell the property, and such authority could not be
reasonably inferred from the ability to enter into a compromise agreement, which was specifically
intended to safeguard the petitioner’s interests. Selling the land—especially at a price much lower
than its assessed value—did not align with the goal of protecting the corporation's rights, and the
petitioner did not receive any proceeds from the sale. The court highlighted that a real estate sale
through an agent requires written authority, and any contract executed without specific authorization
to sell is considered void. Consequently, Villamil-Estrada's sale of the property to Perez was ruled
unauthorized, making both the sale and the compromise agreement void, along with any judgment
based on them. The court recognized that the petitioner had been misled by Villamil-Estrada, who
concealed the compromise agreement, which prevented the petitioner from contesting the sale.
Although one might argue that the petitioner is bound by the agent's actions, this general principle
does not apply in cases of fraud, as it would be unreasonable to expect an agent engaged in such
misconduct to share relevant information with the principal. Ultimately, the court concluded that when
an agent acts for personal gain, they operate outside the boundaries of their authority.
 #68 SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner, vs.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL
DEVELOPMENT CORP. and JNM REALTY AND DEVELOPMENT CORP., respondents.

G.R. No. 129459 September 29, 1998

Facts: The case involves San Juan Structural and Steel Fabricators, Inc. (plaintiff-appellant) and
Motorich Sales Corporation (defendant-appellee) regarding a sales agreement from February 14,
1989, for a parcel of land in Quezon City. The plaintiff made a downpayment of P100,000 and was to
pay the remaining balance by March 2, 1989. However, the defendant's treasurer (Nenita Lee
Gruenberg) failed to meet the plaintiff for the payment, and the company subsequently refused to
execute the necessary Transfer of Rights/Deed of Assignment to finalize the sale. The plaintiff
claimed damages due to this refusal, alleging that the defendants acted in bad faith.

In response, the defendants argued that the agreement was invalid because it lacked the necessary
corporate authorization, particularly the required signatures from the corporation's president. The trial
court dismissed the plaintiff's complaint, stating there was not enough evidence to support their
claims and that the defendants did not misrepresent their authority. The Court of Appeals upheld this
ruling but ordered the return of the P100,000 downpayment. The case highlights issues of contractual
obligations, corporate authority, and the burden of proof in claims of bad faith in contractual disputes.

Issue: Whether or not Gruenberg had the authority to sell the land.

Ruling: No. Th Supreme Court disagrees with San Juan Structural and Steel Fabricators, Inc.’s (the
petitioner) claims that it entered into a contract on February 14, 1989, with Motorich Sales
Corporation, represented by its treasurer, Nenita Lee Gruenberg. The petitioner asserts that the
signatures of Gruenberg and its president, Andres Co, bind both corporations to the agreement. The
court emphasizes that a corporation is a distinct legal entity, and its assets cannot be sold without
explicit approval from its board of directors. According to the Corporation Code of the Philippines in
relation to the general principles of agency, a corporation can act only through its board or authorized
officers, and any agency relationship must follow legal requirements. Motorich denies that Gruenberg
had the authority to sell the property, placing the burden on the petitioner to prove her authorization.
The petitioner failed to provide any evidence of such authority, including relevant provisions from
Motorich’s bylaws or board resolutions. Simply being the treasurer does not imply that Gruenberg had
the power to sell corporate property, which generally lies outside her responsibilities. Moreover, the
petitioner’s argument that Motorich ratified the contract by accepting benefits is not supported; the
provided receipt does not prove that the sale was authorized or ratified. Without written authorization
for the sale, the court concluded that the agreement was void under the Civil Code, meaning it could
not be ratified or legally binding.

#69 CLAUDIO DELOS REYES and LYDIA DELOS REYES, petitioners, vs. THE HON. COURT OF
APPEALS and DALUYONG GABRIEL, substituted by his heirs, namely: MARIA LUISA G.
ESTEBAN, MARIA RITA G. BARTOLOME & RENATO GABRIEL, respondents.

G.R. No. 129103 September 3, 1999

Facts: In this petition for review, the petitioners contest a Court of Appeals decision that overturned a
Regional Trial Court ruling in favor of the De los Reyes couple concerning a property dispute over
land originally owned by Daluyong Gabriel, who died in 1995, leaving his children as heirs. Initially,
Daluyong’s sister managed the property and leased part of it to Lydia De los Reyes. In 1985,
Daluyong’s son, Renato, took over management and entered into a new lease agreement with Lydia.
In 1987, Lydia verbally agreed to buy 300 square meters of the land, making several installment
payments to Renato, although no formal deed of sale was executed. The conflict arose when
Daluyong demanded that the De los Reyes vacate the property after discovering unauthorized
construction. The couple argued that they acted in good faith, believing Renato had the authority to
sell. Legal proceedings followed, with Daluyong filing a lawsuit to recover the property while the De
los Reyes sought specific performance of the sale. The Regional Trial Court ruled in favor of the De
los Reyes, but the Court of Appeals reversed this ruling, declaring the sale unauthorized. The
petitioners argue that this decision misinterpreted the facts and assert that their payments and
Renato's actions confirmed the sale's validity. They contend that even in the absence of formal
ownership, Renato's inheritance after Daluyong's death would legitimize the sale. In response, the
private respondents argue that the petitioners have changed their claims and assert that Renato
never had the authority to sell, maintaining that the property now belongs to another heir.

Issue: Whether or not Renato Gabriel was a duly designated agent of the registered owner
(Daluyong Gabriel) and was authorized to sell subject property in Daluyong’s behalf.

Ruling: No. The Court ruled that the Court of Appeals correctly determined that Renato Gabriel was
not the owner of the disputed property nor an authorized agent of the registered owner, Daluyong
Gabriel, capable of selling it. There was also a lack of evidence showing that Daluyong approved
Renato's actions. Under Article 1874 of the Civil Code, any sale conducted through an agent must be
authorized in writing; if not, the sale is invalid. Because Renato did not have the authority to consent,
the oral sale contract is deemed null and void. The petitioners' claim that Renato became the owner
after Daluyong's death is unfounded, as Daluyong had already donated the property to his daughter
prior to his passing. Nevertheless, the appellate court failed to recognize that the petitioners had
already completed their obligation by paying P90,000 for the land. To prevent unjust enrichment,
Renato should refund this amount. However, the petitioners' request for P1,000,000 related to a
building they constructed lacks sufficient evidence and is denied. The decision of the Court of
Appeals is upheld, affirming that the oral contract is void and ordering Renato to refund the P90,000
to the petitioners, with no costs awarded.

#70 AF REALTY & DEVELOPMENT, INC. and ZENAIDA R. RANULLO, petitioners, vs.
DIESELMAN FREIGHT SERVICES, CO., MANUEL C. CRUZ, JR. and MIDAS DEVELOPMENT
CORPORATION, respondents.

G.R. No. 111448 January 16, 2002

Facts: This is a case involving the legal dispute between Dieselman Freight Service Co. and AF
Realty & Development, Inc. over the sale of a commercial lot in Pasig City. Manuel C. Cruz, Jr.,
member of the Board of Directors of Dieselman, issued a sale authorization (entitled, “Authority to
Sell Real Estate”) to Cristeta N. Polintan (CNP Real Estate Brokerage’s real estate broker) without
proper approval from Dieselman, allowing a her to negotiate a sale. The broker subsequently
permitted Felicisima Noble to engage with AF Realty at a lower price. AF Realty made a partial
payment, but Dieselman later demanded a higher price and terminated the agreement. In response,
AF Realty filed a lawsuit for specific performance, claiming a valid contract existed. Dieselman
countered that no agreement was formed due to a lack of proper authority for the negotiations.
Meanwhile, Dieselman sold the property to Midas Development Corporation, which sought to
intervene in the ongoing lawsuit. Initially, the trial court ruled in favor of AF Realty, declaring a
contract valid. However, the Court of Appeals reversed this decision, stating that Cruz, Jr. did not
have the authority to sell the property. The appellate court affirmed that the sale to Midas was
legitimate and held Dieselman and Cruz, Jr. liable for damages to AF Realty. The Court of Appeals
later amended its ruling, assigning liability solely to Cruz, Jr. AF Realty then petitioned the Supreme
Court to challenge these rulings, with the key issue being the rightful ownership of the property
between AF Realty and Midas.

Issue: Whether or not Manuel C. Cruz, Jr., member of the Board of Directors of Dieselman, has the
capacity to give authorization anent the selling of the lot in question.

Ruling: No. The Court upheld the Court of Appeals’ ruling, highlighting that the board of directors
exercises corporate powers and may delegate authority only in writing. In this instance, respondent
Cruz, Jr. did not have written authorization from Dieselman’s board to sell a lot, rendering his actions
and those of subsequent agents invalid, and the contract void. The argument from petitioner AF
Realty that the contract could be ratified through acceptance of benefits was rejected, as the law
mandates written authority for real estate transactions. On the other hand, the court confirmed that
the sale to Midas was valid because it had board authorization. While the Court of Appeals initially
awarded attorney's fees and damages to AF Realty, this was overturned, as Cruz, Jr. acted without
authority and should not be held liable. The ruling required Dieselman to refund AF Realty's partial
payment of P300,000.
 #71 NIELSON & COMPANY, INC., plaintiff-appellant, vs. LEPANTO CONSOLIDATED MINING
COMPANY, defendant-appellee.

G.R. No. L-21601 December 17, 1966

Facts: The case centers on a management agreement between Nielson and Lepanto concerning
mining properties, originally established in 1937. This contract included a monthly management fee
and a share of the profits. It was set for five years, with plans for renewal in late 1941, but the
outbreak of World War II disrupted operations. In 1942, U.S. Army orders led to the destruction of
equipment to prevent its use by the Japanese, who occupied the mines until 1945. After the war,
Lepanto began the process of rebuilding the mining operations, which was not finished until 1948. A
disagreement arose between Nielson and Lepanto about the status of their contract—specifically,
whether it had been suspended due to the war, which would extend its original 1947 expiration.
Nielson argued for an extension based on a clause in the contract that allowed for suspension during
uncontrollable events like war, while Lepanto maintained that the contract expired as originally
scheduled. The case ultimately hinges on whether the criteria for suspension were met during the
war. The court's ruling will address these conflicting interpretations and may also consider defenses
of laches and prescription.

Issue: Whether or not there exists a agency or lease of service.

Ruling: Only a lease of service. The Court explained that in both agency and service leases, one
party agrees to provide services to the other. Agency is based on representation, while a service
lease is rooted in employment. In agency relationships, the agent acts on behalf of the principal,
whereas a service provider does not represent their employer. Agency functions as a preparatory
contract aimed at facilitating future agreements. The central characteristic of agency is the agent’s
ability to create business relations between the principal and third parties. In contrast, service leases
involve only material acts without any juridical implications. In the current case, the plaintiff's main
duty under the management contract was to operate and develop the mine and mill. Other tasks were
necessary to support this primary responsibility. The plaintiff did not perform juridical acts for the
defendant that would affect business relations with third parties. Thus, the plaintiff was acting as an
employee, not as an agent, receiving compensation for their material work.

#72 DOMINGO DE LA CRUZ, plaintiff-appellant, vs. NORTHERN THEATRICAL ENTERPRISES

INC., ET AL., defendants-appellees.

G.R. No. L-7089 August 31, 1954

Facts: Domingo Dela Cruz was hired by Northern Theatrical Enterprises Inc., a movie corporation, as
a special guard whose duties were to guard the main entrance of the cine, maintain peace and order
and report the commission of disorders within the premises. Dela Cruz was charged with homicide for
defending himself by shooting a gate crasher, Benjamin Martin, who attacked him with a bolo. Dela
Cruz demanded reimbursement of his expenses from Northern Theatrical Enterprises Inc. but was
refused. He brought the action to court for recovery of costs and damages (attorney’s fees, moral
damages and opportunity cost for failure to supervise the cultivation of his land) in the sum of
P15,000.

Issue: Whether or not there is a contract of agency between Dela Cruz and Northern Theatrical
Enterprises Inc.

Ruling: None. The Court ruled that the relationship between the movie corporation and the plaintiff
was not that of principal and agent because the principle of representation was in no way involved.
Plaintiff was not employed to represent the defendant corporation in its dealings with third parties. He
was a mere employee hired to perform a certain specific duty or task, that of acting as special guard
and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and
order within the premises.
 #73 WILLIAM FRESSEL, ET AL., plaintiffs-appellants, vs. MARIANO UY CHACO SONS &
COMPANY, defendant-appellee.

G.R. No. L-10918 March 4, 1916

Facts: Mariano Uy Chaco Sons & Company contracted E. Merrit to build a costly edifice in the City of
Manila. William Fressel and the other plaintiffs delivered construction materials amounting to
P1,381.21 to E. Merrit at the said edifice. However, E. Merrit and Mariano Uy Chaco Sons &
Company did not pay despite the demand by the plaintiffs. Plaintiffs demanded to the defendant the
return of the unused materials or permission to enter the premises to retake the unused materials but
was refused. The plaintiffs insist that E. Merrit acted as an agent of Mariano Uy Chaco Sons and
Company in purchasing said materials and that the defendant, by taking over and using such
materials, accepted and ratified the purchase, thereby obligating itself to pay for the same.

Issue: Whether or not E. Merrit is an agent of Mariano Uy Chaco Sons and Company.

Ruling: No. The allegations in paragraphs 1 to 5, inclusive, above set forth, do not even intimate that
the relation existing between Merritt and the defendant was that of principal and agent, but, on the
contrary, they demonstrate that Merritt was an independent contractor and that the materials were
purchased by him as such contractor without the intervention of the defendant. The fact that "the
defendant entered into a contract with one E. Merritt, where by the said Merritt undertook and agreed
with the defendant to build for the defendant a costly edifice" shows that Merritt was authorized to do
the work according to his own method and without being subject to the defendant's control, except as
to the result of the work. He could purchase his materials and supplies from whom he pleased and at
such prices as he desired to pay.

#74 THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner, vs. FIREMEN'S INSURANCE
COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY INSURANCE CO.,
SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First
Division), respondents.

G.R. No. L-8169 January 29, 1957

Facts: Perlito Sison brought his father’s (Salvador Sison) car to the Shell Gasoline and Service
Station operated by Porfirio De La Fuente for washing, greasing, and spraying. When the service was
almost complete, the car fell from the hydraulic lifter. The case was immediately reported to the
Manila Adjustor Company, the adjustor of the firemen's Insurance Company and the Commercial
Casualty Insurance Company, as the car was insured with these insurance companies. The car was
repaired and delivered to Salvador Sison, who in, in turn made assignments of his rights to recover
damages in favor of the Firemen's Insurance Company and the Commercial Casualty Insurance
Company. The insurance companies and and the owner of the car brought an action in the court
against Shell Company of the Philippines, Ltd. and Porfirio De La Fuente to recover the cost of
repairs, accrued interest, and damages.

Issue:
a. Whether or not Porfirio De La Fuente is an agent of Shell Company of the Philippines, Ltd.
b. Whether or not Shell Company of the Philippines, Ltd. be held liable

Ruling:
a. Yes. The Court found that De la Fuente was the operator of the station "by grace" of the Defendant
Company which could and did remove him as it pleased; that all the equipments needed to operate
the station was owned by the Defendant Company which took charge of their proper care and
maintenance, despite the fact that they were loaned to him; that the Defendant company did not leave
the fixing of price for gasoline to De la Fuente; on the other hand, the Defendant company had
complete control thereof; and that Tiongson, the sales representative of the Defendant Company, had
supervision over De la Fuente in the operation of the station, and in the sale of Defendant Company's
products therein
b. Yes. The Court ruled that as the act of the agent or his employees acting within the scope of his
authority is the act of the principal, the breach of the undertaking by the agent is one for which the
principal is answerable. Moreover, the company undertook to "answer and see to it that the
equipments are in good running order and usable condition;" and the Court of Appeals found that the
Company's mechanic failed to make a thorough check up of the hydraulic lifter and the check up
made by its mechanic was "merely routine" by raising "the lifter once or twice and after observing that
the operator was satisfactory, he (the mechanic) left the place." The latter was negligent and the
company must answer for the negligent act of its mechanic which was the cause of the fall of the car
from the hydraulic lifter.

#75 PACIFIC COMMERCIAL COMPANY, plaintiff-appellant, vs. ALFREDO L. YATCO, defendant-

appellee.

G.R. No. L-45976 July 20, 1939

Facts: Pacific Commercial Company is a corporation engaged in selling of refined sugar for the
account of its manufacturer, Victorias Milling Co. Pacific sells sugar in two ways. Upon obtaining
orders from purchasers, such were sent to Victorias Milling Co either to be delivered ex-ship or ex-
warehouse.

Issues:
a. Whether the plaintiff acted as a commission merchant as to the sugar delivered ex-warehouse
b. Whether the plaintiff acted as a mere commercial broker as to the sugar delivered ex-ship

Ruling:
a. The question of whether the appellant, in connection with the sugar delivered ex-warehouse and
thereafter sold to the purchasers, acted as a commission merchant, presents no doubt. A commission
merchant is one engaged in the purchase or sale for another of personal property which, for this
purpose, is placed in his possession and at his disposal. He maintains a relation not only with his
principal and the purchasers or vendors, but also with the property which is the subject matter of the
transaction. In the present case, the sugar was shipped by Victorias Milling Co., and upon arrival at
the port of destination, the plaintiff received and transferred it for deposit in its warehouses until the
purchaser called for it. The deposit of the sugar in the warehouses of the plaintiff was made upon its
own account and at its own risk until it was sold and taken by the purchaser. There is, therefore, no
doubt that the plaintiff, after taking the sugar on board until it was sold, had it in its possession and at
its own risk, circumstances determinative of its status as a commission merchant in connection with
the sale of sugar under these conditions.

b. There is also no doubt on the question of whether the plaintiff merely acted as a commercial broker
as to the sale of the sugar delivered to the purchaser ex-ship. The broker, unlike the commission
merchant, has no relation with the thing he sells or buys. He is merely an intermediary between the
purchaser and the vendor. He acquires neither the possession nor the custody of the things sold. His
only office is to bring together the parties to the transaction. These circumstances are present in
connection with the plaintiff's sale of the sugar which was delivered to the purchaser's ex-ship. The
sugar sold under these conditions was shipped by the plaintiff at its expense and risk until it reached
its destination, where it was later taken ex-ship by the purchaser. The plaintiff never had possession
of the sugar at any time. The circumstance that the bill of lading was sent to the plaintiff does not alter
its character of being merely a broker, or constitute possession by it of the sugar shipped, inasmuch
as the same was sent to it for the sole purpose of turning it over to the purchaser for the collection of
the price. The sugar did not come to its possession in any sense.

#76 SWITZERLAND GENERAL INSURANCE COMPANY, LTD., petitioner, vs. HON. PEDRO A.
RAMIREZ, Presiding Judge of the Court of First Instance of Manila, Branch XXX, OYAMA
LINES, CITADEL LINES and MABUHAY BROKERAGE CO., INC., respondents.

G.R. No. L-48264 February 21, 1980

Facts: Oyama Lines, a foreign corporation, consigned thru its local ship agent in the Philippines,
Citadel Lines, 60,000 bags of urea nitrogen to Borden International Phils., Inc. The goods were
shipped on board the S/S St. Lourdes from Nihama, Japan which and were insured by Switzerland
General Insurance. The shipment was discharged from the vessel S/S St. Lourdes shipside into
lighters owned by Mabuhay Brokerage Co. Upon delivery to the consignee, it was found out that
some of the goods were lost and/or damaged. Such losses/damages were paid by Switzerland
General Insurance, which later on made repeated demands against herein private respondents for
payment of the aforesaid losses or damages, but no payment was made and, uncertain in whose
custody the goods were damaged, impleaded the private respondents as alternative defendants to
determine their respective liability. Citadel Lines filed an Answer with Compulsory Counterclaim and
Cross-claim, interposing special and affirmative defenses and alleging that it was merely the civil
agent in the Philippines for the Japanese firm Oyama Shipping Co., Ltd., which was the charterer of
the vessel S/S "St. Lourdes", said vessel being owned by Companies Maritime de Brios, Sociedad
Anonima a Panamanian corporation. It was further alleged that the principal agency relationship
between Oyama Shipping Co., Ltd. and Citadel Lines, Inc. was terminated when the Tokyo District
Court declared and decreed latter’s insolvency.

Issue: Whether or not Citadel Lines, ship agent be held solidarily liable with its principal, Oyama
Lines.

Ruling: Yes. The Code of Commerce provides, among others, that the ship agent shall also be liable
for the indemnities in favor of third persons which arise from the conduct of the captain in the care of
the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel
with all her equipments and the freightage he may have earned during the voyage. At any rate, the
liabilities of the ship agent are not disputed by private respondent. It appearing that the Citadel Lines
is the ship agent for the vessel S/S "St. Lourdes" at the port of Manila, it is, therefore, liable to the
petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an amount representing the value
of the goods lost and or damaged, amounting to P38,698.94, which was likewise the amount paid by
petitioner, as insurer, to the insured consignee As found by the court a quo, there has been no proof
presented to show that the officers of the vessel, in whose custody the goods were lost or damaged,
are exempt from liability therefrom and that the damage was caused by factors and circumstances
exempting them from liability. The insolvency of Oyama Lines has no bearing on the instant case
insofar as the liability of Citadel Lines, Inc. is concerned. The law does does not make the liability of
the ship agent dependent upon the solvency or insolvency of the ship owner.

#77 PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MAXIMO STA. MARIA, ET

AL., defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA.
MARIA, defendants-appellants.

G.R. No. L-24765 August 29, 1969

Facts: A special power of attorney to mortgage real estate is restricted to that specific authority and
does not personally bind the grantor to any additional obligations undertaken by the grantee. Maximo
obtained sugar crop loans from the plaintiff bank under a power of attorney granted by his siblings,
authorizing him to mortgage a jointly owned 16-hectare piece of land. Separately, Maximo’s sister,
Valeriana, also granted him a special power of attorney to borrow money and mortgage any real
estate she owned. Maximo applied for two crop loans from the Philippine National Bank (PNB): one
for P15,000, of which P13,216.11 was granted, and another for P23,000, of which P12,427.57 was
extended. To secure these loans, Maximo executed two chattel mortgages in his own name, backed
by surety bonds for the full loan amounts, issued by Associated Insurance & Surety Co., Inc. The
plaintiff bank filed a case on February 10, 1961, against Maximo Sta. Maria, his six siblings, and
Associated Insurance & Surety Co., Inc., seeking to collect the unpaid balances of the two sugar crop
loans. The trial court ruled in favor of PNB. Although Maximo did not appeal, his siblings did, arguing
that they had authorized him to borrow money only for the purpose of mortgaging the jointly owned
real estate. They maintained that their liability should be limited to the value of the property they had
allowed to be used as security and claimed they did not benefit from the loans.

Issue: Whether or not the special power of attorney to mortgage real estate is limited to such
authority to mortgage and does not bind the grantor personally to other obligations contracted by the
grantee.

Ruling: YES, except for defendant Valeriana who had executed another special power of attorney,
expressly authorizing Maximo to borrow money on her behalf In Bank of P.I. vs. De Coster, "where in
an instrument powers and duties are specified and defined, that all of such powers and duties are
limited and confined to those which are specified and defined, and all other powers and duties are
excluded." In the similar case of De Villa vs. Fabricante had already ruled that where the power of
attorney given to the husband by the wife was limited to a grant of authority to mortgage a parcel of
land titled in the wife's name, the wife may not be held liable for the payment of the mortgage debt
contracted by the husband, as the authority to mortgage does not carry with it the authority to contract
obligation. The authority granted by defendants-appellants (except Valeriana) was merely to
mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for
any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to borrow
money, must answer for said loans and the other defendants-appellants' only liability is that the real
estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for
the obligations contracted by Maximo. But they cannot be held personally liable for the payment of
such obligations. Plaintiff's argument that "a mortgage is simply an accessory contract, and that to
effect the mortgage, a loan has to be secured" falls, far short of the mark. Maximo had indeed,
secured the loan on his own account and the defendants-appellants had authorized him to mortgage
their respective undivided shares of the real property jointly owned by them as security for the loan.
But that was the extent of their authority land consequent liability, to have the real property answer for
the loan in case of non-payment. The grant of such authority does not extend to assuming personal
liability, much less solidary liability, for any loan secured by the grantee in the absence of express
authority so given by the grantor.

#78 THE BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. GABRIELA ANDREA DE
COSTER Y ROXAS, ET AL., defendants. LA ORDEN DE DOMINICOS or PP. PREDICADORES DE
LA PROVINCIA DEL SANTISIMO ROSARIO, defendants-appellees; GABRIELA ANDREA DE
COSTER Y ROXAS, defendant-appellant.

G.R. No. L-23181 March 16, 1925

Facts: Defendant Gabriela Andrea de Coster y Roxas issued a Special Power of Attorney authorizing
her husband, Jean M. Poizat, to act on her behalf in borrowing and lending money. Using this
authority, Poizat secured a loan from BPI, backed by a chattel mortgage on the steamers owned by
his company, Poizat Vegetable Oil Mills, and a real estate mortgage on a property, which was already
mortgaged to La Orden de Dominicos. When the defendants defaulted on their obligations to BPI and
La Orden de Dominicos, both creditors sought foreclosure of the mortgaged assets. The RTC
declared the defendants in default due to their failure to appear and ruled in favor of the plaintiffs. De
Coster claimed she was unaware of the proceedings until she read about her default in the
newspapers, as she was out of the country when the summons were served. She also stated that her
husband had fled the country and that the mortgages executed by him lacked her marital consent.
Furthermore, she argued that her husband had no authority to bind her as a surety for the personal
debts of his company.

Issue: Whether or not the principal-wife, Gabriela De Coster y Roxas, is liable for the mortgage
executed by her agent husband, Jean Poizat.

Ruling: NO. The note and mortgage show upon their face that at the time they were executed, the
agent-husband was attorney-in-fact for the defendant wife, and the bank knew or should have known
the nature and extent of his authority and the limitations upon his power. Par. 5 of the Power of
Attorney authorizes the agent husband for and in the name of his wife to “loan or borrow any sums of
money or fungible things, etc.” This is taken to mean that he only had the power to loan his wife’s
money and to borrow money for or on account of his wife as her agent and attorney-in-fact. It does
not carry with it or imply that he had the legal right to make his wife liable as a surety for the
preexisting debt of a third person. It is fundamental rule of construction that where in an instrument
powers and duties are specified and defined, that all of such powers and duties are limited and
confined to those which are specified and defined, and that all other powers and duties are excluded.
The fact that the agent-husband failed and neglected to perform his duties and to represent the
interests of his principal is NOT a bar to the principal obtaining legal relief for the negligence of her
agent. It is apparent from the face of the instrument that the whole purpose and intent of the power of
attorney was to empower and authorize the agent-husband to look after and protect the interests of
the wife and for her and in her name to transact any and all of her business. But nowhere does it
provide or authorize him to make her liable as a surety for the payment of the preexisting debt of a
third person. Thus, the agent-husband does not have the authority to sign the note and to execute the
mortgage for and on behalf of the wife as her act and deed, and that as to her the note is void for
want of power of her husband to execute it.
 #79 C. N. HODGES, plaintiff-appellant, vs. CARLOTA SALAS and PAZ SALAS, defendants-
appellees.

G.R. No. L-42958 October 21, 1936

Facts: Defendants, Carlota Salas and Paz Salas, granted a Power of Attorney to their brother-in-law,
Felix S. Yulo, authorizing him to secure a loan and mortgage the real property covered by Transfer
Certificate of Title No. 3335. Using this authority, Yulo obtained a loan, binding the defendants to
jointly and severally repay it within 10 years with interest. Yulo signed a promissory note for the loan
amount and executed a mortgage deed on the property. However, instead of delivering the loan
amount to Yulo, he and the plaintiff agreed that the funds would be used to settle Yulo’s personal
debts. When the defendants failed to pay the interest due in advance after one year, plaintiff Hodges
initiated foreclosure proceedings. In response, the defendants argued that Yulo had exceeded his
authority.

Issue: Whether or not, Felix Yulo, being the agent, was authorized to borrow money and use it as he
wished for his personal gain by virtue of the authority conferred by the defendants.

Ruling: In the case of Manila Trading & Supply Co. vs. Uy Tiepo, the court held that an agent who
used the borrowed money for his personal gain or benefit is deemed to have exceeded the authority
conferred upon him under the power of attorney in which case should have been specific and limited
to a certain extent. As substantially provided under Article 1881 of the Civil Code that an agent must
act within the scope of his authority and may do such acts as may be conducive to the
accomplishment of the purpose of the agency. In the case at bar, Yulo exceeded the authority
provided under the Power of Attorney by using the loaned money for his personal benefit.

#80 ELEANOR ERICA STRONG, ET AL., plaintiffs-appellees, vs. FRANCISCO GUTIERREZ

REPIDE, defendant-appellant.

G.R. No. L-7154 February 21, 1912

Facts: The case involved a dispute over a share of profits in the sale of friar lands in the Philippines.
Samuel G. Strong, an American businessman, entered into a partnership with Juan Luna, a Filipino,
to purchase and sell these lands. However, due to complications in the transactions, the partnership
involved Mariano Gutierrez Repide, who claimed that he did not agree to share the profits with Strong
as a partner but as a co-owner of the specific property purchased. Strong argued that there was a
partnership between them entitling him to a share in the profits.

Issue: Whether or not the vendor's agent had power to sell where a sale was made through an agent
of the vendor has been effected by the fraud and deceit of the vendee, the sale cannot stand

Ruling: A director upon whose action the value of the shares depends cannot avail of his knowledge
of what his own action will be to acquire shares from those whom he intentionally keeps in ignorance
of his expected action and the resulting value of the shares. Even though a director may not be under
the obligation of a fiduciary nature to disclose to a shareholder his knowledge affecting the value of
the shares, that duty may exist in special cases, and did exist upon the facts in this case. In this
case, the facts clearly indicate that a director of a corporation owning friar lands in the Philippine
Islands, and who controlled the action of the corporation, had so concealed his exclusive knowledge
of the impending sale to the government from a shareholder from whom he purchased, through an
agent, shares in the corporation, that the concealment was in violation of his duty as a director to
disclose such knowledge, and amounted to deceit sufficient to avoid the sale; and, under such
circumstances, it was immaterial whether the shareholder's agent did or did not have power to sell the
stock. While the method of payment cannot have induced the vendor's consent to a sale, where that
method tended to conceal the identity of the purchaser and was part of a scheme to conceal facts,
the knowledge of which would have resulted in vendor's refusal to sell, evidence as to the payment is
admissible to show the fraudulent intent and scheme of the purchaser. The expressed prohibitions in
§ 1459 of the Spanish Civil Code against directors of corporations acquiring shares of stock entrusted
to them do not apply to purchases from others. An expressed prohibition against directors acquiring
shares held by themselves in a fiduciary capacity does not refer to purchases by directors of shares
from others, or so limit the prohibitions against purchases of stock by directors that a sale to one
cannot be avoided by his deceit in not disclosing material facts within his exclusive knowledge.