1. G.R. No. 70926 January 31, 1989

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

FACTS:

The petitioner asks for the reversal of the decision of the Appellate Court in which affirmed the decision of the lower court declaring private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and ordering the petitioner to pay to the private respondent his share in the annual profits of the said restaurant.

This case originated from a complaint filed by respondent Leung Yiu with the lower court to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner 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 interpret or construe

'financial assistance' to mean the contribution of capital by a partner to a partnership.

ISSUE:

WON the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria.

HELD:

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.

2. Heirs of Tan Eng Kee vs. CA

G.R. No. 126881| October 2000 | J. De Leon

Facts

After the death of Tan Eng Kee, Matilde Abubo, the common-law spouse of the decedent joined by their children collectively known as petitioners Heirs of Tan Eng Kee, filed a suit against the decedent’s brother Tan Eng Lay in the RTC of Baguio for accounting, liquidation and winding up of the alleged P formed after WWII between Tang Eng Kee and Tan Eng Lay. The amended complaint alleged that after the WWII, Tan Eng Kee and Tan Eng Lay pooled their resources and industry together, entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. However, they claimed that Tan Eng Lay and his children subsequently caused the conversion of the partnership “Benguet Lumber” into a corporation called “Benguet Lumber Company.” The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business.

Issue: W/N there was a partnership between Tan Eng Kee and his brother Tan Eng Lay notwithstanding the absence of a) firm account; b) firm letterheads; c) certificate of partnership; d) agreement as to profits; and e) time fixed for the duration of the partnership

Held: None

Ratio: The Court held that undoubtedly, the best evidence would have been the contract of P itself, or the articles of P, but there is none. The alleged partnership was never formally organized.

In the absence of evidence, the Court could not accept as an established fact that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose of establishing a P. The Court further held that it is

indeed odd, if not unnatural, that despite the forty years the P was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a P is that the partners share in the profits and losses. Each has the right to demand an accounting as long as the partnership exists.

Furthermore, one of the exhibits presented consisting of payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet Lumber was not overcome by the petitioners. The exhibits in fact shows that Tan Eng Kee received sums as wages of an employee enough to hold that Tan Eng Kee was only an employee, not a partner.

The collective effect of the circumstances such as the exercise of powers of supervision of Tan Eng Kee over the other employees and his duties to place orders with suppliers are not persuasive indicia of a partnership. If anything, the ascendancy of Tan Eng Kee over the other employees could only be because he’s a brother of the owner of the business.

*The Court has occasioned to discuss the meaning of a joint venture which for it “presupposes generally a parity of standing between the joint co-ventures or partners…” Nonetheless, in Aurbach, et al. v. Sanitary Wares Mfg Corp., et al., a joint venture may be likened to a particular partnership. A joint venture has been generally understood to mean an org formed for some temporary purpose. It is hardly distinguishable from the P since their elements are similar—community of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction cited by most opinions in common law jurisdiction is that the P contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature.

3. PASCUAL VS. CIR

FACTS: The petitioners Pascual and dragon bought 5 parcels of land. The first 2 were sold in 1968, while the remaining 3 were sold in 1970. Petitioners paid the corresponding capital gains taxes on both sales availing the tax amnesties way back in 1974. However,the CIR assessed and required petitioners to pay corporate income taxes for the said years. Respondent insisted that in both years, petitioners as co-owners in the real estate transactions formed an unregistered partnership taxable as corporation.

ISSUE: W/N petitioners formed a partnership in both transactions.

HELD: No.There is no evidence that the petitioners entered into an agreement to contribute money, property or industry in a common fund, and that they intended to divide the profits among themselves. Respondent CIR just assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof.

•The transactions were isolated. The character of habituality peculiar to business transactions for the purpose of gain was not present.

•The sharing of returns does not initself establish a partnership whether or not the persons sharing there in have a joint or common right or interest in the property. There must be a clear intent to form a partnership, the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property.

4. Evangelista & Co. vs. Abad Santos51 SCRA 416

Facts: In 1954, partnership was formed under the name of “Evangelista &

Co.”. On June 7, 1955, the articles of co-partnership were amended so as to include herein respondent, Estrella Abad Santos, as industrial partner with petitioners herein Domingo Evangelista Jr, Leonardo Atienza Abad Santos and Conchita Navarro, the original capitalist partners, remaining in that capacity with a contribution of 17, 500 each. The amended articles provided, inter alia: “the contribution of Estrella Abad Santos consists of her industry being an industrial partner, and that the profits and losses shall be divided and distributed among the partners… in the proportion of 70% for the first partners, Domingo Evangelista Jr, Conchita Navarro & Leonardo Atienza Abad Santos to be divided among them equally and 30% for the fourth partner, Estrella Abad Santos.”

In 1963, Estrella Abad Santos filed a suit against the other three partners, alleging that the partnership which was also made a party-defendant, had been paying dividends to the partners, except to her and refuse to let her examine the partnership books and pay to her share in the dividends declared by the partnership. RTC and CA declared Estrella Abad Santos to be an industrial partner of the partnership, and ordering the other three partners to render Estrella an accounting of the business operations. Hence, the Appeal.

Issue:W/not the defendant is an industrial partner or merely a profit-

sharer entitled to 30% of the net profits that may be realized by the partnership?

Held: The judgment appealed from is affirmed. Estrella Abad Santos, is an

industrial partner.

It is not the function of the SC to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court. The CA found the evidences presented conclusive, together with the other factors, consisting both testimonial and documentary.

5. Compaña Maritima vs. Muñoz9 Phil 326

Facts:In March 31, 1905, the defendants Francisco Muñoz, Emilio Muñoz

and Rafael Naval formed an ordinary, general mercantile partnership under the name of Francisco Muñoz and Sons, for the purpose of carrying on the mercantile business in the Province of Albay which had formerly been carried on by Francisco Muñoz. Francisco Muñoz was a capitalist partner and Emilio Muñoz and Rafael Naval were industrial partners. The Articles of Partnership were recorded in the mercantile registry of the Province of Albay. As industrial partners, by signing the Articles, agree to contribute their work to the partnership and Article 138 of the Code of Commerce prohibits them from engaging I other work except y express consent of the partnership.

Issue: W/not, an industrial partner in an ordinary, general mercantile

partnership be relieved from liability to third persons for the debts of the partnership?

Held:The court ruled that neither on principle nor an authority can the

industrial partner be relieved from liability to third persons for the debts of the partnership. Hence, although exempted for the share on losses, industrial partners are held liable. Execution on such judgment shall not issue against the private property of Francisco Muñoz, Emilio Muñoz or Rafael Naval, until the property of Francisco Muñoz is exhausted.

6. BACHRACH V. “LA PROTECTORA”, 37 PHIL 441

Facts:

In the year 1913, the individuals in this action formed a civil partnership, called "La Protectora," for the purpose of engaging in the business of transporting passengers and freight at Laoag, Ilocos Norte.

Marcelo Barba, acting as manager, came to Manila and upon June 23, 1913, negotiated the purchase of two automobile trucks from E. M. Bachrach, for the agreed price of P16,500. He paid the sum of 3,000 in cash, and for the balance executed promissory notes representing the deferred payments. As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano, upon June 12, 1913, executed in due form a document in which they declared that they were members of the firm "La Protectora" and that they had granted to its president full authority "in the name and representation of said partnership to contract for the purchase of two automobiles". Three of these notes, for the sum of P3,375 each, have been made the subject of the present action, and there are exhibited with the complaint in the cause. One was signed by Marcelo Barba in the following manner (the other 2, the word “by” was omitted):

P. P. La Protectora By Marcelo Barba Marcelo Barba.

In the body of the note the word "I" instead of "we" is used before the words "promise to pay" used in the printed form.Additional purchases were made for automobile effects and accessories amounting to P2,916.57. After a chattel mortgage was instituted by Bachrach, there was a deficiency. Hence, this case was filed to recover this balance, together with the sum due for additional purchases. CFI Manila ruled in favor of Bachrach and only the 4 partners (excluding Barba) appealed from this decision.

Issue:

Whether the said partners of “La Protecta” are liable for the firm debts and if so to what extent.

Held:Yes. From what has been said it results that the appellants are severally liable for their respective shares of the entire indebtedness found to be due; and the Court of First Instance committed no error in giving judgment against them. The business conducted under the name of "La Protectora" was evidently that of a civil partnership.

The authority of Marcelo Barba to bind the partnership, in the purchase of the trucks, is fully established by the document executed by the four appellants upon June 12, 1913.

The transaction by which Barba secured these trucks was in conformity with the tenor of this document.

The promissory notes constitute the obligation exclusively of "La Protectora" and of Marcelo Barba; and they do not in any sense constitute an obligation directly binding on the four appellants. Their liability is based on the fact that they are members of the civil partnership and as such are liable for its debts.”

7. ELMO MUÑASQUE vs. COURT OF APPEALS, CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON PONS

G.R. No. L-39780 November 11, 1985

 

FACTS:

Petitioner Elmo Muñasque, in behalf of the partnership of "Galan and Muñasque", entered into a contract with Tropical Commercial, Co. Inc. (Tropical) and Ramon Pons for the remodelling of their Cebu Branch building for P25,000, P7000 to be paid upon the start of construction and P6000 every 15 days till paid.

The first payment was in the form of a check for P7,000.00, which was delivered to petitioner. Petitioner endorsed the check in favour of Galan, so that the latter may pay for the materials and labor. Galan allegedly spend P 6138.37 for personal use.

When the second payment came, petitioner refused to endorse the check. Tropical instead issued the check in the name of “Galan and Associates”, the registered name of the partnership.

Petitioner claimed that he was placed in great financial difficulty because he was supposed to use the P13000 to pay creditors for construction materials.

Petitioner filed a complaint for payment of sum of money and damages against respondent Galan, Tropical and Pons.

The trial court ruled that there existed a partnership between petitioner and Galan and they are both jointly and severally liable to the two intervenors, Cebu Southern Hardware Company and Blue Diamond Glass Palace, both of whom extended credit to their partnership. The Court of Appeals modified the ruling but holding petitioner and Galan as jointly liable.

ISSUE:

(1) Whether or not there existed a partners between Celestino Galan and Elmo Muñasque; and

(2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse money to respondent Galan.

RULING:

Presumption that acting partner has authority to bind the partnership

When petitioner indorsed the first payment in his name in favour of Galan, it appeared that there was a partnership relationship. Tropical, as well as the creditors, had every right to presume that they were true partners. The payments made to the partnership were, therefore, valid payments.

The payment made by Tropical to Galan was a good payment which binds both Galan and the petitioner. Since the two were partners when the debts were incurred, they, are also both liable to third persons who extended credit to their partnership.

Solidary liability – the law protects him who in good faith, relied upon the authority of a partner

The appellate court; however, erred in holding the partners jointly liable. The liability of the partners are merely joint in transactions entered into by the partnership in accordance with Article 1816; however, a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

“The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner, whether such authority is real or apparent.”

Since Tropical, as well as the creditors, had reason to presume that a partnership existed between Galan and petitioner, thereby extending credit to one of the partners, the consequences of any wrongful act committed by any of the partners therein should be answered solidarily by all the partners and the partnership as a whole.

Partner who acted in bad faith is obliged to reimburse.

Since Galan acted in bad faith, justice dictates that Muñasque be reimbursed by Galan for the payments made by the former representing the liability of their partnership to herein intervenors,

8. Summmary: Lim vs. Philippine Fishing Gear Industries Inc. (GR 136448, 3 November 1999)Lim vs. Philippine Fishing Gear Industries Inc.[GR 136448, 3 November 1999]Third Division, Panganiban (J): 3 concur

Facts: On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated 7 February 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (PFGI). They claimed that they were engaged in a business venture with Lim Tong Lim, who however was not a signatory to the agreement. The total price of the nets amounted to P532,045. 400 pieces of floats worth P68,000 were also sold to the Corporation. The buyers, however, failed to pay for the fishing nets and the floats; hence, PFGI filed a collection suit against Chua, Yao and Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission. On 20 September 1990, the lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the Fisheries Port, Navotas, Metro Manila. Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay. He also turned over to PFGI some of the nets which were in his possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to cross-examine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment. The trial court maintained the Writ, and upon motion of PFGI, ordered the sale of the fishing nets at a public auction. PFGI won

the bidding and deposited with the said court the sales proceeds of P900,000. On 18 November 1992, the trial court rendered its Decision, ruling that PFGI was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay PFGI. The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses presented and (2) on a Compromise Agreement executed by the three in Civil Case 1492-MN which Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity of commercial documents; (b) a reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e) damages. Lim appealed to the Court of Appeals (CA) which, affirmed the RTC. Lim filed the Petition for Review on Certiorari. Lim argues, among others, that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him.

Issue: Whether Lim should be held jointly liable with Chua and Yao.

Held: Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim who was Lim Tong Lim’s brother. In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed money, fell under the term "common fund" under Article 1767. The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership. The partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. The fishing nets and the floats, both essential to fishing, were

obviously acquired in furtherance of their business. It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment, without which the business could not have proceeded. The sale of the boats, as well as the division among the three of the balance remaining after the payment of their loans, proves beyond cavil that F/B Lourdes, though registered in his name, was not his own property but an asset of the partnership. It is not uncommon to register the properties acquired from a loan in the name of the person the lender trusts, who in this case is Lim Tong Lim himself. After all, he is the brother of the creditor, Jesus Lim. It is unreasonable — indeed, it is absurd — for petitioner to sell his property to pay a debt he did not incur, if the relationship among the three of them was merely that of lessor-lessee, instead of partners.

As to Lim's argument that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him; Section 21 of the Corporation Code of the Philippines provides that "All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided however, That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality. One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation." Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped from denying its corporate existence. "The reason behind this doctrine is obvious — an unincorporated association has no personality and would be incompetent to act and appropriate for itself the power and attributes of a corporation as provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those who act or purport to

act as its representatives or agents do so without authority and at their own risk. And as it is an elementary principle of law that a person who acts as an agent without authority or without a principal is himself regarded as the principal, possessed of all the right and subject to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent." The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first instance, an unincorporated association, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot allege lack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advantages and benefits. On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as a corporation and received benefits from it, may be barred from denying its corporate existence in a suit brought against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for contracts they impliedly assented to or took advantage of. There is no dispute that PFGI is entitled to be paid for the nets it sold. The only question here is whether Lim should be held jointly liable with Chua and Yao. Lim contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held liable. Although technically it is true that Lim did not directly act on behalf of the corporation; however, having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel.

9. Guquiolay vs. Sycip

Facts: The widow of Tan Sin An of the Goquiolay & Tan Sin An partnership allegedly sold the real property of saod partnership without the authority of Goquiolay. Goquiolay seeks to recind and render invalid the sale to Washington Sycip and Betty Lee on the grounds that Tan Sin An’s widow is but a mere limited partner without authority to sell such properties and that such sale was done to defraud Goquiolay.

Issue: Whether the sale was valid?

Held: Yes the Court finds the sale to be valid.

The contention that Tan Sin An’s widow is a mere limited partner and thus without authority to manage or administer the properties is without merit. It has been proven that Tan Sin An’s widow and her family have been allowed to manage and live on the property in contention by Goquiolay for years. Goquiolay also made no objection for several years to the such management. Such acts of administration and management cannot be done by a mere limited partner.

Further, the articles of partnership between Goquiolay and Tan Sin An clearly stipulate that in the event of the death of either partner before the expiration of the term of the partnership, such will not dissolve the partnership and shall be continued with the deceased heirs or assigns as the deceased partner’s representative. Thus, thus the widow cannot be considered a mere limited partner from the being based on the agreement as she is given the right to continue the partnership. Although ordinarily upon the death of a partner, his heirs and assigns assume limited partnership status, this is done only to protect the heirs and his assets from answering for the liabilities of the partnership. The heirs may opt to waive such protect give by the law and assume the post of a general partner. This has in effect happened from the very beginning of this case as the widow managed said property in dispute.

Third parties who transacted with Tan Sin An’s widow shall not be prejudiced as they have every right to assume that later had authority to sell said property as she was indeed managing said property. Neither should these parties inquire as to whether Tan Sin An’s widow had obtained concurrence with Goquiolay to sell the co-partnership property as the rules presume that she did get it for the benefit of the third parties. Ultimately laches can be attributed to Goquiolay for his inaction in all those years.

On the issue that the sale was done to defraud Goquiolay, such must also fail. Said property being contested is considered as stock in trade because the co-partnership was established to buy and sell land. Thus it is not the capital of the partnership which was sold but the actual goods which their business trades in. Further, said sale was made by the widow in order to answer for the debts of the partnership, and the proceeds of such sale have also accrued to the benefit of said partnership.

The inadequacy of the price cannot also be questioned as it was sold during a time when the price of land was low due to the war. The subsequent valuation made and relied on by Goquiolay was made post war and at a time when land prices were on the rise. Allegations that the buyers connived with the widow to get the land also fail due to lack of evidence. No proof was shown that said buyers did not have the funds to buy the properties themselves.

Finally said sale was made in order to answer for partnership debts which were already due. Tan Sin An’s widow only fulfilled her duty to pay the partnership’s creditors who were demanding from her. Goquiolay should have, if he did not want the sale to occur, answered for the partnership debts as he was also a partner; instead of sitting back and doing nothing.

10. TOCAO vs. CA (2000)

FACTS: Petitioners maintain that there was no partnership between petitioner Belo, on one hand, and respondent Nenita Anay, on the other hand; and that the latter being merely an employee of petitioner Tocao. It was found out that Belo sometimes would participate in Geminesse Enterprise meetings to help petitioner Tocao.

ISSUE: W/N Belo is a partner of Tocao.

HELD: No. Belo’s presence in Geminesse Enterprise’s meetings was merely asguarantor of the company and to help Tocao his personal friend.

•Respondent herself professed lacked of knowledge that petitioner Belo received any share in the profits of Geminesse.

•On the other hand, Tocao declared that Belo was not entitled to any share in the profits of the enterprise.

•With no participation in the profits, petitioner Belo cannot be deemed a partner; since the essence of a partnership is that the partners share in the profits and losses.

11. VICTORIAS MILLING CO., INC vs CA and Consolidated Sugar Corporation

GR. NO. 117356, June 19, 2000

Facts: St. Therese Merchandising (STM) bought 25,000 bags of sugar from petitioner Victorias Milling Co. Inc. (VMC). VMC issued several Shipping List/Delivery Receipts No. 1214 (SLDR No. 1214) to STM as proof of purchased. Later on, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214 for covering the 25,000 bags of sugar. Thus, CSC wrote to petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M together with the letter of authority from STM authorising CSC “to withdraw for and in our behalf” the refined sugar covered by SLDR No. 1214. However, CSC was only allowed to withdraw 2,000 bags from the warehouse. Hence, CSC filed an action for specific performance against petitioner. Petitioner contended that the dealings between it and STM were part of a series of transactions involving only one account or one general contract of sale. Hence, STM or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM. Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's agent. Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate and independent transactions only. The trial court ruled in favor of CSC. CA affirmed such decision and ruled that CSC was not an agent of STM. Thus, CSC is entitled to the remaining 23,000 bags of sugar.

.

Issue: Whether or not CSC was an agent of STM and hence, stopped to sue upon SLDR no. 1214 as an assignee.

Held: NO. Under Art. 1868 of the NCC, “By the contract of agency 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." The basis of agency is representation: principal must have the intention to appoint and the agent must have the intention to accept the same. Thus, the principal must have the power to control the agent, who agrees to act under his control and direction.

In this case, private respondent CSC was a buyer of the SLDR form and not an agent of STM. CSC was not subject to STM’s control. That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention of the parties.  That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency.

12. LVN Pictures, Inc. vs. Phil Musicians Guild, 1 scra 132

FACTS: The Philippine Musicians Guild averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recordings of said companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by independent contractors.

ISSUE: Whether or not the musicians in question are employees of the film companies

HELD: The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture director, the performance of the musicians before the camera, in order to suit the

music they are playing to the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to right of collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the film companies.

13. LAVINA vs. COURT OF APPEALS

FACTS OF THE CASE:

On April 6, 1983, Carmen Paterno, single, 72 years old, executed a donation MORTIS CAUSA in favor of Josefina Gabriel (widowed sis-in-law) a 3,081 sq.m lot in Sampaloc Manila. The donation was thumbmarked by Carmen before Notary Public and the donation was accepted by donee.

Four months after such donation was made, Carmen who was gravely ill with breast cancer executed a Last Will and Testament in which she bequeathed the same Sampaloc property to Remedios Muyot and a small 240 sq.m lot in Antipolo to Josefina Gabriel. In the Last Will and Testament, she named Concepcion De Garcia as executrix of her will.

Carmen also executed a General Power of Attorney appointing Remedios MUyot as her atty.-in-fact.

On Nov.3,1963 Josefina registered an adverse claim over the property in Sampaloc. Remedios hired Atty. Lavina as Carmen’s counsel. Carmen thumbmarked an Affidavit of Denial alleging that Josefina obtained such donation through fraud and trickery and that she had no intention to donate the property to Josefina. Carmen also made a Revocation of Donation on November 19, 1983, which was registered on December 1, 1983. Remedios then sold the Sampaloc property to Cebrero spouses for Php 2,664,655 on November 21, 1983. Carmen passed away on Nov.29, 1983.

Josefina filed a complaint against Carmen’s estate and ROD to annul the deed of revocation on the ground that it was fictitious and false. Remedios received the summons. Josefina also asked the Court to

appoint an executor or administrator over Carmen’s estate. However, regarding the executor or administrator over Carmen’s estate, the court ruled that Concepcion De Garcia is the executor as appointed by Carmen in her Last will and Testament.

ISSUE: Whether or not the GPOA appointing Remedios as Carmen’s atty.-in-fact ceased upon her death

HELD: YES. Upon Carmen’s death, the general power of attorney appointing Remedios as Carmen’s agent was extinguished upon Carmen’s demise. Only the executor or administrator may represent Carmen’s estate because only the administrator may sue and be sued and bring or defend actions for recovery or protection of the property or rights of the deceased.

Furthermore, Atty. Lavina’s authority to represent Carmen also ceased upon Carmen’s death because a dead client has no personality and cannot be represented by an attorney.

14. Green Valley Poultry /Allied Products Inc. Vs. IAC and Squibb and Sons Philippine Corp.133 Scra 697 Facts: Squibb and Sons Appointed Petitioner as the Distributor of the Former's Animal Feed Products in order to sell the same within any place at Luzon. The Parties further stipulated that Petitioner, if ever it sold on credit the products of Squibb and the same was not yet paid, petitioner must notify Squibb why the same was not yet paid. Payment for Purchases of Squibb Products will be due 60 days from date of

invoice or the nearest business day thereto. No payment win be accepted in the form of post-dated checks. Payment by check must be on current dating. For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as aforesaid gave judgment in favor of Squibb which was affirmed by the Court of Appeals. Issue: Whether or not Petitioner is a Comission agent of Squibb and Sons Held: Whether viewed as an agency to sell or as a contract of sale, the liability of Green Valley is indubitable. The Court, Adopting Green Valley's theory that the contract is an agency to sell, Held that Petitioner is liable because it sold on credit without authority from its principal. The Civil Code has a provision exactly in point. It reads: Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale.

15. G.R. No. L-6389            November 29, 1954PASTOR AMIGO and JUSTINO AMIGO, petitioners, vs.SERAFIN TEVES, respondent.   FACTS:

On August 11, 1937, Macario Amigo and Anacleto Cagalitan executed in favor of their son, Marcelino Amigo, a power of attorney granting to the latter, among others, the power "to lease, let, bargain, transfer, convey and sell, remise, release, mortgage and hypothecate, part or any of the properties . . . upon such terms and conditions, and under such covenants as he shall think fit."

On October 30, 1938, Marcelino, in his capacity as attorney-in-fact, sold a parcel of land in favor of Serafin Teves stipulating therein that the vendors could repurchase the land within a period of 18 months from the date of the sale. In the same document, it was also stipulated that vendors would remain in possession of the land as lessees for a period of 18 months subject to the following terms and conditions: (a) the lessees shall pay P180 as rent every six months from the date of the agreement; (b) the period of the lease shall terminate on April 30, 1940; (c) in case of litigation, the lessees shall pay P100 as attorney's fees; and (d) in case of failure to pay any rental as agreed upon, the lease shall automatically terminate and the right of ownership of vendee shall become absolute.

On July 20, 1939, the spouses Macario and Anacleta donated to their sons Justino Amigo and Pastor Amigo several parcels of land including their right to repurchase the land in litigation. The deed of donation was made in a public instrument, was duly accepted by the donees, and was registered in the Office of the Register of Deeds.

The vendors-lessees paid the rental corresponding to the first six months, but not the rental for the subsequent semester, and so on January 8, 1940, Serafin Teves, the vendee-lessor, executed an "Affidavit of Consolidation of Title" in view of the failure of the lessees to pay the

rentals as agreed upon, and registered said affidavit in the Office of the Register of Deeds of Negros Oriental, who, on January 28, 1940, issued to Serafin Teves the corresponding transfer of title over the land in question.

On March 9, 1940, Justino Amigo and Pastor Amigo, as donees of the right to repurchase the land in question, offered to repurchase the land from Serafin Teves by tendering to him the payment of the redemption price but the latter refused on the ground that the ownership had already been consolidated in him as purchaser a retro. Hence, on April 26, 1940, before the expiration of the 18th-month period stipulated for the redemption of the land, the donees instituted the present action.

Petitioners contend that, while the attorney-in-fact, Marcelino, had the power to execute a deed of sale with right to repurchase under the power of attorney granted to him, however, the covenant of lease contained in said deed whereby the vendors agreed to remain in possession of the land as lessees is not germane to said power of attorney and, therefore, Marcelino Amigo acted in excess of his powers as such attorney-in-fact.

 

ISSUE:

Whether or not the lease covenant contained in the deed of sale with pacto de retro executed by Marcelino as attorney-in-fact in favor of Serafin is not germane to, nor within the purview of, the powers granted to said attorney-in-fact and, therefore, isultra vires and null and void.

 

HELD:

No, the powers granted to said attorney-in-fact is not ultra vires nor null and void.

A cursory reading thereof would at once reveal that the power granted to the agent is so broad that it practically covers the celebration of any contract and the conclusion of any covenant or stipulation. Thus, among

the powers granted are: to bargain,contract, agree for, purchase, receive, and keep lands, tenements, hereditaments, and accept the seizing and possessing of all lands," or "to lease, let, bargain, transfer, convey and sell, remise, release, mortgage and hypothecate . . . upon such terms and conditions, and under such covenants as he shall think fit." When the power of attorney says that the agent can enter into any contract concerning the land, or can sell the land under any term or condition and covenant he may think fit, it undoubtedly means that he can act in the same manner and with the same breath and latitude as the principal could concerning the property. The fact that the agent has acted in accordance with the wish of his principals can be inferred from their attitude in donating to the herein petitioners the right to redeem the land under the terms and conditions appearing in the deed of sale executed by their agent.

16. ROBERTO ESCAY, ET AL., petitioners, vs.COURT OF APPEALS, ET AL., respondents.

61 SCRA 369

G.R. No. L-37504 December 18, 1974

THE FACTS:

Emilio Escay mortgaged his properties now in question, to the Philippine National Bank. He died in 1924 before he could pay his obligation with the bank which had mounted. The bank then filed in 1930 a foreclosure suit against the estate of Emilio represented by the administrator, Atty. Eduardo Arboleda. Pending the said suit, on April 28, 1933, a contract hereafter referred to as original contract was entered among the Philippine National Bank, Jose Escay, Sr., the brother, and the administrator, Atty. Arboleda, under which Jose assumed the mortgage indebtedness of his deceased brother Emilio. This was agreed to by Magdalena Escay, widow of Emilio, in her own behalf and as guardian ad litem of their children. When it was discovered that the original contract failed to state the transfer of the ownership of the properties in question to Jose in consideration of his assumption of the mortgage indebtedness of Emilio (subject to the right of repurchase of the heirs of Emilio within five (5) years after the mortgage indebtedness had been fully paid), a supplementary contract was entered into among the Philippine National Bank, the administrator, Atty. Arboleda and Jose Escay, Sr. This was approved by the probate court taking cognizance of the estate of the deceased Emilio Escay.

In 1941, Magdalena Escay, Roberto and the other children filed a complaint against Jose Escay, Sr. and Atty. Arboleda (administrator of the deceased Emilio), for the recovery of the ownership and posession of the properties in question. This case was provisionally dismissed.

ISSUE:

W/N there was grave abuse of discretion on the part of the Court of Appeals in its decision?

RULING:

No. All the findings of fact by the Court of Appeals were supported by the evidence, and in any event, there was no grave abuse of discretion by the Court of Appeals in arriving at its findings.

The SC in its ruling on the issues raised in the CA held that:

(Validity of the original contract, the supplementary contract, and the Order approving the latter)

Magdalena Escay gave her conformity to the deed of conveyance. She gave her consent to the original contract executed by Atty. Arboleda in favor of Jose and the bank . She had, therefore, for herself, and as guardian ad litem of her children, given her consent to the transfer of the rights of the estate to the lots mortgaged to the bank in favor of Jose Escay and the widow also agreed to the execution of the supplementary contract.

It is clear that the intention in the original contract was to transfer the properties to Jose Escay, Sr. since this intention was confirmed in the written consent. It is not true that Magdalena Vda. de Escay understood the original contract or her written conformity to mean only the transfer of possession and administration of the properties.

(Acquisition of the properties by adverse possession)

As early as 1939, the titles over the properties in question were transferred to Jose Escay, Sr. who was therefore the registered owner thereof since that time. These are titled properties in the name of Jose Escay Sr. since 1939 and, therefore, this matter of acquisitive prescription in his favor really need not be discussed except for the fact that this was raised as an alternative defense.

He alone was possessing and enjoying the fruits of the properties and he introduced permanent improvements consisting of roads and fruit trees. This possession in the concept of owner was continuous, uninterrupted, public, open and adverse, and recognized particularly by plaintiff Roberto Escay and by his mother Magdalena Escay.

(Holding of the properties in trust (implied) for the heirs of Emilio Escay)

The SC held that no fraud was proved. The evidence is clear that the original and supplementary contracts were the result of a series of negotiations by the testate estate of Emilio Escay through its Judicial Administrator and legal representative; its creditor, the Philippine National Bank; the heirs represented by their guardian ad litem, Magdalena Vda. de Escay;

Since there was no fraud, there was no trust relation that arose. Actions based on express trust also prescribe and the property held in trust may be acquired by adverse possession from the moment the trust is repudiated by the trustee.

The prescriptibility of an action for reconveyance based on implied or constructive trust, is now a settled question in this jurisdiction. It prescribes in ten years. Express trusts prescribe 10 years from the repudiation of the trust

The SC dismissed the petitioners' petition for certiorari, and denied their motion for reconsideration

18. BELCODERO vs. CAG.R. No. 89667 October 20, 1993

FACTS:In 1946 The husband, Alayo D. Bosing, he left the conjugal home,

and he forthwith started to live instead with Josefa Rivera with whom he later begot one child, named Josephine Bosing, now Josephine Balcobero. On 23 August 1949, Alayo purchased a parcel of land on installment basis from the Magdalena Estate, Inc. In the deed, he indicated his civil status as, "married to Josefa R. Bosing," the common-law wife. In a letter, dated 06 October 1959, which he addressed to Magdalena Estate, Inc., he authorized the latter to transfer the lot in the name of his "wife Josefa R. Bosing."

On 06 June 1958, Alayo married Josefa even while his prior marriage with Juliana was still subsisting. Alayo died on 11 march 1967. About three years later, or on 17 September 1970, Josefa and Josephine executed a document of extrajudicial partition and sale of the lot in question, which was there described as "conjugal property" of Josefa and deceased Alayo. In this deed, Josefa's supposed one-half (1/2) interest as surviving spouse of Alayo, as well as her one-fourth (1/4) interest as heir, was conveyed to Josephine for a P10,000.00 consideration, thereby completing for herself, along with her one-fourth (1/4) interest as the surviving child of Alayo, a full "ownership" of the property. The notice of extrajudicial partition was published on 04, 05 and 06 November 1970 in the Evening Post; the inheritance and estate taxes were paid; and a new Transfer Certificate of Title No. 198840 was issued on 06 June 1974 in the name of Josephine. On 30 October 1980, Juliana (deceased Alayo's real widow) and her three legitimate children filed with the court a quo an action for reconveyance of the property.

the trial court ruled in favor of the plaintiffs. The defendants went to the Court of Appeals which affirmed the trial court's order for reconveyance. Hence, this appeal.

ISSUE: Wether or not the action for reconveyance instituted by juliana and her legittimate children is proper.

HELD:The SC held in the affirmative.The applicable prescriptive period for an action seeking a

reconveyance of the property by the beneficiaries thereof is ten (10) years (Article 1144, Civil Code). Ordinarily, that period starts from the establishment of the implied trust being the day when the cause of action would be considered to have accrued (Article 1150, Civil Code). Unfortunately for Josefa and Josephine, however, the property involved in this case is a realty titled under the Torrens System. The prescriptive period is thus to be counted from the time the transaction affecting the property is registered with the corresponding issuance of a new certificate of title. 3 Between the time Transfer of Certificate of Title No. 198840 was issued on 06 June 1974, and the filing of the action for the reconveyance of the property with the court a quo on 30 October 1980, barely a period of six (6) years and four (4) months had elapsed. The case has accordingly been initiated seasonably.It cannot be seriously contended that, simply because the property was titled in the name of Josefa at Alayo's request, she should thereby be deemed to be its owner. The property unquestionably was acquired by Alayo. Alayo's letter, dated 06 October 1959, to Magdalena Estate, Inc., merely authorized the latter to have title to the property transferred to her name. More importantly, she implicitly recognized Alayo's ownership when, three years after the death of Alayo, she and Josephine executed the deed of extrajudicial partition and sale in which she asserted a one-half (1/2) interest in the property in what may be described as her share in the "conjugal partnership" with Alayo, plus another one-fourth (1/4) interest as "surviving widow," the last one-fourth (1/4) going to Josephine as the issue of the deceased. Observe that the above adjudication would have exactly conformed with a partition in intestacy had they been the sole and legitimate heirs of the decedent.

20. DELUAO V. CASTEEL

AUGUST 29, 1969

FACTS:

Sec. 63 of Act 4003 states that “Permits or leases entitling the holders thereof, for a certain stated period of time not to exceed twenty years, to enter upon definite tracts of a public forest land to be devoted exclusively for fishpond purposes, or to take certain fishery products or to construct fishponds within tidal, mangrove and other swamps, ponds and streams within public forest lands or proclaimed timber lands or established forest reserves, may be issued or executed by the Secretary of Agriculture and Natural Resources,….four. “

It is clear from the Fisheries Act that only holders of permits or leases issued or executed by the Secretary of Agriculture and Natural Resources can devoted exclusively for fishpond purposes. A transferee or sub-lessee of a fishpond is not a holder of a permit or lease. He cannot lawfully enter upon definite tracts of a public forest land to be devoted exclusively for fishpond purposes.

Appellees insist that the prohibition in Fisheries Administrative Order 24, sec 37 (a), refers to fishponds covered by permits or leases and since no permit or lease had as yet been granted to Casteel, the prohibition does not apply. They also assai as inaccurate the statement in the SC’s decision after the Secretary of Agriculture and Natural Resources approved the appellant’s application because he (Secretary) did not approve the appellant’s fishpond application but merely reinstated and gave due course to the same.

On October 26, 1961, the Director of Fisheries issued a memorandum to the District Fishery Officer, Davao instructing the latter to take immediate steps to execute the decisions of the Secretary of Agriculture.

July 9, 1963, a new protest against the execution of the decisions with the Commissioner of Fisheries. Said protest was dismissed by the Acting Commissioner of Fisheries in a letter to Mrs. Innocencia Deluao dated June 1, 1964.

An appeal from the foregoing dismissal was taken by the appellees to the DANR Secretary who dismissed the same in a letter dated September 12, 1967.

ISSUE:

Whether or not there was a valid partnership and whether or not there is a valid trust.

HELD:

1.) No. There was no valid partnership. The Supreme Court held that the contract of partnership to divide the fishpond between them after such award became illegal because there are prohibitory laws in it. Hence, it cannot be made subject to any suspensive condition and a partnership can not be formed for an illegal purpose or one contrary to public policy and that where the object of a partnership is the prosecution of an illegal business or one which is contrary to public policy, the partnership is void. The change in the intention of the parties

to divide the fishpond referred solely to joint administration before the actual division of the fishpond.

2.) There is no valid trust. “Trust is the right, enforceable in equity, to the beneficial employment of property the legal title to which is in another. Since the second part of the contract was held to be illegal, no rights or obligations could have arisen therefrom. Hence, no trust could have resulted from an act violative of the law.