"

#$%&'(%)*+# ,"
-.
)(&/
01+2''(3 44 156"7
!"#$%#$&
AuAB v. NABAT0 ........................................................................................................................................ 2
T0RRES v. CA ................................................................................................................................................. 2
ARBES v. P0LISTIC0 ................................................................................................................................... 4
T0CA0 v. CA ................................................................................................................................................... 6
BEIRS 0F }0SE LIN, iepiesenteu by Elenito Lim v. }0LIET vILLA LIN ............................... 7
Au0ILA v. CA .................................................................................................................................................. 9
TAN v. BEL R0SARI0 ................................................................................................................................. 9
NENBI0LA v. CA ....................................................................................................................................... 1u
ANuELES v. SECRETARY 0F }0STICE .............................................................................................. 1S
uATCBALIAN v. CIR ................................................................................................................................. 1S
PASC0AL v. CIR .......................................................................................................................................... 1S
0BILL0S v. CIR ........................................................................................................................................... 16
RIvERA v. PE0PLE'S BANK ................................................................................................................... 17


T0AS0N v. B0LAN0S .............................................................................................................................. 18
BEIRS 0F TANu ENu KEE v. CA .......................................................................................................... 18
A0RBACB v. SANITARY WARES ......................................................................................................... 19
LIT0N}0A v. LIT0N}0A .......................................................................................................................... 2S
B00RNS v. CARNAN ................................................................................................................................ 2S
SEvILLA v. CA ............................................................................................................................................. 24
PBILEX v. NININu C0RP. ...................................................................................................................... 26
0RTEuA v. CA ............................................................................................................................................. 27












5
#$%&'(%)*+# ,"
-.
)(&/
01+2''(3 44 156"7
()* +,- ./ 0,1(/*12)30
34 /,(51*6 !1*,(3./

,4 7*83/3(3./6 *22*/(3,+ 8*,(51*2
94 !1*,(3./

,:,7 ;4 <,9,(.
(}une 28, 1968)
7.!(13/*= A paitneiship may be constituteu in any foim, except wheie immovable
piopeity oi ieal iights aie contiibuteu theieto, in which case a public instiument
shall be necessaiy. A contiact of paitneiship is voiu, whenevei immovable piopeity
is contiibuteu theieto, if inventoiy of saiu piopeity is not maue, signeu by the
paities, anu attacheu to the public instiument.
/,(51*= Appeal, taken by plaintiff Nauiicio Agau, fiom an oiuei of uismissal of the
Couit of Fiist Instance of Bavao, we aie calleu upon to ueteimine the applicability of
Aiticle 177S of oui Civil Coue to the contiact of paitneiship on which the complaint
heiein is baseu.
0./*/(*= Concepcion, !"#"
8,!(2=
- 0>?@#$@AA ?>>%B%& $C?$ C% ?#D D%A%#D?#$ 2%;%E@#" <?F?$" ?E% G
HIE&I?#$ $" ? HIF>@J @#&$EIK%#$ D?$%D ,IBI&$ LMN OMPL Q G H?E$#%E& @#
? A@&CH"#D FI&@#%&&N to the capital of which Agau contiibuteu P1,uuu, with
the iight to ieceive Su% of the piofits.
- That fiom 19S2 up to anu incluuing 19S6, <?F?$" RC" C?#D>%D $C%
H?E$#%E&C@H AI#D&N C?D S%?E>S E%#D%E%D ?JJ"I#$& "A $C% "H%E?$@"#& "A
$C% H?E$#%E&C@H6 ?#D $C?$N D%&H@$% E%H%?$%D D%K?#D&N <?F?$" C?D
A?@>%D ?#D E%AI&%D $" E%#D%E ?JJ"I#$& foi the yeais 19S7 to 196S.
- Agau piayeu in his complaint against Nabato anu Nabato & Agau Company,
fileu on }une 9, 1964, that TIDBK%#$ F% E%#D%E%D &%#$%#J@#B <?F?$" $"
H?S C@K U,B?DV $C% &IK "A 0OWNXXXN ?& C@& &C?E% @# $C% HE"A@$& "A $C%
H?E$#%E&C@H foi the peiiou fiom 19S7 to 196S, in auuition to P1,uuu as
attoiney's fees, anu oiueiing the uissolution of the paitneiship, as well as
the winuing up of its affaiis by a ieceivei to be appointeu.
- In his answei, <?F?$" ?DK@$$%D $C% A"EK?> ?>>%B?$@"#& "A $C% J"KH>?@#$
?#D D%#@%D $C% %Y@&$%#J% "A &?@D H?E$#%E&C@HN IH"# $C% BE"I#D $C?$ $C%
J"#$E?J$ $C%E%A"E C?D #"$ F%%# H%EA%J$%DN uespite the execution of Annex
"A", because Agau hau allegeuly faileu to give his P1,uuu contiibution to the
paitneiship capital. Nabato piayeu, theiefoie, that the complaint be
uismisseu; that Annex "A" be ueclaieu voiu %& '(')'*; anu that Agau be
sentenceu to pay actual, moial anu exemplaiy uamages, as well as
attoiney's fees.
- <?F?$" A@>%D ? K"$@"# $" D@&K@&&N IH"# $C% BE"I#D $C?$ $C% J"KH>?@#$
&$?$%& #" J?I&% "A ?J$@"# ?#D $C?$ $C% >"R%E J"IE$ C?D #" TIE@&D@J$@"#
";%E $C% &IFT%J$ K?$$%E "A $C% J?&%, because it involves piincipally the
ueteimination of iights ovei public lanus. Aftei uue heaiing, the couit
issueu the oiuei appealeu fiom, gianting the motion to uismiss the
complaint foi failuie to state a cause of action. This conclusion was
pieuicateu upon the theoiy that the contiact of paitneiship is null anu voiu,
puisuant to Ait. 177S of oui Civil Coue, because an inventoiy of the
fishponu iefeiieu in saiu instiument hau not been attacheu theieto.

3225*2=
The issue hinges on whethei oi not "immovable piopeity oi ieal iights" have been
+*(),'&-)./ to the paitneiship unuei consiueiation.
)*+7=
/.4 (Nabato allegeu anu the lowei couit helu that the answei shoulu be in the
affiimative, because "it is ieally inconceivable how a paitneiship engageu in the
0'123*(/ &-1'(.11 coulu exist without saiu fishponu piopeity (being) contiibuteu to
the paitneiship." But...)
1,(3.Z15+3/:=
- The Couit &?@D $C?$ @$ &C"I>D F% #"$%DN C"R%;%EN $C?$N ?& &$?$%D @#
,##%Y Q,Q $C% H?E$#%E&C@H R?& %&$?F>@&C%D Q$" !"#$%&# ? A@&CH"#DQN #"$
$" Q%#B?B% @# ? A@&CH"#D FI&@#%&&Q4 Noieovei, none of the paitneis
contiibuteu eithei a fishponu oi a ieal iight to any fishponu. Theii
contiibutions weie limiteu to the sum of P1,uuu each.
- The opeiation of the fishponu mentioneu in Annex "A" was the puipose of
the paitneiship. Neithei saiu fishponu noi a ieal iight theieto was
contiibuteu to the paitneiship oi became pait of the capital theieof, even if
a fishponu oi a ieal iight theieto coulu become pait of its assets.
-
7320.23(3./=
WBEREF0RE, we finu that saiu Aiticle 177S of the Civil Coue is not in point anu that,
the oiuei appealeu fiom shoulu be, as it is heieby set asiue anu the case iemanueu to
the lowei couit foi fuithei pioceeuings, with the costs of this instance against
uefenuant-appellee, Seveiino Nabato. It is so oiueieu.
[.(*= 4.5.16 #"7"8"6 9':*(6 ;%<%='()%=6 >%=/'?%,6 @%(+2.:6 !%1),*6 A(B.=.1 %(/ C.,(%(/*6
##"6 +*(+-,"
!./!5113/:Z7322*/(3/: .03/3./= /"#%4
,773(3./,+ /.(*2=


(.11*2 ;4 !,
(Becembei 9, 1999)

8
#$%&'(%)*+# ,"
-.
)(&/
01+2''(3 44 156"7
7.!(13/*= Couits may not extiicate paities fiom the necessaiy consequences of
theii acts. That the teims of a contiact tuin out to be financially uisauvantageous to
them will not ielieve them of theii obligations theiein. The lack of an inventoiy of
ieal piopeity will not '31* 0%+)* ielease the contiacting paitneis fiom theii
iespective obligations )* .%+2 *)2., aiising fiom acts executeu in accoiuance with
theii agieement.
/,(51*= Petition foi ieview on ceitioiaii a CA uecision uenying NR
0./*/(*= Panganiban, #"
8,!(2=
-Sisteis Antonia Toiies anu Emeteiia Baiing, petitioneis, enteieu into a "joint
ventuie agieement" with Responuent Nanuel Toiies foi the uevelopment of a paicel
of lanu into a subuivision. Puisuant to the contiact, they executeu a Beeu of Sale
coveiing the saiu paicel of lanu in favoi of iesponuent, who then hau it iegisteieu in
his name. By moitgaging the piopeity, iesponuent obtaineu fiom Equitable Bank a
loan of P4u,uuu which, unuei the }oint ventuie Agieement, was to be useu foi the
uevelopment of the subuivision. All thiee of them also agieeu to shaie the pioceeus
fiom the sale of the subuiviueu lots.
-The pioject uiu not push thiough, anu the lanu was subsequently foiecloseu by the
bank.
Petitioneis: the pioject faileu because of "iesponuent's lack of funus oi means anu
skills." They auu that iesponuent useu the loan not foi the uevelopment of the
subuivision, but in fuitheiance of his own company, 0niveisal 0mbiella Company.
Responuent: allegeu that he useu the loan to implement the Agieement. With the
saiu amount, he was able to effect the suivey anu the subuivision of the lots. Be
secuieu the Lapu Lapu City Council's appioval of the subuivision pioject which he
auveitiseu in a local newspapei. Be also causeu the constiuction of ioaus, cuibs anu
gutteis. Likewise, he enteieu into a contiact with an engineeiing fiim foi the
builuing of sixty low-cost housing units anu actually even set up a mouel house on
one of the subuivision lots. Be uiu all of these foi a total expense of P8S,uuu.
Responuent claimeu that the subuivision pioject faileu, howevei, because petitioneis
anu theii ielatives hau sepaiately causeu the annotations of auveise claims on the
title to the lanu, which eventually scaieu away piospective buyeis. Bespite his
iequests, petitioneis iefuseu to cause the cleaiing of the claims, theieby foicing him
to give up on the pioject.
-petitioneis fileu a ciiminal case foi estafa against iesponuent anu his wife, who weie
howevei acquitteu.
-Theieaftei, they fileu the piesent civil case which, upon iesponuent's motion, was
latei uismisseu by the tiial couit in an 0iuei uateu Septembei 6, 1982.
-0n appeal, howevei, the appellate couit iemanueu the case foi fuithei
pioceeuings. Theieaftei, the RTC issueu its assaileu Becision, which, as eailiei
stateu, was affiimeu by the CA.
CA iuling: petitioneis anu iesponuents foimeu a paitneiship foi the uevelopment of
the subuivision. Thus, they must beai the loss suffeieu by the paitneiship in the
same piopoition as theii shaie in the piofits stipulateu in the contiact. CA citeu
Aiticle 1979 which saiu " The losses anu piofits shall be uistiibuteu in confoimity
with the agieement. If only the shaie of each paitnei in the piofits has been agieeu
upon, the shaie of each in the losses shall be in the same piopoition."
CA also saiu: "In the absence of stipulation, the shaie of each paitnei in the piofits
anu losses shall be in piopoition to what he may have contiibuteu, but the inuustiial
paitnei shall not be liable foi the losses. As foi the piofits, the inuustiial paitnei
shall ieceive such shaie as may be just anu equitable unuei the ciicumstances. If
besiues his seivices he has contiibuteu capital, he shall also ieceive a shaie in the
piofits in piopoition to his capital."
Petitioneis claim CA eiieu in concluuing that the tiansaction between the paities
was a joint ventuiepaitneiship.
3225*2=
W0N a paitneiship ielationship existeu between the paities.
)*+7= Yes.
1,(3.Z15+3/:=
Existence of Paitneiship:
Petitioneis ueny having foimeu a paitneiship with iesponuent. They contenu that
the }oint ventuie Agieement anu the eailiei Beeu of Sale weie voiu.
In the same bieath, howevei, they asseit that unuei those veiy same contiacts,
iesponuent is liable foi his failuie to implement the pioject. Because the agieement
entitleu them to ieceive 6u peicent of the pioceeus fiom the sale of the subuivision
lots, they piay that iesponuent pay them uamages equivalent to 6u peicent of the
value of the piopeity.
The peitinent poitions of the }oint ventuie Agieement ieau as follows:
"That, wheieas, the SEC0NB PARTY, voluntaiily offeieu the FIRST PARTY, this
piopeity locateu at Lapu-Lapu City, Islanu of Nactan, unuei Lot No. 1S68 coveiing
TCT No. T-u184 with a total aiea of 17,uu9 squaie meteis, to be sub-uiviueu by the
FIRST PARTY;
"Wheieas, the FIRST PARTY hau given the SEC0NB PARTY, the sum of: TWENTY
TB00SANB (P2u,uuu.uu) Pesos, Philippine Cuiiency, upon the execution of this
contiact foi the piopeity entiusteu by the SEC0NB PARTY, foi sub-uivision piojects
anu uevelopment puiposes;
"N0W TBEREF0RE, foi anu in consiueiation of the above covenants anu piomises
heiein containeu the iespective paities heieto uo heieby stipulate anu agiee as
follows:
"0NE: That the SEC0NB PARTY signeu an absolute Beeu of Sale x x x uateu Naich S,
1969, in the amount of TWENTY FIvE TB00SANB FIvE B0NBREB TBIRTEEN &
FIFTY CTvS. (P2S,S1S.Su) Philippine Cuiiency, foi 1,7uu squaie meteis at 0NE
|PES0j & FIFTY CTvS. (P1.Su) Philippine Cuiiency, in favoi of the FIRST PARTY, but
the SEC0NB PARTY uiu not actually ieceive the payment.
xxx
"FIFTB: That the sales of the sub-uiviueu lots will be uiviueu into SIXTY
PERCENT0N 6u% foi the SEC0NB PARTY anu F0RTY PERCENT0N 4u% foi the
FIRST PARTY, anu auuitional piofits oi whatevei income ueiiving fiom the sales will
be uiviueu equally accoiuing to the x x x peicentage |agieeu uponj by both paities.
xxx
A ieauing of the teims embouieu in the Agieement inuubitably shows the existence
of a paitneiship puisuant to Aiticle 1767 of the Civil Coue, which pioviues:
"ART. 1767. By the contiact of paitneiship two oi moie peisons binu themselves to
contiibute money, piopeity, oi inuustiy to a common funu, with the intention of
uiviuing the piofits among themselves."

7
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01+2''(3 44 156"7
0nuei the above-quoteu Agieement, petitioneis woulu contiibute piopeity to the
paitneiship in the foim of lanu which was to be uevelopeu into a subuivision; while
iesponuent woulu give, in auuition to his inuustiy, the amount neeueu foi geneial
expenses anu othei costs. Fuitheimoie, the income fiom the saiu pioject woulu be
uiviueu accoiuing to the stipulateu peicentage. Cleaily, the contiact manifesteu the
intention of the paities to foim a paitneiship.
It shoulu be stiesseu that the paities implementeu the contiact. Thus, petitioneis
tiansfeiieu the title to the lanu in the name of the iesponuent. 0n the othei hanu,
iesponuent causeu the subject lanu to be moitgageu, the pioceeus of which weie
useu foi the suivey anu the subuivision of the lanu. As noteu eailiei, he uevelopeu
the ioaus, the cuibs anu the gutteis of the subuivision anu enteieu into a contiact to
constiuct low-cost housing units on the piopeity.
Responuent's actions cleaily belie petitioneis' contention that he maue no
contiibution to the paitneiship. 0nuei Aiticle 1767 of the Civil Coue, a paitnei may
contiibute not only money oi piopeity, but also inuustiy.
(#&)&)!*#$+ ,!-*. /0 1#$2+ !3 4!*&$%5&

Couits aie not authoiizeu to extiicate paities fiom the necessaiy consequences of
theii acts, anu the fact that the contiactual stipulations may tuin out to be financially
uisauvantageous will not ielieve paities theieto of theii obligations. They cannot
now uisavow the ielationship foimeu fiom such agieement uue to theii supposeu
misunueistanuing of its teims.
677#8#. 9-77)&0 !3 &:# (%$&*#$+:)" 68$##2#*&

Petitioneis aigue that the }oint ventuie Agieement is voiu unuei Aiticle 177S of the
Civil Coue, which pioviues:
"ART. 177S. A contiact of paitneiship is voiu, whenevei immovable piopeity is
contiibuteu theieto, if an inventoiy of saiu piopeity is not maue, signeu by the
paities, anu attacheu to the public instiument."
They contenu that since the paities uiu not make, sign oi attach to the public
instiument an inventoiy of the ieal piopeity contiibuteu, the paitneiship is voiu.
We claiify. C',1), Aiticle 177S was intenueu piimaiily to piotect thiiu
peisons. S.+*(/, petitioneis themselves invoke the allegeuly voiu contiact as basis
foi theii claim that iesponuent shoulu pay them 6u peicent of the value of the
piopeity. They cannot in one bieath ueny the contiact anu in anothei iecognize it,
uepenuing on what momentaiily suits theii puipose. Paities cannot auopt
inconsistent positions in iegaiu to a contiact anu couits will not toleiate, much less
appiove, such piactice.
(%$&*#$+:)" 68$##2#*& 9!& &:# ;#+-7& !3 %* <%$7)#$ =77#8%7 4!*&$%5&

Petitioneis also contenu that the }oint ventuie Agieement is voiu unuei Aiticle
1422 of the Civil Coue, because it is the uiiect iesult of an eailiei illegal contiact,
which was foi the sale of the lanu without valiu consiueiation.
This aigument is pueiile. The }oint ventuie Agieement cleaily states that the
consiueiation foi the sale was the expectation of piofits fiom the subuivision
pioject. Its fiist stipulation states that petitioneis uiu not actually ieceive payment
foi the paicel of lanu solu to iesponuent. Consiueiation, moie piopeily uenominateu
as +%-1., can take uiffeient foims, such as the piestation oi piomise of a thing oi
seivice by anothei.
In this case, the cause of the contiact of sale consisteu not in the stateu peso
value of the lanu, but in the expectation of piofits fiom the subuivision pioject, foi
which the lanu was intenueu to be useu. As explaineu by the tiial couit, "the lanu
was in effect given to the paitneiship as |petitionei'sj paiticipation theiein. x x x
Theie was theiefoie a consiueiation foi the sale, the |petitioneisj acting in the
expectation that, shoulu the ventuie come into fiuition, they |wouluj get sixty
peicent of the net piofits."
7320.23(3./= Petition uenieu. CA affiimeu.
[.(*= S
iu
Bivision. Nelo, vitug, Puiisima, anu uonzaga-Reyes concui
!./!5113/:Z7322*/(3/: .03/3./= none


,19*2 ;4 0.+32(3!.
USeptembei 7, 1929V
ABRIAN0 ARBES, ET AL., plaintiffs-appellees, vs. vICENTE P0LISTIC0, ET AL.,
uefenuants-appellants.


7.!(13/*=
Bence the uistinction maue in the seconu paiagiaph of this aiticle |in the piesent
case 1666 but unuei the NCC 177uj of this Coue, pioviuing that the piofits obtaineu
by unlawful means shall not eniich the paitneis, but shall upon the uissolution of the
paitneiship, be given to the chaiitable institutions of the uomicile of the paitneiship,
oi, in uefault of such, to those of the piovince.

This is a new iule, unpieceuenteu by oui law, intiouuceu to supply an obvious
ueficiency of the foimei law, which uiu not uesciibe the puipose to which those
piofits uenieu the paitneis weie to be applieu, noi state what to be uone with
them.The piofits aie so applieu, anu not the contiibutions, because this woulu be an
excessive anu unjust sanction foi, as we have seen, theie is no ieason, in such a case,
foi uepiiving the paitnei of the poition of the capital that he contiibuteu, the
ciicumstances of the two cases being entiiely uiffeient.


/,(51*= Appeal fiom a juugment of CFI
0./*/(*= vILLAN0R, }.:

8,!(2=
This is an action to biing about liquiuation of the funus anu piopeity of the
association calleu "Tuinuhan Polistico & Co." The plaintiffs weie membeis
oi shaieholueis, anu the uefenuants weie uesignateu as piesiuent-
tieasuiei, uiiectois anu secietaiy of saiu association.
It is well to iemembei that this case is now biought befoie the
consiueiation of this couit foi the seconu time. The fiist one was when the
same plaintiffs appeaieu fiom the oiuei of the couit below sustaining the
uefenuant's uemuiiei, anu iequiiing the foimei to amenu theii complaint
within a peiiou, so as to incluue all the membeis of "Tuinuhan Polistico &
Co.," eithei as plaintiffs oi as a uefenuants.

9
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01+2''(3 44 156"7
This couit helu then that in an action against the officeis of a voluntaiy
association to winu up its affaiis anu enfoice an accounting foi money anu
piopeity in theii possessions, it is not necessaiy that all membeis of the
association be maue paities to the action.The case having been iemanueu to
the couit of oiigin, both paities amenu, iespectively, theii complaint anu
theii answei, anu by agieement of the paities, the couit appointeu Amaueo
R. Quintos, of the Insulai Auuitoi's 0ffice, commissionei to examine all the
books, uocuments, anu accounts of "Tuinuhan Polistico & Co.," anu to
ieceive whatevei eviuence the paities might uesiie to piesent.
The commissionei ienueieu his iepoit.
The uefenuants objecteu to the commissionei's iepoit, but the tiial couit,
having examineu the ieasons foi the objection, founu the same sufficiently
explaineu in the iepoit anu the eviuence, anu accepting it, ienueieu
juugment, holuing $C?$ $C% ?&&"J@?$@"# Q(IE#IC?# 0">@&$@J" \ !"4Q @&
I#>?RAI>N ?#D &%#$%#J@#B $C% D%A%#D?#$& T"@#$>S ?#D &%;%E?>>S $"
E%$IE# $C% ?K"I#$ "A 0LWN]X^4_X $" $C% H>?@#$@AA& @# $C@& J?&%N ?#D $"
$C% E%&$ "A $C% K%KF%E& of the saiu association


3225*2=
Whethei the lowei couit eiieu in oiueiing the ietuin of the the amount of
P24,6u7.8u to the plaintiffs in this case, anu to the iest of the membeis of the saiu
association iathei than oiuei it to be given to chaiitable institutions.

)*+7= No. The amount shoulu be ietuineu to the membeis of the saiu association
because they peitain to theii contiibutions anu not to piofits ueiiveu fiom such
unlawful paitneiship.

1,(3.Z15+3/:=
Petitionei's contention:
because the paitneiship is an unlawful paitneiship, some chaiitable
institution to whom the paitneiship funus may be oiueieu to be tuineu
ovei, shoulu be incluueu, as a paity uefenuant
If the paitneiship has no valiu existence, if it is consiueieu juiiuically non-
existent, the contiact enteieu into can have no legal effect; anu in that case,
how can it give iise to an action in favoi of the paitneis to juuicially
uemanu fiom the managei oi the auministiatoi of the paitneiship capital,
each one's contiibution.

C00RT:
The appellants allege that the necessaiy paity, i.e. Chaiitable institution,
was not impleaueu. The appellants iefei to aiticle 1666 of the Civil Coue,
which pioviues:
"A paitneiship must have a lawful object, anu must be establisheu
foi the common benefit of the paitneis.

When the uissolution of an unlawful paitneiship is uecieeu, the
piofits shall be given to chaiitable institutions of the uomicile of
the paitneiship, oi, in uefault of such, to those of the piovince.

Appellant's contention on this point is untenable.
o Accoiuing to saiu aiticle, no chaiitable institution is a necessaiy
paity in the piesent case of ueteimination of the iights of the
paities.
o The action which may aiise fiom saiu aiticle, in the case of
unlawful paitneiship, is that foi the iecoveiy of the amounts paiu
by the membei fiom those in chaige of the auministiation of saiu
paitneiship, anu it is not necessaiy foi the saiu paities to base
theii action to the existence of the paitneiship, but on the fact that
of having contiibuteu some money to the paitneiship capital. Anu
hence, the chaiitable institution of the uomicile of the paitneiship,
anu in the uefault theieof, those of the piovince aie not necessaiy
paities in this case.
The aiticle citeu above peimits no action foi the puipose of obtaining the
eainings maue by the unlawful paitneiship, uuiing its existence as iesult of
the business in which it was engageu, because foi the puipose, as Naniesa
iemaiks, the paitnei will have to base his action upon the paitneiship
contiact, which is to annul anu without legal existence by ieason of its
unlawful object; anu it is self eviuent that what uoes not exist cannot be a
cause of action.
o Bence, paiagiaph 2 of the same aiticle pioviues that when the
uissolution of the unlawful paitneiship is uecieeu, the piofits
cannot inuie to the benefit of the paitneis, but must be given to
some chaiitable institution.
Petitionei's contention:
If the paitneiship has no valiu existence, if it is consiueieu juiiuically non-
existent, the contiact enteieu into can have no legal effect; anu in that case,
how can it give iise to an action in favoi of the paitneis to juuicially
uemanu fiom the managei oi the auministiatoi of the paitneiship capital,
each one's contiibution.

C00RT:
Ricci: The paitnei who limits himself to uemanuing only the amount
contiibuteu by him neeu not iesoit to the paitneiship contiact on which to
base his action.
o that the paitnei makes his contiibution, which passes to the
managing paitnei foi the puipose of caiiying on the business oi
inuustiy which is the object of the paitneiship; oi in othei woius,
to bieathe the bieath of life into a paitneiship contiact with an
objection foibiuuen by law.
o Anu as saiu contiast uoes not exist in the eyes of the law, the
puipose fiom which the contiibution was maue has not come into
existence, anu the auministiatoi of the paitneiship holuing saiu
contiibution ietains what belongs to otheis, without any

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01+2''(3 44 156"7
consiueiation; foi which ieason he is not bounu to ietuin it anu he
who has paiu in his shaie is entitleu to iecovei it.
But this is not the case with iegaiu to piofits eaineu in the couise of the
paitneiship, because they uo not constitute oi iepiesent the paitnei's
contiibution but aie the iesult of the inuustiy, business oi speculation
which is the object of the paitneiship
o theiefoi, in oiuei to uemanu the piopoitional pait of the saiu
piofits, the paitnei woulu have to base his action on the contiact
which is null anu voiu, since this paitition oi uistiibution of the
piofits is one of the juiiuical effects theieof.
o Wheiefoie consiueiing this contiact as non-existent, by ieason of
its illicit object, it cannot give iise to the necessaiy action, which
must be the basis of the juuicial complaint. Fuitheimoie, it woulu
be immoial anu unjust foi the law to peimit a piofit fiom an
inuustiy piohibiteu by it.
Bence the uistinction maue in the seconu paiagiaph of this aiticle of this
Coue, pioviuing that the piofits obtaineu by unlawful means shall not
eniich the paitneis, but shall upon the uissolution of the paitneiship, be
given to the chaiitable institutions of the uomicile of the paitneiship, oi, in
uefault of such, to those of the piovince.
This is a new iule, unpieceuenteu by oui law, intiouuceu to supply an
obvious ueficiency of the foimei law, which uiu not uesciibe the puipose to
which those piofits uenieu the paitneis weie to be applieu, noi state what
to be uone with them.
o The piofits aie so applieu, anu not the contiibutions, because this
woulu be an excessive anu unjust sanction foi, as we have seen,
theie is no ieason, in such a case, foi uepiiving the paitnei of the
poition of the capital that he contiibuteu, the ciicumstances of the
two cases being entiiely uiffeient.
0ui Coue uoes not state whethei, upon the uissolution of the unlawful
paitneiship, the amounts contiibuteu aie to be ietuineu by the paitneis,
because it only ueals with the uisposition of the piofits; but the fact that
saiu contiibutions aie not incluueu in the uisposal piesciibeu piofits, shows
that in consequences of saiu exclusion, the geneial law must be followeu,
anu hence the paitneis shoulu ieimbuise the amount of theii iespective
contiibutions.

7320.23(3./= The juugment appealeu fiom, being in accoiuance with law, shoulu
be, as it is heieby, affiimeu with costs against the appellants; pioviueu, howevei, the
uefenuants shall pay the legal inteiest on the sum of P24,6u7.8u fiom the uate of the
uecision of the couit, anu pioviueu, fuithei, that the uefenuants shall ueposit this
sum of money anu othei uocuments eviuencing uncollecteu cieuits in the office of the
cleik of the tiial couit, in oiuei that saiu couit may uistiibute them among the
membeis of saiu association, upon being uuly iuentifieu in the mannei that it may
ueem piopei. So oiueieu.

[.(*= EN BANC; Avancea, C.}., }ohnson, Stieet, }ohns, Romualuez, anu villa-Real, }}.,
concui. .

(.!,. ;4 !,
(.J$"F%E WN LXXX)
7.!(13/*= It may be constituteu in any foim; a publicinstiument is necessaiy only
wheie immovable piopeity oi ieal iights aie contiibuteu theieto.
This implies that since a contiact of paitneiship is consensual, an oial contiact of
paitneiship is as goou as a wiitten one. Wheie no immovable piopeity oi ieal iights
aieinvolveu, what matteis is that the paities have complieu with the iequisites of a
paitneiship.
/,(51*= Petition foi ieview on ceitioiaii
0./*/(*= `/,1*2a2,/(3,:., #"
8,!(2=
Petitionei William Belo intiouuceu iesponuent NenitaAnay to petitionei
Naijoiie Tocao, who conveyeu hei uesiie to entei into a jointventuie with hei foi the
impoitation anu local uistiibution of kitchen cookwaies. 0nuei the joint ventuie,
Belo acteu as capitalist, Tocao aspiesiuent anu geneial managei, anu Anay as heau of
the maiketing uepaitment anu latei, vice-piesiuent foi sales. The paities agieeu to
useAnay's name in secuiing uistiibutoiship of cookwaie fiom West Benu Company, a
manufactuiei of kitchen cookwaies in Wisconsin, 0.S.A. Thepaities agieeu fuithei
that Anay woulu be entitleu to: (1) ten peicent (1u%) of the annual net piofits of the
business; (2) oveiiiuingcommission of six peicent (6%) of the oveiall weekly
piouuction; (S) thiity peicent (Su%) of the sales she woulu make; anu (4) two
peicent(2%) foi hei uemonstiation seivices. The agieement was not ieuuceu to
wiiting on the stiength of Belo's assuiances that he was sinceie,uepenuable anu
honest when it came to financial commitments. Anay having secuieu the
uistiibutoiship of cookwaie piouucts fiom the WestBenu Company anu oiganizeu
the auministiative staff anu the sales foice, the cookwaie business took off
successfully. They opeiateu unueithe name of ueminesse Enteipiise, a sole
piopiietoiship iegisteieu in Naijoiie Tocao's name, with office at 712 Rufino
Builuing, Ayala Avenue,Nakati City. Belo maue goou his monetaiy commitments to
Anay. 0n 0ctobei 9, 1987, Anay leaineu that Naijoiie Tocao hau signeu a
letteiauuiesseu to the Cubao sales office to the effect that she was no longei the vice-
piesiuent of ueminesseEnteipiise. The following uay,0ctobei 1u, she ieceiveu a note
fiom Lina T. Ciuz, maiketing managei, that Naijoiie Tocao hau baiieu hei fiom
holuing office anu conuuctinguemonstiations in both Nakati anu Cubao offices.
Anay attempteu to contact Belo. She wiote him twice to uemanu hei
oveiiiuing commissionfoi the peiiou of }anuaiy 8, 1988 to Febiuaiy S, 1988 anu the
auuit of the company to ueteimine hei shaie in the net piofits. When hei letteisweie
not answeieu, Anay consulteu hei lawyei, who, in tuin, wiote Belo a lettei. Still, that
lettei was not answeieu. Anay still ieceiveu hei fivepeicent (S%) oveiiiuing
commission up to Becembei 1987. The following yeai, 1988, she uiu not ieceive the
same commission although thecompany netteu a gioss sales of P1S,Suu,S6u.uu. 0n
Apiil S, 1988, Nenita A. Anay fileu Civil Case No. 88-Su9, a complaint foi sum of

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01+2''(3 44 156"7
moneywith uamagesagainst Naijoiie B. Tocao anu William Belo befoie the Regional
Tiial Couit of Nakati, Bianch 14u. The tiial couit helu that theiewas inueeu an oial
paitneiship agieement between the plaintiff anu the uefenuants, baseu on the
following: (a) theie was an intention tocieate a paitneiship; (b) a common funu was
establisheu thiough contiibutions consisting of money anu inuustiy, anu (c) theie
was a jointinteiest in the piofits. Petitioneis appeal to the Couit of Appealswas
uismisseu. Theii Notion foi Reconsiueiation was uenieu by the Couit of Appeals foi
lack of meiit.
3225*2=Whethei oi not a paitneiship exists

)*+7 \1,(3.Z15+3/:=
Yes. The issue of whethei oi not a paitneiship exists is a factual mattei
which is within the exclusive uomain of both the tiial anuappellate couits. This Couit
cannot set asiue factual finuings of such couits absent any showing that theie is no
eviuence to suppoit theconclusion uiawn by the couita quo.
In this case, both the tiial couit anu the Couit of Appeals aie one in iuling
that petitioneis anu piivateiesponuent establisheu a business paitneiship. This
Couit finus no ieason to iule otheiwise. To be consiueieu a juiiuical peisonality,
apaitneiship must fulfill these iequisites: (1) two oi moie peisons binu themselves
to contiibute money, piopeity oi inuustiy to a commonfunu; anu (2) intention on the
pait of the paitneis to uiviue the piofits among themselves.
It may be constituteu in any foim; a publicinstiument is necessaiy only
wheie immovable piopeity oi ieal iights aie contiibuteu theieto.
This implies that since a contiact of paitneiship is consensual, an oial contiact
of paitneiship is as goou as a wiitten one. Wheie no immovable piopeity oi ieal
iights aieinvolveu, what matteis is that the paities have complieu with the iequisites
of a paitneiship. The fact that theie appeais to be no iecoiu in theSecuiities anu
Exchange Commission of a public instiument embouying the paitneiship agieement
puisuant to Aiticle 1772 of the Civil Coue uiu not cause the nullification of the
paitneiship. The peitinent piovision of the Civil Coue on the mattei states:Ait. 1768.
The paitneiship has a juiiuical peisonality sepaiate anu uistinct fiom that of each of
the paitneis, even in case of failuie to complywith the iequiiements of aiticle 1772,
fiist paiagiaph.

7320.23(3./=
-)*1*8.1*, the instant petition foi ieview on +.,)'*,%,' is BENIEB. The
paitneiship among petitioneis anu piivate iesponuent is oiueieu uissolveu, anu the
paities aie oiueieu to effect the winuing up anu liquiuation of the paitneiship
puisuant to the peitinent piovisions of the Civil Coue. This case is iemanueu to the
Regional Tiial Couit foi piopei pioceeuings ielative to saiu uissolution. The appealeu
uecisions of the Regional Tiial Couit anu the Couit of Appeals aie AFFIRNEB with
N0BIFICATI0NS, as follows ---
1. Petitioneis aie oiueieu to submit to the Regional Tiial Couit a foimal account of
the paitneiship affaiis foi the yeais 1987 anu 1988, puisuant to Aiticle 18u9 of the
Civil Coue, in oiuei to ueteimine piivate iesponuent's ten peicent (1u%) shaie in the
net piofits of the paitneiship;
2. Petitioneis aie oiueieu, jointly anu seveially, to pay piivate iesponuent five
peicent (S%) oveiiiuing commission foi the one hunuieu anu fifty (1Su) cookwaie
sets available foi uisposition since the time piivate iesponuent was wiongfully
excluueu fiom the paitneiship by petitioneis;
S. Petitioneis aie oiueieu, jointly anu seveially, to pay piivate iesponuent oveiiiuing
commission on the total piouuction which, foi the peiiou coveiing }anuaiy 8, 1988 to
Febiuaiy S, 1988, amounteu to PS2,uuu.uu;
4. Petitioneis aie oiueieu, jointly anu seveially, to pay piivate iesponuent moial
uamages in the amount of PSu,uuu.uu, exemplaiy uamages in the amount of
PSu,uuu.uu anu attoiney's fees in the amount of P2S,uuu.uu.
[.(*= 1
st
uivision. 9%?'/.6 #,"6 !"#"6 D!2%',E%(F6 G-(*6 H%3-(%(6 anu G%,/*6 ##"6 concui.

)*312 .8 b.2* +3<N E%HE%&%#$%D FS *>%#@$" +@K ;4 b5+3*( [3++, +3<
(Naich S, 2u1u)
7.!(13/*= , D%K?#D A"E H%E@"D@J ?JJ"I#$@#B @& %;@D%#J% "A ? H?E$#%E&C@H4
/,(51*= Petition foi Review on Ceitioiaii unuei Rule 4S of the Rules of Civil
Pioceuuie, assailing the Couit of Appeals (CA) Becision uateu }une 29, 2uuS, which
ieveiseu anu set asiue the uecision of the Regional Tiial Couit (RTC) of Lucena City,
uateu Apiil 12, 2uu4.
0./*/(*= Nachuia, }.
8,!(2=
O4 Petitioneis aie the heiis of the late }ose Lim. iepiesenteu by Elenito Lim.
They fileu a Complaint

foi Paitition, Accounting anu Bamages against
iesponuent }uliet villa Lim (iesponuent), wiuow of the late Elfleuo Lim,
who was the eluest son of }ose anu Ciesencia.
L4 Petitioneis allegeu that }ose was the liaison officei of Inteiwoou Sawmill.
}ose, togethei with his fiienus }immy Yu anu Noibeito 0y foimeu a
paitneiship to engage in the tiucking business. }ose manageu the
opeiations of this tiucking business until his ueath. Theieaftei, }ose's heiis,
incluuing Elfleuo, anu paitneis agieeu to continue the business unuei the
management of Elfleuo. The shaies in the paitneiship piofits anu income
that foimeu pait of the estate of }ose weie helu in tiust by Elfleuo, with
petitioneis' authoiity foi Elfleuo to use, puichase oi acquiie piopeities
using saiu funus.

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01+2''(3 44 156"7
c4 Petitioneis allegeu that Elfleuo was nevei a paitnei oi an investoi in the
business anu meiely supeiviseu the puichase of auuitional tiucks using the
income fiom the tiucking business of the paitneis. By the time the
paitneiship ceaseu, it hau nine tiucks, which weie all iegisteieu in Elfleuo's
name.
4. Elfleuo uieu, leaving iesponuent as his sole suiviving heii. Petitioneis
claimeu that iesponuent took ovei the auministiation of the piopeities,
which belongeu to the estate of }ose, without theii consent anu appioval.
Claiming that they aie co-owneis of the piopeities, petitioneis iequiieu
iesponuent to submit an accounting of all income, piofits anu ientals
ieceiveu fiom the estate of Elfleuo, anu to suiienuei the auministiation
theieof. Responuent iefuseu; thus, the filing of this case.
S. 1%&H"#D%#$ $E?;%E&%D H%$@$@"#%E&d ?>>%B?$@"#& ?#D J>?@K%D $C?$
*>A>%D" R?& C@K&%>A ? H?E$#%E "A /"EF%E$" ?#D b@KKS. Responuent also
claimeu that pei testimony of Ciesencia, }ose gave Elfleuo capital in an
infoimal paitneiship with }immy anu Noibeito. When Elfleuo anu
iesponuent got maiiieu, the paitneiship only hau one tiuck; but thiough
the effoits of Elfleuo, the business flouiisheu.
6. When Noibeito was ambusheu anu killeu, the tiucking business staiteu to
faltei. When Elfleuo uieu uue to a heait attack, iesponuent talkeu to }immy
anu to the heiis of Noibeito, as she coulu no longei iun the business. }immy
suggesteu that thiee out of the nine tiucks be given to him as his shaie,
while the othei thiee tiucks be given to the heiis of Noibeito. Bowevei,
Noibeito's wife, Paquita 0y, was not inteiesteu in the vehicles. Thus, she
solu the same to iesponuent, who paiu foi them in installments.
7. 1%&H"#D%#$ ?>&" ?>>%B%D $C?$ RC%# b"&% D@%DN C% >%A$ #" e#"R# ?&&%$&N
?#D $C% H?E$#%E&C@H R@$C b@KKS ?#D /"EF%E$" J%?&%D IH"# C@& D%K@&%4
1%&H"#D%#$ ?>&" &$E%&&%D $C?$ b"&% >%A$ #" HE"H%E$@%& $C?$ *>A>%D"
J"I>D C?;% C%>D @# $EI&$4 1%&H"#D%#$ K?@#$?@#%D $C?$ ?>> $C%
HE"H%E$@%& @#;">;%D @# $C@& J?&% R%E% HIEJC?&%D ?#D ?JfI@E%D $CE"IBC
C%E ?#D C%E CI&F?#Dg& T"@#$ %AA"E$& ?#D C?ED R"EeN ?#D R@$C"I$ ?#S
H?E$@J@H?$@"# "E J"#$E@FI$@"# AE"K H%$@$@"#%E& "E AE"K b"&%4
1%&H"#D%#$ &IFK@$$%D $C?$ $C%&% ?E% J"#TIB?> H?E$#%E&C@H HE"H%E$@%&;
anu thus, she hau the iight to iefuse to ienuei an accounting foi the income
oi piofits of theii own business.
_4 (!= A?;"IE%D H%$@$@"#%E&
M4 !,= E%;%E&%D $C% D%J@&@"# "A (!
3225*2= -./ *>A>%D" +@K R?& ? H?E$#%E @# $C% FI&@#%&&
)*+7=
O4 `%&
1,(3.Z15+3/:=
O4 , H?E$#%E&C@H %Y@&$& RC%# $R" "E K"E% H%E&"#& ?BE%% $" H>?J% $C%@E
K"#%SN %AA%J$&N >?F"EN ?#D &e@>> @# >?RAI> J"KK%EJ% "E FI&@#%&&N R@$C
$C% I#D%E&$?#D@#B $C?$ $C%E% &C?>> F% ? HE"H"E$@"#?$% &C?E@#B "A $C%
HE"A@$& ?#D >"&&%& ?K"#B $C%K.
L4 The best eviuence woulu have been the contiact of paitneiship oi the
aiticles of paitneiship. 0nfoitunately, theie is none in this case, because the
allegeu paitneiship was nevei foimally oiganizeu.
c4 2! ?AA@EK& $C% !, D%J@&@"#4 (C% %;@D%#J% HE%&%#$%D FS H%$@$@"#%E& A?>>&
&C"E$ "A $C% fI?#$IK "A HE""A E%fI@E%D $" %&$?F>@&C $C?$= UOV b"&% R?&
$C% H?E$#%E ?#D #"$ *>A>%D"6 ?#D ULV ?>> $C% HE"H%E$@%& ?JfI@E%D FS
*>A>%D" ?#D E%&H"#D%#$ A"EK H?E$ "A $C% %&$?$% "A b"&%N C?;@#B F%%#
D%E@;%D AE"K $C% ?>>%B%D H?E$#%E&C@H4
W4 Petitioneis heavily iely on }immy's testimony. But that testimony is just one
piece of eviuence against iesponuent. It must be consiueieu anu weigheu
along with petitioneis' othei eviuence vis--vis iesponuent's contiaiy
eviuence.
P4 At this junctuie, the SC's iuling in Beiis of Tan Eng Kee v. Couit of
Appeals is enlightening. Theiein, we citeu Aiticle 1769 of the Civil Coue.
]4 ,HH>S@#B $C% >%B?> HE";@&@"# $" $C% A?J$& "A $C@& J?&%N $C% A">>"R@#B
J@EJIK&$?#J%& $%#D $" HE";% $C?$ *>A>%D" R?& C@K&%>A $C% H?E$#%E "A
b@KKS ?#D /"EF%E$":
?4 Ciesencia testifieu that }ose gave Elfleuo PSu,uuu.uu, as shaie in
the paitneiship, on a uate that coinciueu with the payment of the
initial capital in the paitneiship;
F4 Elfleuo ian the affaiis of the paitneiship, wieluing absolute
contiol, powei anu authoiity, without any inteivention oi
opposition whatsoevei fiom any of petitioneis heiein;
J4 All of the piopeities, paiticulaily the nine tiucks of the
paitneiship, weie iegisteieu in the name of Elfleuo;
D4 }immy testifieu that Elfleuo uiu not ieceive wages oi salaiies fiom
the paitneiship, inuicating that what he actually ieceiveu weie
shaies of the piofits of the business;
%4 None of the petitioneis, as heiis of }ose, the allegeu paitnei,
uemanueu peiiouic accounting fiom Elfleuo uuiing his lifetime. ,&
E%H%?$%D>S &$E%&&%D @# )%@E& "A (?# *#B h%%N ? D%K?#D A"E
H%E@"D@J ?JJ"I#$@#B @& %;@D%#J% "A ? H?E$#%E&C@H4
^4 Fuitheimoie, petitioneis faileu to auuuce any eviuence to show that the
ieal anu peisonal piopeities acquiieu anu iegisteieu in the names of
Elfleuo anu iesponuent foimeu pait of the estate of }ose, having been
ueiiveu fiom }ose's allegeu paitneiship with }immy anu Noibeito.
_4 SC agiees with CA's finuings that the testimonities piove that Elfleuo was
not just a hiieu help but one of the paitneis in the tiucking business, active
anu visible in the iunning of its affaiis fiom uay one until this ceaseu
opeiations upon his uemise. (C% %Y$%#$ "A C@& J"#$E">N ?DK@#@&$E?$@"#
?#D K?#?B%K%#$ "A $C% H?E$#%E&C@H ?#D @$& FI&@#%&&N $C% A?J$ $C?$ @$&
HE"H%E$@%& R%E% H>?J%D @# C@& #?K%N ?#D $C?$ C% R?& #"$ H?@D &?>?ES "E
"$C%E J"KH%#&?$@"# FS $C% H?E$#%E&N ?E% @#D@J?$@;% "A $C% A?J$ $C?$
*>A>%D" R?& ? H?E$#%E ?#D ? J"#$E">>@#B "#% ?$ $C?$.
M4 Notable too that }ose Lim uieu when the paitneiship was baiely a yeai olu,
anu the paitneiship anu its business not only continueu but also flouiisheu.
If it weie tiue that it was }ose Lim anu not Elfleuo who was the paitnei,
then upon his ueath the paitneiship shoulu have

=
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01+2''(3 44 156"7

7320.23(3./= WBEREF0RE, the instant Petition is BENIEB. The assaileu Couit of
Appeals Becision uateu }une 29, 2uuS is AFFIRNEB. Costs against petitioneis.
[.(*= ,>> J"#JIE


!4 2*0,1,(* b51373!,+ 0*12./,+3(`
,:53+, ;4 !,
8,!(2=

! Petitionei is the managei of A.C. Aguila & Sons, Co, a paitneiship engageu in
lenuing activities.

! Piivate iesponuent Feliciuau Abiogai enteieu into a N0A w A.C. Aquila &
Sons involving a pacto ue ietio sale of a house & lot.

! As piivate iesponuent faileu to ieueem the piopeity within the piesciibeu
peiiou, petitionei causeu the cancellation of TCT anu the issuance of the
new ceitificate of title in the name of the paitneiship.

! Piivate iesponuent fileu a petition foi a ueclaiation of the nullity of the
ueeu of sale anu a ciiminal complaint foi foigeiy against petitionei alleging
that the signatuie of hei husbanu was a foigeiy because he was alieauy
ueau when the ueeu was supposeu to have been executeu.

! Petitionei now contenus that he is not the ieal paity in inteiest but A.C.
Aguila & Co., against which this case shoulu have been biought.

3225*:

W0N the petitionei is the ieal paity in inteiest.

)*+7:

/".

! Rule S, Section 2 of the Rules of Couit of 1964, unuei which the complaint
in this case was fileu, pioviueu that "eveiy action must be piosecuteu anu
uefenueu in the name of the ieal paity in inteiest." A ieal paity in inteiest is
one who woulu be benefiteu oi injuieu by the juugment, oi who is entitleu
to the avails of the suit. This iuling is now embouieu in Rule S, Section 2 of
the 1997 Reviseu Rules of Civil Pioceuuie. Any uecision ienueieu against a
peison who is not a ieal paity in inteiest in the case cannot be executeu.
Bence, a complaint fileu against such a peison shoulu be uismisseu foi
failuie to state a cause of action.

! Ait. 1768 of the Civil Coue, a paitneiship has a juiiuical peisonality
sepaiate anu uistinct fiom that of each paitnei. The paitneis cannot be helu
liable foi the obligations of the paitneiship unless it is shown that the legal
fiction of a uiffeient juiiuical peisonality is being useu foi fiauuulent,
unfaii, oi illegal puiposes.

! In this case, piivate iesponuent has not shown that A.C. Aguila & Sons, Co.,
as a sepaiate juiiuical entity, is being useu foi fiauuulent, unfaii, oi illegal
puiposes. Noieovei, the title to the subject piopeity is in the name of A.C.
Aguila & Sons, Co. anu the Nemoianuum of Agieement was executeu
between piivate iesponuent, with the consent of hei late husbanu, anu A.C.
Aguila & Sons, Co., iepiesenteu by petitionei. Bence, it is the paitneiship,
not its officeis oi agents, which shoulu be impleaueu in any litigation
involving piopeity iegisteieu in its name. A violation of this iule will iesult
in the uismissal of the complaint.


(,/ ;4 7*+ 1.2,13.
(0ctobei S, 1994)

7.!(13/*= U&%% #"$%& F%>"RV
/,(51*: Consoliuateu case. Two special civil actions foi piohibition
0./*/(*: vitug, #"
8,!(2=
! This is a consoliuateu case involving the constitutionality of RA 7496 oi the
2@KH>@A@%D /%$ 3#J"K% (?Y?$@"# (SNIT) scheme.
! Petitioneis claim to be taxpayeis auveisely affecteu by the continueu
implementation of the SNIT.

! 3# $C% O&$ J?&%N they contenueu that the Bouse Bill which eventually
became RA 7496 is a misnomei oi ueficient because it was nameu as
"Simplifieu Net Income Taxation Scheme foi the Self-Employeu anu
Piofessionals Engageu in the Piactice of theii Piofession" while the actual
title contains the saiu woius with the auuitional phiase, ".Amenuing
Section 21 anu 29 of the National Inteinal Revenue Coue."

! They allegeu that this title was in uiiect violation of Section 26 (1) anu 28
(1) in Aiticle vI of the 1987 Constitution. The petitionei also stiesseu that it
violates the equal piotection clause as it only imposeu taxes upon one who

"6
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01+2''(3 44 156"7
piactice his piofession alone anu not to those who aie engageu to single
piopiietoiship.

! 3# $C% L#D J?&%N they aigueu that E%&H"#D%#$& C?;% %YJ%%D%D $C%@E EI>%a
K?e@#B ?I$C"E@$S @# ?HH>S@#B 2/3( $" B%#%E?> HE"A%&&@"#?>
H?E$#%E&C@H& by issuing Revenue Regulation 2-9S to caiiy out the RA. This
is anchoieu on the auministiative inteipietation of public iesponuents that
woulu apply SNIT topaitneis in geneial piofessional paitneiships.-
! Petitioneis citeu the uelibeiations in the B0R iegaiuing the
implementation of the saiu iule in which it was shown that fiameis uiu not
intenu foi the bill to be applicable to business coipoiations oi paitneiships


3225*=
1. W0N RA 7496 is unconstitutional (u.R. No. 1u9289). /.

L4 -./ @# 1, ^WM]N $C% 2/3( ?HH>@%& $" H?E$#%E& @# B%#%E?> HE"A%&&@"#?>
H?E$#%E&C@H&4 U:414 /"4 OXMWW]V4 `*2

)*+7=
1. Constitutionality of RA 7496

o The SC iuleu in the negative. The saiu law is not aibitiaiy; it is
geimane to the puipose of the law anu; applies to all things of
equal conuitions anu of same class.
o It is neithei violative of equal piotection clause uue to the
existence of substantial uiffeience between one who piactice his
piofession alone anu one who is engageu to piopiietoiship.
o Fuithei, the SC saiu that RA 7496 is just an amenuatoiy piovision
of the coue of taxpayeis wheie it classifies taxpayeis in to foui
main gioups: Inuiviuuals, Coipoiations, Estate unuei }uuicial
Settlement anu Iiievocable Tiust.
o The couit woulu have appieciateu the contention of the petitionei
if RA 7496 was an inuepenuent law. But since it is attacheu to a
law that has alieauy classifieu taxpayeis, theie is no violation of
equal piotection clause.

L4 ,HH>@J?$@"# "A 2/3( $" H?E$#%E& @# B%#%E?> HE"A%&&@"#?> H?E$#%E&C@H&

o Theie is no uistinction in income tax liability between a peison
who piactices his piofession alone oi inuiviuually anu one who
uoes it thiough a paitneiship (whethei iegisteieu oi not) with
otheis in the exeicise of a common piofession.
o 0nuei the piesent income tax system, all inuiviuuals ueiiving
income fiom any souice whatsoevei aie tieateu in almost
invaiiably the same mannei anu unuei a common set of iules.
o Although the geneial piofessional paitneiship is exempt fiom the
payment of taxes (but it still has an obligation to file an income tax
ietuin mainly foi auministiation anu uata), the paitneis
themselves aie liable foi the payment of income tax in theii
inuiviuual capacity computeu on theii iespective anu uistiibutive
shaies of piofits.






/.(*2=
Biffeiences between geneial piofessional paitneiships anu oiuinaiy business
paitneiships:
a. , B%#%E?> HE"A%&&@"#?> H?E$#%E&C@H
O
, unlike an "ED@#?ES FI&@#%&&
H?E$#%E&C@H URC@JC @& $E%?$%D ?& ? J"EH"E?$@"# A"E @#J"K% $?Y
HIEH"&%& ?#D &" &IFT%J$ $" $C% J"EH"E?$% @#J"K% $?Y), is not itself an
income taxpayei. (C% @#J"K% $?Y @& @KH"&%D #"$ "# $C% HE"A%&&@"#?>
H?E$#%E&C@HN RC@JC @& $?Y %Y%KH$N FI$ "# $C% H?E$#%E& $C%K&%>;%& @#
$C%@E @#D@;@DI?> J?H?J@$S computeu on theii uistiibutive shaies of
paitneiship piofits.
b. 0iuinaiy business paitneiships, no mattei how cieateu oi oiganizeu, aie
i$?Y?F>% H?E$#%E&C@H&." ueneial piofessional paitneiships aie "%Y%KH$
H?E$#%E&C@H&." 0nuei the Tax Coue on income taxation, the geneial
piofessional paitneiship is ueemeu to be no moie than a meie mechanism
oi a flow-thiough entity in the geneiation of income by, anu the ultimate
uistiibution of such income to, iespectively, each of the inuiviuual paitneis.

7320.23(3[*= WBEREF0RE, the petitions aie BISNISSEB. No special
pionouncement on costs.
[.(3/:= I%,?%1%6 !"#"6 !,-:6 C.='+'%(*6 4.B%=%/*6 9%?'/.6 #,"6 4*E.,*6 7.==*1'==*6 ;.=*6
J-'%1*(6 G-(*6 H%3-(%( %(/ ;.(/*:%6 ##"6 concui.
G%/'==% %(/ 7'/'(6 ##"6 aie on leave.


<*/73.+, ;4 !,

1
A general professional partnership, in this context, must be formed for the sole purpose
of exercising a common profession, no part of the income of which is derived from its
engaging in any trade business; otherwise, it is subject to tax as an ordinary business
partnership or, which is to say, as a corporation and thereby subject to the corporate
income tax. The only other exempt partnership is a joint venture for undertaking
construction projects or engaging in petroleum operations pursuant to an operating
agreement under a service contract with the government (see Sections 20, 23 and 24,
National Internal Revenue Code).


""
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01+2''(3 44 156"7
ARSENI0 T. NENBI0LA vs. C00RT 0F APPEALS, NATI0NAL LAB0R RELATI0NS
C0NNISSI0N, PACIFIC F0REST RES00RCES, PBILS., INC. anuoi CELLNARK AB
(}uly S1, 2uu6)
7.!(13/*= In a paitneiship, the membeis become co-owneis of what is contiibuteu
to the fiim capital anu of all piopeity that may be acquiieu theieby anu thiough the
effoits of the membeis. The piopeity oi stock of the paitneiship foims a community
of goous, a common funu, in which each paity has a piopiietaiy inteiest. In fact, the
New Civil Coue iegaius a paitnei as a co-ownei of specific paitneiship piopeity.
Each paitnei possesses a joint inteiest in the whole of paitneiship piopeity. If the
ielation uoes not have this featuie, it is not one of paitneiship. This essential
element, the community of inteiest, oi co-owneiship of, oi joint inteiest in
paitneiship piopeity is absent in the ielations between petitionei anu piivate
iesponuent Pacfoi. xxx the paities in this case, meiely shaieu piofits. This alone uoes
not make a paitneiship.
Besiues, a coipoiation cannot become a membei of a paitneiship in the absence of
expiess authoiization by statute oi chaitei. This uoctiine is baseu on the following
consiueiations: (1) that the mutual agency between the paitneis, wheieby the
coipoiation woulu be bounu by the acts of peisons who aie not its uuly appointeu
anu authoiizeu agents anu officeis, woulu be inconsistent with the policy of the law
that the coipoiation shall manage its own affaiis sepaiately anu exclusively; anu, (2)
that such an aiiangement woulu impiopeily allow coipoiate piopeity to become
subject to iisks not contemplateu by the stockholueis when they oiiginally investeu
in the coipoiation.
0./*/(*= Puno, }.
8,!(2=
Piivate iesponuent Pacific Foiest Resouices, Phils., Inc. (Pacfoi) is a coipoiation
oiganizeu anu existing unuei the laws of Califoinia, 0SA. It is a subsiuiaiy of
Cellulose Naiketing Inteinational (oiganizeu in Sweuen)
Piivate iesponuent Pacfoi enteieu into a "Siue Agieement on Repiesentative 0ffice
known as Pacific Foiest Resouices (Phils.), Inc." with petitionei Aisenio T. Nenuiola
(ATN). The Siue Agieement outlines the business ielationship of the paities with
iegaiu to the Philippine opeiations of Pacfoi. Piivate iesponuent will establish a
Pacfoi iepiesentative office in the Philippines, to be known as Pacfoi Phils, anu
petitionei ATN will be its Piesiuent. Petitionei's base salaiy anu the oveiheau
expenuituies of the company shall be boine by the iepiesentative office anu funueu
by PacfoiATN, since Pacfoi Phils. is equally owneu on a Su-Su equity by ATN anu
Pacfoi-usa.
In its application (to the SEC), piivate iesponuent Pacfoi pioposeu to establish its
iepiesentative office in the Philippines. It also uesignateu petitionei as its iesiuent
agent in the Philippines, authoiizeu to accept summons anu piocesses in all legal
pioceeuings, anu all notices affecting the coipoiation.
The Siue Agieement was amenueu thiough a "Reviseu 0peiating anu Piofit Shaiing
Agieement foi the Repiesentative 0ffice Known as Pacific Foiest Resouices
(Philippines)," wheie the salaiy of petitionei was incieaseu to $78,uuu pei annum.
Both agieements show that the opeiational expenses will be boine by the
iepiesentative office anu funueu by all paities "as equal paitneis," while the piofits
anu commissions will be shaieu among them.
In }uly 2uuu, petitionei wiote the vice Piesiuent foi Asia of Pacfoi, seeking
confiimation of his Su% equity of Pacfoi Phils. Piivate iesponuent Pacfoi, thiough
its Piesiuent, ieplieu that petitionei is not a pait-ownei of Pacfoi Phils. because the
lattei is meiely Pacfoi-0SA's iepiesentative office anu not an entity sepaiate anu
uistinct fiom Pacfoi-0SA. "It's simply a d$C%"E%$@J?> J"KH?#Sd R@$C $C% HIEH"&% "A
D@;@D@#B $C% @#J"K% PXaPX4Q
11
Petitionei piesumably knew of this aiiangement
fiom the stait, having been the one to piopose to piivate iesponuent Pacfoi the
setting up of a iepiesentative office, anu "not a bianch office" in the Philippines to
save on taxes.
Petitionei claimeu that he was all along maue to believe that he was in a joint ventuie
with them; that he woulu have been bettei off iemaining as an inuepenuent agent oi
iepiesentative of Pacfoi-0SA as ATN Naiketing Coip. Petitionei iaiseu othei issues,
such as the ientals of office fuinituie, salaiy of the employees, company cai, as well
as commissions allegeuly uue him. The issues weie not iesolveu, hence, in 0ctobei
2uuu, petitionei wiote Pacfoi-0SA uemanuing payment of unpaiu commissions anu
office fuinituie anu equipment ientals.
Piivatie iesponuent Pacfoi thiough counsel oiueieu petitionei to tuin ovei to it all
papeis, uocuments, files, iecoius, anu othei mateiials in his oi ATN Naiketing
Coipoiation's possession that belong to Pacfoi oi Pacfoi Phils then to iemit moie
than Suuk xmas giveaway funu foi clients of Pacfoi Phil anu finally Pacfoi withuiaw
all its offeis of settlement anu oiueieu petitionei to tiansfei title anu tuin ovei to it
possession of the seivice cai.
18

Piivate iesponuent Pacfoi likewise sent letteis to its clients in the Philippines,
auvising them not to ueal with Pacfoi Phils.
Petitionei constiueu these uiiectives as a seveiance of the "uniegisteieu
paitneiship" between him anu Pacfoi, anu the teimination of his employment as
iesiuent managei of Pacfoi Phils.
.# $C% F?&@& "A $C% Q2@D% ,BE%%K%#$NQ H%$@$@"#%E @#&@&$%D $C?$ C% ?#D 0?JA"E
%fI?>>S "R# 0?JA"E 0C@>&. Thus, it follows that he anu Pacfoi likewise own, on a

"5
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01+2''(3 44 156"7
SuSu basis, Pacfoi Phils.' office fuinituie anu equipment anu the seivice cai. Be also
ieiteiateu his uemanu foi unpaiu commissions, anu pioposeu to offset these with the
iemaining Chiistmas giveaway funu in his possession. Fuitheimoie, he uiu not
ienew the lease contiact with Pulp anu Papei, Inc., the lessoi of the office piemises of
Pacfoi Phils., wheiein he was the signatoiy to the lease agieement.
Piivate iesponuent Pacfoi placeu petitionei on pieventive suspension anu oiueieu
him to show cause why no uisciplinaiy action shoulu be taken against him. Piivate
iesponuent Pacfoi chaigeu petitionei with willful uisobeuience anu seiious
misconuuct foi his iefusal to tuin ovei the seivice cai anu the Chiistmas giveaway
funu which he applieu to his allegeu unpaiu commissions. Piivate iesponuent also
allegeu loss of confiuence anu gioss neglect of uuty on the pait of petitionei foi
allegeuly allowing anothei coipoiation owneu by petitionei's ielatives, Bigh Enu
Piouucts, Inc. (BEPI), to use the same telephone anu facsimile numbeis of Pacfoi, to
possibly steal anu uiveit the sales anu business of piivate iesponuent.
Petitionei uenieu the chaiges. Be ieiteiateu that he consiueieu the impoit of Pacfoi
Piesiuent's letteis as a "cessation of his position anu of the existence of Pacfoi Phils."
Be likewise infoimeu piivate iesponuent Pacfoi that ATN Naiketing Coip. now
occupies Pacfoi Phils.' office piemises, anu uemanueu payment of his sepaiation
pay.
Petitionei fileu his complaint foi illegal uismissal, iecoveiy of sepaiation pay, anu
payment of attoiney's fees with the NLRC.
Piivate iesponuent uiiecteu petitionei to explain why he shoulu not be uisciplineu
foi seiious misconuuct anu conflict of inteiest; chaigeu petitionei anew with seiious
misconuuct foi the lattei's allegeu act of fiauu anu misiepiesentation in authoiizing
the ielease of an auuitional peso salaiy foi himself, besiues the uollai salaiy agieeu
upon by the paities. Piivate iesponuent also accuseu petitionei of uisloyalty anu
iepiesentation of conflicting inteiests foi having continueu using the Pacfoi Phils.'
office foi opeiations of BEPI
LA: iuleu in favoi of petitionei, finuing theie was constiuctive uismissal. By
uiiecting petitionei to tuin ovei all office iecoius anu mateiials, iegaiuless of
whethei he may have ietaineu copies, piivate iesponuent Pacfoi viitually uepiiveu
petitionei of his job by the giauual uiminution of his authoiity as iesiuent managei.
Petitionei's position as iesiuent managei whose uuty, among otheis, was to maintain
the secuiity of its business tiansactions anu communications was ienueieu
meaningless.
NLRC: in favoi of Piivate iesponuent Pacfoi. Be set asiue the }uly Su, 2uu1 uecision
of the laboi aibitei, foi lack of juiisuiction anu lack of meiit4 3$ C%>D $C%E% R?& #"
%KH>"S%Ea%KH>"S%% E%>?$@"#&C@H F%$R%%# $C% H?E$@%&4 9?&%D "# $C% $R"
?BE%%K%#$& F%$R%%# $C% H?E$@%&N @$ J"#J>ID%D $C?$ H%$@$@"#%E @& #"$ ?#
%KH>"S%% "A HE@;?$% E%&H"#D%#$ 0?JA"EN FI$ ? AI>> J"a"R#%E UPXZPX %fI@$SV4
NR uenieu.
CA: Affiimeu holuing that "the legal basis of the complaint is not employment but
peihaps paitneiship, co-owneiship, oi inuepenuent contiactoiship." Bence, the
Laboi Coue cannot apply.
NR uenieu
3&&I%&= Was theie an employei-employee ielationship oi a paitneiship. Can both
exist at the same time. Theie was an employei employee ielationship but no
paitneiship
Was he constiuctively uismisseu. (Not impoitant so omitteu) YES.
1?$@"=
Petitionei aigues that he is an inuustiial paitnei of the paitneiship he foimeu with
piivate iesponuent Pacfoi, anu also an employee of the paitneiship. Petitionei insists
that an inuustiial paitnei may at the same time be an employee of the paitneiship,
pioviueu theie is such an agieement, which, in this case, is the "Siue Agieement" anu
the "Reviseu 0peiating anu Piofit Shaiing Agieement." We holu that petitionei is an
employee of piivate iesponuent Pacfoi anu that no paitneiship oi co-owneiship
exists between the paities.
In a paitneiship, the membeis become co-owneis of what is contiibuteu to the fiim
capital anu of all piopeity that may be acquiieu theieby anu thiough the effoits of
the membeis. The piopeity oi stock of the paitneiship foims a community of goous,
a common funu, in which each paity has a piopiietaiy inteiest. In fact, the New Civil
Coue iegaius a paitnei as a co-ownei of specific paitneiship piopeity. Each paitnei
possesses a joint inteiest in the whole of paitneiship piopeity. If the ielation uoes
not have this featuie, it is not one of paitneiship. This essential element, the
community of inteiest, oi co-owneiship of, oi joint inteiest in paitneiship piopeity
is absent in the ielations between petitionei anu piivate iesponuent Pacfoi.
Petitionei is not a pait-ownei of Pacfoi Phils. William uleason, piivate iesponuent
Pacfoi's Piesiuent establisheu this fact when he saiu that Pacfoi Phils. is simply a
"theoietical company" foi the puipose of uiviuing the income Su-Su. Be stiesseu that
petitionei knew of this aiiangement fiom the veiy stait, having been the one to
piopose to piivate iesponuent Pacfoi the setting up of a iepiesentative office, anu
"not a bianch office" in the Philippines to save on taxes. Thus, the paities in this case,
meiely shaieu piofits. This alone uoes not make a paitneiship.
Besiues, a coipoiation cannot become a membei of a paitneiship in the absence of
expiess authoiization by statute oi chaitei. This uoctiine is baseu on the following
consiueiations: (1) that the mutual agency between the paitneis, wheieby the
coipoiation woulu be bounu by the acts of peisons who aie not its uuly appointeu

"8
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01+2''(3 44 156"7
anu authoiizeu agents anu officeis, woulu be inconsistent with the policy of the law
that the coipoiation shall manage its own affaiis sepaiately anu exclusively; anu, (2)
that such an aiiangement woulu impiopeily allow coipoiate piopeity to become
subject to iisks not contemplateu by the stockholueis when they oiiginally investeu
in the coipoiation. No such authoiization has been pioveu in the case at bai.
(This pait goes into the employei-employee ielationship bit, I uon't think it's
impoitant but I incluueu it na uin if evei magtanong ie: paano nagging employee)
Be that as it may, we holu that on the basis of the eviuence, an employei-employee
ielationship is piesent in the case at bai. The elements to ueteimine the existence of
an employment ielationship aie: (a) the selection anu engagement of the employee;
(b) the payment of wages; (c) the powei of uismissal; anu (u) the employei's powei
to contiol the employee's conuuct. The most impoitant element is the employei's
contiol of the employee's conuuct, not only as to the iesult of the woik to be uone,
but also as to the means anu methous to accomplish it.
4S
In the instant case, all the foiegoing elements aie piesent. Fiist, it was piivate
iesponuent Pacfoi which selecteu anu engageu the seivices of petitionei as its
iesiuent agent in the Philippines. Seconu, as stipulateu in theii Siue Agieement,
piivate iesponuent Pacfoi pays petitionei his salaiy amounting to $6S,uuu pei
annum which was latei incieaseu to $78,uuu. Thiiu, piivate iesponuent Pacfoi holus
the powei of uismissal, as may be gleaneu thiough the vaiious memoianua it issueu
against petitionei, placing the lattei on pieventive suspension while chaiging him
with vaiious offenses, incluuing willful uisobeuience, seiious misconuuct, anu gioss
neglect of uuty, anu oiueiing him to show cause why no uisciplinaiy action shoulu be
taken against him.
Lastly anu most impoitant, piivate iesponuent Pacfoi has the powei of contiol ovei
the means anu methou of petitionei in accomplishing his woik.
The powei of contiol iefeis meiely to the existence of the powei, anu not to the
actual exeicise theieof. The piincipal consiueiation is whethei the employei has the
iight to contiol the mannei of uoing the woik, anu it is not the actual exeicise of the
iight by inteifeiing with the woik, but the iight to contiol, which constitutes the test
of the existence of an employei-employee ielationship.
44
In the case at bai, piivate
iesponuent Pacfoi, as employei, cleaily possesses such iight of contiol. Petitionei, as
piivate iesponuent Pacfoi's iesiuent agent in the Philippines, is, exactly so, only an
agent of the coipoiation, a iepiesentative of Pacfoi, who tiansacts business, anu
accepts seivice on its behalf.
This iight of contiol was exeiciseu by piivate iesponuent Pacfoi uuiing the peiiou of
Novembei to Becembei 2uuu, when it uiiecteu petitionei to tuin ovei to it all
iecoius of Pacfoi Phils.; when it oiueieu petitionei to iemit the Chiistmas giveaway
funu intenueu foi clients of Pacfoi Phils.; anu, when it withuiew all its offeis of
settlement anu oiueieu petitionei to tiansfei title anu tuin ovei to it the possession
of the seivice cai. It was also uuiing this peiiou when piivate iesponuent Pacfoi sent
letteis to its clients in the Philippines, paiticulaily Inteicontinental Papei Inuustiies,
Inc. anu BAvC0R, auvising them not to ueal with petitionei anuoi Pacfoi Phils. In its
lettei to BAvC0R, piivate iesponuent Pacfoi ieplieu to the client's iequest foi an
invoice payment extension, anu foimulateu a ieviseu payment piogiam foi BAvC0R.
This is one unmistakable pioof that piivate iesponuent Pacfoi exeicises contiol ovei
the petitionei.
BISP0SITIvE: 3/ [3*- -)*1*.8, the petition is :1,/(*7. The Couit of Appeals'
}anuaiy Su, 2uuS Becision in CA-u.R. SP No. 71u28 anu }uly Su, 2uuS Resolution,
affiiming the Becembei 2u, 2uu1 Becision of the National Laboi Relations
Commission, aie ,//5+*7 anu 2*( ,237*. The }uly Su, 2uu1 Becision of the Laboi
Aibitei is1*3/2(,(*7 with the <.7383!,(3./ that the amount of P2Su,uuu.uu
iepiesenting an allegeu inciease in petitionei's salaiy shall be ueuucteu fiom the
giant of sepaiation pay foi lack of eviuence.
2. .17*1*7.
[.(*K @%(/*?%=LM-)'.,,.:6 !*,*(%6 A:+-(%6 M%,+'%6 #"#"6 concui

,/:*+*2 ;4 2*!1*(,1` .8 b52(3!*
(}uly 29, 2uuS)

N1+%, A(B.=.1 %(/ OE.,')% A(B.=.16 petitioneis, v. P2. Q*(" @.+,.)%,5 *0 #-1)'+. %(/
C.='(* ;.,+%/*6 iesponuents

7.!(13/*=The puipose of iegistiation of the contiact of paitneiship with the SEC is
to give notice to thiiu paities. Failuie to iegistei the contiact of paitneiship uoes not
affect the liability of the paitneiship anu of the paitneis to thiiu peisons, noi uoes it
affect the paitneiship's juiiuical peisonality. A paitneiship may exist even if the
paitneis uo not use the woius "paitnei" oi "paitneiship."

/,(51*= Special civil action. Ceitioiaii.

0./*/(*= Caipio, #"

8,!(2=

Angeles spouses fileu a ciiminal complaint foi estafa against Neicauo, theii
biothei-in-law
o Claimeu that Neicauo convinceu them to entei into a contiact of antichiesis,
to last foi S yeais, coveiing 8 paicels of lanu planteu with fiuit-beaiing
lanzones tiees in Nagcailan, Laguna anu owneu by }uan Sanzo
o The paities agieeu that Neicauo woulu auministei the anus anu complete the
necessaiy papeiwoik

"7
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01+2''(3 44 156"7
o Aftei S yeais, the Angeles spouses askeu foi an accounting fiom Neicauo, anu
they claim that only aftei this uemanu foi an accounting uiu thy uiscovei that
Neicauo hau put the contiact of antichiesis ovei the subject lanu unuei
Neicauo anu his spouse's names
Neicauo uenieu the Angeles spouses' allegations
o Claimeu that theie exists an @#DI&$E@?> H?E$#%E&C@HN colloquially known as
1*15* '(/-1),'%=6 between him anu his spouse as inuustiial paitneis anu the
Angeles spouses as financieis, anu that this hau existeu since 1991, befoie the
contiact of antichiesis ovei the subject lanu
o Neicauo useu his anu his spouse's eainings as pait of the capital in the
business tiansactions which he enteieu into in behalf of the Angeles spouses.
It was theii piactice to entei into business tiansactions with othei people
unuei the name of Neicauo because the Angeles spouses uiu not want to be
iuentifieu as the financieis
o Attacheu bank ieceipts showing ueposits in behalf of Emeiita Angeles anu
contiacts unuei his name foi the Angeles spouses
Buiing the baiangay conciliation pioceeuings, 0scai Angeles stateu that theie
was a wiitten 1*15* '(/-1),'%= agieement: capital woulu come fiom the Angeles
spouses while the piofit woulu be uiviueu evenly between Neicauo anu the
Angeles spouses
0E";@#J@?> 0E"&%JI$@"# .AA@J%= fiist iecommenueu the filing of a ciiminal
infoimation foi estafa, but aftei Neicauo fileu his countei-affiuavit anu moveu foi
ieconsiueiation, issueu an amenueu iesolution uismissing the complaint
Angeles spouses appealeu to Sec. of }ustice, saying that the uocument eviuencing
the contiact of antichiesis executeu in the name of the Neicauo spouses, insteau
of the Angeles spouses, anu that such uocument alone pioves Neicauo's
misappiopiiation of theii P21u, uuu
2%J4 "A bI&$@J%= uismisseu the appeal
o Angeles spouses faileu to show sufficient pioof that Neicauo uelibeiately
ueceiveu them in the tiansaction
o Neicauo satisfactoiily explaineu that the Angeles spouses uo not want to be
ievealeu as the financieis
o 0nuei the ciicumstances, it was moie likely that the Angeles spouses knew
fiom the veiy stait that the questioneu uocument was not ieally in theii
names
o A paitneiship tiuly existeu between the Angeles spouses anu Neicauo, which
was cleai fiom the fact that they contiibuteu money to a common funu anu
uiviueu the piofits among themselves.
o Angeles spouses acknowleugeu theii joint business ventuie in the baiangay
conciliation pioceeuings although they assaileu the mannei the business was
conuucteu
o Although the legal foimalities foi the foimation weie not auheieu to, the
paitneiship ielationship was eviuent.
o Theie is no estafa wheie money is ueliveieu by a paitnei to his co-paitnei on
the lattei's iepiesentation that the amount shall be applieu to the business of
theii paitneiship. In case of the money ieceiveu, the co-paitnei's liability is
civil in natuie

3225*2Z)*+7=

1. WN the Sec. of }ustice committeu giave abuse of uiscietion in uismissing
the appeal - No
2. WN a paitneiship existeu between Neicauo anu the Angeles spouses - Yes
S. WN theie was misappiopiiation by Neicauo - No

1,(3.Z15+3/:=

1. Angeles spouses fail to convince that the Secietaiy of }ustice committeu giave
abuse of uiscietion when he uismisseu theii appeal. Noieovei, they committeu a
pioceuuial eiioi when they faileu to file a motion foi ieconsiueiation of the Sec. of
}ustice's iesolution, which is alieauy enough ieason to uismiss the case.

2. Angeles spouses allege that they hau no paitneiship with Neicauo, ielying on Aits.
1771 to 177S of the Civil Coue.

The Angeles spouses' position that theie is no paitneiship because of the lack of a
public instiument inuicating the same anu a lack of iegistiation with the SEC
holus no watei
o The Angeles spouses contiibuteu money to the paitneiship anu not
immovable piopeity
o Neie failuie to iegistei the contiact of paitneiship with the SEC uoes not
invaliuate a contiact that has the essential iequisites of a paitneiship. The
puipose of iegistiation is to give notice to thiiu paities.
Failuie to iegistei uoes not affect the liability of the paitneiship anu of the
paitneis to thiiu peisons, noi uoes it affect the paitneiship's juiiuical peisonality
The Angeles spouses aumit to facts that piove the existence of a paitneiship
o A contiact showing a 1*15* '(/-1),'%= oi inuustiial paitneiship
o Contiibution of money & inuustiy to a common funu
o Bivision of piofits between the Angeles spouses anu Neicauo

S. Neicauo satisfactoiily explaineu that the Angeles spouses uo not want to be
ievealeu as the financieis, thus the uocument which was in the name of Neicauo anu
his spouse fail to convince that theie was ueceit oi false iepiesentation that inuuceu
the Angeles spouses to pait with theii money

Even the RTC of Sta. Ciuz, Laguna, which hanuleu the civil case fileu by the
Angeles spouses against Neicauo anu Leo Ceiayban stateu that it was the
piactice to have the contiacts secuieu in Neicauo's name as the Angeles spouses
feai being kiunappeu by the NPA oi being questioneu by the BIR as 0scai Angeles
was woiking with the goveinment.

Accounting of the pioceeus is not a piopei subject foi the piesent case.

7320.23(3./= Petition foi ceitioiaii uismisseu. Becision of Sec. of }ustice affiimeu.

[.(*= 1
st
Bivision, all concui.

"9
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-.
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01+2''(3 44 156"7



74 <5(5,+ ,:*/!`
*4 732(3/:532) 81.<
O4 !"a"R#%E&C@H6 !"aH"&&%&&@"#
L4 (%#?#JS @# J"KK"#6 T"@#$ $%#?#JS
c4 b"@#$ [%#$IE%&
W4 b"@#$ ,D;%#$IE%&
P4 b"@#$ ?JJ"I#$&
]4 !I%#$?& %# 0?E$@J@H?J@"#
^4 ,B%#JS
:,(!),+3,/ ;4 !31
A3,'= RS6 TSUS

0./*/(*= Impeiial, }.

8,!(2=
The 1Splaintiff aie all iesiuents of the municipality of Pulilan, Bulacan,
puichaseu one sweepstakes ticket valueu at two pesos (P2), uiviueu in vaiious
amounts among themselves.
o the saiu ticket was iegisteieu in the name of }ose uatchalian anu
Company;
o The ticket won Su,uuu pesos.
Plaintiff submitteu 1S income tax ietuins foi exemption fiom the 1,499 tax on
the lotteiy winnings, asking that the tax be uiviueu accoiuing to the amount paiu
by each plaintiff;
o CIR uenieu the plaintiff's iequest foi exemption, stating that the
plaintiffs aie a paitneiship;

3225*=
O4 Whethei the plaintiffs foimeu a paitneiship, oi meiely a community of
piopeity without a peisonality of its own; 8"EK%D ? H?E$#%E&C@H "A ? J@;@>
#?$IE%4
L4 Whethei they shoulu pay the tax collectively oi whethei the lattei shoulu
be pioiateu among them anu paiu inuiviuually; !">>%J$@;%>S4

)*+7=
O4 Accoiuing to the stipulation facts the plaintiffs oiganizeu a paitneiship of a
civil natuie because each of them put up money to buy a sweepstakes ticket
A"E $C% &">% HIEH"&% "A D@;@D@#B %fI?>>S $C% HE@j% RC@JC $C%S K?S R@#,
as they uiu in fact in the amount of PSu,uuu;
The paitneiship was not only foimeu, but upon the oiganization
theieof anu the winning of the piize, }ose uatchalian peisonally
appeaieu in the office of the Philippines Chaiity Sweepstakes, in
his capacity as co-paitnei, as such collection the piize, the office
issueu the check foi PSu,uuu in favoi of }ose uatchalian anu
company, anu the saiu paitnei, in the same capacity, collecteu the
saiu check.
All these ciicumstances iepel the iuea that the plaintiffs oiganizeu
anu foimeu a community of piopeity only.
L4 Baving oiganizeu anu constituteu a paitneiship of a civil natuie, the saiu
entity is the one bounu to pay the income tax which the uefenuant collecteu
unuei the afoiesaiu section 1u (%) of Act No. 28SS, as amenueu by section 2
of Act No. S761.

0,2!5,+ ;4 !31
(0ctobei 18, 1988)
7.!(13/*= Theie must be a cleai intent to foim a paitneiship, the existence of a
juiiuical peisonality uiffeient fiom the inuiviuual paitneis, anu the fieeuom of each
paity to tiansfei oi assign the whole piopeity.
/,(51*= Petition foi ieview on ceitioiaii of the uecision of the Couit of Tax Appeals
(CTA) affiiming the uecision of the Commissionei of Inteinal Revenue.
0./*/(*= uancayo, #"
8,!(2=
Petitioneis Naiiano Pascual anu Renato P. Biagon aie siblings.
196S - Bought 2 Paicels of Lanu
1966 - Bought anothei S Paicels of Lanu
1968 - Solu the fiist to Paicels of Lanu
197u - Solu the iemaining S Paicels.
They iealizeu a total of P 6u,uuu.uu piofit, anu paiu the coiiesponuing capital gains
by availing of the tax amnesty in the yeais 197S - 74.
BIR Commissionei assesseu that the siblings oweu P1u7,1u1.7u foi coipoiate income
tax being an uniegisteieu paitneiship.
Petitioneis asseit that they aie not a paitneiship, but aie co-owneis who have paiu
theii coiiesponuing capital gains in '7S anu '74.
3225*2=
WN the Siblings weie an uniegisteieu paitneiship which was liable to pay
coipoiate tax.

":
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01+2''(3 44 156"7
)*+7=
No, they weie co-owneis.
1,(3.Z15+3/:=
The CTA anchoieu theii iuling on an eailiei case of Evangelista. Which helu that the
iequisite foi a paitneiship is a) an agieement to contiibute money, piopeity oi
inuustiy in a common funu, anu b) intent to uiviue the piofits among the contiacting
paities.
In the piesent case, theie is no eviuence that petitioneis enteieu into an agieement
to contiibute money, piopeity oi inuustiy to a common funu anu that they intenueu
to uiviue the piofits among themselves. Commissionei meiely assumeu the piesence
of these elements.
Also, the eailiei iuling in O?%(B.='1)% showeu that theie weie seveial tiansactions,
which showeu the chaiactei of C?F@$I?>>S H%JI>@?E to business tiansactions engageu
in foi the puipose of gain was piesent.
The common owneiship of piopeity uoes not in itself cieate a paitneiship between
the owneis, though they may use it foi puipose of making gains; anu they may,
without becoming paitneis, agiee among themselves as to the management, anu use
of such piopeity anu applications of the pioceeus theiefiom.
The shaiing of ietuins uoes not in itself establish a paitneiship whethei oi not the
peisons shaiing theiein have a joint oi common iight oi inteiest in the piopeity.
Theie must be a cleai intent to foim a paitneiship, the existence of a juiiuical
peisonality uiffeient fiom the inuiviuual paitneis, anu the fieeuom of each paity to
tiansfei oi assign the whole piopeity.
Theie must be intent to cieate a PARTNERSBIP with a uistinct juiiuical peisonality
to that of the paitneis.
7320.23(3./= Petition is :1,/(*7 uecision of the CTA is 1*[*12*7 anu 2*(
,237*
[.(*= Siu Bivision. Ciuz, uiino-Aquino, Neuialuea, }}. Concui
Naivasa, }. Took no pait

.93++.2 ;4 !31
(0ctobei 29, 198S)
7.!(13/*= P2. 12%,'(B *0 B,*11 ,.)-,(1 /*.1 (*) *0 ')1.=0 .1)%&='12 %
3%,)(.,12'36 V2.)2., *, (*) )2. 3.,1*(1 12%,'(B )2.E 2%?. % W*'() *, +*EE*( ,'B2) *,
'().,.1) '( %(5 3,*3.,)5 0,*E V2'+2 )2. ,.)-,(1 %,. /.,'?./" P2.,. E-1) &. %(
-(E'1)%<%&=. '().()'*( )* 0*,E % 3%,)(.,12'3 *, W*'() ?.()-,."

/,(51*= Petition to ieview the uecision of the Couit of Tax Appeals
0./*/(*= Aquino, #"
8,!(2=
Foi at least one yeai aftei theii ieceipt of two paicels of lanu fiom theii
fathei, petitioneis iesolu saiu lots to the Walleu City Secuiities Coipoiation anu 0lga
Ciuz Canua, foi which they eaineu a piofit of P1S4,S41.88 oi PSS,S84 foi each of
them. They tieateu the piofit as a capital gain anu paiu an income tax on one-half
theieof oi of P16,792.
0ne uay befoie the expiiation of the five-yeai piesciiptive peiiou, the
Commissionei of Inteinal Revenue, Commissionei acting on the theoiy that the foui
petitioneis hau foimeu an uniegisteieu paitneiship oi joint ventuie, iequiieu the
foui petitioneis to pay +*,3*,%). '(+*E. )%X on the total piofit of P1S4,SS6 in
auuition to inuiviuual income tax on theii shaies theieof, a Su% fiauu suichaige anu
a 42% accumulateu inteiest. Fuithei, the Commissionei consiueieu the shaie of the
piofits of each petitionei in the sum of PSS,S84 as a " taxable in full (not a meie
capital gain of which is taxable) anu iequiieu them to pay ueficiency income taxes
aggiegating PS6,7u7.2u incluuing the Su% fiauu suichaige anu the accumulateu
inteiest.
The petitioneis contesteu the assessments. Two }uuges of the Tax Couit
sustaineu the same. }uuge Roaquin uissenteu. Bence, the instant appeal.

3225*2=Whethei oi not petitioneis have inueeu foimeu a paitneiship oi joint
ventuie anu thus, liable foi coipoiate income tax.

)*+7 \1,(3.Z15+3/:=We holu that it is eiioi to consiuei the petitioneis
as having foimeu a paitneiship unuei aiticle 1767 of the Civil Coue simply because
they allegeuly contiibuteu P178,7u8.12 to buy the two lots, iesolu the same anu
uiviueu the piofit among themselves.
To iegaiu the petitioneis as having foimeu a taxable uniegisteieu
paitneiship woulu iesult in oppiessive taxation anu confiim the uictum that the
powei to tax involves the powei to uestioy. That eventuality shoulu be obviateu.
As testifieu by }ose 0billos, }i., they hau no such intention. They weie co-
owneis puie anu simple. To consiuei them as paitneis woulu obliteiate the
uistinction between a co-owneiship anu a paitneiship. The petitioneis weie not
engageu in any joint ventuie by ieason of that isolateu tiansaction.
Aiticle 1769(S) of the Civil Coue pioviues that "the shaiing of gioss ietuins
uoes not of itself establish a paitneiship, whethei oi not the peisons shaiing them
have a joint oi common iight oi inteiest in any piopeity fiom which the ietuins aie
ueiiveu". Theie must be an unmistakable intention to foim a paitneiship oi joint
ventuie.

7320.23(3./=WBEREF0RE, the juugment of the Tax Couit is ieveiseu anu set asiue.
The assessments aie cancelleu. No costs.


";
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01+2''(3 44 156"7
[.(*= 2nu Bivision. A&%/ @%()*16 O1+*='(6 !-.?%16 A=%E3%5concui. Concepcion }i. on
leave.

13[*1, ;4 0*.0+*g2 9,/h
(Apiil 7, 1942)
7.!(13/*= In the absence of cleai pioof of the contiaiy, the SC gives full faith anu
cieuit to the ceitificate of ueposit, which iecites in effect that the funus in question
belongeu to peisons A anu B; that they weie T"@#$ "R#%E& anu that eithei of them
coulu withuiaw any pait oi the whole of saiu account uuiing the lifetime of both, anu
the balance, if any, upon the ueath of eithei, belongeu to the suivivoi.
/,(51*= The question iaiseu in this appeal is the valiuity of the suivivoiship
agieement maue by anu between Eugai Stephenson, now ueceaseu, anu Ana Riveia,
appellant heiein
0./*/(*= 0zaeta, }.
8,!(2=
Ana Riveia was employeu by Eugai Stephenson as housekeepei. Stephenson openeu
an account in his name with the uefenuant Peoples Bank.
When theie was a balance of P2,u72 in saiu account, the suivivoiship agieement in
question was executeu anu the saiu account was tiansfeiieu to the name of "Eugai
Stephenson anuoi Ana Riveia." At the time of Stephenson's ueath Ana Riveia helu
the ueposit book, anu theie was a balance in saiu account of P7u1.4S, which Ana
Riveia claimeu but which the bank iefuseu to pay to hei upon auvice of its attoineys
who gave the opinion that the suivivoiship agieement was of uoubtful valiuity.
Ana Riveia instituteu the piesent action against the bank, anu Ninnie Stephenson,
auministiatix of the estate of the ueceaseu, inteiveneu anu claimeu the amount foi
the estate, alleging that the money uepositeu in saiu account was anu is the exclusive
piopeity of the ueceaseu.
TC: helu that the agieement in question, vieweu fiom its effect uuiing the lives of the
paities, was a meie powei of attoiney authoiizing Ana Riveia to withuiaw the
ueposit, which powei teiminateu upon the ueath of the piincipal, Eugai Stephenson;
but that, vieweu fiom its effect aftei the ueath of eithei of the paities, the agieement
was a uonation E*,)'1 +%-1% with iefeience to the balance iemaining at the ueath of
one of them, which, not having been executeu with the foimalities of a testamentaiy
uisposition as iequiieu by the Civil Coue, was of no legal effect.
3225*2=
O4-./ $C% suivivoiship agieement was a meie powei of attoiney fiom Stephenson
to Ana Riveia, oi that it is a gift E*,)'1 +%-1% of the bank account in question fiom
him to hei.
2. W0N the suivivoiship agieement is valiu
)*+7=
L4 /"
c4 `%&
1,(3.Z15+3/:=

8@E&$ 3&&I%
O4 The TC's conclusion is pieuicateu on the assumption that Stephenson was
the exclusive ownei of the funus uepositeu in the bank, which assumption
was in tuin baseu on the facts (1) that the account was oiiginally openeu in
the name of Stephenson alone anu (2) that Ana Riveia "seiveu only as
housemaiu of the ueceaseu."
L4 9I$ @$ #"$ @#AE%fI%#$>S C?HH%#& $C?$ ? H%E&"# D%H"&@$& K"#%S @# $C%
F?#e @# $C% #?K% "A ?#"$C%E6 ?#D @# $C% @#&$?#$ J?&% @$ ?>&" ?HH%?E&
$C?$ ,#? 1@;%E? &%E;%D C%E K?&$%E A"E ?F"I$ #@#%$%%# S%?E& R@$C"I$
?J$I?>>S E%J%@;@#B C%E &?>?ES AE"K C@K4 (C% A?J$ $C?$ &IF&%fI%#$>S
2$%HC%#&"# $E?#&A%EE%D $C% ?JJ"I#$ $" $C% #?K% "A C@K&%>A ?#DZ"E ,#?
1@;%E? ?#D %Y%JI$%D R@$C $C% >?$$%E $C% &IE;@;"E&C@H ?BE%%K%#$ @#
fI%&$@"# ?>$C"IBC $C%E% R?& #" E%>?$@"# "A e@#&C@H F%$R%%# $C%K FI$
"#>S $C?$ "A K?&$%E ?#D &%E;?#$N #I>>@A@%& $C% ?&&IKH$@"# $C?$
2$%HC%#&"# R?& $C% %YJ>I&@;% "R#%E "A $C% F?#e ?JJ"I#$4
c4 3# $C% ?F&%#J% "A J>%?E HE""A "A $C% J"#$E?ESN $C% 2! B@;%& AI>> A?@$C ?#D
JE%D@$ $" $C% J%E$@A@J?$% "A D%H"&@$N RC@JC E%J@$%& @# %AA%J$ $C?$ $C% AI#D&
@# fI%&$@"# F%>"#B%D $" *DB?E 2$%HC%#&"# ?#D ,#? 1@;%E?6 $C?$ $C%S
R%E% T"@#$ "R#%E& ?#D $C?$ %@$C%E "A $C%K J"I>D R@$CDE?R ?#S H?E$ "E
$C% RC">% "A &?@D ?JJ"I#$ DIE@#B $C% >@A%$@K% "A F"$CN ?#D $C% F?>?#J%N
@A ?#SN IH"# $C% D%?$C "A %@$C%EN F%>"#B%D $" $C% &IE;@;"E4

2%J"#D @&&I%=
>? G,'E% 0%+'., SC thinks it is valiu. 3$ @& ?# ?>%?$"ES J"#$E?J$ &IHH"E$%D FS
>?R ? >?RAI> J"#&@D%E?$@"# the mutual agieement of the joint
uepositois peimitting eithei of them to withuiaw the whole ueposit uuiing
theii lifetime, anu tiansfeiiing the balance to the suivivoi upon the ueath of
one of them. The tiial couit saiu that the Civil Coue "contains no piovisions
sanctioning such an agieement" SC thinks it is coveieu by aiticle 179u of
the Civil Coue.
@? Fuitheimoie, Q@$ @& R%>> %&$?F>@&C%D $C?$ ? F?#e ?JJ"I#$ K?S F% &"
JE%?$%D $C?$ $R" H%E&"#& &C?>> F% T"@#$ "R#%E& $C%E%"A DIE@#B $C%@E
KI$I?> >@;%&N ?#D $C% &IE;@;"E $?e% $C% RC">% "# $C% D%?$C "A $C%
"$C%E. The iight to make such joint ueposits has geneially been helu not to
be uone with by statutes abolishing joint tenancy anu suivivoiship
geneially as they existeu at common law."
A? ,>$C"IBC $C% &IE;@;"E&C@H ?BE%%K%#$ @& "#$ +# #"$ J"#$E?ES $" >?RN @$&
"H%E?$@"# "E %AA%J$ K?S F% ;@">?$@;% "A $C% >?R4 Foi instance, if it be
shown in a given case that such agieement is a meie cloak to hiue an

"<
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01+2''(3 44 156"7
inofficious uonation, to tiansfei piopeity in fiauu of cieuitois, oi to uefeat
the legitime of a foiceu heii, it may be assaileu anu annulleu upon such
giounus. /" &IJC ;@J% C?& F%%# @KHI$%D ?#D %&$?F>@&C%D ?B?@#&$ $C%
?BE%%K%#$ @#;">;%D @# $C% J?&%4
7320.23(3./= The agieement appealeu fiom is ieveiseu anu anothei juugment will
be enteieu in favoi of the plaintiff oiueiing the uefenuant bank to pay to hei the sum
of P7u1.4S, with legal inteiest theieon fiom the uate of the complaint, anu the costs
in both instances. So oiueieu.
[.(*= ,>> J"#JIE

(5,2./ ;4 9.+,/.2
8,!(2:

This was an action to iecovei possesion of iegisteieu lanu situateu in baiiio Tatalon,
Quezon City.

The plaintiff was iepiesenteu by a coipoiation, the law fiim Aianeta & Aianeta.

3225*:

W0N the case shoulu be uismisseu on the giounu that the case was not biought by
the ieal piopeity in inteiest

)*+7:

No.

! Theie is nothing to the contention that the piesent action is not
biought by the ieal paity in inteiest, that is, by }. N. Tuason anu Co.,
Inc. What the Rules of Couit iequiie is that an action be biought '( )2.
(%E. *06 but not necessaiily &5, the ieal paity in inteiest. (Section 2,
Rule 2.)
! The complaint is signeu by the law fiim of Aianeta anu Aianeta,
"counsel foi plaintiff" anu commences with the statement "comes now
plaintiff, thiough its unueisigneu counsel." It is tiue that the complaint
also states that the plaintiff is "iepiesenteu heiein by its Nanaging
Paitnei uiegoiio Aianeta, Inc.", anothei coipoiation.
! (C%E% @& #"$C@#B ?B?@#&$ "#% J"EH"E?$@"# F%@#B E%HE%&%#$%D FS
?#"$C%E H%E&"#N #?$IE?> "E TIE@D@J?>N @# ? &I@$ @# J"IE$4
! (C% J"#$%#$@"# $C?$ :E%B"E@" ,E?#%$? 3#J4 J?##"$ ?J$ ?& K?#?B@#B
H?E$#%E A"E H>?@#$@AA "# $C% $C%"ES $C?$ @$ @& @>>%B?> A"E $R"
J"EH"E?$@"#& $" %#$%E @#$" ? H?E$#%E&C@H @& R@$C"I$ K%E@$N A"E $C%
$EI% EI>% @& $C?$ $C"IBC ? J"EH"E?$@"# C?& #" H"R%E @#$" ?
H?E$#%E&C@HN @$ K?S #%;%E$C%>%&& %#$%E @#$" ? T"@#$ ;%#$IE% R@$C
?#"$C%E RC%E% $C% #?$IE% "A $C?$ ;%#$IE% @& @# >@#% R@$C $C%
FI&@#%&& ?I$C"E@j%D FS @$& JC?E$%E (Wyoming-Inuiana 0il uas Co. ?1.
Weston, 8u A. L. R., 1u4S, citing 2 Fletchei Cyc. of Coip., 1u82.)
! Theie is nothing in the iecoiu to inuicate that the ventuie in which
plaintiff is iepiesenteu by uiegoiio Aianeta, Inc. as "its managing
paitnei" is not in line with the coipoiate business of eithei of them.


)*312 .8 (,/: */: h** ;4 !,
N+)*&., U6 RYYY
8,!(2=
The common-law spouse anu chiluien of TAN ENu KEE (the plaintiffs) fileu suit
against the ueceuent's biothei TAN ENu LAY foi accounting, liquiuation anu
winuing up of the ?>>%B%D H?E$#%E&C@H A"EK%D ?A$%E -"E>D -?E 33 F%$R%%#
(?# *#B h%% ?#D (?# *#B +?S6
o Aftei the seconu Woilu Wai, Tan Eng Kee anu Tan Eng Lay, pooling
theii iesouices anu inuustiy togethei, enteieu into a paitneiship
engageu in the business of selling lumbei anu haiuwaie anu
constiuction supplies nameu "Benguet Lumbei" which they jointly
manageu until Tan Eng Kee's ueath.
o Petitioneis claim that in 1981, Tan Eng Lay anu his chiluien causeu the
conveision of the paitneiship "Benguet Lumbei" into a coipoiation
calleu "Benguet Lumbei Company." The incoipoiation was puipoiteuly
a iuse to uepiive Tan Eng Kee anu his heiis of theii iightful
paiticipation in the piofits of the business.
RTC gianteu the petitionei foi accouting anu ueteimineu that Tan Eng Kee anu
Tan Eng Lay hau enteieu into a joint ventuie, but the CA ieveiseu such uecision,
hence the piesent petition.
3225*= Was theie a paitneiship between Tan Eng Kee anu Tan Eng Lay. /"4
)*+7=
PLAINTIFFS CLAIN TBAT because of the pooling of iesouices, the post-wai
Benguet Lumbei was eventually establisheu. That the fathei of the plaintiffs anu
Lay weie paitneis, is obvious fiom the fact that: (1) they conuucteu the affaiis of
the business uuiing Kee's lifetime, jointly, (2) they weie the ones giving oiueis
to the employees, (S) they weie the ones piepaiing oiueis fiom the supplieis,
(4) theii families stayeu togethei at the Benguet Lumbei compounu, anu (S) all
theii chiluien weie employeu in the business in uiffeient capacities.
o B0WEvER: (C%&% ?E% #"$ %;@D%#J%& &IHH"E$@#B $C% %Y@&$%#J% "A ?
H?E$#%E&C@H. (C%E% R?& #" H?E$#%E&C@H RC?$&"%;%E. Except foi a
fiim name, theie was no fiim account, no fiim letteiheaus submitteu as
eviuence, no ceitificate of paitneiship, no agieement as to piofits anu

"=
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01+2''(3 44 156"7
losses, anu no time fixeu foi the uuiation of the paitneiship. Theie was
even no attempt to submit an accounting coiiesponuing to the peiiou
aftei the wai until Kee's ueath in 1984. It hau no business book, no
wiitten account noi any memoianuum foi that mattei anu no license
mentioning the existence of a paitneiship.

.# HE"A@$& %?E#%D= Tan Eng Kee was only an employee, not a paitnei. Even if the
payiolls as eviuence weie uiscaiueu, petitioneis woulu still be back to squaie one, so
to speak, since they uiu not piesent anu offei eviuence that woulu show that Tan Eng
Kee ieceiveu amounts of money allegeuly iepiesenting his shaie in the piofits of the
enteipiise. Petitioneis faileu to show how much theii fathei, Tan Eng Kee, ieceiveu, if
any, as his shaie in the piofits of Benguet Lumbei Company foi any paiticulai peiiou.
Bence, they faileu to piove that Tan Eng Kee anu Tan Eng Lay intenueu to uiviue the
piofits of the business between themselves, which is one of the essential featuies of a
paitneiship.

.# H"R%E $" B@;% "ED%E&= even a meie supeivisoi in a company, factoiy oi stoie
gives oiueis anu uiiections to his suboiuinates. So long, theiefoie, that an
employee's position is highei in iank, it is not unusual that he oiueis aiounu those
lowei in iank.

.# HE%H?E@#B &IHH>S "ED%E&= even a messengei oi othei tiusteu employee, ovei
whom confiuence is ieposeu by the ownei, can oiuei mateiials fiom supplieis foi
anu in behalf of Benguet Lumbei. Fuitheimoie, even a paitnei uoes not necessaiily
have to peifoim this paiticulai task. It is, thus, not an inuication that Tan Eng Kee
was a paitnei.

.# &$?S@#B @# $C% HE%K@&%& "A 9%#BI%$ +IKF%E= although Tan Eng Kee, togethei
with his family, liveu in the lumbei compounu anu this piivilege was not accoiueu to
othei employees, the unuisputeu fact iemains that P%( O(B H.. '1 )2. &,*)2., *0 P%(
O(B 8%5. Natuially, close peisonal ielations existeu between them. Whatevei
piivileges Tan Eng Lay gave his biothei, anu which weie not given the othei
employees, only pioves the kinuness anu geneiosity of Tan Eng Lay towaius a bloou
ielative.

3# D%$%EK@#@#B RC%$C%E ? H?E$#%E&C@H %Y@&$&N $C%&% EI>%& &C?>> ?HH>S=
(1) Except as pioviueu by Aiticle 182S, peisons who aie not paitneis
as to each othei aie not paitneis as to thiiu peisons;
(2) Co-owneiship oi co-possession uoes not of itself establish a
paitneiship, whethei such co-owneis oi co-possessois uo oi uo
not shaie any piofits maue by the use of the piopeity;
(S) The shaiing of gioss ietuins uoes not of itself establish a
paitneiship, whethei oi not the peisons shaiing them have a joint
oi common iight oi inteiest in any piopeity which the ietuins aie
ueiiveu;
(4) The ieceipt by a peison of a shaie of the piofits of a business is
a 3,'E% 0%+'. eviuence that he is a paitnei in the business, but no
such infeience shall be uiawn if such piofits weie ieceiveu in
payment:
(a) As a uebt by installment oi otheiwise;
(b) As wages of an employee oi ient to a lanuloiu;
(c) As an annuity to a wiuow oi iepiesentative of a ueceaseu
paitnei;
(u) As inteiest on a loan, though the amount of payment
vaiy with the piofits of the business;
(e) As the consiueiation foi the sale of a goouwill of a
business oi othei piopeity by installments oi otheiwise.

7320.23(3[*= Theie being no paitneiship, it follows that theie is no uissolution,
winuing up oi liquiuation to speak of. Bence, the petition must fail.

,519,!) ;4 2,/3(,1` -,1*2
(Becembei 1S, 1989)
7.!(13/*= The iule is that whethei the paities to a paiticulai contiact have theieby
establisheu among themselves a joint ventuie oi some othei ielation uepenus upon
theii actual intention which is ueteimineu in accoiuance with the iules goveining the
inteipietation anu constiuction of contiacts.
/,(51*= Consoliuateu petitions seek the ieview of the amenueu uecision of the
Couit of Appeals in CA-u.R. SP Nos. uS6u4 anu uS617 which set asiue the eailiei
uecision uateu }une S, 1986, of the then Inteimeuiate Appellate Couit
0./*/(*= uutieiiez, }i., #"
8,!(2=
- In 1961, 2?#@R?E%&N ? D"K%&$@J J"EH"E?$@"# R?& @#J"EH"E?$%D A"E $C%
HE@K?ES HIEH"&% "A K?#IA?J$IE@#B ?#D K?Ee%$@#B &?#@$?ES R?E%&. 0ne
of the incoipoiatois, Ni. Baluwin Young went abioau to look foi foieign
paitneis, Euiopean oi Ameiican who coulu help in its expansion plans. 0n
August 1S, 1962, ASI, a foieign coipoiation uomicileu in Belawaie, 0niteu
States enteieu into an Agieement with Saniwaies anu some Filipino
investois wheieby ASI anu the Filipino investois agieeu to paiticipate in
the owneiship of an enteipiise which woulu engage piimaiily in the
business of manufactuiing in the Philippines anu selling heie anu abioau
vitieous china anu sanitaiy waies. (C% H?E$@%& ?BE%%D $C?$ $C% FI&@#%&&
"H%E?$@"#& @# $C% 0C@>@HH@#%& &C?>> F% J?EE@%D "# FS ?# @#J"EH"E?$%D
%#$%EHE@&% anu that the name of the coipoiation shall initially be "Sanitaiy
Waies Nanufactuiing Coipoiation."
- S. A,)'+=.1 *0 Z(+*,3*,%)'*(
(a) The Aiticles of Incoipoiation of the Coipoiation shall be substantially in
the foim annexeu heieto as Exhibit A anu, insofai as peimitteu unuei
Philippine law, shall specifically pioviue foi
(1) Cumulative voting foi uiiectois:
xxx xxx xxx

56
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01+2''(3 44 156"7
S. ;%(%B.E.()
(a) The management of the Coipoiation shall be vesteu in a Boaiu of
Biiectois, which shall consist of nine inuiviuuals. As long as Ameiican-
Stanuaiu shall own at least Su% of the outstanuing stock of the
Coipoiation, thiee of the nine uiiectois shall be uesignateu by Ameiican-
Stanuaiu, anu the othei six shall be uesignateu by the othei stockholueis of
the Coipoiation.
- The ?BE%%K%#$ J"#$?@#%D HE";@&@"#& D%&@B#%D $" HE"$%J$ @$ ?& ?
K@#"E@$S BE"IH, incluuing the giant of veto poweis ovei a numbei of
coipoiate acts anu the iight to uesignate ceitain officeis, such as a membei
of the Executive Committee whose vote was iequiieu foi impoitant
coipoiate tiansactions.
- The joint enteipiise thus enteieu into by the Filipino investois anu the
Ameiican coipoiation piospeieu. 5#A"E$I#?$%>SN R@$C $C% FI&@#%&&
&IJJ%&&%&N $C%E% J?K% ? D%$%E@"E?$@"# "A $C% @#@$@?>>S C?EK"#@"I&
E%>?$@"#& F%$R%%# $C% $R" BE"IH&4 ,JJ"ED@#B $" $C% 8@>@H@#" BE"IHN ?
F?&@J D@&?BE%%K%#$ R?& DI% $" $C%@E D%&@E% $" %YH?#D $C% %YH"E$
"H%E?$@"#& "A $C% J"KH?#S $" RC@JC ,23 "FT%J$%D ?& @$ ?HH?E%#$>S C?D
"$C%E &IF&@D@?E@%& "A T"@#$ T"@#$ ;%#$IE% BE"IH& @# $C% J"I#$E@%& RC%E%
0C@>@HH@#% %YH"E$& R%E% J"#$%KH>?$%D. 0n Naich 8, 198S, the annual
stockholueis' meeting was helu4
- The ASI gioup nominateu thiee peisons namely; Wolfgang Auibach, }ohn
uiiffin anu Baviu P. Whittingham. The Philippine investois nominateu six,
namely; Einesto Laguameo, Si., Raul A. Boncan, Einesto R. Laguameo, }i.,
ueoige F. Lee, anu Baluwin Young. Ni. Euuaiuo R, Ceniza then nominateu
Ni. Luciano E. Salazai, who in tuin nominateu Ni. Chailes Chamsay. The
chaiiman, Baluwin Young iuleu the last two nominations out of oiuei on
the basis of section S (a) of the Agieement, the consistent piactice of the
paities uuiing the past annual stockholueis' meetings to nominate only
nine peisons as nominees foi the nine-membei boaiu of uiiectois, anu the
legal auvice of Saniwaies' legal counsel.
- Theie weie piotests against the action of the Chaiiman anu heateu
aiguments ensueu. An appeal was maue by the ASI iepiesentative to the
bouy of stockholueis piesent that a vote be taken on the iuling of the
Chaiiman. A seiies of events then ensueu that culminateu in the eventual
aujouinment of the meeting anu wheie the ASI uioup, Luciano E. Salazai
anu othei stockholueis, allegeuly iepiesenting SS oi S4% of the shaies of
Saniwaies, ueciueu to continue the meeting at the elevatoi lobby of the
Ameiican Stanuaiu Builuing. The continueu meeting was piesiueu by
Luciano E. Salazai, while Anuies uatmaitan acteu as Secietaiy. 0n the basis
of the cumulative votes cast eailiei in the meeting, the ASI uioup
nominateu its foui nominees; Wolfgang Auibach, }ohn uiiffin, Baviu
Whittingham anu Chailes Chamsay. Luciano E. Salazai voteu foi himself,
thus the saiu five uiiectois weie ceitifieu as electeu uiiectois by the Acting
Secietaiy, Anuies uatmaitan, with the explanation that theie was a tie
among the othei six (6) nominees foi the foui (4) iemaining positions of
uiiectois anu that the bouy ueciueu not to bieak the tie.
- (C%&% @#J@D%#$& $E@BB%E%D "AA $C% A@>@#B "A &%H?E?$% H%$@$@"#& FS $C%
H?E$@%& R@$C $C% 2%JIE@$@%& ?#D *YJC?#B% !"KK@&&@"# U2*!V4 (C% $R"
H%$@$@"#& R%E% J"#&">@D?$%D ?#D $E@%D T"@#$>S FS ? C%?E@#B "AA@J%E RC"
E%#D%E%D ? D%J@&@"# IHC">D@#B $C% %>%J$@"# "A $C% +?BD?K%" :E"IH
?#D D@&K@&&@#B $C% fI" R?EE?#$" H%$@$@"# "A 2?>?j?E ?#D !C?K&?S4 (C%
,23 :E"IH ?#D 2?>?j?E ?HH%?>%D the uecision to the SEC en banc which
affiimeu the heaiing officei's uecision.
- The SEC uecision leu to the filing of two sepaiate appeals with the
Inteimeuiate Appellate Couit by Wolfgang Auibach, }ohn uiiffin, Baviu
Whittingham anu Chailes Chamsay (uocketeu as AC-u.R. SP No. uS6u4) anu
by Luciano E. Salazai (uocketeu as AC-u.R. SP No. uS617). The petitions
weie consoliuateu anu the appellate couit in its uecision oiueieu the
iemanu of the case to the Secuiities anu Exchange Commission with the
uiiective that a new stockholueis' meeting of Saniwaies be oiueieu
convokeu as soon as possible, unuei the supeivision of the Commission.
- 5H"# ? K"$@"# A"E E%J"#&@D%E?$@"# A@>%D FS $C% ?HH%>>%%& U+?BD?K%"
:E"IHV $C% ?HH%>>?$% J"IE$ U!"IE$ "A ,HH%?>&V E%#D%E%D $C%
fI%&$@"#%D ?K%#D%D D%J@&@"#4 Petitioneis Wolfgang Auibach, }ohn
uiiffin, Baviu P. Whittingham anu Chailes Chamsay in u.R. No. 7S87S assign
the following eiiois:
- I. TBE C00RT 0F APPEALS, IN EFFECT, 0PBELB TBE ALLEuEB ELECTI0N
0F PRIvATE RESP0NBENTS AS NENBERS 0F TBE B0ARB 0F BIRECT0RS
0F SANIWARES WBEN IN FACT TBERE WAS N0 ELECTI0N AT ALL.
- II. TBE C00RT 0F APPEALS PR0BIBITS TBE ST0CKB0LBERS FR0N
EXERCISINu TBEIR F0LL v0TINu RIuBTS REPRESENTEB BY TBE
N0NBER 0F SBARES IN SANIWARES, TB0S BEPRIvINu PETITI0NERS ANB
TBE C0RP0RATI0N TBEY REPRESENT 0F TBEIR PR0PERTY RIuBTS
WITB00T B0E PR0CESS 0F LAW.
- Petitionei Luciano E. Salazai in u.R. Nos. 7S97S-76 assails the amenueu
uecision on the following giounus:
- 11.1. That Amenueu Becision woulu sanction the CA's uisiegaiu of binuing
contiactual agieements enteieu into by stockholueis anu the ieplacement
of the conuitions of such agieements with teims nevei contemplateu by the
stockholueis but meiely uictateu by the CA .
- 11.2. The Amenueu uecision woulu likewise sanction the uepiivation of the
piopeity iights of stockholueis without uue piocess of law in oiuei that a
favoieu gioup of stockholueis may be illegally benefitteu anu guaianteeu a
continuing monopoly of the contiol of a coipoiation. (pp. 14-1S, Rollo-
7S97S-76)
- 0n the othei hanu, the petitioneis in u.R. No. 7S9S1 contenu that:
- TBE ANENBEB BECISI0N 0F TBE RESP0NBENT C00RT, WBILE
REC0uNIZINu TBAT TBE ST0CKB0LBERS 0F SANIWARES ARE BIvIBEB
INT0 TW0 BL0CKS, FAILS T0 F0LLY ENF0RCE TBE BASIC INTENT 0F TBE
AuREENENT ANB TBE LAW.

5"
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01+2''(3 44 156"7
- TBE ANENBEB BECISI0N B0ES N0T CATEu0RICALLY R0LE TBAT
PRIvATE PETITI0NERS BEREIN WERE TBE B0LY ELECTEB BIRECT0RS
B0RINu TBE 8 NARCB 198S ANN0AL ST0CKB0LBERS NEETINu 0F
SANTWARES. (P. 24, Rollo-7S9S1)
-
3225*2=
The main issue hinges on who weie the uuly electeu uiiectois of Saniwaies foi the
yeai 198S uuiing its annual stockholueis' meeting helu on Naich 8, 198S. To answei
this question the following factois shoulu be ueteimineu: UOV $C% #?$IE% "A $C%
FI&@#%&& %&$?F>@&C%D FS $C% H?E$@%& RC%$C%E @$ R?& ? T"@#$ ;%#$IE% "E ?
J"EH"E?$@"# ?#D (2) whethei oi not the ASI uioup may vote theii auuitional 1u%
equity uuiing elections of Saniwaies' boaiu of uiiectois.
)*+7=
3# $C% @#&$?#$ J?&%&N "IE %Y?K@#?$@"# "A @KH"E$?#$ HE";@&@"#& "A $C% ,BE%%K%#$
?& R%>> ?& $C% $%&$@K"#@?> %;@D%#J% HE%&%#$%D FS $C% +?BD?K%" ?#D `"I#B
:E"IH &C"R& $C?$ $C% H?E$@%& ?BE%%D $" %&$?F>@&C ? T"@#$ ;%#$IE% ?#D #"$ ?
J"EH"E?$@"#4

1,(3.Z15+3/:=
- Theie aie two gioups in this case, the Laguameo gioup composeu of
Filipino investois anu the Ameiican Stanuaiu Inc. composeu of foieign
investois. The ASI uioup anu petitionei Salazai contenu that the actual
intention of the paities shoulu be vieweu stiictly on the "Agieement" uateu
August 1S, 1962 wheiein it stateu the paities' intention was to foim a
coipoiation anu not a joint ventuie.
- The ASI uioup anu petitionei Salazai (u.R. Nos. 7S97S-76) contenu that the
actual intention of the paities shoulu be vieweu stiictly on the "Agieement"
uateu August 1S,1962 wheiein it is cleaily stateu that the paities' intention
was to foim a coipoiation anu not a joint ventuie.
- They specifically mention numbei 16 unuei ;'1+.==%(.*-1 G,*?'1'*(1 which
states:
xxx xxx xxx
c) nothing heiein containeu shall be constiueu to constitute any of the
paities heieto paitneis oi joint ventuieis in iespect of any tiansaction
heieunuei. (At P. 66, Rollo-uR No. 7S87S)
- They object to the aumission of othei eviuence which tenus to show that
the paities' agieement was to establish a joint ventuie piesenteu by the
Laguameo anu Young uioup on the giounu that it contiavenes the paiol
eviuence iule unuei section 7, Rule 1Su of the Reviseu Rules of Couit.
- 3# $C% @#&$?#$ J?&%&N "IE %Y?K@#?$@"# "A @KH"E$?#$ HE";@&@"#& "A $C%
,BE%%K%#$ ?& R%>> ?& $C% $%&$@K"#@?> %;@D%#J% HE%&%#$%D FS $C%
+?BD?K%" ?#D `"I#B :E"IH &C"R& $C?$ $C% H?E$@%& ?BE%%D $" %&$?F>@&C
? T"@#$ ;%#$IE% ?#D #"$ ? J"EH"E?$@"#4 The histoiy of the oiganization of
Saniwaies anu the unusual aiiangements which govein its policy making
bouy aie all consistent with a joint ventuie anu not with an oiuinaiy
coipoiation. As stateu by the SEC:
- Accoiuing to the uniebutteu testimony of Ni. Baluwin Young, he negotiateu
the Agieement with ASI in behalf of the Philippine nationals. Be testifieu
that ASI agieeu to accept the iole of minoiity vis-a-vis the Philippine
National gioup of investois, on the conuition that the Agieement shoulu
contain piovisions to piotect ASI as the minoiity.
- ,# %Y?K@#?$@"# "A $C% ,BE%%K%#$ &C"R& $C?$ J%E$?@# HE";@&@"#& R%E%
@#J>ID%D $" HE"$%J$ $C% @#$%E%&$& "A ,23 ?& $C% K@#"E@$S4 Foi example, the
vote of 7 out of 9 uiiectois is iequiieu in ceitain enumeiateu coipoiate acts.
ASI is contiactually entitleu to uesignate a membei of the Executive
Committee anu the vote of this membei is iequiieu foi ceitain tiansactions.
The Agieement also iequiies a 7S% supei-majoiity vote foi the
amenument of the aiticles anu by-laws of Saniwaies. ASI is also given the
iight to uesignate the piesiuent anu plant managei. The Agieement fuithei
pioviues that the sales policy of Saniwaies shall be that which is noimally
followeu by ASI anu that Saniwaies shoulu not expoit "Stanuaiu" piouucts
otheiwise than thiough ASI's Expoit Naiketing Seivices. 0nuei the
Agieement, ASI agieeu to pioviue technology anu know-how to Saniwaies
anu the lattei paiu ioyalties foi the same.
- It is peitinent to note that the piovisions of the Agieement iequiiing a 7 out
of 9 votes of the boaiu of uiiectois foi ceitain actions, in effect gave ASI
(which uesignates S uiiectois unuei the Agieement) an effective veto
powei. Fuitheimoie, the giant to ASI of the iight to uesignate ceitain
officeis of the coipoiation; the supei-majoiity voting iequiiements foi
amenuments of the aiticles anu by-laws; anu most significantly to the issues
of tms case, the piovision that ASI shall uesignate S out of the 9 uiiectois
anu the othei stockholueis shall uesignate the othei 6, cleaily inuicate that
theie aie two uistinct gioups in Saniwaies, namely ASI, which owns 4u% of
the capital stock anu the Philippine National stockholueis who own the
balance of 6u%, anu that 2) ASI is given ceitain piotections as the minoiity
stockholuei.
- Piemises consiueieu, we believe that unuei the Agieement theie aie two
gioups of stockholueis who establisheu a coipoiation with piovisions foi a
special contiactual ielationship between the paities, i.e., ASI anu the othei
stockholueis. (pp. 4-S)
- Section S (a) of the ?BE%%K%#$ I&%& $C% R"ED QD%&@B#?$%DQ ?#D #"$
Q#"K@#?$%DQ "E Q%>%J$%DQ @# $C% &%>%J$@"# "A $C% #@#% D@E%J$"E& "# ? &@Y
$" $CE%% E?$@"4 *?JC BE"IH @& ?&&IE%D "A ? A@Y%D #IKF%E "A D@E%J$"E& in
the boaiu.
- Noieovei, ,23 @# @$& J"KKI#@J?$@"#& E%A%EE%D $" $C% %#$%EHE@&% ?& T"@#$
;%#$IE%4 Baluwin Young also testifieu that Section 16(c) of the Agieement
that "Nothing heiein containeu shall be constiueu to constitute any of the
paities heieto paitneis oi joint ventuieis in iespect of any tiansaction
heieunuei" was meiely to obviate the possibility of the enteipiise being
tieateu as paitneiship foi tax puiposes anu liabilities to thiiu paities.
- kI@$% "A$%#N 8@>@H@#" %#$E%HE%#%IE& @# $C%@E D%&@E% $" D%;%>"H $C%
@#DI&$E@?> ?#D K?#IA?J$IE@#B J?H?J@$@%& "A ? >"J?> A@EK ?E% J"#&$E?@#%D

55
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-.
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01+2''(3 44 156"7
$" &%%e $C% $%JC#">"BS ?#D K?Ee%$@#B ?&&@&$?#J% "A CIB% KI>$@#?$@"#?>
J"EH"E?$@"#& "A $C% D%;%>"H%D R"E>D4 Aiiangements aie foimalizeu
wheie a foieign gioup becomes a minoiity ownei of a fiim in exchange foi
its manufactuiing expeitise, use of its bianu names, anu othei such
assistance. Bowevei, theie is always a uangei fiom such aiiangements. The
foieign gioup may, fiom the stait, intenu to establish its own sole oi
monopolistic opeiations anu meiely uses the joint ventuie aiiangement to
gain a footholu oi test the Philippine wateis, so to speak. 0i the
covetousness may come latei. As the Philippine fiim enlaiges its opeiations
anu becomes piofitable, the foieign gioup unueimines the local majoiity
owneiship anu actively tiies to completely oi pieuominantly take ovei the
entiie company. (C@& I#D%EK@#@#B "A T"@#$ ;%#$IE%& @& #"$ J"#&@&$%#$
R@$C A?@E D%?>@#B $" &?S $C% >%?&$4 (" $C% %Y$%#$ $C?$ &IJC &IF;%E&@;%
?J$@"#& J?# F% >?RAI>>S HE%;%#$%DN $C% J"IE$& &C"I>D %Y$%#D HE"$%J$@"#
%&H%J@?>>S @# @#DI&$E@%& RC%E% J"#&$@$I$@"#?> ?#D >%B?> E%fI@E%K%#$&
E%&%E;% J"#$E">>@#B "R#%E&C@H $" 8@>@H@#" J@$@j%#&4
- The Laguameo uioup stateu in theii appellees' biief in the Couit of Appeal:
- In fact, $C% 0C@>@HH@#% !"EH"E?$@"# !"D% @$&%>A E%J"B#@j%& $C% E@BC$ "A
&$"JeC">D%E& $" %#$%E @#$" ?BE%%K%#$& E%B?ED@#B $C% %Y%EJ@&% "A $C%@E
;"$@#B E@BC$&.
Sec. 1uu. Agieements by stockholueis.-
xxx xxx xxx
2. An agieement between two oi moie stockholueis, if in wiiting anu signeu
by the paities theieto, may pioviue that in exeicising any voting iights, the
shaies helu by them shall be voteu as theiein pioviueu, oi as they may
agiee, oi as ueteimineu in accoiuance with a pioceuuie agieeu upon by
them.
Appellants contenu that the above piovision is incluueu in the Coipoiation
Coue's chaptei on close coipoiations anu Saniwaies cannot be a close
coipoiation because it has 9S stockholueis. Fiistly, although Saniwaies hau
9S stockholueis at the time of the uisputeu stockholueis meeting, these 9S
stockholueis aie not sepaiate fiom each othei but aie uivisible into gioups
iepiesenting a single Iuentifiable inteiest. Foi example, ASI, its nominees
anu lawyeis count foi 1S of the 9S stockholueis. The YoungYutivo family
count foi anothei 1S stockholueis, the Chamsay family foi 8 stockholueis,
the Santos family foi 9 stockholueis, the By family foi 7 stockholueis, etc. If
the membeis of one family anuoi business oi inteiest gioup aie
consiueieu as one (which, it is iespectfully submitteu, they shoulu be foi
puiposes of ueteimining how closely helu Saniwaies is theie weie as of 8
Naich 198S, piactically only 17 stockholueis of Saniwaies. (Please iefei to
uiscussion in pp. S to 6 of appellees' Rejoinuei Nemoianuum uateu 11
Becembei 1984 anu Annex "A" theieof).
Seconuly, even assuming that Saniwaies is technically not a close
coipoiation because it has moie than 2u stockholueis, the unueniable fact
is that it is a +=*1.L2.=/ coipoiation. Suiely, appellants cannot honestly claim
that Saniwaies is a public issue oi a wiuely helu coipoiation.
,& J"EE%J$>S C%>D FS $C% 2*! )%?E@#B .AA@J%E=
- 3$ @& &?@D $C?$ H?E$@J@H?#$& @# ? T"@#$ ;%#$IE%N @# "EB?#@j@#B $C% T"@#$
;%#$IE% D%;@?$% AE"K $C% $E?D@$@"#?> H?$$%E# "A J"EH"E?$@"#
K?#?B%K%#$4 , #"$%D ?I$C"E@$S C?& H"@#$%D "I$ $C?$ TI&$ ?& @# J>"&%
J"EH"E?$@"#&N &C?E%C">D%E&d ?BE%%K%#$& @# T"@#$ ;%#$IE% J"EH"E?$@"#&
"A$%# J"#$?@# HE";@&@"#& RC@JC D" "#% "E K"E% "A $C% A">>"R@#B: (1)
iequiie gieatei than majoiity vote foi shaieholuei anu uiiectoi action; (2)
give ceitain shaieholueis oi gioups of shaieholueis powei to select a
specifieu numbei of uiiectois; (S) give to the shaieholueis contiol ovei the
selection anu ietention of employees; anu (4) set up a pioceuuie foi the
settlement of uisputes by aibitiation.
- Thiiuly paiagiaph 2 of Sec. 1uu of the Coipoiation Coue uoes not
necessaiily imply that agieements iegaiuing the exeicise of voting iights
aie alloweu only in close coipoiations. As Campos anu Lopez-Campos
explain:
- Paiagiaph 2 iefeis to pooling anu voting agieements in paiticulai. 3$ @&
&IFK@$$%D $C?$ $C%E% @& #" E%?&"# A"E D%#S@#B &$"JeC">D%E& "A
J"EH"E?$@"#& "$C%E $C?# J>"&% "#%& $C% E@BC$ $" %#$%E @#$" #"$ ;"$@#B "E
H"">@#B ?BE%%K%#$& $" HE"$%J$ $C%@E @#$%E%&$&N ?& >"#B ?& $C%S D" #"$
@#$%#D $" J"KK@$ ?#S RE"#BN "E AE?ID "# $C% "$C%E &$"JeC">D%E& #"$
H?E$@%& $" $C% ?BE%%K%#$4 0f couise, voting oi pooling agieements aie
peihaps moie useful anu moie often iesoiteu to in close coipoiations. But
they may also be founu necessaiy even in wiuely helu coipoiations.
Noieovei, since the Coue limits the legal meaning of close coipoiations to
those which comply with the iequisites laiu uown by section 96, it is
entiiely possible that a coipoiation which is in fact a close coipoiation will
not come within the uefinition. In such case, its stockholueis shoulu not be
piecluueu fiom enteiing into contiacts like voting agieements if these aie
otheiwise valiu. 3# &C"E$N %;%# ?&&IK@#B $C?$ &%J4 PU?V "A $C% ,BE%%K%#$
E%>?$@#B $" $C% D%&@B#?$@"# "E #"K@#?$@"# "A D@E%J$"E& E%&$E@J$& $C%
E@BC$ "A $C% ,BE%%K%#$d& &@B#?$"E@%& $" ;"$% A"E D@E%J$"E&N &IJC
J"#$E?J$I?> HE";@&@"#N ?& J"EE%J$>S C%>D FS $C% 2*!N @& ;?>@D ?#D F@#D@#B
IH"# $C% &@B#?$"E@%& $C%E%$"N RC@JC @#J>ID% ?HH%>>?#$&4

7320.23(3./=
WBEREF0RE, the petitions in u.R. Nos. 7S97S-76 anu u.R. No. 7S87S aie BISNISSEB
anu the petition in u.R. No. 7S9S1 is paitly uRANTEB. The amenueu uecision of the
Couit of Appeals is N0BIFIEB in that Nessis. Wolfgang Auibach }ohn uiiffin, Baviu
Whittingham Emesto v. Laguameo, Baluwin Young, Raul A. Boncan, Einesto R.
Laguameo, }i., Eniique Laguameo, anu ueoige F. Lee aie ueclaieu as the uuly electeu
uiiectois of Saniwaies at the Naich 8,198S annual stockholueis' meeting. In all othei

58
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01+2''(3 44 156"7
iespects, the questioneu uecision is AFFIRNEB. Costs against the petitioneis in u.R.
Nos. 7S97S-76 anu u.R. No. 7S87S. S0 0RBEREB.

[.(*= S
iu
Bivision. C.,(%(6 !"#"6 D!2%',E%(F6 7'/'( %(/ !*,).16 ##"6 +*(+-," C.='+'%(*6 #"6
)**< (* 3%,)"
!./!5113/:Z7322*/(3/: .03/3./= /"#%4
,773(3./,+ /.(*2= Soiiy mahaba at magulo. Essentially just ieau the uoctiine
anu the unueilineu poitions sa iatio. Yung uoctiine lang naman ang impoitante, the
iest of the uiscussions show the B0W anu WBY of the uoctiine na joint ventuie nga
yung intent.

+3(./b5, ;4 +3(./b5,
(Bec 1S, 2uuS)
7.!(13/*=
A Paitneiship must be in a public uocument if:
1) Immoveable Piopeity anu Real Rights contiibuteu to it.
a. If it involves immoveable piopeity, inventoiy of such is neeueu
signeu by the paitneis. (else v0IB)
2) It involves capital P S,uuu (must be fileu in the SEC)
/,(51*= Petition foi ieview on ceitioiaii
0./*/(*= uaicia, #"
8,!(2=
Auielio (Petitionei) anu Euuaiuo Litonjua aie biotheis.
Auielio alleges that he hau a paitneiship with his biothei Euuaiuo eviuenceu by a
piivate memoianuum (unsigneu) executeu by Euuaiuo which saiu he was giving
1u% of the equity oi 1 million pesos, anu that they woulu woik togethei in
maintaining the family business.
A thiiu peison Yang was also allegeu to be a membei in the joint ventuie anu
paitneiship.
Beie Auielio files foi an action of Specific Peifoimance against his paitneis, to
ienuei an accounting anu give him his shaie of the piofits.
3225*2= WN theie is a valiu Paitneiship.
)*+7= No, the contiact was voiu oi at most unenfoiceable.
1,(3.Z15+3/:=
The supposeu contiact of paitneiship was eviuenceu by a piivate memoianuum
(unsigneu), in which Euuaiuo expiesseu his uesiie to tiain his biothei, anu
piomising him a 1u% shaie oi 1 million pesos.
The supposeu contiact is voiu, foi being contiaiy to Aiticles 1771, 1772, anu 177S of
the Civil Coue.
The memoianuum, on its face, contains typewiitten entiies, peisonal in tone, but is
unsigneu anu unuateu. As an unsigneu uocument, theie can be no quibbling that
1) The memoianuum uoes not meet the public instiumentation
iequiiements exacteu unuei Aiticle 1771 of the Civil Coue.
2) Noieovei, being unsigneu anu uoubtless iefeiiing to a paitneiship
involving moie than PS,uuu.uu in money oi piopeity, The
Nemoianuum cannot be piesenteu foi notaiization, let alone iegisteieu
with the Secuiities anu Exchange Commission (SEC), as calleu foi unuei the
Aiticle 1772 of the Coue.
S) Anu inasmuch as the inventoiy iequiiement unuei the succeeuing
Aiticle 177S goes into the mattei of valiuity when immovable piopeity is
contiibuteu to the paitneiship, the next logical point of inquiiy tuins on the
natuie of petitionei's contiibution, if any, to the supposeu paitneiship.
Petitionei, then goes on to allege that, assuming aiguenuo, that the contiact was not
one of paitneiship that the same actually establisheu an innominate contiact anu
was a souice of actionable iights.
Couit iuleu even as a innominate contiact, it woulu be voiu as in violation of the
statute of fiauus. (Being it's peifoimance was to be uone 1 yeai aftei peifection of
the contiact.)
7320.23(3./= Petition is 7*/3*7 iuling of the CA ,8831<*7
[.(*= 1
st
Bivision. G%(B%('&%(6 @%(/*?%=LM-)'.,,.:6 !*,*(%6 !%,3'*L;*,%=.1 concui

9.51/2 ;4 !,1<,/
UBecembei 4, 19u6V
FRANK S. B00RNS, Plaintiff-Appellee , vs. B. N. CARNAN, ET AL., Befenuants-
Appellants.

7.!(13/*=
A paitneiship, the existence of which was only known to those who hau an inteiest in
the same, being no mutual agieements between the paitneis anu without a coipoiate
name inuicating to the public in some way that theie weie othei people besiues the
one who ostensibly manageu anu conuucteu the business, is exactly the acciuental
paitneiship of cuentas en paiticipacion uefineu in aiticle 2S9 of the Coue of
Commeice.
Those who contiact with the peison unuei whose name the business of
such paitneiship of cuentas en paiticipacion is conuucteu, shall have only a

57
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01+2''(3 44 156"7
iight of action against such peison anu not against the othei peisons
inteiesteu, anu the lattei, on the othei hanu, shall have no iight of action
against the thiiu peison who contiacteu with the managei unless such
managei foimally tiansfeis his iight to them. (Ait 242 of the coue 0f
Commeice.) It follows, theiefoie that the plaintiff has no iight to uemanu
fiom the appellants the payment of the amount claimeu in the complaint, as
Lo-Chim-Lim was the only one who contiacteu with him.

/,(51*= Appeal fiom a juugment of the CFI
0./*/(*= NAPA, }.:

8,!(2=
The plaintiff in this action seeks to iecovei the sum of $4S7.Su, balance uue
on a contiact foi the sawing of lumbei foi the lumbei yaiu of Lo-Chim-Lim.
The contiact ielating to the saiu woik was enteieu into by the saiu Lo-
Chim-Lim, acting as in his own name with the plaintiff, anu it appeais that
the saiu Lo-Chim-Lim peisonally agieeu to pay foi the woik himself.
The plaintiff, howevei, has biought this action against Lo-Chim-Lim anu his
couefenuants jointly, alleging that,
o at the time the contiact was maue, they weie the joint piopiietois
anu opeiatois of the saiu lumbei yaiu engageu in the puichase
anu sale of lumbei unuei the name anu style of Lo-Chim-Lim.
o that the othei uefenuants weie the paitneis of Lo-Chim-Lim in the
saiu lumbei-yaiu business.
The couit below uismisseu the action as to the uefenuants B. N. Caiman
anu Fulgencio Tan-Tongco on the giounu that they weie not the paitneis of
Lo-Chim-Lim, vicente Palanca anu uo-Tauco only excepteu to the saiu
juugment, moveu foi a new tiial, anu have biought the case to this couit by
bill of exceptions.
The eviuence of iecoiu shows, accoiuing to the juugment of the couit, "That
Lo-Chim-Lim hau a ceitain lumbei yaiu in Calle Lemeiy of the city of
Nanila, anu that he was the managei of the same, having oiueieu the
plaintiff to uo some woik foi him at his sawmill in the city of Nanila; anu
that vicente Palanca was his paitnei, anu hau an inteiest in the saiu
business as well as in the piofits anu losses theieof . . .," anu that uo-Tuaco
ieceiveu pait of the eainings of the lumbei yaiu in the management of
which he was inteiesteu.
CFI: "Lo-Chim-Lim, vicente Palanca, uo-Tuaco hau a lumbei yaiu in Calle
Lemmeiy of the city of Nanila in the yeai 19u4, anu paiticipateu in the
piofits anu losses of business anu that Lo-Chim-Lim was managing paitnei
of the saiu lumbei yaiu." In othei woius, copaiticipants with the saiu Lo-
Chim-Lim in the business in question.

3225*2= What is the ieal legal natuie of the paiticipation which the appellants hau in
Lo-Chim-Lim's lumbei yaiu anu consequently theii liability towaiu the plaintiff.

)*+7=
(C% H?E$#%E&C@H @& ? H?E$#%E&C@H "A JI%#$?& %# H?E$@J@H?J@"#4
Those who contiact with the peison unuei whose name the business of
such paitneiship of cuentas en paiticipacion is conuucteu, shall have only a
iight of action against such peison anu not against the othei peisons
inteiesteu, anu the lattei, on the othei hanu, shall have no iight of action
against the thiiu peison who contiacteu with the managei unless such
managei foimally tiansfeis his iight to them. (Ait 242 of the coue 0f
Commeice.) It follows, theiefoie that the plaintiff has no iight to uemanu
fiom the appellants the payment of the amount claimeu in the complaint, as
Lo-Chim-Lim was the only one who contiacteu with him.

1,(3.Z15+3/:=
It seems that the allegeu paitneiship between Lo-Chim-Lim anu the
appellants was foimeu by veibal agieement only. At least theie is no
eviuence tenuing to show that the saiu agieement was ieuuceu to wiiting,
oi that it was evei iecoiueu in a public instiument.
Noieovei, that paitneiship hau no coipoiate name. The plaintiff himself
alleges in his complaint that the paitneiship was engageu in business unuei
the name anu style of Lo-Chim-Lim only, which accoiuing to the eviuence
was the name of one of the uefenuants.
0n the othei hanu, it uoes not appeai that theie was any mutual
agieement, between the paities, anu if theie weie any, it has not been
shown what the agieement was. As fai as the eviuence shows it seems that
the business was conuucteu by Lo-Chim-Lim in his own name, although he
gave to the appellants a shaie was has been shown with ceitainty.
o The contiacts maue with the plaintiff weie maue by Lo-Chim-Lim
inuiviuually in his own name, anu theie is no eviuence that the
paitneiship ovei contiacteu in any othei foim.
0nuei such ciicumstances we finu nothing upon which to consiuei this
paitneiship othei than as a paitneiship of cuentas en paiticipacion. It may
be that, as a mattei of fact, it is something uiffeient, but a simple business
conuucteu by Lo-Chim-Lim exclusively, in his own name, the names of othei
peisons inteiesteu in the piofits anu losses of the business nowheie
appeaiing.
A paitneiship constituteu in such a mannei, the existence of which was only
known to those who hau an inteiest in the same, being no mutual
agieements between the paitneis anu without a coipoiate name inuicating
to the public in some way that theie weie othei people besiues the one who
ostensibly manageu anu conuucteu the business, is exactly the acciuental
paitneiship of cuentas en paiticipacion uefineu in aiticle 2S9 of the Coue of
Commeice.

7320.23(3./= The juugment appealeu fiom this heieby ieveiseu anu the appellants
aie absolveu of the complaint without expiess piovisions as to the costs of both
instances.
[.(*= EN BANC; Aiellano, C.}., Toiies, }ohnson, Caison, Willaiu anu Tiacey, }}.,
concui

2*[3++, ;4 !,

59
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-.
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01+2''(3 44 156"7
(Apiil 16, 1988)
7.!(13/*= , T"@#$ ;%#$IE%N @#J>ID@#B ? H?E$#%E&C@HN HE%&IHH"&%& B%#%E?>>S ?
"A &$?#D@#B F%$R%%# $C% T"@#$ J"a;%#$IE%E& "E H?E$#%E&N @# RC@JC %?JC H?E$S C?&
?# %fI?> HE"HE@%$?ES @#$%E%&$ @# $C% J?H@$?> "E HE"H%E$S J"#$E@FI$%D ?#D RC%E%
%?JC H?E$S %Y%EJ@&%& %fI?> E@BC$& @# $C% J"#DIJ$ "A $C% FI&@#%&&.


/,(51*= Appeal by ceitioiaii
0./*/(*= Saimiento, }.
8,!(2=
O4 0n the stiength of a contiact enteieu into by anu between Nis. Segunuina
Nogueia anu the Touiist Woilu Seivice, Inc., iepiesenteu by Ni. Eliseo
Canilao, the Touiist Woilu Seivice, Inc. leaseu the piemises belonging to
Nogueia at Nabini St., Nanila foi the foimei's use as a bianch office. When
the bianch office was openeu, the same was iun by the heiein appellant
Lina Sevilla.
2. The Touiist Woilu Seivice, Inc. appeais to have been infoimeu that Lina
Sevilla was connecteu with a iival fiim, the Philippine Tiavel Buieau, anu,
since the bianch office was anyhow losing, the Touiist Woilu Seivice
consiueieu closing uown its office. This was fiimeu up by two iesolutions of
the boaiu of uiiectois of Touiist Woilu Seivice, Inc. the fiist abolishing the
office of the managei anu vice-piesiuent of the Touiist Woilu Seivice, Inc.,
Eimita Bianch, anu the seconu, authoiizing the coipoiate secietaiy to
ieceive the piopeities of the Touiist Woilu Seivice then locateu at the saiu
bianch office. To comply with the manuate of the Touiist Woilu Seivice, the
coipoiate secietaiy uabino Canilao went ovei to the bianch office, anu,
finuing the piemises lockeu, anu, being unable to contact Lina Sevilla, he
paulockeu the piemises on }une 4, 1962 to piotect the inteiests of the
Touiist Woilu Seivice.
c4 When neithei the appellant Lina Sevilla noi any of hei employees coulu
entei the lockeu piemises, ? J"KH>?@#$ R?& A@>%D FS $C% C%E%@#
?HH%>>?#$& ?B?@#&$ $C% ?HH%>>%%& R@$C ? HE?S%E A"E $C% @&&I?#J% "A
K?#D?$"ES HE%>@K@#?ES @#TI#J$@"#4 9"$C ?HH%>>%%& ?#&R%E%D R@$C
J"I#$%EJ>?@K&4 Foi appaient lack of inteiest of the paities theiein, $C%
$E@?> J"IE$ "ED%E%D $C% D@&K@&&?> "A $C% J?&% R@$C"I$ HE%TID@J%4
4. The appellee Segunuina Nogueia sought ieconsiueiation of the oiuei
uismissing hei counteiclaim which the couit a quo, in an oiuei uateu }une
8, 196S, gianteu peimitting hei to piesent eviuence in suppoit of hei
counteiclaim.
S. Appellant Lina Sevilla iefileu hei case against the heiein appellees anu aftei
the issues weie joineu, the ieinstateu counteiclaim of Segunuina Nogueia
anu the new complaint of appellant Lina Sevilla weie jointly heaiu
following which the couit a quo oiueieu both cases uismiss foi lack of meiit
3225*2= -./ $C%E% R?& ? H?E$#%E&C@H F%$R%%# ("IE@&$ -"E>D 2%E;@J% ?#D +@#?
2%;@>>?
)*+7= /.
1,(3.Z15+3/:=
O4 The Couit is askeu to ueclaie the tiue natuie of the ielation between Lina
Sevilla anu Touiist Woilu Seivice, Inc. The iesponuent Couit of see fit to
iule on the question, the ciucial issue, in its opinion being "whethei oi not
the paulocking of the piemises by the Touiist Woilu Seivice, Inc. without
the knowleuge anu consent of the appellant Lina Sevilla entitleu the lattei
to the ielief of uamages piayeu foi anu RC%$C%E "E #"$ $C% %;@D%#J% A"E
$C% &?@D ?HH%>>?#$ &IHH"E$& $C% J"#$%#$@"# $C?$ $C% ?HH%>>%% ("IE@&$
-"E>D 2%E;@J%N 3#J4 I#@>?$%E?>>S ?#D R@$C"I$ $C% J"#&%#$ "A $C%
?HH%>>?#$ D@&J"##%J$%D $C% $%>%HC"#% >@#%& "A $C% *EK@$? FE?#JC "AA@J%
"A $C% ?HH%>>%% ("IE@&$ -"E>D 2%E;@J%N 3#J4


2. ("IE@&$ -"E>D 2%E;@J%N 3#J4N @#&@&$&N "# $C% "$C%E C?#DN $C?$ +@#?
2*[3++, R?& ? K%E% %KH>"S%%N F%@#B QFE?#JC K?#?B%EQ "A @$& *EK@$?
QFE?#JCQ "AA@J% ?#D $C?$ @#A%E%#$@?>>SN &C% C?D #" &?S "# $C% >%?&%
%Y%JI$%D R@$C $C% HE@;?$% E%&H"#D%#$N 2%BI#D@#? /"BI%E?4
S. (C% H%$@$@"#%E& J"#$%#DN C"R%;%EN $C?$ E%>?$@"# F%$R%%# $C% F%$R%%#
H?E$@%& R?& "#% "A T"@#$ ;%#$IE%, but conceue that [V2%).?., E'B2) 2%?.
&..( )2. ),-. ,.=%)'*(12'3 &.)V..( @.?'==% %(/ P*-,'1) \*,=/ @.,?'+.6[ the
Rule of Law enjoineu Touiist Woilu Seivice anu Canilao fiom taking the law
into theii own hanus, in iefeience to the paulocking now questioneu.
4. The Couit finus the iesolution of the issue mateiial, foi if, as the piivate
iesponuent, Touiist Woilu Seivice, Inc., maintains, that the ielation
between the paities was in the chaiactei of employei anu employee, the
couits woulu have been without juiisuiction to tiy the case, laboi uisputes
being the exclusive uomain of the Couit of Inuustiial Relations, latei, the
Buieau 0f Laboi Relations, puisuant to statutes then in foice.
S. (C% E%J"ED& R@>> &C"R $C?$ $C% H%$@$@"#%EN +@#? 2%;@>>?N R?& #"$ &IFT%J$
$" J"#$E"> FS $C% HE@;?$% E%&H"#D%#$ ("IE@&$ -"E>D 2%E;@J%N 3#J4N eithei
as to the iesult of the enteipiise oi as to the means useu in connection
theiewith.
a. In the fiist place, unuei the contiact of lease coveiing the Touiist
Woilus Eimita office, she hau bounu heiself in 1*='/-E as anu foi
iental payments, an aiiangement that woulu be like claims of a
mastei-seivant ielationship. Tiue the iesponuent Couit woulu
latei minimize hei paiticipation in the lease as one of meie
guaianty, that uoes not make hei an employee of Touiist Woilu,
since in any case, a tiue employee cannot be maue to pait with his
own money in puisuance of his employei's business, oi otheiwise,
assume any liability theieof. In that event, the paities must be
bounu by some othei ielation, but ceitainly not employment.
b. In the seconu place, anu as founu by the Appellate Couit, '|wjhen
the bianch office was openeu, the same was iun by the heiein

5:
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01+2''(3 44 156"7
appellant Lina 0. Sevilla payable to Touiist Woilu Seivice, Inc. by
any aiiline foi any faie biought in on the effoit of Nis. Lina Sevilla.
0nuei these ciicumstances, it cannot be saiu that Sevilla was
unuei the contiol of Touiist Woilu Seivice, Inc. "as to the means
useu." Sevilla in puisuing the business, obviously ielieu on hei
own gifts anu capabilities.
6. It is fuithei aumitteu that 2%;@>>? R?& #"$ @# $C% J"KH?#Sd& H?SE">>4 8"E
C%E %AA"E$&N &C% E%$?@#%D Wl @# J"KK@&&@"#& AE"K ?@E>@#% F""e@#B&N $C%
E%K?@#@#B cl B"@#B $" ("IE@&$ -"E>D4 5#>@e% ?# %KH>"S%% $C%#N RC"
%?E#& ? A@Y%D &?>?ES I&I?>>SN &C% %?E#%D J"KH%#&?$@"# @# A>IJ$I?$@#B
?K"I#$& D%H%#D@#B "# C%E F""e@#B &IJJ%&&%&.
^4 The fact that Sevilla hau been uesignateu 'bianch managei" uoes not make
hei Touiist Woilu's employee. As we saiu, %KH>"SK%#$ @& D%$%EK@#%D FS
$C% E@BC$a"AaJ"#$E"> $%&$ ?#D J%E$?@# %J"#"K@J H?E?K%$%E&4
8. 3# E%T%J$@#B ("IE@&$ -"E>D 2%E;@J%N 3#J4d& ?EBIK%#$& C"R%;%EN R% ?E%
#"$N ?& ? J"#&%fI%#J%N ?JJ%H$@#B +@#? 2%;@>>?d& "R#N $C?$ @&N $C?$ $C%
H?E$@%& C?D %KF?Ee%D "# ? T"@#$ ;%#$IE% "E "$C%ER@&%N ? H?E$#%E&C@H4
,#D ?HH?E%#$>SN 2%;@>>? C%E&%>A D@D #"$ E%J"B#@j% $C% %Y@&$%#J% "A &IJC
? E%>?$@"#4 In hei lettei of Novembei 28, 1961, she expiessly 'conceues
youi |Touiist Woilu Seivice, Inc.'sj iight to stop the opeiation of youi
bianch office in effect, accepting Touiist Woilu Seivice, Inc.'s contiol ovei
the mannei in which the business was iun. , T"@#$ ;%#$IE%N @#J>ID@#B ?
H?E$#%E&C@HN HE%&IHH"&%& B%#%E?>>S ? "A &$?#D@#B F%$R%%# $C% T"@#$ J"a
;%#$IE%E& "E H?E$#%E&N @# RC@JC %?JC H?E$S C?& ?# %fI?> HE"HE@%$?ES
@#$%E%&$ @# $C% J?H@$?> "E HE"H%E$S J"#$E@FI$%D ?#D RC%E% %?JC H?E$S
%Y%EJ@&%& %fI?> E@BC$& @# $C% J"#DIJ$ "A $C% FI&@#%&&.


9. Fuitheimoie, $C% H?E$@%& D@D #"$ C">D $C%K&%>;%& "I$ ?& H?E$#%E&N ?#D
$C% FI@>D@#B @$&%>A R?& %KF%>>@&C%D R@$C $C% %>%J$E@J &@B# Q("IE@&$
-"E>D 2%E;@J%N 3#J4 @# >@%I "A ? D@&$@#J$ H?E$#%E&C@H #?K%4
OX4 It is the Couit's consiueieu opinion, RC%# $C% H%$@$@"#%EN +@#? 2%;@>>?N
?BE%%D $" UR"VK?# $C% HE@;?$% E%&H"#D%#$N ("IE@&$ -"E>D 2%E;@J%N
3#J4d& *EK@$? "AA@J%N &C% KI&$ C?;% D"#% &" HIE&I?#$ $" ? J"#$E?J$ "A
?B%#JS. It is the essence of this contiact that the agent ienueis seivices "in
iepiesentation oi on behalf of anothei.

In the case at bai, Sevilla soliciteu
aiiline faies, but she uiu so foi anu on behalf of hei piincipal, Touiist Woilu
Seivice, Inc. As compensation, she ieceiveu 4% of the pioceeus in the
concept of commissions. Anu as we saiu, Sevilla heiself baseu on hei lettei
of Novembei 28, 1961, pie-assumeu hei piincipal's authoiity as ownei of
the business unueitaking. -% ?E% J"#;@#J%DN J"#&@D%E@#B $C%
J@EJIK&$?#J%& ?#D AE"K $C% E%&H"#D%#$ !"IE$d& E%J@$?> "A A?J$&N $C?$
$C% $@%& C?D J"#$%KH>?$%D ? HE@#J@H?> ?B%#$ E%>?$@"#&C@HN E?$C%E $C?# ?
T"@#$ K?#?B?K%#$ "E ? H?E$#%E&C@H4
11. But unlike simple giants of a powei of attoiney, the agency that we heieby
ueclaie to be compatible with the intent of the paities, cannot be ievokeu at
will. The ieason is that it is one coupleu with an inteiest, the agency having
been cieateu foi mutual inteiest, of the agent anu the piincipal. It appeais
that Lina Sevilla is a &*(% 0'/. tiavel agent heiself, anu as such, she hau
acquiieu an inteiest in the business entiusteu to hei. Noieovei, she hau
assumeu a peisonal obligation foi the opeiation theieof, holuing heiself
soliuaiily liable foi the payment of ientals. She continueu the business,
using hei own name, aftei Touiist Woilu hau stoppeu fuithei opeiations.
Bei inteiest, obviously, is not to the commissions she eaineu as a iesult of
hei business tiansactions, but one that extenus to the veiy subject mattei of
the powei of management uelegateu to hei. It is an agency that, as we saiu,
cannot be ievokeu at the pleasuie of the piincipal. Accoiuingly, the
ievocation complaineu of shoulu entitle the petitionei, Lina Sevilla, to
uamages.
7320.23(3./= WBEREF0RE, the Becision piomulgateu on }anuaiy 2S, 197S as well
as the Resolution issueu on }uly S1, 197S, by the iesponuent Couit of Appeals is
heieby REvERSEB anu SET ASIBE. The piivate iesponuent, Touiist Woilu Seivice,
Inc., anu Eliseo Canilao, aie 0RBEREB jointly anu seveially to inuemnify the
petitionei, Lina Sevilla, the sum of 2S,uu.uu as anu foi moial uamages, the sum of
P1u,uuu.uu, as anu foi exemplaiy uamages, anu the sum of PS,uuu.uu, as anu foi
nominal anuoi tempeiate uamages.
[.(*= ,>> J"#JIE

0)3+*m ;4 <3/3/: !.104
8,!(2:

Petitionei Philex Nining Coip. enteieu into an agieement with Baguio uolu, wheie
the foimei agieeu to manage the mining opeiations of the lattei.

The agieement was eviuenceu by a "Powei of Attoiney".

! It was inuicateu in the saiu uocument, that Baguio uolu woulu
contiibute 0OO< unuei its ownei's account plus any of its @#J"K%
that is left in the pioject, in auuition to its ?J$I?> K@#@#B J>?@K.

! Neanwhile, petitionei's contiibution woulu consist of its
%YH%E$@&% @# $C% K?#?B%K%#$ anu opeiation of mines, anu of the
managei's account which is compiiseu of 0OO< in funus.

! The compensation of the NANAuER shall be fifty pei cent (Su%)
of the net piofit of the pioject befoie income tax.

The mining suffeieu seiious loses which enueu business of both paities eviuenceu by
theii execution of a "compiomise agieement."

The CIR assesseu Philex Nining foi tax ueficiencies. It stiesseu that Philex enteieu
into a paitneiship with Baguio uolu.


5;
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01+2''(3 44 156"7
Petitionei uenieu the allegations of the CIR anu maintaineu that its auvances of
money anu piopeity to Baguio uolu weie in a natuie of a loan as eviuenceu by the
"compiomise agieement".

3225*=

W0N the paities enteieu into a contiact of agency coupleu with an inteiest which is
not ievocable at will

)*+7=

No. An examination of the "Powei of Attoiney" ieveals that a paitneiship oi joint
ventuie was inueeu intenueu by the paities.

In an agency coupleu with inteiest, it is the agency that cannot be ievokeu
oi withuiawn by the piincipal uue to an inteiest of a thiiu paity that
uepenus upon it, oi the mutual inteiest of both piincipal anu agent. In this
case, the non-ievocation oi non-withuiawal unuei paiagiaph S(c) applies
to the auvances maue by petitionei who is supposeuly the agent anu not the
piincipal unuei the contiact. Thus, it cannot be infeiieu fiom the
stipulation that the paities' ielation unuei the agieement is one of agency
coupleu with an inteiest anu not a paitneiship.
Neithei can paiagiaph 16 of the agieement be taken as an inuication that
the ielationship of the paities was one of agency anu not a paitneiship.
Although the saiu piovision states that "this Agency shall be iiievocable
while any obligation of the PRINCIPAL in favoi of the NANAuERS is
outstanuing, inclusive of the NANAuERS' account," it uoes not necessaiily
follow that the paities enteieu into an agency contiact coupleu with an
inteiest that cannot be withuiawn by Baguio uolu.
The main object of the "Powei of Attoiney" was not to confei a powei in
favoi of petitionei to contiact with thiiu peisons on behalf of Baguio uolu
but to cieate a business ielationship between petitionei anu Baguio uolu, in
which the foimei was to manage anu opeiate the lattei's mine thiough the
paities' mutual contiibution of mateiial iesouices anu inuustiy. The
essence of an agency, even one that is coupleu with inteiest, is the agent's
ability to iepiesent his piincipal anu biing about business ielations
between the lattei anu thiiu peisons.
The stiongest inuication that petitionei was a paitnei in the Sto. Nino Nine
is the fact that it woulu ieceive Su% of the net piofits as "compensation"
unuei paiagiaph 12 of the agieement. The entiiety of the paities'
contiactual stipulations simply leaus to no othei conclusion than that
petitionei's "compensation" is actually its shaie in the income of the joint
ventuie. Aiticle 1769 (4) of the Civil Coue explicitly pioviues that the
"ieceipt by a peison of a shaie in the piofits of a business is piima facie
eviuence that he is a paitnei in the business."
While a coipoiation, like the petitionei, cannot geneially entei into a
contiact of paitneiship unless authoiizeu by law oi its chaitei, it has been
helu that it may entei into a joint ventuie which is akin to a paiticulai
paitneiship:

o unuei Philippine law, a joint ventuie is a foim of paitneiship anu
shoulu be goveineu by the law of paitneiships


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