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Partnership and Agency Case Digests PDF
Partnership and Agency Case Digests PDF
She
further prayed that she be paid the five percent (5%)
TOCAO V. COURT OF APPEALS “overriding commission“ on the remaining 150 West Bend
cookware sets before her “dismissal.”
342 SCRA 20 (2000)
However, Tocao and Belo asserted that the alleged agreement
Facts: was not reduced to writing nor ratified, hence, unenforceable,
void, or nonexistent. Also, they denied the existence of a
Petitioner William T. Bello introduced private respondent partnership because, as Anay herself admitted, Geminesse
Nenita Anay to petitioner Tocao, who conveyed her desire to Enterprise was the sole proprietorship of Marjorie Tocao. Belo
enter into a joint venture with her for the importation and local also contended that he merely acted as a guarantor of Tocao
distribution of kitchen cookwares. Belo acted the capitalist, and denied contributing capital. Tocao, on the other hand,
Tocao as president and general manager, and Anay as head of denied that they agreed on a ten percent (10%) commission on
the marketing department (considering her experience and the net profits.
established relationship with West Bend Company,c a
manufacturer of kitchen wares in Wisconsin, U.S.A) and later, Both trial court and court of appeals ruled that a business
vice-president for sales. The parties agreed further that Anay partnership existed and ordered the defendants to pay.
would be entitled to:
Issue: Whether or not a partnership existed – YES
(1) ten percent (10%) of the annual net profits of the
business; (2) overriding commission of six percent (6%) of the Ratio:
overall weekly production; (3) thirty percent (30%) of the
sales she would make; and (4) two percent (2%) for her To be considered a juridical personality, a partnership must
demonstration services. fulfill these requisites: (1) two or more persons bind
themselves to contribute money, property or industry to a
The same was not reduced to writing on the strength of Belo’s common fund; and (2) intention on the part of the partners to
assurances. divide the profits among themselves. It may be constituted in
any form; a public instrument is necessary only where
Later, Anay was able to secure the distributorship of cookware immovable property or real rights are contributed thereto. This
products from the West Bend Company. They operated under implies that since a contract of partnership is consensual, an
the name of Geminesse Enterprise, a sole proprietorship oral contract of partnership is as good as a written one.
registered in Marjorie Tocao’s name. Anay attended
distributor/dealer meetings with West Bend Company with the Private respondent Anay contributed her expertise in the
consent of Tocao. business of distributorship of cookware to the partnership and
hence, under the law, she was the industrial or managing
Due to Anay’s excellent job performance she was given a partner.
plaque of appreciation. Also, in a memo signed by Belo, Anay
was given 37% commission for her personal sales "up Dec Petitioner Belo had an proprietary interest. He presided over
31/87,” apart from the 10% share in profits. meetings regarding matters affecting the operation of the
business. Moreover, his having authorized in writing giving
On October 9, 1987, Anay learned that Marjorie Tocao Anay 37% of the proceeds of her personal sales, could not be
terminated her as vice-president of Geminesse Enterprise. interpreted otherwise than that he had a proprietary interest in
Anay attempted to contact Belo. She wrote him twice to the business. This is inconsistent with his claim that he merely
demand her overriding commission for the period of January acted as a guarantor. If indeed he was, he should have
8, 1988 to February 5, 1988 and the audit of the company to presented documentary evidence. Also, Art. 2055 requires that
determine her share in the net profits. Belo did not answer. a guaranty must be express and the Statute of Frauds requires
that it must be in writing. Petitioner Tocao was also a
Anay still received her five percent (5%) overriding capitalist in the partnership. She claimed that she herself
commission up to December 1987. The following year, 1988, financed the business.
she did not receive the same commission although the
company netted a gross sales of P13,300,360.00. The business venture operated under Geminesse Enterprise did
not result in an employer-employee relationship between
On April 5, 1988, Nenita A. Anay filed a complaint for sum of petitioners and private respondent. First, Anay had a voice in
money with damages against Tocao and Belo before the RTC the management of the affairs of the cookware distributorship
of Makati. She prayed that she be paid (1) P32,00.00 as unpaid and second, Tocao admitted that Anay, like her, received only
overriding commission from January 8, 1988 to February 5, commissions and transportation and representation allowances
1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 and not a fixed salary. If Anay was an employee, it is difficult
as exemplary damages. The plaintiff also prayed for an audit to believe that they recieve the same income.
of the finances of Geminesse Enterprise from the inception of
its business operation until she was “illegally dismissed” to Also, the fact that they operated under the name of Geminesse
BUSORG CASE DIGESTS 1
Atty. Charlie Mendoza
Enterprise, a sole proprietorship, is of no moment. Said The lower court rendered judgment in favor of the plaintiff
business name was used only for practical reasons - it was and ordered the defendant to restore possession of the land to
utilized as the common name for petitioner Tocao’s various the plaintiff, as well as to pay corresponding rent from January
business activities, which included the distributorship of 1940 until he vacates the land. On appeal defendant raised a
cookware. number of assignments or errors in the decision, one of which
is that the trial court erred in not dismissing the case on the
The partnership exists until dissolved under the law. Since the ground that the case was not brought by the real party in
partnership created by petitioners and private respondent has interest.
no fixed term and is therefore a partnership at will predicated
on their mutual desire and consent, it may be dissolved by the Issue: Whether or not the lower court erred in not dismissing
will of a partner. the case on the ground that it was not brought by the real party
in interest? – NO
Petitioners Tocao’s unilateral exclusion of private respondent
from the partnership is shown by her memo to the Cubao Ratio:
office plainly stating that private respondent was, as of
October 9, 1987, no longer the vice-president for sales of What the Rules of Court require is that an action be broughtin
Geminesse Enterprise. By that memo, petitioner Tocao the name of, but not necessarily by, the real party in interest.
effected her own withdrawal from the partnership and In fact the practice is for an attorney-at-law to bring the action,
considered herself as having ceased to be associated with the that is to file the complaint, in the name of the plaintiff. That
partnership in the carrying on of the business. Nevertheless, practice appears to have been followed in this case, since the
the partnership was not terminated thereby; it continues until complaint is signed by the law firm of Araneta and Araneta,
the winding up of the business. "counsel for plaintiff" and commences with the statement
"comes now plaintiff, through its undersigned counsel." It is
The partnership among petitioners and private respondent is true that the complaint also states that the plaintiff is
ordered dissolved, and the parties are ordered to effect the "represented herein by its Managing Partner Gregorio Araneta,
winding up and liquidation of the partnership pursuant to the Inc.", another corporation, but there is nothing against one
pertinent provisions of the Civil Code. Petitioners are ordered corporation being represented by another person, natural or
to pay Anay’s 10% share in the profits, after accounting, 5% juridical, in a suit in court. The contention that Gregorio
overriding commission for the 150 cookware sets available for Araneta, Inc. can not act as managing partner for plaintiff on
disposition since the time private respondent was wrongfully the theory that it is illegal for two corporations to enter into a
excluded from the partnership by petitioner, overriding partnership is without merit, for the true rule is that "though a
commission on the total production, as well as moral and corporation has no power to enter into a partnership, it may
exemplary damages, and attorney’s fees nevertheless enter into a joint venture with another where the
nature of that venture is in line with the business authorized by
its charter."
JM TUAZON and CO v. BOLANOS
ROJAS V. MAGLANA Later on, the two availed the services of Agustin Pahamotang
December 10, 1990 as industrial partner and executed another articles of co-
Paras, C.J. partnership with the latter. The purpose of this second
Rañeses, Roberto Miguel partnership was to hold and secure renewal of timber license
and the term of which was fixed to 30 years.
SUMMARY: Maglana and Rojas executed their articles of
co-partnership called EDE. It had an indefinite term, was Still later on, the three executed a conditional sale of interest
registered with the SEC, and had a Timer License. Later, in the partnership wherein Maglana and Rojas shall purchase
Agustin Pahamitang became an industrial partner and the interest, share and participation in the partnership of
another articles of co-partnership was executed. The term of Pahamotang. It was also agreed that after payment of such
the second co-partnership was fixed to 30 years. After some including amount of loan secured by Pahamotang in favor of
time, the three executed a conditional sale of interest in the the partnership, the two shall become owners of all equipment
partnership where Magalana and Rojas shall purchase the contributed by Pahamotang. After this, the two continued the
interest, share, and participation of Pahamotang. It was partnership without any written agreement or reconstitution of
agreed that, after payment of such including the loan secured their articles of partnership.
by Pahamotang, the two shall become owners of all
equipment contributed by Pahamotang. The two continued Subsequently, Rojas entered into a management contract with
the partnership without any written agreement or CMS Estate Inc. Maglana wrote him regarding his
reconstitution of the articles of partnership. Subsequently, contribution to the capital investments as well as his duties as
Rojas entered into a contarct with CMS Estate. Maglana logging superintendent. Rojas replied that he will not be able
reminded him of his contribution to the capital investments to comply with both. Maglana then told Rojas that the latter’s
and his duties to the partnership. Rojas said he would not be share will just be 20% of the net profits. Such was the sharing
able to comply. Maglana told Rojas that the latter is only from 1957 to 1959 without complaint or dispute. Rojas took
CFI RULING: 2. As there are only two parties when Maglana notified
1. The partnership of Maglana and Rojas after Rojas that he dissolved the partnership, it is in effect
Pahamotang retired is one of de facto and at will; the a notice of withdrawal.
sharing of profits and losses is on the basis of actual
contributions; Under Article 1830, par. 2 of the Civil Code, even if
2. there is no evidence these properties were acquired there is a specified term, one partner can cause its
by the partnership funds thus it should not belong to dissolution by expressly withdrawing even before
it; the expiration of the period, with or without
3. neither is entitled to damages; the letter of Maglana justifiable cause. Of course, if the cause is not
in effect dissolved the partnership; justified or no cause was given, the withdrawing
4. sale of forest concession is valid and binding and partner is liable for damages but in no case can he be
should be considered as Maglana’s contribution; compelled to remain in the firm. With his
5. Rojas must pay or turn over to the partnership the withdrawal, the number of members is decreased,
profits he received from CMS and pay his personal hence, the dissolution. And in whatever way he may
account to the partnership; view the situation, the conclusion is inevitable that
6. Maglana must be paid 85k which he should’ve Rojas and Maglana shall be guided in the liquidation
received but was not paid to him and must be of the partnership by the provisions of its duly
considered as his contribution registered Articles of Co-Partnership; that is, all
profits and losses of the partnership shall be divided
ACTION AND PRAYER: N/A "share and share alike" between the partners.
On the other hand, there is no dispute that the second William Belo introduced Nenita Anay to his girlfriend,
partnership was dissolved by common consent. Said Marjorie Tocao. The three agreed to form a joint venture for
dissolution did not affect the first partnership which the sale of cooking wares. Belo was to contribute P2.5 million;
continued to exist. Significantly, Maglana and Rojas Tocao also contributed some cash and she shall also act as
agreed to purchase the interest, share and president and general manager; and Anay shall be in charge of
participation in the second partnership of marketing. Belo and Tocao specifically asked Anay because of
Pahamotang and that thereafter, the two (Maglana her experience and connections as a marketer. They agreed
and Rojas) became the owners of equipment further that Anay shall receive the following:
contributed by Pahamotang. Maglana even reminded
Rojas of his obligation to contribute either in cash or 1. 10% share of annual net profits
in equipment, to the capital investment of the
BUSORG CASE DIGESTS 11
Atty. Charlie Mendoza
2. 6% overriding commission for weekly sales Meliton Zabat started a lending Business venture together
3. 30% of sales Anay will make herself proposed by Nieves. It was agreed on the Articles of
4. 2% share for her demo services Agreement that petitioner will get 70% of the profits and
They operated under the name Geminesse Enterprise, this Nieves and Zabat would earn 15% each.
name was however registered as a sole proprietorship with the
Bureau of Domestic Trade under Tocao. The joint venture - Nievas introduced Gragera (chairman of Monte Maria
agreement was not reduced to writing because Anay trusted Development Corporation) to petitioner, and sought short term
Belo’s assurances. loans for its members and with an agreement that Monte
Maria will be entitled to P1.31 commission per thousand paid
The venture succeeded under Anay’s marketing prowess. daily. Nieves acted as bookkeeper while her husband Arsenio
acted as credit investigator.
But then the relationship between Anay and Tocao soured.
One day, Tocao advised one of the branch managers that Anay - Gragera complained that his commissions were inadequately
was no longer a part of the company. Anay then demanded remitted. This prompt petitioner to file a complaint against
that the company be audited and her shares be given to her. respondent allegedly in their capacities as employees of
petitioner, with having misappropriated funds.
ISSUE: Whether or not there is a partnership.
ISSUE: Whether or not the business relationship between
petitioner and respondent was one of partnership
HELD: Yes, even though it was not reduced to writing, for a
partnership can be instituted in any form. The fact that it was
registered as a sole proprietorship is of no moment for such HELD
registration was only for the company’s trade name.
YES
Anay was not even an employee because when they ventured
Nieves herself provided the initiative in the lending activities
into the agreement, they explicitly agreed to profit sharing this
with Monte Maria.
is even though Anay was receiving commissions because this
is only incidental to her efforts as a head marketer.
- The fact that in their “Articles of Agreement”, the parties
agreed to divide the profits of a lending business “in a 70-15-
The Supreme Court also noted that a partner who is excluded 15, manner, with petitioner getting the lions share proved the
wrongfully from a partnership is an innocent partner. Hence, establishment of a partnership,” even when the other parties to
the guilty partner must give him his due upon the dissolution the agreement were given separate compensation as
of the partnership as well as damages or share in the profits bookkeeper and creditor investigator.
“realized from the appropriation of the partnership business
and goodwill.” An innocent partner thus possesses “pecuniary
By the contract of partnership, two or more persons bind
interest in every existing contract that was incomplete and in
themselves to contribute money, property or industry to a
the trade name of the co-partnership and assets at the time he
common fund, with the intention of dividing the profits among
was wrongfully expelled.”
themselves. (Art. 1767 NCC)
An unjustified dissolution by a partner can subject him to MORAN JR. v. COURT OF APPEALS 133 SCRA 88
action for damages because by the mutual agency that arises in (1984)
a partnership, the doctrine of delectus personae allows the
partners to have the power, although not necessarily the right Facts:
to dissolve the partnership.
Moran and Pecson agreed to contribute P15 000 each for the
Tocao’s unilateral exclusion of Anay from the partnership is purpose of printing 95 000 posters of the delegates to the then
shown by her memo to the Cubao office plainly stating that 1971 Constitutional Commission. It was further agreed that
Anay was, as of October 9, 1987, no longer the vice-president Pecson will receive a commission of P 1000 a month and that
for sales of Geminesse Enterprise. By that memo, petitioner the partnership is to be liquidated on December 15, 1971.
Tocao effected her own withdrawal from the partnership and
considered herself as having ceased to be associated with the Pecson partially fulfilled his obligation when he issued P10k
partnership in the carrying on of the business. Nevertheless, in favor of the partnership. He gave the P10k to Moran as the
the partnership was not terminated thereby; it continues until managing partner. Moran however did not add anything and,
the winding up of the business. instead, he only used P4k out of the P10k in printing 2,000
posters. He only printed 2,000 posters. All the posters were
SANTOS VS REYES 368 SCRA 261 sold for a total of P10k.
FACTS: Pecson sued Moran. The trial court ordered Moran to pay
Pecson damages. The Court of Appeals affirmed the decision
- Petitioner Fernando Santos, Respondent Nieves Reyes and but modified the same as it ordered Moran to pay P47.5k for
BUSORG CASE DIGESTS 12
Atty. Charlie Mendoza
unrealized profit; P8k for Pecson’s monthly commissions; P7k expired, Menzi proceeded to liquidate the fertilizer business in
as return of investment because the venture never took off; question. The plaintiff refused to agree to this. It argued,
plus interest. among others, that the written contract entered into by the
parties is a contract of general regular commercial partnership,
Issue: Whether or not the Court of Appeals erred in holding wherein Menzi was the capitalist and the plaintiff the
Moran liable to respondent Pecson in the sum of P47,500 as industrial partner.
the supposed expected profits due him.
Issue: Is the relationship between the petitioner and Menzi
Ratio: that of partners?
The first question raised in this petition refers to the award of Held: The relationship established between the parties was not
P47,500.00 as the private respondent's share in the unrealized that of partners, but that of employer and employee, whereby
profits of the partnership. The award of speculative damages the plaintiff was to receive 35% of the net profits of the
has no basis in fact and law. fertilizer business of Menzi in compensation for his services
for supervising the mixing of the fertilizers. Neither the
The rule is, when a partner who has undertaken to contribute a provisions of the contract nor the conduct of the parties prior
sum of money fails to do so, he becomes a debtor of the or subsequent to its execution justified the finding that it was a
partnership for whatever he may have promised to contribute contract of copartnership. The written contract was, in fact, a
(Art. 1786, Civil Code) and for interests and damages from the continuation of the verbal agreement between the parties,
time he should have complied with his obligation (Art. 1788, whereby the plaintiff worked for the defendant corporation for
Civil Code. In this case, there was mutual breach. Private onehalf of the net profits derived by the corporation form
respondent failed to give his entire contribution in the amount certain fertilizer contracts. According to Art. 116 of the Code
of P15,000.00. He contributed only P10,000.00. The petitioner of Commerce, articles of association by which two or more
likewise failed to give any of the amount expected of him. He persons obligate themselves to place in a common fund any
further failed to comply with the agreement to print 95,000 property, industry, or any of these things, in order to obtain
copies of the posters. Instead, he printed only 2,000 copies. profit, shall be commercial, no matter what it class may be,
provided it has been established in accordance with the
There is no evidence whatsoever that the partnership between provisions of the Code. However in this case, there was no
the petitioner and the private respondent would have been a common fund. The business belonged to Menzi & Co. The
profitable venture. In fact, it was a failure doomed from the plaintiff was working for Menzi, and instead of receiving a
start. There is therefore no basis for the award of speculative fixed salary, he was to receive 35% of the net profits as
damages in favor of the private respondent compensation for his services. The phrase in the written
contract “en sociedad con”, which is used as a basis of the
Being a contract of partnership, each partner must share in the plaintiff to prove partnership in this case, merely means “en
profits and losses of the venture. That is the essence of a reunion con” or in association with. It is also important to note
partnership. And even with an assurance made by one of the that although Menzi agreed to furnish the necessary financial
partners that they would earn a huge amount of profits, in the aid for the fertilizer business, it did not obligate itself to
absence of fraud, the other partner cannot claim a right to contribute any fixed sum as capital or to defray at its own
recover the highly speculative profits expense the cost of securing the necessary credit.
Facts: Bastida offered to assign to Menzi & Co. his contract G.R. No. L-49982 April 27, 1988
with Phil Sugar Centrals Agency and to supervise the mixing Facts:
of the fertilizer and to obtain other orders for 50 % of the net Petitioner and private respondents are brothers and sisters who
profit that Menzi & Co., Inc., might derive therefrom. J. M. are co-owners of certain lots which were then being leased to
Menzi (gen. manager of Menzi & Co.) accepted the offer. The the Shell Company of the Philippines Limited (SHELL). They
agreement between the parties was verbal and was confirmed agreed to open and operate a gas station thereat to be known
by the letter of Menzi to the plaintiff on January 10, 1922. as Estanislao Shell Service Station with an initial investment
Pursuant to the verbal agreement, the defendant corporation on of P 15,000.00 to be taken from the advance rentals due to
April 27, 1922 entered into a written contract with the them from SHELL. They agreed to help their brother,
plaintiff, marked Exhibit A, which is the basis of the present petitioner herein, by allowing him to operate and manage the
action. Still, the fertilizer business as carried on in the same gasoline service station of the family. They negotiated with
manner as it was prior to the written contract, but the net profit SHELL. It was agreed that petitioner would apply for the
that the plaintiff herein shall get would only be 35%. The dealership. Respondent Remedios helped in managing the
intervention of the plaintiff was limited to supervising the business with petitioner.
mixing of the fertilizers in the bodegas of Menzi. Prior to the Later the parties herein entered into an Additional Cash Pledge
expiration of the contract (April 27, 1927), the manager of Agreement with SHELL wherein it was reiterated that the P
Menzi notified the plaintiff that the contract for his services 15,000.00 advance rental shall be deposited with SHELL to
would not be renewed. Subsequently, when the contract cover advances of fuel to petitioner as dealer with a proviso
BUSORG CASE DIGESTS 13
Atty. Charlie Mendoza
that said agreement “ cancels and supersedes the Joint intention of dividing the profits among themselves. The sole
Affidavit executed by the co-owners. ” dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was in
For sometime, the petitioner submitted financial statements compliance with the afore-stated policy of SHELL and the
regarding the operation of the business to private respondents, understanding of the parties of having only one
but therafter petitioner failed to render subsequent accounting. dealer of the SHELL products.”
Private respondents filed a complaint in the Court of First
Instance of Rizal against petitioner praying among others that VICENTE SY, TRINIDAD PAULINO, 6B’S TRUCKING
the latter be ordered: (1) to execute a public document CORPORATION, and SBT[1] TRUCKING
embodying all the provisions of the partnership agreement CORPORATION, petitioners, vs. HON. COURT OF
entered into between plaintiffs and defendant as provided in APPEALS and JAIME SAHOT, respondents.
Article 1771 of the New
Civil Code; (2) to render a formal accounting of the business This petition for review seeks the reversal of the
operation up to the time the order is issued and that the same decision[2] of the Court of Appeals dated February 29, 2000,
be subject to proper audit; (3) to pay the plaintiffs their lawful in CA-G.R. SP No. 52671, affirming with modification the
shares and participation in the net profits of the business. The decision[3] of the National Labor Relations Commission
trial court dismissed the complaint. Private respondents moved promulgated on June 20, 1996 in NLRC NCR CA No.
for reconsideration. The dismissal was set aside and the trial 010526-96. Petitioners also pray for the reinstatement of the
court rendered in their favor. Petitioner appealed, decision[4] of the Labor Arbiter in NLRC NCR Case No. 00-
the appellate court affirmed in toto the decision of the trial 09-06717-94.
court and denied the subsequent motion for reconsideration.
Hence, this petition for certiorari. Culled from the records are the following facts of this
Petitioner argued that because of the said stipulation case:
cancelling and superseding that previous Joint Affidavit,
whatever partnership agreement there was in said previous Sometime in 1958, private respondent Jaime Sahot[5]
agreement had thereby been abrogated. started working as a truck helper for petitioners’ family-owned
trucking business named Vicente Sy Trucking. In 1965, he
Issue(s): became a truck driver of the same family business, renamed T.
Whether or not a partnership exists between members of the Paulino Trucking Service, later 6B’s Trucking Corporation in
same family arising from their joint ownership of certain 1985, and thereafter known as SBT Trucking Corporation
properties since 1994. Throughout all these changes in names and for 36
years, private respondent continuously served the trucking
Held: business of petitioners.
“ We find no merit in [petitioner’s] argument. Said cancelling
In April 1994, Sahot was already 59 years old. He had
provision was necessary for the Joint Affidavit speaks of P
been incurring absences as he was suffering from various
15,000.00 advance rentals starting May 25, 1966 while the
ailments. Particularly causing him pain was his left thigh,
latter agreement also refers to advance rentals of the same
which greatly affected the performance of his task as a
amount starting May 24, 1966. There is, therefore, a
driver. He inquired about his medical and retirement benefits
duplication of reference to the P 15,000.00 hence the need to
with the Social Security System (SSS) on April 25, 1994, but
provide in the subsequent document that it "cancels and
discovered that his premium payments had not been remitted
supersedes" the
by his employer.
previous one. True it is that in the latter document, it is silent
as to the statement in the Joint Affidavit that the P 15,000.00 Sahot had filed a week-long leave sometime in May
represents the "capital investment" of the parties in the 1994. On May 27th, he was medically examined and treated
gasoline station business and it speaks of petitioner as the sole for EOR, presleyopia, hypertensive retinopathy G II (Annexes
dealer, but this is as it should be for in the latter document “G-5” and “G-3”, pp. 48, 104, respectively),[6] HPM, UTI,
SHELL was a signatory and it would be against its policy if in Osteoarthritis (Annex “G-4”, p. 105),[7] and heart
the agreement it should be stated that the business is a enlargement (Annex G, p. 107).[8] On said grounds, Belen
partnership with private respondents and not a sole Paulino of the SBT Trucking Service management told him to
proprietorship of petitioner. file a formal request for extension of his leave. At the end of
“Moreover other evidence in the record shows that there was his week-long absence, Sahot applied for extension of his
in fact such partnership agreement between the parties. This is leave for the whole month of June, 1994. It was at this time
attested by the testimonies of private respondent Remedies when petitioners allegedly threatened to terminate his
Estanislao and Atty. Angeles. Petitioner submitted to private employment should he refuse to go back to work.
respondents periodic accounting of the business. Petitioner
gave a written authority to private respondent Remedies At this point, Sahot found himself in a dilemma. He
Estanislao, his sister, to examine and audit the books of their was facing dismissal if he refused to work, But he could not
“common business” (aming negosyo). Respondent Remedios retire on pension because petitioners never paid his correct
assisted in the running of the business. There is no doubt that SSS premiums. The fact remained he could no longer work as
the parties hereto formed a partnership when they bound his left thigh hurt abominably. Petitioners ended his dilemma.
themselves to contribute money to a common fund with the
BUSORG CASE DIGESTS 14
Atty. Charlie Mendoza
They carried out their threat and dismissed him from work, Petitioners assailed the decision of the NLRC before
effective June 30, 1994. He ended up sick, jobless and the Court of Appeals. In its decision dated February 29, 2000,
penniless. the appellate court affirmed with modification the judgment of
the NLRC. It held that private respondent was indeed an
On September 13, 1994, Sahot filed with the NLRC employee of petitioners since 1958. It also increased the
NCR Arbitration Branch, a complaint for illegal dismissal, amount of separation pay awarded to private respondent to
docketed as NLRC NCR Case No. 00-09-06717-94. He P74,880, computed at the rate of P2,080 per year for 36 years
prayed for the recovery of separation pay and attorneys fees of service from 1958 to 1994. It decreed:
against Vicente Sy and Trinidad Paulino-Sy, Belen Paulino,
Vicente Sy Trucking, T. Paulino Trucking Service, 6B’s WHEREFORE, the assailed decision is hereby AFFIRMED
Trucking and SBT Trucking, herein petitioners. with MODIFICATION. SB Trucking Corporation is hereby
directed to pay complainant Jaime Sahot the sum of
For their part, petitioners admitted they had a trucking SEVENTY-FOUR THOUSAND EIGHT HUNDRED
business in the 1950s but denied employing helpers and EIGHTY (P74,880.00) PESOS as and for his separation
drivers. They contend that private respondent was not pay.[10]
illegally dismissed as a driver because he was in fact
petitioner’s industrial partner. They add that it was not until
Hence, the instant petition anchored on the following
the year 1994, when SBT Trucking Corporation was
contentions:
established, and only then did respondent Sahot become an
employee of the company, with a monthly salary that reached I
P4,160.00 at the time of his separation.
RESPONDENT COURT OF APPEALS IN
Petitioners further claimed that sometime prior to June PROMULGATING THE QUESTION[ED] DECISION
1, 1994, Sahot went on leave and was not able to report for AFFIRMING WITH MODIFICATION THE DECISION OF
work for almost seven days. On June 1, 1994, Sahot asked NATIONAL LABOR RELATIONS COMMISSION
permission to extend his leave of absence until June 30, DECIDED NOT IN ACCORD WITH LAW AND PUT AT
1994. It appeared that from the expiration of his leave, private NAUGHT ARTICLE 402 OF THE CIVIL CODE.[11]
respondent never reported back to work nor did he file an
extension of his leave. Instead, he filed the complaint for
illegal dismissal against the trucking company and its owners. II
Petitioners add that due to Sahot’s refusal to work after RESPONDENT COURT OF APPEALS VIOLATED
the expiration of his authorized leave of absence, he should be SUPREME COURT RULING THAT THE NATIONAL
deemed to have voluntarily resigned from his work. They LABOR RELATIONS COMMISSION IS BOUND BY THE
contended that Sahot had all the time to extend his leave or at FACTUAL FINDINGS OF THE LABOR ARBITER AS THE
least inform petitioners of his health condition. Lastly, they LATTER WAS IN A BETTER POSITION TO OBSERVE
cited NLRC Case No. RE-4997-76, entitled “Manuelito THE DEMEANOR AND DEPORTMENT OF THE
Jimenez et al. vs. T. Paulino Trucking Service,” as a defense in WITNESSES IN THE CASE OF ASSOCIATION OF
view of the alleged similarity in the factual milieu and issues INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS
of said case to that of Sahot’s, hence they are in pari material NATIONAL CAPITAL REGION (305 SCRA 233).[12]
and Sahot’s complaint ought also to be dismissed.
III
The NLRC NCR Arbitration Branch, through Labor
Arbiter Ariel Cadiente Santos, ruled that there was no illegal PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY
dismissal in Sahot’s case. Private respondent had failed to RESPONDENT SBT TRUCKING CORPORATION.[13]
report to work. Moreover, said the Labor Arbiter, petitioners
and private respondent were industrial partners before January
1994. The Labor Arbiter concluded by ordering petitioners to Three issues are to be resolved: (1) Whether or not an
employer-employee relationship existed between petitioners
pay “financial assistance” of P15,000 to Sahot for having
and respondent Sahot; (2) Whether or not there was valid
served the company as a regular employee since January 1994
dismissal; and (3) Whether or not respondent Sahot is entitled
only.
to separation pay.
On appeal, the National Labor Relations Commission
Crucial to the resolution of this case is the
modified the judgment of the Labor Arbiter. It declared that
determination of the first issue. Before a case for illegal
private respondent was an employee, not an industrial partner,
dismissal can prosper, an employer-employee relationship
since the start. Private respondent Sahot did not abandon his
must first be established.[14]
job but his employment was terminated on account of his
illness, pursuant to Article 284[9] of the Labor Code. Petitioners invoke the decision of the Labor Arbiter
Accordingly, the NLRC ordered petitioners to pay private Ariel Cadiente Santos which found that respondent Sahot was
respondent separation pay in the amount of P60,320.00, at the not an employee but was in fact, petitioners’ industrial
rate of P2,080.00 per year for 29 years of service. partner.[15] It is contended that it was the Labor Arbiter who
BUSORG CASE DIGESTS 15
Atty. Charlie Mendoza
heard the case and had the opportunity to observe the when the trucking business was under operation. Neither is
demeanor and deportment of the parties. The same conclusion, there any proof that he had actively participated in the
aver petitioners, is supported by substantial evidence.[16] management, administration and adoption of policies of the
Moreover, it is argued that the findings of fact of the Labor business. Thus, the NLRC and the CA did not err in reversing
Arbiter was wrongly overturned by the NLRC when the latter the finding of the Labor Arbiter that private respondent was an
made the following pronouncement: industrial partner from 1958 to 1994.
We agree with complainant that there was error committed by On this point, we affirm the findings of the appellate
the Labor Arbiter when he concluded that complainant was an court and the NLRC. Private respondent Jaime Sahot was not
industrial partner prior to 1994. A computation of the age of an industrial partner but an employee of petitioners from 1958
complainant shows that he was only twenty-three (23) years to 1994. The existence of an employer-employee relationship
when he started working with respondent as truck helper. How is ultimately a question of fact[23] and the findings thereon by
can we entertain in our mind that a twenty-three (23) year old the NLRC, as affirmed by the Court of Appeals, deserve not
man, working as a truck helper, be considered an industrial only respect but finality when supported by substantial
partner. Hence we rule that complainant was only an evidence. Substantial evidence is such amount of relevant
employee, not a partner of respondents from the time evidence which a reasonable mind might accept as adequate to
complainant started working for respondent.[17] justify a conclusion.[24]
Time and again this Court has said that “if doubt exists
Because the Court of Appeals also found that an
between the evidence presented by the employer and the
employer-employee relationship existed, petitioners aver that
employee, the scales of justice must be tilted in favor of the
the appellate court’s decision gives an “imprimatur” to the
latter.”[25] Here, we entertain no doubt. Private respondent
“illegal” finding and conclusion of the NLRC.
since the beginning was an employee of, not an industrial
Private respondent, for his part, denies that he was ever partner in, the trucking business.
an industrial partner of petitioners. There was no written
Coming now to the second issue, was private
agreement, no proof that he received a share in petitioners’
respondent validly dismissed by petitioners?
profits, nor was there anything to show he had any
participation with respect to the running of the business.[18] Petitioners contend that it was private respondent who
refused to go back to work. The decision of the Labor Arbiter
The elements to determine the existence of an
pointed out that during the conciliation proceedings,
employment relationship are: (a) the selection and engagement
petitioners requested respondent Sahot to report back for
of the employee; (b) the payment of wages; (c) the power of
work. However, in the same proceedings, Sahot stated that he
dismissal; and (d) the employer’s power to control the
was no longer fit to continue working, and instead he
employee’s conduct. The most important element is the
demanded separation pay. Petitioners then retorted that if
employer’s control of the employee’s conduct, not only as to
Sahot did not like to work as a driver anymore, then he could
the result of the work to be done, but also as to the means and
be given a job that was less strenuous, such as working as a
methods to accomplish it.[19]
checker. However, Sahot declined that suggestion. Based on
As found by the appellate court, petitioners owned and the foregoing recitals, petitioners assert that it is clear that
operated a trucking business since the 1950s and by their own Sahot was not dismissed but it was of his own volition that he
allegations, they determined private respondent’s wages and did not report for work anymore.
rest day.[20] Records of the case show that private respondent
In his decision, the Labor Arbiter concluded that:
actually engaged in work as an employee. During the entire
course of his employment he did not have the freedom to While it may be true that respondents insisted that
determine where he would go, what he would do, and how he complainant continue working with respondents despite his
would do it. He merely followed instructions of petitioners alleged illness, there is no direct evidence that will prove that
and was content to do so, as long as he was paid his wages. complainant’s illness prevents or incapacitates him from
Indeed, said the CA, private respondent had worked as a truck performing the function of a driver. The fact remains that
helper and driver of petitioners not for his own pleasure but complainant suddenly stopped working due to boredom or
under the latter’s control. otherwise when he refused to work as a checker which
certainly is a much less strenuous job than a driver.[26]
Article 1767[21] of the Civil Code states that in a
contract of partnership two or more persons bind themselves
to contribute money, property or industry to a common fund, But dealing the Labor Arbiter a reversal on this score
with the intention of dividing the profits among the NLRC, concurred in by the Court of Appeals, held that:
themselves.[22] Not one of these circumstances is present in
this case. No written agreement exists to prove the partnership While it was very obvious that complainant did not have any
between the parties. Private respondent did not contribute intention to report back to work due to his illness which
money, property or industry for the purpose of engaging in the incapacitated him to perform his job, such intention cannot be
supposed business. There is no proof that he was receiving a construed to be an abandonment. Instead, the same should
share in the profits as a matter of course, during the period have been considered as one of those falling under the just
BUSORG CASE DIGESTS 16
Atty. Charlie Mendoza
causes of terminating an employment. The insistence of In the case at bar, the employer clearly did not comply
respondent in making complainant work did not change the with the medical certificate requirement before Sahot’s
scenario. dismissal was effected. In the same case of Sevillana vs. I.T.
(International) Corp., we ruled:
It is worthy to note that respondent is engaged in the trucking
Since the burden of proving the validity of the dismissal of the
business where physical strength is of utmost requirement
employee rests on the employer, the latter should likewise
(sic). Complainant started working with respondent as truck
bear the burden of showing that the requisites for a valid
helper at age twenty-three (23), then as truck driver since
dismissal due to a disease have been complied with. In the
1965. Complainant was already fifty-nine (59) when the
absence of the required certification by a competent public
complaint was filed and suffering from various illness
health authority, this Court has ruled against the validity of the
triggered by his work and age.
employee’s dismissal. It is therefore incumbent upon the
private respondents to prove by the quantum of evidence
x x x[27] required by law that petitioner was not dismissed, or if
dismissed, that the dismissal was not illegal; otherwise, the
In termination cases, the burden is upon the employer dismissal would be unjustified. This Court will not sanction a
to show by substantial evidence that the termination was for dismissal premised on mere conjectures and suspicions, the
lawful cause and validly made.[28] Article 277(b) of the evidence must be substantial and not arbitrary and must be
Labor Code puts the burden of proving that the dismissal of an founded on clearly established facts sufficient to warrant his
employee was for a valid or authorized cause on the employer, separation from work.[32]
without distinction whether the employer admits or does not
admit the dismissal.[29] For an employee’s dismissal to be In addition, we must likewise determine if the
valid, (a) the dismissal must be for a valid cause and (b) the procedural aspect of due process had been complied with by
employee must be afforded due process.[30] the employer.
Article 284 of the Labor Code authorizes an employer From the records, it clearly appears that procedural due
to terminate an employee on the ground of disease, viz: process was not observed in the separation of private
respondent by the management of the trucking company. The
Art. 284. Disease as a ground for termination- An employer employer is required to furnish an employee with two written
may terminate the services of an employee who has been notices before the latter is dismissed: (1) the notice to apprise
found to be suffering from any disease and whose continued the employee of the particular acts or omissions for which his
employment is prohibited by law or prejudicial to his health as dismissal is sought, which is the equivalent of a charge; and
well as the health of his co-employees: xxx (2) the notice informing the employee of his dismissal, to be
issued after the employee has been given reasonable
However, in order to validly terminate employment on opportunity to answer and to be heard on his defense.[33]
this ground, Book VI, Rule I, Section 8 of the Omnibus These, the petitioners failed to do, even only for record
Implementing Rules of the Labor Code requires: purposes. What management did was to threaten the employee
with dismissal, then actually implement the threat when the
Sec. 8. Disease as a ground for dismissal- Where the occasion presented itself because of private respondent’s
employee suffers from a disease and his continued painful left thigh.
employment is prohibited by law or prejudicial to his health or
to the health of his co-employees, the employer shall not All told, both the substantive and procedural aspects of
terminate his employment unless there is a certification by due process were violated. Clearly, therefore, Sahot’s
competent public health authority that the disease is of such dismissal is tainted with invalidity.
nature or at such a stage that it cannot be cured within a
period of six (6) months even with proper medical treatment. If On the last issue, as held by the Court of Appeals,
the disease or ailment can be cured within the period, the respondent Jaime Sahot is entitled to separation pay. The law
employer shall not terminate the employee but shall ask the is clear on the matter. An employee who is terminated because
employee to take a leave. The employer shall reinstate such of disease is entitled to “separation pay equivalent to at least
employee to his former position immediately upon the one month salary or to one-half month salary for every year of
restoration of his normal health. (Italics supplied). service, whichever is greater xxx.”[34] Following the formula
set in Art. 284 of the Labor Code, his separation pay was
computed by the appellate court at P2,080 times 36 years
As this Court stated in Triple Eight integrated Services, (1958 to 1994) or P74,880. We agree with the computation,
Inc. vs. NLRC,[31] the requirement for a medical certificate after noting that his last monthly salary was P4,160.00 so that
under Article 284 of the Labor Code cannot be dispensed one-half thereof is P2,080.00. Finding no reversible error nor
with; otherwise, it would sanction the unilateral and arbitrary grave abuse of discretion on the part of appellate court, we are
determination by the employer of the gravity or extent of the constrained to sustain its decision. To avoid further delay in
employee’s illness and thus defeat the public policy in the the payment due the separated worker, whose claim was filed
protection of labor. way back in 1994, this decision is immediately executory.
Otherwise, six percent (6%) interest per annum should be
BUSORG CASE DIGESTS 17
Atty. Charlie Mendoza
charged thereon, for any delay, pursuant to provisions of the participation or contribution from petitioners or from Jose.
Civil Code.
ISSUE: Whether or not a partnership exists.
WHEREFORE, the petition is DENIED and the
decision of the Court of Appeals dated February 29, 2000 is HELD: YES. A partnership exists when two or more persons
AFFIRMED. Petitioners must pay private respondent Jaime agree to place their money, effects, labor, and skill in lawful
Sahot his separation pay for 36 years of service at the rate of commerce or business, with the understanding that there shall
one-half monthly pay for every year of service, amounting to be a proportionate sharing of the profits and losses among
P74,880.00, with interest of six per centum (6%) per annum them. A contract of partnership is defined by the Civil Code as
from finality of this decision until fully paid. Costs against one where two or more persons bind themselves to contribute
petitioners. money, property, or industry to a common fund, with the
intention of dividing the profits among themselves.
HEIRS OF JOSE LIM, represented by ELENITO LIM vs.
JULIET VILLA LIM G.R. No. 172690, March 3, 2010 The following circumstances tend to prove that Elfledo was
himself the partner of Jimmy and Norberto: 1) Cresencia
NACHURA, J.: testified that Jose gave Elfledo P50,000.00, as share in the
partnership, on a date that coincided with the payment of the
FACTS: Petitioners are the heirs of the late Jose Lim (Jose). initial capital in the partnership; (2) Elfledo ran the affairs of
They filed a Complaint for Partition, Accounting and the partnership, wielding absolute control, power and
Damages against respondent Juliet Villa Lim (respondent), authority, without any intervention or opposition whatsoever
widow of the late Elfledo Lim (Elfledo), who was the eldest from any of petitioners herein; (3) all of the properties were
son of Jose and Cresencia. registered in the name of Elfledo; (4) Jimmy testified that
Elfledo did not receive wages or salaries from the partnership,
Petitioners alleged that Jose was the liaison officer of indicating that what he actually received were shares of the
Interwood Sawmill in Cagsiay, Mauban, Quezon. Sometime in profits of the business; and (5) none of the petitioners, as heirs
1980, Jose, together with his friends Jimmy Yu (Jimmy) and of Jose, the alleged partner, demanded periodic accounting
Norberto Uy (Norberto), formed a partnership to engage in the from Elfledo during his lifetime.
trucking business. Initially, with a contribution of P50,000.00
each, they purchased a truck to be used in the hauling and G.R. No. 31057 September 7, 1929 ADRIANO ARBES, ET
transport of lumber of the sawmill. Jose managed the AL., plaintiffs-appellees, vs. VICENTE POLISTICO, ET
operations of this trucking business until his death on August AL., defendants-appellants.
15, 1981. Thereafter, Jose's heirs, including Elfledo, and
partners agreed to continue the business under the This is an action to bring about liquidation of the funds and
management of Elfledo. The shares in the partnership profits property of the association called "Turnuhan Polistico & Co."
and income that formed part of the estate of Jose were held in The plaintiffs were members or shareholders, and the
trust by Elfledo, with petitioners' authority for Elfledo to use, defendants were designated as president-treasurer, directors
purchase or acquire properties using said funds. Petitioners and secretary of said association.
alleged that Elfledo was never a partner or an investor in the
business and merely supervised the purchase of additional By agreement of the parties, the court appointed a
trucks using the income from the trucking business of the commissioner to examine all the books, documents, and
partners. accounts of "Turnuhan Polistico & Co. The commissioner
rendered his report, showing a balance of the cash on hand in
On May 18, 1995, Elfledo died, leaving respondent as his sole the amount of P24,607.80. The trial court in accepting the
surviving heir. Petitioners claimed that respondent took over report, rendered judgment, holding that the association
the administration of the aforementioned properties, which "Turnuhan Polistico & Co." is unlawful, and sentencing the
belonged to the estate of Jose, without their consent and defendants jointly and severally to return the amount of
approval. Claiming that they are co-owners of the properties, P24,607.80, as well as the documents showing the uncollected
petitioners required respondent to submit an accounting of all credits of the association, to the plaintiffs in this case, and to
income, profits and rentals received from the estate of Elfledo, the rest of the members of the said association represented by
and to surrender the administration thereof. Respondent said plaintiffs.
refused; thus, the filing of this case.
There is no question that "Turnuhan Polistico & Co." is an
Respondent traversed petitioners' allegations and claimed that
unlawful partnership, but the appellants allege that because it
Elfledo was himself a partner of Norberto and Jimmy.
is so, some charitable institution to whom the partnership
Respondent also alleged that when Jose died in 1981, he left
funds may be ordered to be turned over, should be included, as
no known assets, and the partnership with Jimmy and
a party defendant. The appellants refer to article 1666 of the
Norberto ceased upon his demise. Respondent also stressed
Civil Code, particularly the second paragraph, which
that Jose left no properties that Elfledo could have held in
provides: “When the dissolution of an unlawful partnership is
trust. Respondent maintained that all the properties involved in
decreed, the profits shall be given to charitable institutions of
this case were purchased and acquired through her and her
the domicile of the partnership, or, in default of such, to those
husband’s joint efforts and hard work, and without any
BUSORG CASE DIGESTS 18
Atty. Charlie Mendoza
of the province.” partner's contribution but are the result of the industry,
business or speculation which is the object of the partnership,
ISSUE: and therefor, in order to demand the proportional part of the
said profits, the partner would have to base his action on the
WHETHER OR NOT A CHARITABLE INSTITUTION IS A contract which is null and void, since this partition or
NECESSARY PARTY IN THIS CASE. distribution of the profits is one of the juridical effects
thereof. (3) Furthermore, it would be immoral and unjust for
RULING: the law to permit a profit from an industry prohibited by it.
NO, no charitable institution is a necessary party in the present CHARLES F. WOODHOUSE, plaintiff-appellant,
case of determination of the rights of the parties. The action vs. FORTUNATO F. HALILI, defendant-appellant. G.R.
which may arise from said article, in the case of unlawful No. L-4811
partnership, is that for the recovery of the amounts paid by the July 31, 1953
member from those in charge of the administration of said
partnership, and it is not necessary for the said parties to base FACTS: On November 29, 1947, plaintiff Woodhouse
their action to the existence of the partnership, but on the fact entered into a written agreement with defendant Halili stating
that of having contributed some money to the partnership among others that: 1) that they shall organize a partnership for
capital. Hence, the charitable institution of the domicile of the the bottling and distribution of Missionsoft drinks, plaintiff to
partnership, and in the default thereof, those of the province act as industrial partner or manager, and the defendant as a
are not necessary parties in this case. capitalist, furnishing the capital necessary therefore; 2) that
plaintiff was to secure the Mission Soft Drinks franchise for
In so ruling, the court had the occasion of explaining the scope and in behalf of the proposed partnership and 3) that the
and spirit of the provision of Article 1666 of the Civil Code plaintiff was to receive 30 per cent of the net profits of the
(now Article 1770 of the New Civil Code). business. Prior to entering into this agreement, plaintiff had
informed the Mission Dry Corporation of Los Angeles,
With regard to Contributions of an Illegal Partnership: the California, that he had interested a prominent financier
court holds that – (1) The partner who limits himself to (defendant herein) in the business, who was willing to invest
demanding only the amount contributed by him need not half a milliondollars in the bottling and distribution of the said
resort to the partnership contract on which to base his action beverages, and requested, in order that he may close the deal
since said contract does not exist in the eyes of the law, the with him, that the right to bottle and distribute be granted him
purpose from which the contribution was made has not come for a limited time under the condition that it will finally be
into existence, and the administrator of the partnership holding transferred to the corporation. Pursuant to this request,
said contribution retains what belongs to others, without any plaintiff was given “a thirty days’ option on exclusive bottling
consideration; for which reason he is not bound to return it and distribution rights for the Philippines”. The contract was
and he who has paid in his share is entitled to recover it. finally signed by plaintiff on December 3, 1947. When the
bottling plant was already in operation, plaintiff demanded of
(2) Our Code does not state whether, upon the dissolution of defendant that the partnership papers be executed. Defendant
the unlawful partnership, the amounts contributed are to be Halili gave excuses and would not execute said agreement,
returned by the partners, because it only deals with the thus the complaint by the plaintiff. Plaintiff prays for the :
disposition of the profits; but the fact that said contributions 1.execution of the contract of partnership; 2) accounting of
are not included in the disposal prescribed profits, shows that profits and 3)share thereof of 30 percent with 4) damages in
in consequences of said exclusion, the general law must be the amount of P200,000. The Defendant on the other hand
followed, and hence the partners should reimburse the amount claims that: 1) the defendant’s consent to the agreement, was
of their respective contributions. secured by the representation of plaintiff that he was the
owner, or was about to become owner of an exclusive bottling
(3) Any other solution is immoral, and the law will not franchise, which representation was false, and that plaintiff did
consent to the latter remaining in the possession of the not secure the franchise but was given to defendant himself 2)
manager or administrator who has refused to return them, by that defendant did not fail to carry out his undertakings, but
denying to the partners the action to demand them. that it was plaintiff who failed and 3)that plaintiff agreed to
contribute to the exclusive franchise to the partnership, but
With regard to Profits of an Illegal Partnership: the court plaintiff failed to do so with a 4) counterclaim for P200,00 as
holds that – (1) The article cited above permits no action for damages. The CFI ruling: 1) accounting of profits and to pay
the purpose of obtaining the earnings made by the unlawful plaintiff 15 % of the profits and that the 2) execution of
partnership, during its existence as result of the business in contract cannot be enforced upon parties. Lastly, the 3) fraud
which it was engaged, because for the purpose, the partner wasn’t proved
will have to base his action upon the partnership contract,
which is to annul and without legal existence by reason of its
unlawful object; and it is self evident that what does not exist ISSUES 1. WON plaintiff falsely represented that he had an
cannot be a cause of action. (2) Profits earned in the course of exclusive franchise to bottle Mission beverages 2. WON false
the partnership, because they do not constitute or represent the representation, if it existed, annuls the agreement to form the
BUSORG CASE DIGESTS 19
Atty. Charlie Mendoza
partnership recognizes the individual’s freedom or liberty to do an act he
has promised to do, or not to do it, as he pleases.
All monies collected by Orient Air Services for IATA and ATC Rules
transportation sold hereunder on American's ticket
stock or on exchange orders, less applicable The provisions of this Agreement are subject to
commissions to which Orient Air Services is any applicable rules or resolutions of the
entitled hereunder, are the property of American International Air Transport Association and the Air
and shall be held in trust by Orient Air Services Traffic Conference of America, and such rules or
until satisfactorily accounted for to American. resolutions shall control in the event of any
conflict with the provisions hereof.
Commissions
Termination
American will pay Orient Air Services
commission on transportation sold hereunder by American may terminate the Agreement on two
Orient Air Services or its sub-agents as follows: days' notice in the event Orient Air Services is
unable to transfer to the United States the funds
(a) Sales agency commission payable by Orient Air Services to American under
this Agreement. Either party may terminate the
American will pay Orient Air Services a sales Agreement without cause by giving the other 30
agency commission for all sales of transportation days' notice by letter, telegram or cable.
by Orient Air Services or its sub-agents over
American's services and any connecting through On 11 May 1981, alleging that Orient Air had reneged on its
air transportation, when made on American's ticket obligations under the Agreement by failing to promptly remit
stock, equal to the following percentages of the the net proceeds of sales for the months of January to March
tariff fares and charges: 1981 in the amount of US $254,400.40, American Air by itself
undertook the collection of the proceeds of tickets sold
1. For transportation solely between points within the originally by Orient Air and terminated forthwith the
United States and between such points and Agreement in accordance with Paragraph 13 thereof
Canada: 7% or such other rate(s) as may be (Termination).
prescribed by the Air Traffic Conference of
America. Four (4) days later, or on 15 May 1981, American Air
2. For transportation included in a through ticket instituted suit against Orient Air with the Court of First
covering transportation between points other than Instance of Manila, Branch 24, for Accounting with
those described above: 8% or such other rate(s) as Preliminary Attachment or Garnishment, Mandatory
may be prescribed by the International Air Injunction
Transport Association.
Answer: defendant Orient Air denied the material allegations
(b) Overriding commission
- Contending that after application thereof to the
In addition to the above commission American commissions due it under the Agreement, plaintiff in
will pay Orient Air Services an overriding fact still owed Orient Air a balance in unpaid
commission of 3% of the tariff fares and charges overriding commissions. Further, the defendant
for all sales of transportation over American's contended that the actions taken by American Air in
service by Orient Air Service or its sub-agents. the course of terminating the Agreement as well as
BUSORG CASE DIGESTS 27
Atty. Charlie Mendoza
the termination itself were untenable, Orient Air As the designated exclusive General Sales Agent of
claiming that American Air's precipitous conduct had American Air, Orient Air was responsible for the
occasioned prejudice to its business interests. promotion and marketing of American Air's services for
air passenger transportation, and the solicitation of sales
RTC: Ruled in favor of ORIENT therefor.
CA affirmed court a quo In and marketing of American Air's services for air
passenger transportation, and the solicitation of sales
Reconsideration: The decision was modified. therefor. In return for such efforts and services, Orient Air
was to be paid commissions of two (2) kinds:
- The decision of January 27, 1986 is modified in
paragraphs (1) and (2) of the dispositive part so that 1. first, a sales agency commission, ranging from 7-8%
the payment of the sums mentioned therein shall be of tariff fares and charges from sales by Orient Air
at their Philippine peso equivalent in accordance when made on American Air ticket stock; and
with the official rate of exchange legally prevailing 2. second, an overriding commission of 3% of tariff
on the date of actual payment. fares and charges for all sales of passenger
transportation over American Air services.
BOTH PARTIES APPEALED.
It is immediately observed that the precondition attached
CONTENTION OF AMERICAN AIR: to the first type of commission does not obtain for the
second type of commissions. The latter type of
- American Air that such commission is based only on commissions would accrue for sales of American Air
sales of its services actually negotiated or transacted services made not on its ticket stock but on the ticket
by Orient Air, otherwise referred to as "ticketed sales. stock of other air carriers sold by such carriers or other
- Orient Air can claim entitlement to the disputed authorized ticketing facilities or travel agents. To rule
overriding commission based only on ticketed sales. otherwise, i.e., to limit the basis of such overriding
- Thus, to be entitled to the 3% overriding commission, commissions to sales from American Air ticket stock
the sale must be made by Orient Air and the sale would erase any distinction between the two (2) types of
must be done with the use of American Air's ticket commissions and would lead to the absurd conclusion that
stocks. the parties had entered into a contract with meaningless
provisions. Such an interpretation must at all times be
CONTENTION OF ORIENT AIR: avoided with every effort exerted to harmonize the entire
Agreement.
- Contractual stipulation of a 3% overriding
commission covers the total revenue of American Air CONTRACT OF ADHESION:
and not merely that derived from ticketed sales
undertaken by Orient Air. It is clear from the records that American Air was the party
- Invokes its designation as the exclusive General Sales responsible for the preparation of the Agreement.
Agent of American Air, with the corresponding Consequently, any ambiguity in this "contract of adhesion" is
obligations arising from such agency, such as, the to be taken "contra proferentem", i.e., construed against the
promotion and solicitation for the services of its party who caused the ambiguity and could have avoided it by
principal. In effect, by virtue of such exclusivity, "all the exercise of a little more care. Thus, Article 1377 of the
sales of transportation over American Air's services Civil Code provides that the interpretation of obscure words
are necessarily by Orient Air." or stipulations in a contract shall not favor the party who
caused the obscurity.
ISSUE: Extent of Orient Air's right to the 3% overriding
commission Propriety of American Air's termination of the
Agreement:
HELD:
CA’s decision: It is not denied that Orient withheld
Interpretation of contract: remittances but such action finds justification from paragraph
4 of the Agreement, Exh. F, which provides for remittances to
- The entirety thereof must be taken into consideration American less commissions to which Orient is entitled, and
to ascertain the meaning of its provisions. from paragraph 5(d) which specifically allows Orient to retain
- After a careful examination of the records, the Court the full amount of its commissions. Since, as stated ante,
finds merit in the contention of Orient Air that the Orient is entitled to the 3% override. American's premise,
Agreement, when interpreted in accordance with the therefore, for the cancellation of the Agreement did not exist
foregoing principles, entitles it to the 3% overriding
commission based on total revenue, or as referred to SC: We agree with CA.
by the parties, "total flown revenue."
BUSORG CASE DIGESTS 28
Atty. Charlie Mendoza
- Orient Air was entitled to an overriding commission vs.
based on total flown revenue. American Air's THE HONORABLE COURT OF APPEALS, DAVAO
perception that Orient Air was remiss or in default of MERCHANDISING CORPORATION, FIELDMEN'S
its obligations under the Agreement was, in fact, a INSURANCE COMPANY INC., CESAR B. CEBALLOS,
situation where the latter acted in accordance with the JESUS C. MARQUEZ and BARTOLOME
Agreement—that of retaining from the sales proceeds CABANGBANG,respondents.
its accrued commissions before remitting the balance
to American Air. FACTS: The National Rice and Corn Corporation (Naric)
- Since the latter was still obligated to Orient Air by had on stock 8000 metric tons of corn which it could not
way of such commissions. Orient Air was clearly dispose of due to its poor quality. Naric called for bids for the
justified in retaining and refusing to remit the sums purchase of the corn and rice. But precisely because of the
claimed by American Air. poor quality of the corn, a direct purchase of said corn even
- The latter's termination of the Agreement was, with the privilege of importing commodities did not attract
therefore, without cause and basis, for which it good offers. Davao Merchandising Corporation (Damerco)
should be held liable to Orient Air. came in with its offer to act as agent in the exportation of the
corn, with the agent answering for the price thereof and
DAMAGES: shouldering all expenses incidental thereto, provided it can
import commodities, paying the NARIC therefor from the
- No error: appellate court modified by reduction the price it offered for the corn. Damerco was to open a domestic
trial court's award of exemplary damages and letter of credit, which shall be available to the NARIC drawing
attorney's fees. therefrom through sight draft without recourse. The
availability of said letter or letters of credit to the NARIC was
REINSTATEMENT OF ORIENT AS GSA: dependent upon the issuance of the export permit. The
payment therefor depended on the importation of the collateral
- Appellate court erred in affirming the rest of the goods, which is after its arrival.
decision of the trial court. We refer particularly to the
lower court's decision ordering American Air to The first half of the collateral goods was successfully
"reinstate defendant as its general sales agent for imported. Due to the inferior quality of the corn, it had to be
passenger transportation in the Philippines in replaced with more acceptable stock. This caused such delay
accordance with said GSA Agreement." that the letters of credit expired without the NARIC being able
- In effect, compels American Air to extend its to draw the full amount therefrom. Checks and PN were issued
personality to Orient Air. Such would be violative of by DAMERCO for the purpose of securing the unpaid part of
the principles and essence of agency, defined by law the price of the corn and as guaranty that DAMERCO will
as a contract whereby "a person binds himself to purchase the corresponding collateral goods.
render some service or to do something in
representation or on behalf of another, WITH THE
But because of the change of administration in the
CONSENT OR AUTHORITY OF THE LATTER”
government, barter transactions were suspended. Hence,
- In an agent- principal relationship, the personality of
DAMERCO was not able to import the remaining collateral
the principal is extended through the facility of the
goods.
agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts
which the latter would have him do. Such a NARIC instituted in the CFI of Manila against
relationship can only be effected with the consent of DAMERCO and Fieldmen’s Insurance Co. Inc. an action for
the principal, which must not, in any way, be recovery of a sum of money representing the balance of the
compelled by law or by any court. value of corn and rice exported by DAMERCO.
- The Agreement itself between the parties states that
"either party may terminate the Agreement without DAMERCO alleged that its juridical relationship
cause by giving the other 30 days' notice by letter, with the NARIC is governed by a contract, wherein it was
telegram or cable." agreed that DAMERCO would "act as agent" of NARIC "in
- We, therefore, set aside the portion of the ruling of exporting the quantity and kind of corn and rice", "as well as
the respondent appellate court reinstating Orient Air in importing the collateral goods that will be imported thru
as general sales agent of American Air. barter on a back to back letter of credit or no-dollar remittance
basis"; that DAMERCO had agreed "to buy the
SC AFFIRMS CA aforementioned collateral goods", not the corn grains that
were exported; that, therefore, it had no obligation to NARIC
until after such collateral goods had been imported. It also
G.R. No. L-32320 July 16, 1979 alleged that it should not be made to pay NARIC, since the
collateral goods worth more than US$480,000.00 had not been
imported as a consequence of the suspension of barter
NATIONAL RICE & CORN CORPORATION (NOW transactions and non-renewal of barter permits by the new
RICE & CORN ADMINISTRATION), petitioner,
BUSORG CASE DIGESTS 29
Atty. Charlie Mendoza
administration; and that the promissory notes sued upon by contract providing unconditionally that Damerco was buying
NARIC do not reflect the true intent and relationship of the the rice and corn. To be more specific, if the agreement was
parties and is wanting of consideration. just a sale of corn to Damerco, the contract need not specify
that Damerco was to buy the collateral goods.
The trial court rendered in favor of NARIC ordering
DAMERCO and Fieldmen’s Insurance Co. Inc., to pay, jointly
and severally. CA reversed the trial court’s decision and BIENVENIDO R. MEDRANO and IBAAN RURAL
rendered a new judgement dismissing the complaint as BANK, petitioners, vs. COURT OF APPEALS, PACITA G.
premature and for lack of cause of action. Hence this petition BORBON, JOSEFINA E. ANTONIO and ESTELA A.
for certiorari. FLOR, respondents
Sale of Milagros, Minerva, and Zenaida’s share to the Belarminos – IN BAD FAITH
Pahuds - VALID
The Belarminos, for their part, cannot argue that they
While the sale with respect to the 3/8 portion (Milagros, purchased the property from Virgilio in good faith. As a
Minerva, and Zenaida) is void by express provision of law and general rule, a purchaser of a real property is not required to
not susceptible to ratification, we nevertheless uphold its make any further inquiry beyond what the certificate of title
validity on the basis of the common law principle of estoppel. indicates on its face. But the rule excludes those who purchase
with knowledge of the defect in the title of the vendor or of
True, at the time of the sale to the Pahuds, Eufemia was not facts sufficient to induce a reasonable and prudent person to
armed with the requisite special power of attorney to dispose inquire into the status of the property. Such purchaser cannot
of the 3/8 portion of the property. Initially, in their answer to close his eyes to facts which should put a reasonable man on
the complaint in intervention, Eufemia and her other co-heirs guard, and later claim that he acted in good faith on the belief
denied having sold their shares to the Pahuds. During the pre- that there was no defect in the title of the vendor. His mere
trial conference, however, they admitted that they had indeed refusal to believe that such defect exists, or his obvious
sold 7/8 of the property to the Pahuds sometime in 1992. Thus, neglect by closing his eyes to the possibility of the existence
the previous denial was superseded, if not accordingly of a defect in the vendor’s title, will not make him an innocent
amended, by their subsequent admission. Moreover, in their purchaser for value, if afterwards it turns out that the title was,
Comment, the said co-heirs again admitted the sale made to in fact, defective. In such a case, he is deemed to have bought
petitioners.
BUSORG CASE DIGESTS 33
Atty. Charlie Mendoza
the property at his own risk, and any injury or prejudice
occasioned by such transaction must be borne by him.
In the case at bar, the Belarminos were fully aware that the
property was registered not in the name of the immediate
transferor, Virgilio, but remained in the name of Pedro San
Agustin and Agatona Genil. This fact alone is sufficient
impetus to make further inquiry and, thus, negate their claim
that they are purchasers for value in good faith. They knew
that the property was still subject of partition proceedings
before the trial court, and that the compromise agreement
signed by the heirs was not approved by the RTC following
the opposition of the counsel for Eufemia and her six other co-
heirs. The Belarminos, being transferees pendente lite, are
deemed buyers in mala fide, and they stand exactly in the
shoes of the transferor and are bound by any judgment or
decree which may be rendered for or against the
transferor. Furthermore, had they verified the status of the
property by asking the neighboring residents, they would have
been able to talk to the Pahuds who occupy an adjoining
business establishment and would have known that a portion
of the property had already been sold. All these existing and
readily verifiable facts are sufficient to suggest that the
Belarminos knew that they were buying the property at their
own risk.