RAUL DELOSA JR.

LAW ON PARTNERSHIP, AGENCY AND TRUST

CASE DIGEST ATTY. ARIFF LAO

1. FEDERICO JARANTILLA, JR., v. ANTONIETA JARANTILLA

G.R. No. 154486; December 1, 2010

FACTS: The spouses Jarantilla were survived by eight children. Federico, Delfin,

Benjamin, Conchita, Rosita, Pacita, Rafael and Antonieta

Petitioner Federico Jarantilla, Jr. is the grandchild of the late Jarantilla spouses by their
son Federico Jarantilla, Sr. Petitioner also has two other brothers: Doroteo and Tomas
Jarantilla.

The Jarantilla heirs extrajudicially partitioned amongst themselves the real properties of
their deceased parents.

Sps. Rosita Jarantilla and Vivencio Deocampo entered into an agreement with the
spouses Buenaventura Remotigue and Conchita Jarantilla to provide mutual assistance
to each other by way of financial support to any commercial and agricultural activity on a
joint business arrangement.

The spouses Buenaventura executed a document Acknowledgement of Participating

Capital stating the participating capital of their co-owners with Antonieta stated as eight
thousand pesos (P8,000.00) and Federico Jarantilla, Jr. as five thousand pesos
(P5,000.00).

Antonieta filed a complaint against Buenaventura, Cynthia, Doroteo and Tomas, for the
accounting of the assets and income of the co-ownership, for its partition and the
delivery of her share corresponding to eight percent (8%), and for damages. She
alleged that the initial contribution of property and money came from the heirs
inheritance, and her subsequent annual investment of seven thousand five hundred
pesos (P7,500.00) as additional capital came from the proceeds of her farm.

Respondents denied having formed a partnership. They did not deny the existence and
validity of the "Acknowledgement of Participating Capital" and in fact used this as
evidence to support their claim that Antonietas 8% share was limited to the businesses
enumerated therein. Petitioner Federico Jr joined his aunt Antonieta and likewise
asserted his share in the supposed partnership.

The RTC rendered judgment in favor of Antonieta and Federico. On appeal, the CA set
the RTC Decision. Petitioner filed a petition for review to the SC.

ISSUE: Did the CA err in ruling that petitioners are not entitled to profits over the
businesses not listed in the Acknowledgement?
HELD: No.

There is a co-ownership when an undivided thing or right belongs to different persons. It

is a partnership when two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among
themselves. The common ownership of property does not itself create a partnership
between the owners, though they may use it for the purpose of making gains; and they
may, without becoming partners, agree among themselves as to the management, and
use of such property and the application of the proceeds therefrom.

Under Article 1767 of the Civil Code, there are two essential elements in a contract of
partnership: (a) an agreement to contribute money, property or industry to a common
fund; and (b) intent to divide the profits among the contracting parties.

It is not denied that all the parties in this case have agreed to contribute capital to a
common fund to be able to later on share its profits. They have admitted this fact,
agreed to its veracity, and even submitted one common documentary evidence to prove
such partnership - the Acknowledgement of Participating Capital.

Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If
only the share of each partner in the profits has been agreed upon, the share of each in
the losses shall be in the same proportion. In the absence of stipulation, the share of
each partner in the profits and losses shall be in proportion to what he may have
contributed, but the industrial partner shall not be liable for the losses.

The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of
Participating Capital. However, petitioner fails to realize that this document specifically
enumerated the businesses covered by the partnership: Manila Athletic Supply,
Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City.

Since there was a clear agreement that the capital the partners contributed went to the
three businesses, then there is no reason to deviate from such agreement and go
beyond the stipulations in the document. Therefore, the CA did not err in limiting
petitioners share to the assets of the businesses enumerated in the Acknowledgement
of Participating Capital.

In Villareal v. Ramirez, the Court held that since a partnership is a separate juridical
entity, the shares to be paid out to the partners is necessarily limited only to its total
resources.
 2. VICENTE SY vs. HON. COURT OF APPEALS
G.R. No. 142293; February 27, 2003

FACTS: Sometime in 1958, private respondent Jaime Sahot started working as a truck
helper for petitioners’ family-owned trucking business named Vicente Sy Trucking. In
1965, he became a truck driver of the same family business, renamed T. Paulino
Trucking Service, later 6B’s Trucking Corporation in 1985, and thereafter known as SBT
Trucking Corporation since 1994. Throughout all these changes in names and for 36
years, private respondent continuously served the trucking business of petitioners.
When Sahot was 59 years old, he incurred several absences due to various ailments
which greatly affected the performance of his task as a driver. He inquired about his
medical and retirement benefits with the Social Security System (SSS) on April 25,
1994, but discovered that his premium payments had not been remitted by his
employer.
Sahot filed a leave to get medical attention. He was treated for EOR, presleyopia,
hypertensive retinopathy G II and heart enlargement. Because of such, the SBT
Trucking Service management told him to file a formal request for extension of his
leave. When Sahot applied for an extended leave, he was threatened of termination of
employment should he refuse to go back to work.
Eventually, Sahot was dismissed from employment which prompted the latter to file an
illegal dismissal case with the NLRC. For their part, petitioners admitted they had a
trucking business in the 1950s but denied employing helpers and drivers. They contend
that private respondent was not illegally dismissed as a driver because he was in fact
petitioner’s industrial partner. They add that it was not until the year 1994, when SBT
Trucking Corporation was established, and only then did respondent Sahot become an
employee of the company, with a monthly salary that reached P4,160.00 at the time of
his separation. The NLRC and the CA ruled that Sahot was an employee of the
petitioner.

ISSUE: Whether Sahot is an industrial partner

 
HELD: No.

Article 1767 of the Civil Code states that in a contract of partnership two or more
persons bind themselves to contribute money, property or industry to a common fund,
with the intention of dividing the profits among themselves.

Not one of these circumstances is present in this case. No written agreement exists to
prove the partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is no
proof that he was receiving a share in the profits as a matter of course, during the
period when the trucking business was under operation. Neither is there any proof that
he had actively participated in the management, administration and adoption of policies
of the business.

Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that
private respondent was an industrial partner from 1958 to 1994. On this point, the Court
affirmed the findings of the appellate court and the NLRC. Private respondent Jaime
Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994.

The existence of an employer-employee relationship is ultimately a question of fact and

the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only
respect but finality when supported by substantial evidence. Substantial evidence is
such amount of relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion.
3. MARJORIE TOCAO and WILLIAM T. BELO vs. COURT OF APPEALS 
G.R. No. 127405; September 20, 2001

FACTS: Petitioner Belo introduced private

respondent Nenita Anay to petitioner Tocao, who conveyed her desire to enter into a
joint venture with her for the importation and local distribution of kitchen cookwares.
Belo acted the capitalist, Tocao as president and general manager, and Anay as head
of the marketing department and later,vice-president for sales.

Later, Anay was able to secure the distributorship of

cookware products from the West Bend Company. They operated underthe name of
Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao’s name. Anay
attended distributor/dealer meetings with West Bend Company with the consent of
Tocao.

On October 9, 1987, Anay learned that Marjorie Tocao terminated her as vice-president
of Geminesse Enterprise. Anay attempted to contact Belo. She wrote him twice to
demand her overriding commission for the period of January 8, 1988 to February 5,
1988 and the audit of the company to determine her share in the net profits. Belo did not
answer.

 Nenita A. Anay filed a complaint for sum of money with damages against Tocao and
Belo before the RTC of Makati. She prayed that she be paid the overriding commission,
moral damages, and exemplary damages. The plaintiff also prayed for an audit of the
finances of Geminesse Enterprise from the inception of its business operation until she
was “illegally dismissed” to determine her ten percent (10%) share in the net profits.
She further prayed that she be paid the five percent (5%) overriding commission on the
remaining 150 West Bend cookware sets before her dismissal.

However, Tocao and Belo asserted that the alleged agreement was not reduced to
writing nor ratified, hence, unenforceable, void, or nonexistent. Also, they denied the
existence of a partnership because, as Anay herself admitted, Geminesse Enterprise
was the sole proprietorship of Marjorie Tocao. Belo also contended that he merely acted
as a guarantor of Tocao and denied contributing capital. Tocao, on the other hand,
denied that they agreed on a ten percent (10%) commission on the net profits.

Both trial court and court of appeals ruled that a business partnership existed and
ordered the defendants to pay. Hence, this petition.

ISSUE: Whether or not a partnership existed.

HELD: Yes

To be considered a juridical personality, a partnership must fulfill these requisites: (1)

two or more persons bind themselves to contribute money, property or industry to a
common fund; and (2) intention on the part of the partners to divide the profits among
themselves. It may be constituted in any form; a public instrument is necessary only
where immovable property or real rights are contributed thereto. This implies that since
a contract of partnership is consensual, an oral contract of partnership is as good as a
written one.

Private respondent Anay contributed her expertise in the business of distributorship of

cookware to the partnership and hence, under the law, she was the industrial or
managing partner.

Petitioner Belo had an proprietary interest. He presided over meetings regarding

matters affecting the operation of the business. Moreover, his having authorized in
writing giving Anay 37% of the proceeds of her personal sales, could not be interpreted
otherwise than that he had a proprietary interest in the business. This is inconsistent
with his claim that he merely acted as a guarantor. If indeed he was, he should
have presented documentary evidence. Also, Art. 2055 requires that a guaranty must
be express and the Statute of Frauds requires that it must be in writing. Petitioner Tocao
was also a capitalist in the partnership. She claimed that she herself financed the
business.

The business venture operated under Geminesse Enterprise did not result in an
employer-employee relationship between petitioners and private respondent. First, Anay
had a voice in the management of the affairs of the cookware distributorship and
second, Tocao admitted that Anay, like her, received only commissions and
transportation and representation allowances and not a fixed salary. If Anay was an
employee, it is difficult to believe that they recieved the same income. Also, the fact that
they operated under the name of Geminesse Enterprise, a sole proprietorship, is of no
moment. Said business name was used only for practical reasons - it was utilized as the
common name for petitioner Tocao’s various  business activities, which included the
distributorship of cookware.

The partnership exists until dissolved under the law. Since the partnership created by
petitioners and private respondent has no fixed term and is therefore a partnership at
will predicated on their mutual desire and consent, it may be dissolved by the will of a
partner.

Petitioners Tocao’s unilateral exclusion of private respondent from the partnership is

shown by her memo to the Cubao office plainly stating that private respondent was, as
of October 9, 1987, no longer the vice-president for sales of Geminesse Enterprise. By
that memo, petitioner Tocao effected her own withdrawal from the partnership and
considered herself as having ceased to be associated with the  partnership in the
carrying on of the business. Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business.

The partnership among petitioners and private respondent is ordered dissolved, and the
parties are ordered to effect the winding up and liquidation of the partnership pursuant
to the pertinent provisions of the Civil Code. Petitioners are ordered to pay Anay’s 10%
share in the profits, after accounting, 5% overriding commission for the 150 cookware
sets available for disposition since the time private respondent was wrongfully excluded
from the partnership by petitioner, overriding commission on the total production, as well
as moral and exemplary damages, and attorney’s fees
4. HEIRS of JOSE LIM vs. JULIET VILLA LIM
G.R. No. 172690; March 3, 2010

FACTS: A complaint for partition, accounting and damages was filed by the Petitioner
Heirs of Jose Lim against the Respondent Juliet Villa Lim, widow of the Elfedo Lim, who
was the eldest son of Jose and Cresencia Lim.

The Petitioners alleged that the deceased Jose Lim and his friends, Jimmy Yu and
Norberto Uy, formed a partnership in 1980 to engage in the trucking business with an
initial contribution of ₱ 50,000.00 each.

Also in the same year, Jose gave his eldest son, Elfedo, ₱ 50,000.00 as the latter’s
capital in the said partnership. Upon Jose’s death, the heirs and partners agreed to
continue the business under the Management of Elfedo. Further, the shares of the
partnership profits and income formed part of the estate of Jose, held in trust by Elfedo.

The Petitioners’ gave Elfedo the authority to use, purchase, and acquire properties
using the said funds. Thus, he was never a partner thereof, but merely supervised and
managed the trucking business of the partners.

On the other hand, the Respondent claimed that Elfedo was a partner, stating that Jose
gave him ₱ 50,000.00 as his capital to the partnership. He managed the trucking
business, which flourished through his effort. Further, the partnership was able to
engage in other business ventures and acquire real properties. Thus, he was a partner
separate and distinct from Jose, especially after the latter died. His assets arising from
the now-ceased partnership must not be subject of the complaint.

The Regional Trial Court (RTC) rendered its decision in favor of the Petitioners.
Aggrieved, the Respondent appealed to the Court of Appeals (CA). On appeal, the CA
reversed the RTC decision. Hence, this Petition.

ISSUE: Whether or not Elfedo was a partner of the partnership formed by Jose and his
friends.

HELD: Yes.

A partnership exists when two or more persons agree to place their money, effects,
labor, and skill in lawful commerce or business, with the understanding that there shall
be a proportionate sharing of the profits and losses among them.

In determining whether a partnership exists, Article 1769 of the Civil Code provides the
rules to be applied. It specifically provides under Paragraph 4 that the receipts by a
person of a share of the profits of a business is a prima facie evidence that he is a
partner in the business, but not such inference shall be drawn if such profits were
received in payment: (a) as a debt by installment or otherwise; (b) as wages of an
employee or rent to a landlord; (c) as an annuity to a widow or representative of a
deceased partner; (d) as interest on a loan, though the amount of payment vary with the
profits of the business; and, (e) as the consideration for the sale of a goodwill of a
business or other property by installments or otherwise.

Applying the legal provision above-mentioned, it was clearly established that Elfedo
himself was the partner of Jimmy and Norberto through the following circumstances: (1)
Jose gave Elfedo ₱ 50,000.00 as share in the partnership; (2) Elfedeo ran the affairs of
the partnership, having absolute control, power, and authority without any intervention
from the Petitioners; (3) all of the properties of the partnership were registered under the
name of Elfedo; (4) Elfedo did not receive wages or salaries from the partnership,
indicating that he was actually receiving shares of the profits of the business; and (5)
none of the Petitioners demanded periodic accounting accounting from Elfedo during
his lifetime. Thus, there is no denying that Elfedo was a partner and not merely hired in
the partnership of the trucking business.
5. MAURICIO AGAD v. SEVERINO MABATO and MABATO AND AGAD CO.
G.R.No. L-24193; June 28, 1968

FACTS: Petitioner Mauricio Agad claims that he and defendant Severino Mabato are
partners in a fishpond business to which they contributed P1000 each. As managing
partner, Mabato yearly rendered the accounts of the operations of the partnership.

However, for the years 1957-1963, defendant failed to render the accounts despite
repeated demands. Petitioner filed a complaint against Mabato to which a copy of the
public instrument evidencing their partnership is attached. Aside from the share of
profits of P14,000 and attorney’s fees of P1,000 , petitioner prayed for the dissolution of
the partnership and winding up of its affairs.

In his answer, Mabato admitted the formal allegations of the complaint and denied the
existence of said partnership on the ground that the contract therefor had not been
perfected because Agad had allegedly failed to give his P1000 contribution to the
partnership capital. Also, Mabato filed a motion to dismiss, upon the ground that the
complaint states no cause of action and that the lower court had no jurisdiction over the
subject matter of the case, because it involves principally the determination of rights
over public lands. After due hearing, the court issued the order appealed from, granting
the motion to dismiss the complaint for failure to state a cause of action.

RTC ruled that the complaint was subsequently dismissed upon the theory that the
contract of partnership is null and void pursuant to Art. 1773.

Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be
necessary.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed

thereto, if inventory of said property is not made, signed by the parties; and attached to
the public instrument.

ISSUE: Whether or not immovable property or real rights have been contributed to the
partnership under consideration.

HELD:

The issue before us hinges on whether or not "immovable property or real rights" have
been contributed to the partnership under consideration. Mabato alleged and the lower
court held that the answer should be in the affirmative, because "it is really
inconceivable how a partnership engaged in the fishpond business could exist without
said fishpond property (being) contributed to the partnership." It should be noted,
however, that, as stated in Annex "A" the partnership was established "to operate a
fishpond", not to "engage in a fishpond business". Moreover, none of the partners
contributed either a fishpond or a real right to any fishpond. Their contributions were
limited to the sum of P1,000 each.

The operation of the fishpond mentioned in Annex "A" was the purpose of the
partnership. Neither said fishpond nor a real right thereto was contributed to the
partnership or became part of the capital thereof, even if a fishpond or a real right
thereto could become part of its assets.
6. MAXIMILIANO SANCHO v. SEVERIANO LIZARRAGA
G.R. No. L-33580; February 6, 1931

FACTS: The plaintiff brought an action for the rescission of the partnership contract
between himself and the defendant and the reimbursement of his investment worth
50,000php with interest at 12 per cent per annum form October 15, 1920, with costs,
and any other just and equitable remedy against said defendant. The defendant denies
generally and specifically all the allegations of the complaint and asked for the
dissolution of the partnership, and the payment to him as its manager and administrator
P500 monthly from October 15, 1920 until the final dissolution with interest.

The Court of First Instance found that the defendant had not contributed all the capital
he had bound himself to invest hence it demanded that the defendant liquidate the
partnership, declared it dissolved on account of the expiration of the period for which it
was constituted, and ordered the defendant, as managing partner, to proceed without
delay to liquidate it, submitting to the court the result of the liquidation together with the
accounts and vouchers within the period of thirty days from receipt of notice of said
judgment. The plaintiff appealed from said decision praying for the rescission of the
partnership contract between him and the defendant in accordance with Art. 1124.

ISSUE: Whether or not the plaintiff acquired the right to demand rescission of the
partnership contract according to article 1124 of the Civil Code.

HELD:

The SC ruled that owing to the defendant’s failure to pay to the partnership the whole
amount which he bound himself to pay, he became indebted to the partnership for the
remainder, with interest and any damages occasioned thereby, but the plaintiff did not
thereby acquire the right to demand rescission of the partnership contract according to
article 1124 of the Code. Article 1124 cannot be applied to the case in question,
because it refers to the resolution of obligations in general, whereas articles 1681 and
1682 specifically refer to the contract of  partnership in particular. And it is a well known
principle that special provisions prevail over general provisions. Hence, SC dismissed
the appeal left the decision appealed from in full force.
7. TAI TONG CHUACHE & CO. vs. THE INSURANCE COMMISSION
G.R. No. L-55397; February 29, 1988

FACTS: Azucena Palomo obtained a loan from Tai Tong in the amount of P100,000.00.

To secure the payment of the loan, a mortgage was executed over the land and the
building in favour of Tai Tong. Arsenio Chua, representative of Thai Tong insured the
latter's interest with Travellers Multi-Indemnity Corporation.

Pedro Palomo secured a Fire Insurance Policy with Zenith Insurance Corporation,
Philippine British Assurance Co. and S.S.S. Group of Accredited Insurers. The building
and the contents were totally razed by fire. Spouses Palomo claimed the proceeds of
the insurance policies from the four insurers. However, Travellers Multi-Indemnity
refused to pay the amount of P30,894.31. Hence, a complaint was filed against
Travellers Multi-Indemnity. Subsequently, petitioner filed a complaint in intervention
claiming the proceeds of the insurance policy issued by respondent.

Respondent insurance commission dismissed the complaint of spouses Palomos on the

ground that the insurance policy subject of the complaint was taken out by Tai Tong,
petitioner herein, for its own interest only as mortgagee of the insured property and thus
complainant as mortgagors of the insured property have no right of action against
herein respondent. Also, respondent insurance commission absolved Travellers Multi-
Indemnity from liability on the basis that at the time of the occurrence of the peril,
petitioner as mortgagee had no more insurable interest over the insured property since
the credit secured by the mortgaged property was already paid by the Palomos before
the said property was gutted down by fire and it is Antonio Lopez Chua and not Tai
Tong who is entitled to the insurance proceeds since he was named as the complainant
in the certification issued by the Court of First Instance of Davao

Petitioner’s motion was denied, hence this appeal. It is the contention of the petitioner
that respondent erred in ruling that a certain Arsenio Lopez Chua is the one entitled to
the insurance proceeds and not Tai Tong. Public respondent argued that the civil case
should have been brought by Tai Tong or by its representative in its own behalf and
since it was filed by Arsenio Chua, he was deemed as the personal creditor of Spouses
Palomo.

ISSUE: Whether or not the civil case was filed by Arsenio Chua in his capacity as
personal creditor of spouses.

HELD: No.

It should be borne in mind that petitioner being a partnership may sue and be sued inits
name or by its duly authorized representative. The fact that Arsenio Lopez Chua is the
representative of petitioner is not questioned. Petitioner's declaration that Arsenio Lopez
Chua acts as the managing partner of the partnership was corroborated by respondent
insurance company. Thus, Chua as the managing partner of the partnership may
execute all acts of administration including the right to sue debtors of the partnership in
case of their failure to pay their obligation when it became due and demandable. Or at
the very least, Chua being a partner of petitioner Tai Ton is an agent of the partnership.
Being an agent, it is understood that he acted for and in behalf of the firm.
8. EMILIO EMNACE vs. COURT OF APPEALS
G.R. No. 126334; November 23, 2001

FACTS: Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a
business concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986,
they decided to dissolve their partnership and executed an agreement of partition and
distribution of the partnership properties among them. 

Petitioner failed to submit to Tabanao's heirs any statement of assets and liabilities of
the partnership, and to render an accounting of the partnership's finances. Petitioner
also reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3 share in
the total assets of the partnership.  Tabanao's filed against petitioner an action for
accounting, payment of shares, division of assets and damages.

ISSUE: Whether or not the heirs of Vicente Tabanao lacks the capacity to sue the
petitioner.

HELD: No.

The surviving spouse does not need to be appointed as executrix or administratrix of

the estate before she can file the action. She and her children are complainants in their
own right as successors of Vicente Tabanao. From the very moment of Vicente
Tabanao's death, his rights insofar as the partnership was concerned were transmitted
to his heirs, for rights to the succession are transmitted from the moment of death of the
decedent.

Whatever claims and rights Vicente Tabanao had against the partnership and petitioner
were transmitted to respondents by operation of law, more particularly by succession,
which is a mode of acquisition by virtue of which the property, rights and obligations to
the extent of the value of the inheritance of a person are transmitted.  Moreover,
respondents became owners of their respective hereditary shares from the moment
Vicente Tabanao died.
9. JO CHUNG CANG vs. PACIFIC COMMERCIAL CO.
G.R. No. 19892 September 6, 192

FACTS: Following the presentation of an application to be adjudged an insolvent by

the "Sociedad Mercantil, Teck Seing & Co., Ltd.," the creditors, the Pacific Commercial
Company, Piñol & Company, Riu Hermanos, and W. H. Anderson & Company, filed a
motion in which the Court was prayed to enter an order: "(A) Declaring the individual
partners as described in paragraph 5 parties to this proceeding; (B) to require each of
said partners to file an inventory of his property in the manner required by section 51 of
Act No. 1956; and (C) that each of said partners be adjudicated insolvent debtors in
this proceeding."
 
The trial judge first granted the motion, but, subsequently, on opposition being renewed,
denied it. It is from this last order that an appeal was taken in accordance with section
82 of the Insolvency Law.

ISSUE: Whether or not the partnership contract created a limited partnership.

 
HELD: No.
 
The contract created was not a limited partnership but a general partnership even if
“Ltd.” Was used in the firm’s name to avoid liability for possible losses.

The general rule is, that those who seek to avail themselves of the protection of laws
permitting the creation of limited partnerships must show a substantially full compliance
with such laws. A limited partnership that has NOT complied with the law of its creation
is not considered a limited partnership at all, but a GENERAL partnership in which all
the members are liable.

To establish a limited partnership there must be, at least, one general partner and
the name of the least one of the general partners must appear in the firm name. (Code
of Commerce, Arts.122 [2], 146,148). But neither of these requirements have been
fulfilled.
10. INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, ET AL. vs.
COMMISSION ON ELECTIONS;
G.R. No. 159139; January 13, 2004

had indeed been a written

agreement among the "consortium"
members,34 although it was
an internal matter among them,35
and of the fact that it would be
presented by counsel for
private respondent.36 However,
under questioning by Chief Justice
Hilario G. Davide Jr. and
Justice Jose C. Vitug,
Commissioner Tuason in effect
admitted that, while he was the
commissioner-in-charge of
Comelec’s Legal Department, he
had never seen, even up to that
late date, the agreement he spoke
of. Under further questioning, he
was likewise unable to
provide any information regarding
the amounts invested into the
project by several members
of the claimed consortium. A short
while later, he admitted that the
Commission had not taken
a look at the agreement. Even if
the BAC or the Phase II Team had
taken charge of evaluating
the eligibility, qualifications and
credentials of the consortium-
bidder, still, in all probability,
the former would have referred the
task to Commissioner Tuason,
head of Comelec’s Legal
Department. That task was the
appreciation and evaluation of
the legal effects and
consequences of the terms,
conditions, stipulations and
covenants contained in any joint
venture agreement, consortium
agreement or a similar document --
assuming of course that
any of these was available at the
time. The fact that Commissioner
Tuason was barely aware
of the situation bespeaks the
complete absence of such
document, or the utter failure or
neglect of the Comelec to examine
it -- assuming it was available at
all -- at the time the award
was made on April 15, 2003. The
problem is that Comelec never
bothered to check. It never
based its decision on documents or
other proof that would concretely
establish the existence
of the claimed consortium or
joint venture or agglomeration.
It relied merely on the self-
serving representation in an
uncorroborated letter signed by
only one individual, claiming that
his company represented a
"consortium" of several different
corporations. It concluded
forthwith that a consortium
indeed existed, composed of
such and such members, and
thereafter declared that the entity
was eligible to bid. True, copies of
financial statements and
incorporation papers of the alleged
"consortium" members were
submitted. But these papers
did not establish the existence of
a consortium, as they could
have been provided by the
companies concerned for purposes
other than to prove that they were
part of a consortium or
joint venture. For instance, the
papers may have been intended to
show that those companies
were each qualified to be a
sub- contractor (and nothing
more) in a major project. Those
documents did not by themselves
support the assumption that a
consortium or joint venture
existed among the companies. In
brief, despite the absence of
competent proof as to the
existence and eligibility of the
alleged consortium (MPC), its
capacity to deliver on the Contract,
and the members’ joint and several
liability therefor, Comelec
nevertheless assumed that such
consortium existed and was
eligible. It then went ahead and
considered the bid of MPC, to
which the Contract was eventually
awarded, in gross violation of the
former’s own bidding
rules and procedures contained in
its RFP. Therein lies Comelec’s
grave abuse of discretion.
On June 7, 1995, Congress passed R.A. 8046 (An act authorizing the COMELEC to conduct a
nationwide demonstration of a computerized election system and pilot-test it in the March 1996
elections in the Autonomous Region in Muslim Mindanao (ARMM) and for other
purposes). On December 22, 1997, Congress enacted R.A. 8436 (An act authorizing the
COMELEC to use an automated election system in the May 11, 1998 national or local elections
and in subsequent national and local electoral exercises, providing funds therefore and for other
purposes). On October 29, 2002, COMELEC adopted its Resolution 02-0170 a
modernization program for the 2004 elections. It resolved to conduct biddings for the three
phases of its Automated Election System: namely, Phase I-Voter Registration and Validation
System; Phase II-Automated Counting and Canvassing System; and Phase III-Electronic
Transmissions. President Gloria Macapagal-Arroyo issued EO No. 172, which allocated the sum
of P 2.5 billion to fund the AES for May 10, 2004 elections. She authorized the release of an
additional P 500 million, upon the request of COMELEC. On June 7, 1995, Congress passed
R.A. 8046 (An act authorizing the COMELEC to conduct a nationwide demonstration of a
computerized election system and pilot-test it in the March 1996 elections in the Autonomous
Region in Muslim Mindanao (ARMM) and for other purposes). On December 22, 1997,
Congress enacted R.A. 8436 (An act authorizing the COMELEC to use an automated
election system in the May 11, 1998 national or local elections and in subsequent national and
local electoral exercises, providing funds therefore and for other purposes). On October 29,
2002, COMELEC adopted its Resolution 02-0170 a modernization program for the 2004
elections. It resolved to conduct biddings for the three phases of its Automated Election System:
namely, Phase I-Voter Registration and Validation System; Phase II-Automated Counting and
Canvassing System; and Phase III-Electronic Transmissions. President Gloria Macapagal-
Arroyo issued EO No. 172, which allocated the sum of P 2.5 billion to fund the AES for May 10,
2004 elections. She authorized the release of an additional P 500 million, upon the request of

had indeed been a written

COMELEC.

agreement among the "consortium"

members,34 although it was
an internal matter among them,35
and of the fact that it would be
presented by counsel for
private respondent.36 However,
under questioning by Chief Justice
Hilario G. Davide Jr. and
Justice Jose C. Vitug,
Commissioner Tuason in effect
admitted that, while he was the
commissioner-in-charge of
Comelec’s Legal Department, he
had never seen, even up to that
late date, the agreement he spoke
of. Under further questioning, he
was likewise unable to
provide any information regarding
the amounts invested into the
project by several members
of the claimed consortium. A short
while later, he admitted that the
Commission had not taken
a look at the agreement. Even if
the BAC or the Phase II Team had
taken charge of evaluating
the eligibility, qualifications and
credentials of the consortium-
bidder, still, in all probability,
the former would have referred the
task to Commissioner Tuason,
head of Comelec’s Legal
Department. That task was the
appreciation and evaluation of
the legal effects and
consequences of the terms,
conditions, stipulations and
covenants contained in any joint
venture agreement, consortium
agreement or a similar document --
assuming of course that
any of these was available at the
time. The fact that Commissioner
Tuason was barely aware
of the situation bespeaks the
complete absence of such
document, or the utter failure or
neglect of the Comelec to examine
it -- assuming it was available at
all -- at the time the award
was made on April 15, 2003. The
problem is that Comelec never
bothered to check. It never
based its decision on documents or
other proof that would concretely
establish the existence
of the claimed consortium or
joint venture or agglomeration.
It relied merely on the self-
serving representation in an
uncorroborated letter signed by
only one individual, claiming that
his company represented a
"consortium" of several different
corporations. It concluded
forthwith that a consortium
indeed existed, composed of
such and such members, and
thereafter declared that the entity
was eligible to bid. True, copies of
financial statements and
incorporation papers of the alleged
"consortium" members were
submitted. But these papers
did not establish the existence of
a consortium, as they could
have been provided by the
companies concerned for purposes
other than to prove that they were
part of a consortium or
joint venture. For instance, the
papers may have been intended to
show that those companies
were each qualified to be a
sub- contractor (and nothing
more) in a major project. Those
documents did not by themselves
support the assumption that a
consortium or joint venture
existed among the companies. In
brief, despite the absence of
competent proof as to the
existence and eligibility of the
alleged consortium (MPC), its
capacity to deliver on the Contract,
and the members’ joint and several
liability therefor, Comelec
nevertheless assumed that such
consortium existed and was
eligible. It then went ahead and
considered the bid of MPC, to
which the Contract was eventually
awarded, in gross violation of the
former’s own bidding
rules and procedures contained in
its RFP. Therein lies Comelec’s
grave abuse of discretion.
FACTS: On June 7, 1995, Congress passed R.A. 8046 (An act authorizing the
COMELEC to conduct a nationwide demonstration of a computerized election system
and pilot-test it in the March 1996 elections in the Autonomous Region in Muslim
Mindanao (ARMM) and for other purposes). On December 22, 1997, Congress enacted
R.A. 8436 (An act authorizing the COMELEC to use an automated election system in
the May 11, 1998 national or local elections and in subsequent national and local
electoral exercises, providing funds therefore and for other purposes). On October 29,
2002, COMELEC adopted its Resolution 02-0170 a modernization program for the 2004
elections. It resolved to conduct biddings for the three phases of its Automated Election
System: namely, Phase I-Voter Registration and Validation System; Phase II-
Automated Counting and Canvassing System; and Phase III-Electronic
Transmissions. President Gloria Macapagal-Arroyo issued EO No. 172, which allocated
the sum of P 2.5 billion to fund the AES for May 10, 2004 elections. She authorized the
release of an additional P 500 million, upon the request of COMELEC.

The COMELEC issued an “Invitation to Apply for Eligibility and to Bid”. There are 57
bidders who participated therein. The Bids and Awards Committee (BAC) found MPC
and the Total Information Management Corporation (TIMC) eligible. Both were referred
to Technical Working Group (TWG) and the Department of Science and Technology
(DOST). However, the DOST said in its Report on the Evaluation of Technical
Proposals on Phase II that both MPC and TIMC had obtained a number of failed marks
in technical evaluation. Notwithstanding these failures, the COMELEC en banc issued
Resolution No. 6074, awarding the project to MPC. Wherefore, petitioners Information
Technology Foundation of the Philippines wrote a letter to the COMELEC chairman
Benjamin Abalos, Sr. They protested the award of the contract to respondent MPC.
However, in a letter-reply, the COMELEC rejected the protest.

ISSUE: Whether or not the Commission on Elections, the agency vested with the
exclusive constitutional mandate to oversee elections, gravely abused its discretion
when, in the exercise of its administrative functions, it awarded to MPC the
contract for the second phase of the comprehensive Automated Election System

HELD: Yes.

The petition is meritorious. The Court is beguiled by the statements of Commissioner

Florentino Tuason Jr., given in open court during the Oral Argument last October 7,
2003. The good commissioner affirmed that he was aware, of his own personal
knowledge, that there had indeed been a written agreement among the "consortium"
members, 34 although it was an internal matter among them, 35 and of the fact that it
would be presented by counsel for private respondent.36 However, under questioning
by Chief Justice Hilario G. Davide Jr. and Justice Jose C. Vitug, Commissioner Tuason
in effect admitted that, while he was the commissioner-in-charge of Comelec’s
Legal Department, he had never seen, even up to that late date, the agreement he
spoke of. Under further questioning, he was likewise unable to provide any information
regarding the amounts invested into the project by several members of the claimed
consortium. A short while later, he admitted that the Commission had not taken a look at
the agreement. Even if the BAC or the Phase II Team had taken charge of evaluating
the eligibility, qualifications and credentials of the consortium-bidder, still, in all
probability, the former would have referred the task to Commissioner Tuason, head of
Comelec’s Legal Department. That task was the appreciation and evaluation of
the legal effects and consequences of the terms, conditions, stipulations and
covenants contained in any joint venture agreement, consortium agreement or a
similar document -- assuming of course that any of these was available at the time. The
fact that Commissioner Tuason was barely aware of the situation bespeaks the
complete absence of such document, or the utter failure or neglect of the Comelec
to examine it -- assuming it was available at all -- at the time the award was made on
April 15, 2003. The problem is that Comelec never bothered to check. It never based its
decision on documents or other proof that would concretely establish the existence of
the claimed consortium or joint venture or agglomeration. It relied merely on the self-
serving representation in an uncorroborated letter signed by only one individual,
claiming that his company represented a "consortium" of several different
corporations. It concluded forthwith that a consortium indeed existed, composed of
such and such members, and thereafter declared that the entity was eligible to bid.
True, copies of financial statements and incorporation papers of the alleged
"consortium" members were submitted. But these papers did not establish the
existence of a consortium, as they could have been provided by the companies
concerned for purposes other than to prove that they were part of a consortium or joint
venture. For instance, the papers may have been intended to show that those
companies were each qualified to be a sub-contractor (and nothing more) in a
major project. Those documents did not by themselves support the assumption that a
consortium or joint venture existed among the companies. In brief, despite the absence
of competent proof as to the existence and eligibility of the alleged consortium (MPC),
its capacity to deliver on the Contract, and the members’ joint and several liability
therefor, Comelec nevertheless assumed that such consortium existed and was eligible.
It then went ahead and considered the bid of MPC, to which the Contract which the
Contract was eventually awarded, in gross violation of the former’s own bidding rules
and procedures contained in its RFP. Therein lies Comelec’s grave abuse of discretion.