BUSORG 1 CASES

PARTNERSHIP1. OA vs.THE COMMISSIONER OF INTERNAL REVENUEG.R. No. L-19342; May 25, 1972

FACTS: Lorenzo Oa was appointed administrator of the estate of his late wife Julia Bunales. He submitted the project of partition, which was approved by the Court. Although the project of partition was approved by the Court, no attempt was made to divide the properties among the 5 children. Instead, the properties remained under the management of Lorenzo T. Oa who used said properties in business by leasing or selling them and investing the income derived therefrom and the proceeds from the sales thereof in real properties and securities.In the years 1944 to 1954, the respondent Commissioner of Internal Revenue did treat petitioners as co-owners, not liable to corporate tax, and it was only from 1955 that he considered them as having formed an unregistered partnership

ISSUE: Whether or not unregistered partnership was formedHELD: YES. It is admitted that all the profits from these ventures were divided among petitioners proportionately in accordance with their respective shares in the inheritance. From the moment petitioners allowed not only the incomes from their respective shares of the inheritance but even the inherited properties themselves to be used by Lorenzo T. Oa as a common fund in undertaking several transactions or in business, with the intention of deriving profit to be shared by them proportionally, such act was tantamonut to actually contributing such incomes to a common fund and, in effect, they thereby formed an unregistered partnership.

2. Gatchalian vs. Collector of Internal Revenue67 Phil. 666, April 29, 1939

FACTS:Petitioners purchased, in the ordinary course of business, from one of the duly authorized agents of the National Charity Sweepstakes Office one ticket for the sum of two pesos (P2), said ticket was registered in the name of Jose Gatchalian and Company. The ticket won one of the third-prizes in the amount of P50,000. Gatchalian was required to file the corresponding income tax return covering the prize won. Respondent made an assessment against the petitioners requesting the payment to the deputy provincial treasurer of Pulilan, Bulacan. However, a petitioner, through their counsel, made a request for exemption but was denied. Petitioner failed to pay the amount due, hence a warrant of distraint and levy was issued. They paid under protest a part of the tax and penalties to avoid the effects of the warrant.

ISSUE: Whether or not the petitioners formed a partnership for them to be liable for income tax.HELD: Yes. There is no doubt that if the petitioners merely formed a community of property the latter is exempt from the payment of income tax under the law. But according to the stipulated facts the petitioners organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 . The partnership was not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared in the office of the Philippine Charity Sweepstakes, in his capacity as co-partner, as such collected the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner. in the same capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only.

3. Afisco Insurance Corporation v. Court of Appeals 302 SCRA 1

FACTS: The petitioners are 41 non-life insurance corporations. Upon issuance of All Risk insurance policies, the petitioners entered into a Quota Share Reinsurance treaty and a Surplus Reinsurance Treaty with the Munchener Ruckversicherungs-Gesselschaft (Munich), a non-resident foreign corporation. The reinsurance treaties required petitioners to form a pool. The pool of machinery insurers submitted a financial statement and filed an Information Return of Organization Exempt from Income Tax for the year ending in 1975, on the basis of which it was assessed by the Commissioner of Internal Revenue deficiency corporate taxes in the amount of P1,843,237.60 and withholding taxes in the amount of P1,768,799.39 and P89,438.68 on dividends paid to Munich and to the petitioners. These assessments were protested by the petitioners through its auditors Sycip, Gorres, Velayo and Co. However, the Commissioner of Internal Revenue denied the protest and ordered the petitioners, assessed as Pool of Machinery Insurers, to pay deficiency income tax, interest, and withholding tax.

ISSUE: Whether or not the Clearing House, acting as a mere agent and performing strictly administrative functions was a partnership.HELD: Yes. Article 1767 of the Civil Code recognizes of a contract of 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. Its requisites are thus follows:1. Mutual contribution to a common stock;2. A joint interest in the profits.In other words, a partnership id formed when persons contract to devote to a common purpose either money, property, or labor with the intention of dividing the profits between themselves. In the case before us, the ceding companies entered into a Pool Agreement or an association that would handle all the insurance business covered under their quota-share reinsurance treaty and surplus reinsurance treaty with Munich. The pool has a common fund, consisting of money and valuables that are deposited in the name and credit of the pool. This common fund pays for the administration and operation expenses of the pool. This is unmistakably indicates a partnership.

4. TORRES vs. CA320 SCRA 428

FACTS: Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40, 000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank.Petitioners alleged that the project failed because of respondents lack of funds or means and skills. They add that respondent used the loan in furtherance of his own company, Universal Umbrella Company.

Respondent alleged otherwise, claiming that the subdivision project failed because petitioners and their relatives had separately caused the annotations of adverse claims on the title to the land, which eventually scared away prospective buyers.

ISSUE: WON a partnership existsHELD: Under their Agreement, petitioners would contribute property to the partnership in the form of land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the amount needed for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to form a partnership.

It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title to the land to facilitate its use in the name of the respondent. On the other hand, respondent caused the subject land to be mortgaged, the proceeds of which were used for the survey and the subdivision of the land. As noted, he developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on the property.Respondents actions clearly belie petitioners contention that he made no contribution to the partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or property, but also industry.

OBLIGATIONS OF PARTNERS AMONG THEMSELVES5. Lozana vs DepakakiboGR No. L-13680RE: Property contributed

FACTS: Lozana entered into a contract with Depakakibo to operate, maintain, and distribute electric light and power in Dumangas, Iloilo under a franchise issued to Buenaflor. They established a partnership, capitalized at P30,000, with contributions at 60% for Lozana and 40% for Depakakibo. However, the franchise in favor of Buenaflor was cancelled and revoked by the Public Service Commission. A temporary certificate of Public Service Commission was issued in the name of Decolongon instead. Because of this, Lozana sold a Buda generator to the grantee. Depakakibo on the other hand, sold one Crossly Engine to Sps. Harder. Lozana brought an action against defendant alleging that he is the owner of the Buda generator and 70 wooden posts with connecting wires to the generator and the different houses supplied by electric current in Dumangas and he suffered damages as consequence of being wrongfully detained of them. Defendant answered by saying that generator and equipment was contributed to the partnership entered by them. In addition, Lozana sold his partnership contribution in violation of the terms of agreement. CFI declared Lozano owner of the equipment. Depakakibo appealed to the Supreme Court.

ISSUE: WON the partnership is void and if the disposal of the contribution of the parties is allowedHELD: Validity of the Partnership.Partnership is valid. The fact of furnishing the current to the holder of the franchise alone, without the previous approval of the Public Service Commission, does not per se make the contract of partnership null and void from the beginning and render the partnership entered into by the parties for the purpose also void and non-existentDisposal of Contributed Property to the Partnership. Facts show that parties entered into the contract of partnership, Lozana contributing the amount of P18, 000, and there has not been liquidation prior to the sale of the contributed properties: Buda Diesel Engine and 70 posts. It necessarily follows that the Buda diesel engine contributed by the plaintiff had become the property of the partnership. As properties of the partnership, the same could not be disposed of by the party contributing the same without the consent or approval of the partnership or of the other partner.

6. RAMNANI VS COURT OF APPEALSRE: Distribution of profits

FACTS: Ishwar Jethmal Ramnani and his wife Sonya had their main business based in New York. Ishwar received US$150,000.00 from his father-in-law in Switzerland. In 1965, Ishwar Jethmal Ramnanisent the amount of US $150,000.00 toChoithram in two bank draftsof US$65,000.00 andUS$85,000.00 for the purpose of investing the same in real estate in the Philippines.

Subsequently, spouses Ishwar executed a general power of attorney appointing Ishwars full blood brothers Choithram and Navalrai as attorneys-in-fact, empowering them to manage and conduct their business concerns in the Philippines. Choithram, as attorney-in-fact, entered into two agreements for the purchase of two parcels of land located in Pasig Rizal from Ortigas & Company, Ltd. Partnership (Ortigas Ltd.) with a total area of approximately 10,048 square meters. Three buildings were constructed thereon and were leased out by Choithram as attorney-in-fact of spouses Ishwar. Two of these buildings were later burned.

In 1970 Ishwar asked Choithram to account for the income and expensesrelative to these properties during the period1967 to1970. Choithram failed and refused to render suchaccounting, which prompted Ishwar to revoke thegeneral power of attorney.

Choithram and Ortigas Ltd. were duly notified by notice in writing of such revocation. It was also registered with the Securities and Exchange Commission and published in The Manila Times. Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Ishwar spouses in favor of Nirmla Ramnani, the wife of Choitrams son, Moti. Ortigas also executed the corresponding deeds of sale in favor of Nirmla and the TCT issued in her favor. Thus, spouses Ishwar filed a complaint in the Court of First Instance of Rizalagainst Choithram and spouses Nirmla and Moti(Choithram et al.) and Ortigas Ltd. for reconveyance of said properties or payment of its value and damages.

The trial court dismissed the complaint ruling that the lone testimony of Ishwar regarding the cash remittance is unworthy of faith and credit because the cash remittance wasmade before the execution of the general powerof attorney. Ishwar also failed to corroborate this lone testimony and did not exhibit any commercial document as regard to the alleged remittances. It believed the claim of Choitram that he and Ishwar entered into a temporary arrangement in order to enable Choithram, then a British citizen, to purchase the properties in the name of Ishwar who was an American citizen and who was then qualified to purchase property in the Philippines under thethen Parity Amendment.

Upon appeal, the CA reversed the decision and gave credence to Ishwar. It upheld the validity of Ishwars testimony and gave cognizance to a letter written by Choihtram imploring Ishwar to renew the power of attorney after it was revoked. It states therein that Choithram reassures his brother that he is not after his money and that the revocation is hurting the reputation of Ishwar. Choithram also made no mention of his claimed temporary arrangement in the letter. The CA ruled that Choithram is also estopped in pais or by deed from claiming an interest over the properties. Because of Choitrams admissions from (1) power of attorney, (2) the Agreements and (3) the Contract of Lease. It furthermore HELD thatChoithram's temporary arrangement, bywhich he claimed purchasing the two (2) parcels in questioning 1966 and placing them in the name of Ishwar who is an American citizen circumvents the disqualification provision of aliens acquiring real properties in the Philippines. Upholding the supposed "temporary arrangement" with Ishwar would be sanctioning the perpetration of an illegal act and culpable violation of the Constitution.

During the pendency of the case,Choithram made several attempts to dispose ofhis properties by wayof donation and also mortgaged the properties under litigation for 3 million USD to a shell partnership with a mere capital of 100 USD.

ISSUE: Whether or not there was a partnership between the brothers Ishwar and Choithram.HELD: Yes. Even without a written agreement, the scenario is clear. Spouses Ishwar supplied the capital of $150,000 for the business. They entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For this purpose, they appointed Choithram as their attorney-in-fact.Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar- Instead of paying for the lots in cash, he paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the buildings were burned later, Choithram was able to build two other buildings on the property. He rented them out and collected the rentals. Through the industry and genius of Choithram, Ishwar's property was developed and improved into what it is nowa valuable asset worth millions of pesos. As of the last estimate in 1985, while the case was pending before the trial court, the market value of the properties is no less than P22,304,000.00.39It should be worth much more today.We have a situation where two brothers engaged in a business venture. One furnished the capital; the other contributed his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is thicker than water.

7. EMNACE vs CA G.R. No. 126334;November 23, 2001Re: Prescriptive Period

FACTS: Emilio Emnace, Jacinto Divinagracia and Vicente Tabanao formed a partnership engaged in the fishing industry. In 1986, Jacinto decided to leave the partnership hence they agreed to dissolve the partnership. At that time, the partnership has an estimated asset amounting to P30,000,000.00.HOWEVER, until the death of Vicente Tabanao in 1994, Emnace never rendered an accounting either to Vicente or his heirs. Emnace reneged on his promise to turn over Tabanaos share which is 1/3 of the P30M. The heirs of Tabanao then sued Emnace. Emnace argued, among others, that the heirs are barred by prescription hence they can no longer demand an accounting. He contends that the partnership was dissolved in 1986 and that was the time when Tabanaos (and his heirs) right to inquire into the business affairs accrued; that said right has expired in 1990 or 4 years after. So beyond 1990, they can no longer inquire.

ISSUE:Whether or not the heirs of Vicente Tabanao are barred by prescription to demand an accounting.HELD: No. Prescription has not run in this case, it has never begun. The three finalstagesof partnership are: a) dissolution, b) winding up, and c) termination. In this case, Emnace and his partners dissolved their partnership but such did not perfect the dissolution because no accounting took place. The partnership, although dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs, including the partitioning and distribution of the net partnership assets to the partners. For as long as the partnership exists, any of the partners (or legal representative in this case the heirs of Tabanao) may demand an accounting of the partnerships business.Prescription of the said right starts to run only upon the dissolution of the partnership whenthe finalaccounting is done.When a final accounting is made, it is only then that prescription begins to run.In the case at bar, no final accounting has been made, and that is precisely what the heirs are seeking in their action before the trial court, since Emnace has failed or refused to render an accounting of the partnerships business and assets.Hence, the said action is not barred by prescription

OBLIGATIONS OF PARTNERS WITH REGARD TO 3RD PERSONS8. PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO.July 30, 1979RE: Rule here has been abandoned in view of Rule 3.02 of Code of Professional Responsibilty

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

ISSUE: WON the surviving partners may be allowed by the court to retain the name of the partners who already passed away in the name of the firm? NOHELD: In the case of Register of Deeds of Manila vs. China Banking Corporation, the SC said:The Court believes that, in view of the personal and confidential nature of the relations between attorney and client, and the high standards demanded in the canons of professional ethics, no practice should be allowed which even in a remote degree could give rise to the possibility of deception. Said attorneys are accordingly advised to drop the names of the deceased partners from their firm name.The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on that old firms reputation established by deceased partners.The court also made the difference from the law firms and business corporations:A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose. It is not a partnership formed for the purpose of carrying on trade or business or of holding property. 11 Thus, it has been stated that the use of a nom de plume, assumed or trade name in law practice is improper.We find such proof of the existence of a local custom, and of the elements requisite to constitute the same, wanting herein. Merely because something is done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a juridical custom.Petition suffers legal and ethical impediment.

9. PNB vs. Lo RE: Subsidiary or secondary liability of partners

FACTS: In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam and Peng formed a commercial partnership under the name of Tai Sing and Co., with a capital of P40,000 contributed by said partners. The firm name was registered in the mercantile registrar in the Province of Iloilo. Ping, in the articles of partnership, was assigned as the general manager. However, in 1917, he executed a special power of attorney in favor of Lam to act in his behalf as the manager of the firm. Subsequently, Lam obtained a loan from PNB the loan was under the firms name. In the same year, Ping died in China. From 1918 to 1920, the firm, via GM Lam, incurred other loans from PNB. The loans were not objected by any of the partners. Later, PNB sued the firm for non-payment. Lo, in his defense, argued that he cannot be liable as a partner because the partnership, according to him, is void; that it is void because the firms name did not comply with the requirement of the Code of Commerce that a firm name should contain the names of all of the partners, of several of them, or only one of them. Lo also argued that the acts of Lam after the death of Ping is not binding upon the other partners because the special power of attorney shall have already ceased.

ISSUE: Whether or not Lo is correct in both arguments.HELD: No. The anomalous adoption of the firm name above noted does not affect the liability of the general partners to third parties under Article 127 of the Code of Commerce. The object of the Code of Commerce in requiring a general partnership to transact business under the name of all its members, of several of them, or of one only, is to protect the public from imposition and fraud; it is for the protection of the creditors rather than of the partners themselves. It is unenforceable as between the partners and at the instance of the violating party, but not in the sense of depriving innocent parties of their rights who may have dealt with the offenders in ignorance of the latter having violated the law; and that contracts entered into by a partnership firm defectively organized are valid when voluntarily executed by the parties, and the only question is whether or not they complied with the agreement. Therefore, Lo cannot invoke in his defense the anomaly in the firm name which they themselves adopted. Lo was not able to prove his second argument. But even assuming arguendo, his second contention does not deserve merit because (a) Lam, in acting as a GM, is also a partner and his actions were never objected to by the partners, and (b) it also appeared from the evidence that Lo, Lam and the other partners authorized some of the loans.NOTE: Under the New Civil Code, a firm name may or may not include the name of one or more of the partners (Article 1815).

10. MUNASQUE V. CAG.R. No. L-39780 November 11, 1985Re: Presumption that acting partner has the authority to bind the partnership

DOCTRINES: There is a general presumption that each individual partner is an authorized agent for the firm and that he has authority to bind the firm in carrying on the partnership transactions. (Mills vs. Riggle,112 Pan, 617) Cited decision: George Litton v. Hill and Ceron, et al, (67 Phil. 513, 514)

The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of members of the firm acting apparently in its behalf and within the scope of his authority. (Le Roy vs. Johnson, 7 U.S. (Law. ed.), 391.)--------------------------------ARTICLE 1824 "All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823." While the liability of the partners are merely joint in transactions entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

FACTS: Petitioner Elmo Muasque was a partner in the construction business partnership "Galan and Muasque located in Cebu City. Munasque, as Contractor, entered into a contract with respondent Tropical through its Cebu Branch Manager Ramon Pons for remodeling a portion of Tropicals building. Celestino Galan (Galan) was named as a casual partner in the said contract.

A total amount of P25,000.00 was to be paid under the contract for the entire services of the Contractor. The balance of the total amount was to be paid in installments to Munasque. Munasque indorsed the first check in favor of respondent Galan to enable the latter to deposit it in the bank and pay for the materials and labor used in the project. He later alleged that Galan misused the funds. When the second check came and Galan asked the petitioner to indorse it again, the petitioner refused.

Galan then informed the Cebu branch of Tropical that there was a "misunderstanding" between him and petitioner which led to respondent Tropical changing the name of the payee in the second check from Muasque to "Galan and Associates" ( the duly registered name of the partnership between Galan and petitioner) This enabled Galan to encash the second check.Thus, Petitioner filed a complaint for payment of sum of money and damages against the private respondents Galan and Tropical.

Trial Court: Held Munasque and Galan, jointly and severally liable to the intervenor-partnership creditors Cebu Southern Hardware Company and Blue Diamond Glass Palace.

Court of Appeals: CA affirmed TC with modification: liability imposed on the credit of Cebu Southern Hardware and Blue Diamond Glass Palace was changed from "jointly and severally" to "jointly."

ISSUE: WON a partnership existed between petitioner and respondent Galan HELD: YES, a partnership exists between petitioner Munasque and respondent Galan.The liability of partners under the law to third persons for contracts executed in connection with partnership business is only pro rata under Art. 1816, of the Civil Code.

ARTICLE 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract.

This provision should be construed together with Article 1824 which provides that:ARTICLE 1824 "All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823."

In short, while the liability of the partners are merely joint in transactions entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable.

In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan and Associates" and delivering the same to Galan because as far as it was concerned, Galan was a true partner with real authority to transact on behalf of the partnership with which it was dealing.

Galan, however acted in bad faith. Muasque should then be reimbursed by Galan for the payments made by the former representing the liability of their partnership to herein intervenors.It is but fair that the consequences of any wrongful act committed by any of the partners therein should be answered solidarily by all the partners and the partnership as a whole.

Decision appealed from is hereby AFFIRMED with the MODIFICATION that the liability of petitioner and respondent Galan to intervenors Blue Diamond Glass and Cebu Southern Hardware is declared to be joint and solidary.

11. SYJUCO v CASTRORE: Conveyance

FACTS: Back in November 1964, the Lims, borrowed from petitioner Santiago Syjuco, Inc., the sum of P800,000.00. The loan was given on the security of a first mortgage on property registered in the names of said borrowers as owners in common under Transfer Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of Manila. Thereafter additional loans on the same security were obtained by the Lims from Syjuco, so that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the security had been augmented by bringing into the mortgage other property, also registered as owned pro indiviso by the Lims under two titles: TCT Nos. 75416 and 75418 of the Manila Registry.

On November 8, 1967, the Lims failed to pay it despite demands therefore; that Syjuco consequently caused extra-judicial proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of Manila; and that the latter scheduled the auction sale of the mortgaged property on December 27, 1968.

The attempt to foreclose triggered off a legal battle that has dragged on for more than twenty years now, fought through five (5) cases in the trial courts, two (2) in the Court of Appeals, and three (3) more in the Supreme Court.

One of the complaints filed by the Lims was filed not in their individual names, but in the name of a partnership of which they themselves were the only partners: "Heirs of Hugo Lim." The complaint advocated the theory that the mortgage which they, together with their mother, had individually constituted (and thereafter amended during the period from 1964 to 1967) over lands standing in their names in the Property Registry as owners pro indiviso, in fact no longer belonged to them at that time, having been earlier deeded over by them to the partnership, "Heirs of Hugo Lim," more precisely, on March 30, 1959, hence, said mortgage was void because executed by them without authority from the partnership.

ISSUE: Whether the mortgage executed by the Lims be attributable to their partnershipHELD: Yes, the mortgage executed by the Lims is attributable to their partnership. The Supreme Court held that the legal fiction of a separate juridical personality and existence will not shield it from the conclusion of having such knowledge which naturally and irresistibly flows from the undenied facts. It would violate all precepts of reason, ordinary experience and common sense to propose that a partnership, as such, cannot be held accountable with knowledge of matters commonly known to all the partners or of acts in which all of the latter, without exception, have taken part, where such matters or acts affect property claimed as its own by said partnership.

The silence and failure of the partnership to impugn said mortgage within a reasonable time, let alone a space of more than seventeen years, brought into play the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized.

There is no reason to distinguish between the Lims, as individuals, and the partnership itself, since the former constituted the entire membership of the latter. In other words, despite the concealment of the existence of the partnership, for all intents and purposes and consistently with the Lims' own theory, it was that partnership which was the real party in interest in all the actions; it was actually represented in said actions by all the individual members thereof, and consequently, those members' acts, declarations and omissions cannot be deemed to be simply the individual acts of said members, but in fact and in law, those of the partnership.

12. LIWANAGvs. WORKMEN'S COMPENSATION COMMISSIONRE: Solidary liability of partners for tort

FACTS: Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners (business partners) of Liwanag Auto Supply. The guard of the said Auto Supply shop has been killed while in line of duty. The deceased guards widow Ciriaca Vda. de Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama, in due time, filed a claim for compensation with the Workmen's Compensation Commission. The claim was granted and appellants Benito Liwanag and Maria Liwanag Reyes were ordered to payjointly and severallythe amount of P3,494.40 Pesos to the claimants in lump sum. The respondents appealed to the Supreme Court contending that the commission erred in ordering appellants to payjointly and severallythe amount awarded. They argue that there is nothing in the compensation Act which provides that the obligation of an employer arising from compensable injury or death of an employee should be solidary obligation, the same should have been specifically provided, and that, in absence of such clear provision, the responsibility of appellants should not be solidary but merely joint.

ISSUE: Whether or not the obligation of business partners arising from compensable injury or death of an employee should be solidary.HELD: The Supreme Court ruled that the law governing the liability of partners is not applicable to the case at bar wherein a claim for compensation by dependents of an employee who died in line of duty is involved. And although the Workmen's Compensation Act does not contain any provision expressly declaring solidary obligation of business partners, there are other provisions of law from which it could be gathered that their liability must be solidary. Articles 1711 and 1712 of the new Civil Code provide:

ART. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. . . . .

ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. . . . .And section 2 of the Workmen's Compensation Act provides that the right to compensation as provided in this Actshall not be defeated or impairedon the ground that the death, injury or disease was due to the negligence of a fellow servant or employee, without prejudice to the right of the employer to proceed against the negligence party.

The provisions of the new Civil Code above quoted taken together with those of Section 2 of the Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of business partners, like appellants, should be solidary; otherwise, the right of the employee may be defeated. If the responsibility of appellants were to be merely joint and solidary, and one of them happens to be insolvent, the amount awarded to the appellees would only be partially satisfied, which is evidently contrary to the intent and purposes of the Workmen Compensation Act.

DISSOLUTION OF PARTNERSHIP13. TOCAO V. COURT OF APPEALS342 SCRA 20 (2000)RE: Unjustified dissolution

FACTS: Petitioner William T. Bello 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 (considering her experience and established relationship with West Bend Company,c a manufacturer of kitchen wares in Wisconsin, U.S.A) and later, vice-president for sales. The parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the business;(2) overriding commission of six percent (6%) of the overall weekly production;(3) thirty percent (30%) of the sales she would make; and(4) two percent (2%) for her demonstration services. The same was not reduced to writing on the strength of Belos assurances. Later, Anay was able to secure the distributorship of cookware products from the West Bend Company. They operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocaos name. Anay attended distributor/dealer meetings with West Bend Company with the consent of Tocao. Due to Anays excellent job performance she was given a plaque of appreciation. Also, in a memo signed by Belo, Anay was given 37% commission for her personal sales "up Dec 31/87, apart from the 10% share in profits. 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. Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did not receive the same commission although the company netted a gross sales of P13,300,360.00. On April 5, 1988, 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 (1) P32,00.00 as unpaid overriding commission from January 8, 1988 to February 5, 1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 as 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. ISSUE: Whether or not a partnership existed YES HELD: 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 recieve 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 Tocaos 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 Tocaos 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 Anays 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 attorneys fees.

14. LOTA vs. TOLENTINOG.R. No. L-3518RE: Duty to liquidate

FACTS: A partnership was entered into by the plaintiff and defendant whereby they agreed to engage in a general business, divide the profits and share the losses, and that defendant would be the manager of the said partnership. Plaintiff filed a complaint alleging that from 1918 until 1928 defendant had rendered an annual accounting, but has refused to do so from 1929 to 1937. Defendant, in his answer, alleged that he was an industrial partner, and that he rendered a yearly accounting and liquidation from 1918 to 1932, and that in the latter year, the partnership was dissolved and defendant delivered all its properties and assets to the plaintiff.

The plaintiff died in 1983 and was substituted by the administrator of his estate. The following year, the defendant also died during the pendency of the case for accounting and liquidation. Defendants counsel made a suggestion upon the record that defendant had already died. The Court gave plaintiff 30 days to amend the complaint by substituting for the deceased defendant the administrator of his estate or his legal representative, but the plaintiff failed to do so.

ISSUE: Whether or not, after the death of the defendant, plaintiffs action for accounting and liquidation of the partnership may be continued against the heirs of the defendant. HELD: No, the action may not be continued against the heirs of the defendant. The Court held that it is well settled that when a member of a mercantile partnership dies, the duty of liquidating its affairs devolves upon the surviving member, or members, of the firm, not upon the legal representatives of the deceased partner. And the same rule must be equally applicable to a civil partnership clothed with the form of a commercial association. As held in the case of Lim Ka Yam, upon his death, it therefore became the duty of his surviving associates to take the proper steps to settle the affairs of the firm, and any claim against him, or his state, for a sum of money due to the partnership by reason of any misappropriation of its funds by him, or for damages resulting from his wrongful acts as a manager, should be prosecuted against his estate in administration in the manner provided by the Rules of Court. Moreover, when it appears that the properties are in the possession of the partner, the proper step for the surviving associates to take would be to make an application to the court having charge of the administration to require the administrator to surrender such property.

15. YU vs. NLRCRE: Rights of creditors

FACTS: BenjaminYuwas formerly the Assistant General Manager of the marble quarrying and export business operated by a registered partnership, Jade Mountain Products Company Limited. The partnership was originally organized on 28 June 1984 with Bendals as general partners and Chiu Shian Jeng, Chen Ho-Fu andYuChang as limited partners. The partnership business consisted of exploiting a marble deposit in Bulacan province. BenjaminYuwas hired by virtue of a Partnership Resolution dated 14 March 1985, as Assistant General Manager with a monthly salary of P4,000.00. However Yu asserts that he actually received only half of his stipulated monthly salary, since he had accepted the promise of the partners that the balance would be paid when the firm shall have secured additional operating funds from abroad. BenjaminYuactually managed the operations and finances of the business.

Sometime in 1988, without the knowledge of BenjaminYu, the general partners Bendals sold and transferred their interests in the partnership to Willy Co and to one Emmanuel Zapanta. Mr.YuChang, a limited partner, also sold and transferred his interest in the partnership to Willy Co. Between Mr. Emmanuel Zapanta and himself, Willy Co acquired the great bulk of the partnership interest. The partnership now constituted solely by Willy Co and Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they moved the firm's main office from Makati to Mandaluyong. A Supplement to the Memorandum Agreement relating to the operation of the marble quarry was entered into with the Cruz spouses in February of 1988.The actual operations of the business enterprise continued as before. All the employees of the partnership continued working in the business, all, save petitioner BenjaminYuas it turned out.On 16 November 1987, having learned of the transfer of the firm's main office from Makati to Mandaluyong, BenjaminYureported to the Mandaluyong office for work and there met Willy Co for the first time but he was in fact not allowed to work anymore in the Jade Mountain business enterprise and the unpaid salaries remained unpaid.

On 21 December 1988, BenjaminYufiled a complaint for illegal dismissal and recovery of unpaid salaries accruing from November 1984 to October 1988, moral and exemplary damages and attorney's fees, against Jade Mountain, Mr. Willy Co and the other private respondents. The partnership and Willy Co denied petitioner's charges, contending in the main that BenjaminYuwas never hired as an employee by the present or new partnership. Labor Arbiter De Castro rendered a decision holding that Yu had been illegally dismissed, decreed his reinstatement and awarded him his claim for unpaid salaries, backwages and attorney's fees.

On appeal, NLRC reversed the decision of the Labor Arbiter and dismissed Yus complaint and held that the new partnership had not retainedYuin his original position as Assistant General Manager, and that there was no law requiring the new partnership to absorb the employees of the old partnership. BenjaminYu, therefore, had not been illegally dismissed by the new partnership which had simply declined to retain him in his former managerial position or any other position. Hence, this petition.

ISSUE: Whether or not petitionerYucould nonetheless assert his rights under his employment contract as against the new partnership.||| HELD: YES. The Court held that under Article 1840 of the Civil Code , BenjaminYuis entitled to enforce his claim for unpaid salaries, as well as other claims relating to his employment with the previous partnership, against the new Jade Mountain. What is important for present purposes is that, under the above described situation, not only the retiring partners (Rhodora Bendal, et al.) but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, the Court held that under facts very similar to those in the case at bar, a withdrawing partner remains liable to a third party creditor of the old partnership. The liability of the new partnership, upon the other hand, in the set of circumstances obtaining in the case at bar, is established in Article 1840 of the Civil Code. Under Article 1840, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which continued the business of the old one without liquidation of the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-vis any claim of any retired or previous partner insofar as such retired partner's interest in the dissolved partnership is concerned. It is not necessary for the Court to determine under which one or more of the above six (6) paragraphs, the case at bar would fall, if only because the facts on record are not detailed with sufficient precision to permit such determination.

AGENCY16. ORIENT AIR vs.COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.G.R. No. 76931 May 29, 1991RE: Legal fiction

FACTS: On 15 January 1977, American Airlines, Inc., an air carrier offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives, entered into a General Sales Agency Agreement whereby American Airlines authorized Orient Air Services to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation.

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof (Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order averring the aforesaid basis for the termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff."

In its Answer with counterclaim, defendant Orient Air denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the defendant contended that the actions taken by American Air in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its business interests.

Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its favor and against plaintiff dismissing the complaint and holding the termination made by the latter as affecting the GSA agreement illegal and improper and ordered the plaintiff to reinstate defendant as its general sales agent for passenger tranportation in the Philippines in accordance with said GSA agreement. Plaintiff is ordered to pay defendant the balance of the overriding commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month commencing from January 1, 1981 until such reinstatement. Further, plaintiff is directed to pay defendant exemplary damages and attorney's fees.

On appeal, the Court of Appeals affirmed the findings of the court a quo on their material points but with some modifications with respect to the monetary awards granted.

The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission. It is the stand of American Air that such commission is based only on sales of its services actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales."

On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American Air's services are necessarily by Orient Air."

ISSUES:(1) WON Orient Air is entitled to an overriding commission based on total flown revenue.(2) WON CA erred in ordering reinstatement of Orient Air as an agent.

HELD:(1) Yes. Orient Air was entitled to an overriding commission based on total flown revenue. American Air's perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where the latter acted in accordance with the Agreementthat of retaining from the sales proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American Air. The latter's termination of the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air.

(2) Yes. The respondent appellate court erred in affirming the rest of the decision of the trial court, particularly to the lower court's decision ordering American Air to "reinstate defendant as its general sales agent for passenger transportation in the Philippines in accordance with said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air. Such would be violative of the principles and essence of agency, defined by law as a contract whereby "a person binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER. In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court.

17. Air France v Court of Appeals126 SCRA 448RE: Notice to the agent

FACTS: The Ganas purchased from Air France through Imperial Travels, a duly authorized agent, 9 open dated tickets for a Manila/Osaka/Tokyo/Manila. The expiry date was May 8, 1970. Jose Gana sought the assistance of Teresita Manucdoc, a secretary of the company where Jose Gana worked, to procure the extension of the validity of their tickets. Manucdoc talked with Lee Ella, Manager of the Philippine Travel Bureau. She was told that they would have to pay fare differentials and that the extension is impossible. The GANAS scheduled their departure for May 7 and on May 6, Teresita again asked for Lee Ellas help in the revalidation. She was told that it would only be valid until May 8 and no longer valid for the rest of the trip after that. However, Ella attached revalidation stickers on the 2 tickets (revalidated by the Philippine Travel Bureau), without informing Air France. The Ganas departed and but the airlines refused to honor their tickets at the start of the Osaka/Tokyo leg. The GANAS had to purchase new tickets at re-adjusted rates and arrived at Manila on different dates. TC-Air France. CA- Ganas. SC-Air France

ISSUES:1. WON Ella acted beyond his powers as travel agent? YES2. WON notice to Manucdoc is notice to the Ganas? YESHELD: The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of the advice of Reno, the Office Manager of Air France, that the tickets in question could not be extended beyond the period of their validity without paying the fare differentials and additional travel taxes brought about by the increased fare rate and travel taxes. To all legal intents and purposes, Teresita was the agent of the Ganas and notice to her of the rejection of the request for extension of the validity of the tickets was notice to Gana as her principal. The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. The validating stickers that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not legally serve to extend the validity of a ticket or revive an expired one. The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in for having insisted on using tickets that were due to expire in an effort, perhaps, to beat the deadline and in the thought that by commencing the trip the day before the expiry date, they could complete the trip even thereafter. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL. Stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted within their contractual rights when they dishonored the tickets on the remaining segments of the trip and when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the Tokyo/Manila flight.

18. Laureano T. Angeles vs. Philippine National Railways (PNR) and Rodolfo FloresAugust 31, 2006 G.R. No. 150128RE: Agent as assignee

FACTS: Respondent Philippine National Railways (PNR) informed a certain Gaudencio Romualdez (Romualdez, hereinafter) that it has accepted the latters offer to buy the PNRs scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 andP2,100.00 per metric ton, respectively, for the total amount of P96,600.00. Romualdez paid the purchase price and addressed a letter to Atty. Cipriano Dizon, PNRs Acting Purchasing Agent. The letter authorized LIZETTE R. WIJANCO to be his (Romualdez) lawful representative in the withdrawal of the scrap/unserviceable rails awarded to him. Furthermore, the original copy of the award which indicates the waiver of rights, interest and participation in favor of Lizetter R. Wijanco was also given. The Lizette R. Wijanco was petitioner's now deceased wife. That very same day, Lizette requested the PNR to transfer the location of withdrawal for the reason that the scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable railsin Murcia, Capas and San Miguel, Tarlac instead. However, PNR subsequently suspended the withdrawal in view of what it considered as documentary discrepancies coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac. Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00. The PNR, however, refused to pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn. The spouses Angeles filed suit against the PNR for specific performance and damages before the Regional Trial Court. Lizette W. Angeles passed away and was substituted by her heirs, among whom is her husband, herein petitioner Laureno T. Angeles. The trial court, on the postulate that the spouses Angeles are not the real parties-in-interest, rendered judgment dismissing their complaint for lack of cause of action. As held by the court, Lizette was merely a representative of Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latter's rights with respect to the award. Petitioner appealed with the Court of Appeals which dismissed the appeal and affirmed that of the trial court.

ISSUE: Whether or not the CA erred in affirming the trial court's holding that petitioner and his spouse, as plaintiffs a quo, had no cause of action as they were not the real parties-in-interest in this case.HELD: No. The CAs conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but merely an agent whose authority was limited to the withdrawal of the scrap rails, hence, without personality to sue. Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the principal and not to the agent and the relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must, generally, be a contracting party. The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent may, in his own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also recognizes that when one has a right assigned to him, he is then the real party-in-interest and may maintain an action upon such claim or right.WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED. Costs against the petitioner.

19. CORAZON NEVADA vs. ATTY. RODOLFO D. CASUGAA.C. NO. 7591 (668 SCRA 441)20 March 2012RE: Presumption of agency

FACTS: Corazon T. Nevada (petitioner), a principal stockholder of C.T. Nevada & Sons, Inc. which operates the Mt. Crest Hotel in Baguio City, allowed the use of one of the Hotels function rooms for the church services of One in Jesus Christ Church. Because both Nevada and Casuga (respondent) are members of the aforementioned religious group, the latter was able to gain the trust and confidence of the former.

Nevada alleges that unbeknownst to her, Casuga started to represent himself as the administrator of the hotel sometime in 2006. In fact, he entered into a contract of leasewith a certain Jung Jong Chul covering an office space in the hotel. He signed the contract of lease, notarized the document himself and received the amount of Php 90,000 as rental deposit. Petitioner claims that the money was never turned over to her. Furthermore, several pieces of jewelry with the aggregate amount of Php 300,000 as well as a gold Rolex watch worth USD 12,000 belonging to Nevada were acquired by Casuga who was under the obligation to sell the same and remit the proceeds to the former but no jewelry nor money was returned.

Respondent Casuga, in an affidavit, claims that Nevada informally instituted him as the administrator of the hotel in a limited capacity and with regard to the jewelry, he stated that Nevada pawned the same in a pawnshop and later instructed respondents wife to redeem them using their own money. Thereafter, Nevada asked respondents wife to sell the valuables and reimburse herself from the proceeds. Respondent, however, was not able to produce any evidence to support his claims.

ISSUE: Whether or not respondent is guilty of Gross Misconduct.HELD: Yes, Atty. Rodulfo D. Casuga is liable for Gross Misconduct for violation of Canon 16 of the Code of Professional Responsibility and the Notarial Rules.

The court has defined Gross Misconduct as the transgression of some established or definite rule of action, more particularly, unlawful behavior or gross negligence, or the corrupt or persistent violation of the law or disregard of well-known legal rules.

Casuga represented himself as a duly-authorized representative of Nevada when in fact he was not. Casuga admitted signing the subject contract of lease, but claimed that he was duly authorized to do so by Nevada. However, Casuga failed to adduce an iota of evidence to prove that he was indeed so authorized. One who alleges the existence of an agency relationship must prove such fact. The Court ruled in Yun Kwan Byung v. Philippine Amusement and Gaming Corporation, "The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it."

Plainly enough, Casuga is guilty of misrepresentation, when he made it appear that he was authorized to enter into a contract of lease in behalf of Nevada when, in fact, he was not. Furthermore, the records reveal that Casuga received the rentals by virtue of the contract of lease, benefitting from his misrepresentation.Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.Agency may be oral, unless the law requires a specific form.

General Rule: Agency is generally not presumed. The relation between principal and agent must exist as a fact. Thus, it is held that where relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with burden of proof resting upon the person alleging the agency to show, not only the fact of its existence, but also its nature and extent.Exception: The only exceptions to this rule are when agency arises by operation of law or to prevent unjust enrichment.

20. Litonjua, Jr. vs Eternit Corporation490 SCRA 204 (2006)RE: Intention to create agency

FACTS: The Eternit Corporation, a corporation duly organized and registered under Philippine laws is engaged in the manufacture of roofing materials and pipe products. Its manufacturing operations were conducted on eight parcels of land located in Mandaluyong city with a total area of 47,233 square meters. Eteroutremer S.A. Corporation (ESAC) owned Ninety percent of the shares of stocks of EC, a corporation organized and registered under the laws of Belgium. Jack Glanville, an Australian citizen, was the General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of ESAC.

In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its operations in the country. The Committee for Asia of ESAC instructed a member of ECs Board of Directors, Michael Adams, to dispose of the eight parcels of land. Adams then engaged the services of realtor/broker Lauro G. Marquez so that the properties could be offered for sale to prospective buyers. Marquez then offered the parcels of land to Eduardo B. Litonjua, Jr. and his brother Anton. The Litonjuas offered to buy the property for P20,000,000 in cash. Marquez apprised Jack Glanville and Claude Delsaux of the said offer but no response came from Delsaux. Glanville telexed Delsaux inquiring on his position on the offer. Delsaux answered stating that, based on the "Belgian/Swiss decision," the final offer was US$1,000,000.00 andP2,500,000.00 to cover all existing obligations prior to final liquidation. Litonjua accepted the offer and Marquez thereafter stated that the siblings would confirm full payment within 90 days after all the dosuments of sale, with the government clearances have been executed. The Litonjuas deposited US$1,000,000 with the Security Bank and Trust and drafted an Escrow Agreement. Corazon Aquino assumed presidency of the Philippines resulting in the improvement of the political situation. Glanville called Marquez and informed him that the sale would no longer push through. The decision to not sell the properties was made during a board meeting. The Litonjuas thereafter demanded payment for damages they suffered due to the aborted sale. However, Eternit Corporation rejected their demand.

ISSUES: Whether or not Glanville, Delsaux and Marquez were authorized by Eternit Corporation to act as its agents in the sale of their property?HELD: No. The Court held that, in an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts, which the latter would have him do. Such relationship can only be effected with the consent of the principal, which must not in any way, be compelled by law or any court.

A corporation is a juridical person separate and distinct from its members or stockholders. Personal rights, obligations and transactions of its members or stockholders do not affect it. It may act only through the board of directors or through its agents or officers. Furthermore, the property of a corporation may not be sold without authority from the board of directors. Absent such authorization, the rule is that the declarations of an individual director, but not in the course or connected with the performance of the authorized duties of the director, are not binding upon the corporation.

An agency may be impled or expressed from the principals acts, from hi silence or lack of action or his failure to repudiate the agency. To create or convey real rights over immovable property, a special power of attorney is needed.

In the case at bar, the Litonjuas failed to produce evidence empowering Marquez, Glanville and Delsaux as agents of Eternit Corporation to sell the property in its behalf. They acted in behalf of ESAC and not as agents of Eternit Corporation. An agency by estoppel requires proof of reliance upon the representations., proof which is absent in this case. As such the sale was not valid and binding.

21. Victorias Milling Co. vs. CA & Consoliated Sugar CorpRE: Control

FACTS: St. Therese Merchandising (STM) regularly bought sugar from petitioner Victorias Milling Co., Inc., (VMC). In the course of their dealings, VMC issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M, which gave rise to the instant case. This SLDR No. 1214M covers 25,000 bags of sugar, each bag containing 50 kg priced at P638.00 per bag as "per sales order VMC Marketing No. 042." The transaction it covered was a "direct sale."

Later on, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M. CSC wrote VMC that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by SLDR No. 1214M.

CSC surrendered SLDR No. 1214M to VMC's warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been released, VMC refused to allow further withdrawals of sugar against SLDR No. 1214M. CSC then sent VMC a letter informing it that SLDR No. 1214M had been "sold and endorsed" to it but that it had been refused further withdrawals of sugar from its warehouse. Thus CSC sent VMC a letter demanding the release of the balance of 23,000 bags.Thereafter, CSC filed a complaint for specific performance.

ISSUE: WON C.S.C. was an agent of S.T.M.HELD: Petitioner VMC heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion of said letter reads: "This is to authorize CSC to withdraw for and in our behalf the refined sugar covered by (SLDR) No. 1214M in the total quantity of 25, 000 bags." VMCs reliance on such would fail.

The Civil Code defines a contract of agency as follows: "Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter."

It is clear from Article 1868 that the basis of agency is representation. On the part of the principal, there must be an actual intention to appoint, or an intention naturally inferable from his words or actions. On the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency.

One factor which most clearly distinguishes agency from other legal concepts is control. One person - the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word "agency" has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category.

The CA, in finding that CSC, was not an agent of STM, opined: "This Court has ruled that where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence, but also its nature and extent (Antonio vs. Enriquez [CA], 51 O.G. 3536]. Here, VMC failed to sufficiently establish the existence of an agency relation between CSC and STM. The fact alone that STM had authorized withdrawal of sugar by CSC "for and in our (STM's) behalf" should not be eyed as pointing to the existence of an agency relation ...."In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not an agent of STM. CSC was not subject to STM's control. The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency.

Ultimately, what is decisive is the intention of the parties. That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency. Hence, no error was committed by the respondent C.A. when it held that CSC was not STM's agent and that it could independently sue VMC.

22. CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and AURORA QUEAO, respondents.RE: Agency by estoppel

FACTS: Queao applied with Naguiat for a loan in the amount of Two Hundred Thousand Pesos (P200,000.00), which Naguiat granted.To secure the loan, Queao executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat, and surrendered to the latter the owners duplicates of the titles covering the mortgaged properties.Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds.On 16 October 1980, Queao received a letter from Naguiats lawyer, demanding settlement of the loan. Shortly thereafter, Queao and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queao told Naguiat that she did not receive the proceeds of the loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiats agent.on 11 August 1981, private respondent Aurora Queao (Queao) filed a complaint before the Pasay City RTC for cancellation of a Real Estate Mortgage she had entered into with petitioner Celestina Naguiat (Naguiat). The RTC rendered a decision, declaring the questioned Real Estate Mortgage void, which Naguiat appealed to the Court of Appeals. After the Court of Appeals upheld the RTC decision, Naguiat instituted the present petition.

ISSUE: Whether or not there was agency by estoppelHELD: The Supreme Court held in the affirmative.The existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. As correctly pointed out by the Court of Appeals, Ruebenfeldt was not a stranger or an unauthorized person. Naguiat instructed Ruebenfeldt to withhold from Queao the checks she issued or indorsed to Queao, pending delivery by the latter of additional collateral. Ruebenfeldt served as agent of Naguiat on the loan application of Queaos friend, Marilou Farralese, and it was in connection with that transaction that Queao came to know Naguiat. It was also Ruebenfeldt who accompanied Queao in her meeting with Naguiat and on that occasion, on her own and without Queao asking for it, Reubenfeldt actually drew a check for the sum of P220,000.00 payable to Naguiat, to cover for Queaos alleged liability to Naguiat under the loan agreement.The Court of Appeals recognized the existence of an agency by estoppel citing Article 1873 of the Civil Code.Apparently, it considered that at the very least, as a consequence of the interaction between Naguiat and Ruebenfeldt, Queao got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to correct Queaos impression. In that situation, the rule is clear. One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith, and in the honest belief that he is what he appears to be.The Court of Appeals is correct in invoking the said rule on agency by estoppel.More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the checks issued or indorsed to Queao were never encashed or deposited to her account of Naguiat.

23. COSMIC LUMBER CORP. vs. CARE: Sale of real property without authority of agent in writing

FACTS: COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact -x x x to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots.

On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the Regional Trial Court of Dagupan. On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez, wherein Villamil-Estrada sold to respondent Perez for P26, 640 computed at P80/sq. meter the 333 sq. meter portion of lot 443. Villamil-Estrada received the amount paid by Perez. On 27 November 1985 the Compromise Agreement was approved by the trial court and I judgment was rendered in accordance therewith. Although the decision became final and executory it was not executed within the 5-year period from date of its finality allegedly due to the failure of petitioner to produce the owners duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise agreement. Thus on 25 January 1993 respondent filed a complaint to revive the judgment.

ISSUE: 1. Whether or not Petitioner the decision of the trial court is void because the a compromise agreement upon which it was based is void. 2. Whether or not Villamil-Estrada possess the authority to sell.HELD: Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was she armed with a Board Resolution authorizing the sale of its property. She was merely empowered to enter into a compromise agreement in the recovery suit she was authorized to file against persons squatting on Lot No. 443, such authority being expressly confined to the ejectment of third persons or squatters of x x x lot x x x (No.) 443 x x x for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot x x x x

Neither can a conferment of the power to sell be validly inferred from the specific authority to enter into a compromise agreement because of the explicit limitation fixed by the grantor that the compromise entered into shall only be so far as it shall protect the rights and interest of the corporation in the aforementioned lots. In the context of the specific to investiture of powers to Villamil-Estrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale.

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.[9] Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute.[10] A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration.[11] The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned.[12] For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.[13]It is therefore clear that by selling to respondent Perez a portion of petitioners land through a compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. This being the case, the judgment based thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving petitioners motion for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its decision based on the compromise agreement

It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence there is a well-established exception to the general rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy.[21] The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal. Verily, when an agent is engaged in the perpetuation of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency.[22] Indeed, the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and his act in secret hostility to the interests of his principal transcends the power afforded him.

24. VELOSO v. COURT OF APPEALS.A SPECIAL POWER OF ATTORNEY CAN BE INCLUDED IN THE GENERAL POWER WHEN IT IS SPECIFIED THEREIN THE ACT OR TRANSACTION FOR WHICH THE SPECIAL POWER IS REQUIREDRE: GPA

FACTS: Petitioner Francisco Veloso owns a parcel of land in Tondo, Manila with an area of 177m2 and covered by a TCT No. 49138 issued by the Registry of Deeds of Manila. The title was registered in his name before he married Irma Veloso. Hence, the property did not belong to their conjugal partnership.

The said title was subsequently cancelled and a new TCT No. 180685 was issued in the name of Aglaloma B. Escario.Petitioner Veloso led an action for annulment of documents, reconveyance of property with damages and preliminary injunction and/or restraining order.

Petitioner alleged that he was the absolute owner of the subject property and he never authorized anybody to sell it, and that he was in possession of the title. He found out that his copy was missing when his wife left for abroad. When he veried with the Registry of Deeds of Manila, he discovered that his title was already canceled in favor of defendant Aglaloma Escario. The transfer of property was supported by a GPA and Deed of Absolute Sale executed by Irma Veloso and defendant Aglaloma Escario. Petitioner Veloso denied having executed the power of attorney and alleged that his signature was falsied. He also denied having seen or even known the supposed witnesses in the execution of the power of attorney, and having met or transacted with the defendant. Thus, he contended that the sale of the property and the subsequent transfer thereof were null and void. Petitioner Veloso prayed that a temporary restraining order be issued to prevent the transfer of the subject property; that the GPA, the Deed of Absolute Sale and the new TCT No. 180685 be annulled; and the subject property be reconveyed to him.

Defendant Aglaloma Escario alleged that she was a buy