Busorg Case Digest Compilation

Case Digests on Partnership, Agency and Trusts
2S 2012-2013
TOCAO V. COURT OF APPEALS

342 SCRA 20 (2000)
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
damagesagainst 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
That in all things, God may be glorified!

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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
Ratio:
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 allowancesand 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

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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.

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JM TUAZON and CO v. BOLANOS

95 PHIL 106
Facts:
This is an action to recover possession of registered land situated in Barrio Tatalon,
Quezon City. The complaint of plaintiff JM Tuason & Co Inc was amended 3 times with
respect to the extent and description of the land sough to be recovered. Originally, the
land sought to be recovered was said to be more or less 13 hectares, but it was later
amended to 6 hectares, after the defendant had indicated the plaintiff's surveyors the
portion of land claimed and occupied by him. The second amendment is that the portion
of the said land was covered in another TCT and the 3rd amendment was made after
the defendant' surveyor and a witness, Quirino Feria testified that the land occupied by
the defendant was about 13 hectares.
Defendant raised the defense of prescription and title thru "open, continuous, exclusive
and public and notorious possession of land in dispute. He also alleged that the
registration of the land was obtained by plaintiff's predecessor through fraud or error.
The lower court rendered judgment in favor of the plaintiff and ordered the defendant to
restore possession of the land to the plaintiff, as well as to pay corresponding rent from
January 1940 until he vacates the land. On appeal defendant raised a number of
assignments or errors in the decision, one of which is that the trial court erred in not
dismissing the case on the ground that the case was not brought by the real party in
interest.
Issue: Whether or not the lower court erred in not dismissing the case on the ground
that it was not brought by the real party in interest? NO
Ratio:
What the Rules of Court require is that an action be broughtin the name of, but not
necessarily by, the real party in interest. In fact the practice is for an attorney-at-law to
bring the action, that is to file the complaint, in the name of the plaintiff. That practice
appears to have been followed in this case, since the complaint is signed by the law firm
of Araneta and Araneta, "counsel for plaintiff" and commences with the statement
"comes now plaintiff, through its undersigned counsel." It is true that the complaint also
states that the plaintiff is "represented herein by its Managing Partner Gregorio Araneta,
Inc.", another corporation, but there is nothing against one corporation being
represented by another person, natural or juridical, in a suit in court. The contention that
Gregorio Araneta, Inc. can not act as managing partner for plaintiff on the theory that it is
illegal for two corporations to enter into a partnership is without merit, for the true rule is
that "though a corporation has no power to enter into a partnership, it may nevertheless
enter into a joint venture with another where the nature of that venture is in line with the
business authorized by its charter."

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AURBACH v. SANITARY WARES

180 SCRA 130
Facts:
Saniwares, a domestic corporation was incorporated for the primary purpose of
manufacturing and marketing sanitary wares. One of the incorporators, Mr. Baldwin
Young went abroad to look for foreign partners who could help in its expansion plans. a
foreign corporation domiciled in Delaware, United States entered into an Agreement with
Saniwares and some Filipino investors whereby ASI and the Filipino investors agreed to
participate in the ownership of an enterprise which would engage primarily in the
business of manufacturing in the Philippines and selling here and abroad vitreous china
and sanitary wares.
Thus, the birth of the two groups. One representing the Filipino investors(Lagdameo
Group) and the other, the foreign investors(American Standard Inc.)
The joint enterprise thus entered into by the Filipino investors and the American
corporation prospered. Unfortunately, with the business successes, there came a
deterioration of the initially harmonious relations between the two groups.
On March 8, 1983, the annual stockholders' meeting was held. The stockholders then
proceeded with the election of the Board of Directors. ASI nominated three, while
Lagdameo nominated six, the last one being Eduardo Ceniza, who, in turn, nominated
Luciano Salazar, who further nominated another, Mr. Charles Chamsay. Mr. Young, the
presiding chairman, ruled the last two nominations out of order pursuant to sec.5(a) of
the agreement.(The consistent practice of the parties during the past annual
stockholders' meetings is to nominate only nine persons as nominees for the ninemember board of directors)
After appeal and protests, The Chairman then instructed the Corporate Secretary to cast
all the votes present and represented by proxy equally for the 6 nominees of the
Philippine Investors and the 3 nominees of ASI, thus effectively excluding the 2
additional persons nominated. The ASI representative protested this decision, and
stated that all the votes accruing to them were being cumulatively voted for the three ASI
nominees and Charles Chamsay. The Chairman did not heed this protest and accepted
the duly nominated as the elected board members.
Issues:
(1)Whether or not the nature of the business established by the parties is a joint venture
YES
(2) Whether or not the ASI Group may vote their additional 10% equity during elections
of Saniwares' board of directors. NO
Ratio:
(1) The rule is that whether the parties to a particular contract have thereby established
among themselves a joint venture or some other relation depends upon their actual
intention which is determined in accordance with the rules governing the interpretation
and construction of contracts.
An examination of important provisions of the Agreement as well as the testimonial
evidence presented by the Lagdameo and Young Group shows that the parties agreed

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to establish a joint venture and not a corporation.

(2) Section 24 of the Corporation Code(cumulative voting) is not applicable to joint
ventures.The legal concept of a joint venture is of common law origin. It has no precise
legal definition but it has been generally understood to mean an organization formed for
some temporary purpose. It is in fact hardly distinguishable from the partnership, since
their elements are similar community of interest in the business, sharing of profits and
losses, and a mutual right of control. The main distinction cited by most opinions in
common law jurisdictions is that the partnership contemplates a general business with
some degree of continuity, while the joint venture is formed for the execution of a single
transaction, and is thus of a temporary nature. This observation is not entirely accurate
in this jurisdiction, since under the Civil Code, a partnership may be particular or
universal, and a particular partnership may have for its object a specific undertaking. It
would seem therefore that under Philippine law, a joint venture is a form of
partnership and should thus be governed by the law of partnerships. The
Supreme Court has however recognized a distinction between these two business
forms, and has held that although a corporation cannot enter into a partnership
contract, it may however engage in a joint venture with others.
Having entered into a well-defined contractual relationship, it is imperative that the
parties should honor and adhere to their respective rights and obligations thereunder.
The Court upheld the original nine nominees to be the members of the Board of
Directors of Saniware.

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TAI TONG CHUACHE & CO. v. INSURANCE COMMISSION

158 SCRA 336 (1988)
Facts:
Complainants acquired from a certain Rolando Gonzales a parcel of land and a building
located at San Rafael Villagae, Davao City; they also ssumed the mortgage of the
building in favor of SSS which building was insured with respondent SSS Accredited
Groupd of Insurers for P 25,000.
Azucena Palomo obtained a loan from petitioner herein, Tai Tong Chuache Inc. in the
amount of P100,000 and to secure payment thereof, a mortgage was executed over the
land and building in favor of the latter. Several days after, Arsenue Chua insured
petitioners interest with Travellers Multi- Indemnity Corporation for P100,000.
On the other hand, Pedro Palomo secured a Fire Insurance Policy for the building worth
P50,000 with respondent herein, Zenith Insurance Corporation. Later on, another fire
insurance policy was procured from Philippine British Assurance Company covering the
same building for the same amount as the first fire insurance policy.
The building and contents were totally razed by a fire. As such complainants was paid by
the following insurance company:
Philippine British Assurance Co
P 41, 546.79
Zenith Insurance Corporation
P 11, 877.14
SSS Group of Accredited Insurers P 5, 936.57
Noticeably, respondent Travellers Multi-Indemnity Travellers Multi-Indemnity failed to
give its share in spite of demands and as such complainants demanded from the other
3 (above mentioned) the balance of each share in the loss based on the computation of
the Adjustment Standard Report excluding Travellers Multi-Indemnity. An amount of P
30,894.31 was demanded from the 3 insurance companies but was refused.
Philippine British Assurance Co
P 22,294
Zenith Insurance Corporation
P 5,732
SSS Group of Accredited Insurers P 2,866
Both Philippine British and Zenith Insurance denied liability on the ground that the claim
had already been waived and extinguished. SSS on the other hand informed the
Commissioner that the claim for the balance had already been paid. Travellers
Insurance alleged that the fire policy covering the building and furniture was secured by
Arsenio Chua, mortgage creditor, for the purpose of protecting his mortgage credit
against complainants and that the Chua paid the premiums for said insurance. Thus,
Travellers is not liable to pay complainants.
Tai Tong Chuache filed a complaint in intervention claiming proceeds if the fire
insurance but such was dimissed. Hence, this petition.
Issue:Whether or not petitioner is entitled to the proceeds of the fire insurance policy
issued by respondent. YES
Ratio:
Respondent advanced the affirmative defense of lack of insurable interest on the part of
petitioner alleging that before the occurrence of the fire insured against Palomos had
already paid their credit due to petitioner. Respondent exerted no effort to present any

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evidence to substantiate the aforesaid claim. Respondent Insurance Commission

absolved respondent insurance company (Travellers Multi-Indemnity) from liability on the
basis of the certification issued by then CFI of Davao.
Petitioner, on the other hand, offered as evidence the contract of mortgage which has
not been cancelled or released. Jurisprudence would say that when the creditor is in
possession of the document of credit, he need not to prove non-payment for it is
presumed. Petitioners claim that the loan extended to Palomos has not been paid was
corroborated by Azucena Palomo who testified that they are still indebted to herein
petitioner.
Respondent alleged that the civil action must be brought in the name of the real party in
interest. However, petitioner being a partnership may sue and be sued in its name or by
its duly authorized representative Arsenio Chua being the manager partner may execute
all acts of administration including the right to sue debtor of the partnership in case of
failure to pay. At the very least, Chua being a partner of petitioner herein is an agent of
the partnership and being one it is understood that he acted for and in behalf of the firm.
Respondent insurance company, having failed to prove the allegation of lack on
insurable interest on the part of the petitioner is bound by the terms and conditions of the
policy in favor of petitioner.

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AGUILA, JR. v. COURT OF APPEALS

316 SCRA 246 (1999)
Facts:
Alfredo N. Aguilar, Jr. (petitioner) is the manager of A.C. Aguila & Sons, Co., a
partnership engaged in lending activities. Felicidad S. Vda. de Abrogar (private
respondent) and her late husband, Ruben M. Abrogar, were the registered owners of a
house and lot, covered by Transfer Certificate of Title No. 195101, in Marikina, Metro
Manila. On April 18, 1991, private respondent, with the consent of her late husband, and
A.C. Aguila & Sons, Co., represented by petitioner, entered into a Memorandum of
Agreement which provided that A.C. Aguila & Sons, Co. shall buy the property from
private respondent for P200,000 subject to an option to repurchase for P230,000 (valid
for 90 days), etc. On the same day, the parties likewise executed a deed of absolute
sale, dated June 11, 1991, wherein private respondent, with the consent of her late
husband, sold the subject property to A.C. Aguila & Sons, Co., represented by petitioner,
for P200,000,00. In a special power of attorney dated the same day, April 18, 1991,
private respondent authorized petitioner to cause the cancellation of TCT No. 195101
and the issuance of a new certificate of title in the name of A.C. Aguila and Sons, Co., in
the event she failed to redeem the subject property as provided in the Memorandum of
Agreement. Private respondent failed to redeem the property. Pursuant to the special
power of attorney mentioned above, petitioner caused the cancellation of TCT No.
195101 and the issuance of a new certificate of title in the name of A.C. Aguila and
Sons, Co. Private respondent then received a letter dated August 10, 1991 from Atty.
Lamberto C. Nanquil, counsel for A.C. Aguila & Sons, Co., demanding that she vacate
the premises within 15 days after receipt of the letter and surrender its possession
peacefully to A.C. Aguila & Sons, Co. Otherwise, the latter would bring the appropriate
action in court. Upon the refusal of private respondent to vacate the subject premises,
A.C. Aguila & Sons, Co. filed an ejectment case against her in the Metropolitan Trial
Court, Branch 76, Marikina, Metro Manila.MeTC, Marikina, MM (April 3, 1992): Ruled in
favor of A.C. Aguila & Sons, Co.Private respondent appealed to RTC Pasig, CA, and
then SC but she still lost.Private respondent then filed a petition for declaration of nullity
of a deed of sale filed by Felicidad S. Vda. de Abrogar against Alfredo N. Aguila, Jr. She
alleged that the signature of her husband on the deed of sale was a forgery because he
was already dead when the deed was supposed to have been executed on June 11,
1991.
RTC, Marikina, MM (April 11, 1995): Dismissed.
CA (November 29, 1990): Reversed ruling of the RTC.
Hence, this petition for review on certiorari.
Petitioner now contends that: (1) he is not the real party in interest but A.C. Aguila & Co.,
against which this case should have been brought; (2) the judgment in the ejectment
case is a bar to the filing of the complaint for declaration of nullity of a deed of sale in this
case; and (3) the contract between A.C. Aguila & Sons, Co. and private respondent is a
pacto de retro sale and not an equitable mortgage as held by the appellate court.
Issue: Whether the real party in interest is A.C. Aguila & Co. and not petitioner. YES
Ratio:
Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate and
distinct from that of each of the partners." The partners cannot be held liable for the
obligations of the partnership unless it is shown that the legal fiction of a different

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juridical personality is being used for fraudulent, unfair, or illegal purposes. In this case,
private respondent has not shown that A.C. Aguila & Sons, Co., as a separate juridical
entity, is being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the
subject property is in the name of A.C. Aguila & Sons, Co. and the Memorandum of
Agreement was executed between private respondent, with the consent of her late
husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence, it is the
partnership, not its officers or agents, which should be impleaded in any litigation
involving property registered in its name. A violation of this rule will result in the dismissal
of the complaint.
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HEIRS OF TAN ENG KEE v. COURT OF APPEALS

341 SCRA 740 (2000)
Facts:
The heirs of Tan Eng Kee filed a suit against the decedents brother Tan Eng Lay. The
complaint alleged that after the Second World War, the brothers, pooling their resources
and industry together, entered into a partnership engaged in the selling of lumber and
hardware and construction supplies. They named their enterprise Benguet Lumber
which they jointly managed until Tan Kees death. Petitioners averred that the business
prospered due to the hard work and thrift of the alleged partners. However, they claimed
that in 1981, Tan Eng Lay and his children caused the conversion of the partnership
Benguet Lumber into a corporation called Benguet Lumber Company. The
incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their
rightful participation in the profits of the business. Petitioners prayed for accounting of
the partnership assets, and the dissolution, and winding up of the alleged partnership
formed after the World War II between Tan Eng Kee and Tan Eng Lay. The Regional
Trial court found that Benguet Lumber is a joint venture which is akin to a particular
partnership, and declared that the assets of Benguet Lumber are the same assets
turned over to Benguet lumber Co. and as such the heirs or legal representatives of the
deceased Tan Eng Kee have a legal right to share in the said assets. The Court of
Appeals reversed the judgment of the Trial Court.
Issue:Whether or not a partnership existed between Tan Eng Kee and Tan Eng Lay
NO
Ratio:
In order to constitute a partnership, it must be established that (1) two or more persons
bound themselves to contribute money, property, or industry to a common fund, and (2)
they intend to divide the profits among themselves. The best evidence of the
partnerships existence would have been the contract of partnership itself, or the articles
of partnership but there is none. The alleged partnership, though, was never formally
organized. In addition, petitioners point out that the New Civil Code was not yet in effect
when the partnership was allegedly formed sometime in 1945, although the contrary
may well be argued that nothing prevented the parties from complying with the
provisions of the New Civil Code when it took effect on August 30, 1950. A review of the
record persuades us that the Court of Appeals correctly reversed the decision of the trial
court. The evidence presented by petitioners falls short of the quantum of proof required
to establish a partnership.
It is indeed odd, if not unnatural, that despite the forty years the partnership was
allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses. Each has the right to
demand an accounting as long as the partnership exists. A demand for periodic
accounting is evidence of a partnership. During his lifetime, Tan Eng Kee appeared
never to have made any such demand for accounting from his brother.
This brings us to the matter of Exhibits 4 to 4-U for private respondents, consisting of
payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet
Lumber, as it was then called. Exhibits 4 to 4-U in fact shows that Tan Eng Kee
received sums as wages of an employee.In connection therewith, Article 1769 of the
Civil Code provides:
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In determining whether a partnership exists, these rules shall apply:

XXX
(4) The receipt by a person of a share of the profits of a business is prima facie evidence
that he is a partner in the business, but no 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;
(b) 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;
(e) As the consideration for the sale of a goodwill of a business or other
property by installments or otherwise.
In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only
an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners
would still be back to square one, so to speak, since they did not present and offer
evidence that would show that Tan Eng Kee received amounts of money allegedly
representing his share in the profits of the enterprise. Petitioners failed to show how
much their father, Tan Eng Kee, received, if any, as his share in the profits of Benguet
Lumber Company for any particular period. Hence, they failed to prove that Tan Eng Kee
and Tan Eng Lay intended to divide the profits of the business between themselves,
which is one of the essential features of a partnership.
Nevertheless, petitioners would still want us to infer or believe the alleged existence of a
partnership from this set of circumstances: that Tan Eng Lay and Tan Eng Kee were
commanding the employees; that both were supervising the employees; that both were
the ones who determined the price at which the stocks were to be sold; and that both
placed orders to the suppliers of the Benguet Lumber Company. They also point out that
the families of the brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet Lumber
Company compound, a privilege not extended to its ordinary employees.
Even the aforesaid circumstances, when taken together are not persuasive indicia of a
partnership. They only tend to show that Tan Eng Kee was involved in the operations of
Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that
as a member of the family, he occupied a niche above the rank-and-file employees. He
would have enjoyed liberties otherwise unavailable were he not kin, such as his
residence in the Benguet Lumber Company compound. He would have moral, if not
actual, superiority over his fellow employees, thereby entitling him to exercise powers of
supervision. It may even be that among his duties is to place orders with suppliers.
Again, the circumstances proffered by petitioners do not provide a logical nexus to the
conclusion desired; these are not inconsistent with the powers and duties of a manager,
even in a business organized and run as informally as Benguet Lumber Company.
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PASCUAL vs. COMMISSIONER OF INTERNAL REVENUE

166 SCRA 560 (1988)
Facts:
On June 22, 1965, petitioners Mariano Pascual and Renato Dragon bought two (2)
parcels of land from Santiago Bernardino, et al. and on May 28, 1966, they bought
another three (3) parcels of land from Juan Roque.
The first two parcels of land were sold by petitioners in 1968 to Marenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes
and Maria Samson on March 19, 1970.
Petitioners realized a net profit in the sale made in 1968 in the amount of P165,224.70,
while they realized a net profit of P60,000.00 in the sale made in 1970. The
corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing
of the tax amnesties granted in the said years.
However, in a letter of then Acting BIR Commissioner Efren I. Plana, petitioners were
assessed and required to pay a total amount of P107,101.70 as alleged deficiency
corporate income taxes for the years 1968 and 1970. Petitioners protested the said
assessment asserting that they had availed of tax amnesties way back in 1974.
Respondent Commissioner informed petitioners that in the years 1968 and 1970,
petitioners as co-owners in the real estate transactions formed an unregistered
partnership or joint venture taxable as a corporation under the National Internal Revenue
Code.
Issue:Whether or not respondent is correct in its presumptive determination that
petitioners formed an unregistered partnership thus subject to corporate income tax.
NO
Ratio:
There is no evidence that petitioners entered into an agreement to contribute money,
property or industry to a common fund, and that they intended to divide the profits
among themselves. Respondent commissioner and/ or his representative just assumed
these conditions to be present on the basis of the fact that petitioners purchased certain
parcels of land and became co-owners thereof. In Evangelista, there was a series of
transactions where petitioners purchased twenty-four (24) lots showing that the purpose
was not limited to the conservation or preservation of the common fund or even the
properties acquired by them. The character of habituality peculiar to business
transactions engaged in for the purpose of gain was present. Reliance of the lower court
to the case of Evangelista v. Collector is untenable. In order to constitute a partnership
inter sese there must be: (a) An intent to form the same; (b) generally participating in
both profits and losses; (c) and such a community of interest, as far as third persons are
concerned as enables each party to make contract, manage the business, and dispose
of the whole property.There is no adequate basis to support the proposition that they
thereby formed an unregistered partnership. The two isolated transactions whereby they
purchased properties and sold the same a few years thereafter did not thereby make
them partners.
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LORENZO T. OA v. THE COMMISSIONER OF INTERNAL REVENUE

G.R. No. L-19342 May 25, 1972
Facts:
Julia Bunales died on March 23, 1944, leaving as heirs her surviving spouse. Lorenzo T.
Oa and her five children. Lorenzo T. Oa, the surviving spouse was appointed
administrator of the estate of said deceased. A partition was thereafter approved by the
Court. The Court also appointed Lorenzo, upon petition to the CFI of Manila, to be
appointed guardian of the persons and property of Luz, Virginia and Lorenzo, Jr., who
were minors at the time.
Although the project of partition was approved by the Court on May 16, 1949. no
attempt was made to divide the properties therein listed. 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. As a result, petitioners
properties and investments gradually increased from P105,450.00 in 1949 to
P480.005.20 in 1956. However, petitioners did not actually receive their shares in the
yearly income. The income was always left in the hands of Lorenzo T. Oa who, as
heretofore pointed out, invested them in real properties and securities.
On the basis of the foregoing facts, respondent (Commissioner of Internal Revenue)
decided that petitioners formed an unregistered partnership and therefore, subject to the
corporate income tax, pursuant to Section 24, in relation to Section 84(b), of the Tax
Code. Accordingly, he assessed against the petitioners the amounts of P8,092.00 and
P13,899.00 as corporate income taxes for 1955 and 1956, respectively. The defense of
petitioners revolved mainly in the contention that they are co-owners of the properties
inherited from Julia Buales and the profits derived therefrom rather than having formed
a partnership.
Issue:Whether or not it was proper to consider petitioners as an unregistered
partnership. YES
Ratio:
The first thing that has struck the Court is that whereas petitioners predecessor in
interest died way back on March 23, 1944 and the project of partition of her estate was
judicially approved as early as May 16, 1949, and presumably petitioners have been
holding their respective shares in their inheritance since those dates admittedly under
the administration or management of the head of the family, the widower and father
Lorenzo T. Oa, the assessment in question refers to the later years 1955 and 1956. We
believe this point to be important because, apparently, at the start, or in the years 1944
to 1954, the respondent Commissioner of Internal Revenue did treat petitioners as coowners, not liable to corporate tax, and it was only from 1955 that he considered them
as having formed an unregistered partnership.
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, as a result of which said
properties and investments steadily increased yearly from P87,860.00 in land account
and P17,590.00 in building account in 1949 to P175,028.68 in investment account,
P135,714.68 in land account and P169,262.52 in building account in 1956. And all
these became possible because, admittedly, petitioners never actually received any
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share of the income or profits from Lorenzo T. Oa, and instead, they allowed him to
continue using said shares as part of the common fund for their ventures, even as they
paid the corresponding income taxes on the basis of their respective shares of the profits
of their common business as reported by the said Lorenzo T. Oa.
It is thus incontrovertible that petitioners did not, contrary to their contention, merely limit
themselves to holding the properties inherited by them. Indeed, it is admitted that during
the material years herein involved, some of the said properties were sold at considerable
profit, and that with said profit, petitioners engaged, thru Lorenzo T. Oa, in the
purchase and sale of corporate securities. It is likewise admitted that all the profits from
these ventures were divided among petitioners proportionately in accordance with their
respective shares in the inheritance. In these circumstances, it is Our considered view
that 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
tantamount to actually contributing such incomes to a common fund and, in effect, they
thereby formed an unregistered partnership within the purview of the abovementioned
provisions of the Tax Code.
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GATCHALIAN v. COLLECTOR OF INTERNAL REVENUE

67 Phil. 666 (1939)
Facts:
Plaintiffs (15 persons), in order to enable them to purchase one sweepstakes ticket
valued at two pesos (P2), subscribed and paid each varied amounts aggregating 2
pesos. The said ticket was registered in the name of Jose Gatchalian and Company .
The above-mentioned ticket bearing No. 178637 won one of the third prizes in the
amount of 50, 000. Jose Gatchalian was required by income tax examiner Alfredo David
to file the corresponding income tax return covering the prize won by Jose Gatchalian &
Company. The Collector of Internal Revenue collected the tax under section 10 of Act
No. 2833, as last amended by section 2 of Act No. 3761, reading as follows:
"SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon the
total net income received in the preceding calendar year from all sources by every
corporation, joint-stock company, partnership, joint account (cuenta en participacin),
association or insurance company, organized in the Philippine Islands, no matter how
created or organized, but not including duly registered general copartnerships
(compaias colectivas), a tax of three per centum upon such income;
Issue:Whether or not the plaintiffs formed a partnership, or merely a community of
property without a personality of its own; in the first case it is admitted that the
partnership thus formed is liable for the payment of income tax, whereas if there was
merely a community of property, they are exempt from such payment.
Ratio:
There is no doubt that if the plaintiffs 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 plaintiffs 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 (article 1665, Civil
Code). 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.
Having organized and constituted a partnership of a civil nature, the 'said entity is the
one bound to pay the income tax which the defendant collected.
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OBILLOS, JR. v. COMMISSIONER OF INTERNAL REVENUE

139 SCRA 436 (1985)
Facts:
On 2 March 1973, Jose Obillos, Sr. completed payment to Ortigas & Co Ltd. on two lots
located at Greenhills, San Juan, Rizal. The next day, he transferred his rights to his four
children (petitioners) to enable them to build their residences. The company sold the two
lots to petitioners, and the torrens title issued to them show that they were co-owners of
the two lots. In 1974, petitioners resold the lots to Walled City Securities Corporation and
Olga Cruz and divided among themselves the profit. They treated the profit as capital
gain and paid an income tax on one-half thereof. In 1980, or a day before the expiration
of the five-year prescriptive period, the CIR required the petitioners to pay corporate
income tax on the total profit, in addition to individual income tax on their shares thereof.
A total of Php 127,781.76 was ordered to be paid by the petitioners, including the
corporate income tax, 50% fraud surcharge, accumulated interest, income taxes and
distributive dividend. Such was ordered by the Commissioner, acting on the theory that
the four petitioners had formed an unregistered partnership or joint venture.
Issue:
Whether or not the petitioners formed an unregistered partnership by the act of selling
the two lots, of which they were co-owners. NO
Ratio:
It is wrong to consider petitioners as having formed a partnership under Article 1767 of
the Civil Code simply because they allegedly contributed money to buy the two lots,
resold the same and divided the profit among themselves. They were co-owners, pure
and simple. The petitioners were not engaged in any joint venture by reason of that
isolated transaction.
Their original purpose was to divide the lots for residential purposes. If later on they
found it not feasible to build their residences on the lots because of the high cost of
construction, then they had no choice but to resell the same to dissolve the coownership. The division of the profit was merely incidental to the dissolution of the
co-ownership which was in the nature of things a temporary state.
Article 1769(3) of the Civil Code provides that "the sharing of gross returns does
not of itself establish a partnership, whether or not the persons sharing them have
a joint or common right or interest in any property from which the returns are
derived". There must be an unmistakable intention to form a partnership or joint
venture.
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AFISCO v. COURT OF APPEALS

302 SCRA 1 (1999)
Facts:
The petitioners are 41 non-life insurance corporations, organized and existing under the
laws of the Philippines, entered into a Quota Share Reinsurance Treaty and a Surplus
Reinsurance Treaty with the Munchener Ruckversi-cherungs-Gesselschaft (hereafter
called Munich), a non-resident foreign insurance corporation. The reinsurance treaties
required petitioners to form a [p]ool. Accordingly, a pool composed of the petitioners was
formed on the same day.
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 P1,843,273.60, and withholding taxes in the amount of
P1,768,799.39 and P89,438.68 on dividends paid to Munich and to the petitioners,
respectively. These assessments were protested by the petitioners.
On January 27, 1986, 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 with[h]olding tax.
The CA ruled in the main that the pool of machinery insurers was a partnership taxable
as a corporation, and that the latters collection of premiums on behalf of its members,
the ceding companies, was taxable income.
Issue: Whether or not the Clearing House, acting as a mere agent and performing
strictly administrative functions, and which did not insure or assume any risk in its own
name, was a partnership or association subject to tax as a corporation YES
Ratio:
Article 1767 of the Civil Code recognizes the creation 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: (1) mutual contribution to a common stock, and (2) a joint interest
in the profits. In other words, a partnership is formed when persons contract to devote
to a common purpose either money, property, or labor with the intention of dividing the
profits between themselves. Meanwhile, an association implies associates who enter
into a joint enterprise x x x for the transaction of business.
In the case before us, the ceding companies entered into a Pool Agreement or an
association that would handle all the insurance businesses covered under their quotashare reinsurance treaty and surplus reinsurance treaty with Munich. The following
unmistakably indicates a partnership or an association covered by Section 24 of the
NIRC: (1) The pool has a common fund, consisting of money and other 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. (2) The pool functions through an
executive board, which resembles the board of directors of a corporation, composed of
one representative for each of the ceding companies. (3) True, the pool itself is not a
reinsurer and does not issue any insurance policy; however, its work is indispensable,
beneficial and economically useful to the business of the ceding companies and Munich,
because without it they would not have received their premiums. The ceding companies
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share in the business ceded to the pool and in the expenses according to a Rules of
Distribution annexed to the Pool Agreement. Profit motive or business is, therefore, the
primordial reason for the pools formation.
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TORRES v. COURT OF APPEALS

G.R. No. 134559 December 9, 1999
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
Issue:Whether or not there was a contract of partnership YES
Ratio:
Under the 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.
Petitioners also contend that the Joint Venture Agreement is void under Article 1422 of
the Civil Code, because it is the direct result of an earlier illegal contract, which was for
the sale of the land without valid consideration. This argument is puerile. The Joint
Venture Agreement clearly states that the consideration for the sale was the expectation
of profits from the subdivision project. Its first stipulation states that petitioners did not
actually receive payment for the parcel of land sold to respondent. Consideration, more
properly denominated as cause, can take different forms, such as the prestation or
promise of a thing or service by another.
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LIM TONG LIM v. PHILIPPINE FISHING GEAR INDUSTRIES

G.R. No. 136448. November 3, 1999
Facts:
Antonio Chua and Peter Yao entered into a contract for the purchase of fishing nets from
the Philippine Fishing Gear Industries. They claimed that they were engeged in a
business venture with petitioner Lim Tong Lim. The buyers however failed to pay for the
nets and the floats. Private respondent filed a collection suit against Yao, Chua an Lim
Tong Lim with preliminary attachment. Trial court rendered its decision in favor of Phil.
Fishing Gear and that Chua, Yao and Lim, as general partners were jointly liable to pay
respondents. It based its decision on a compromise agreement wherein joint liability was
presumed from the equal distribution of the profit and loss. The Court of Appeals
affirmed. Hence, this petition.
Issue: Whether or not, by their acts, Lim, Chua and Yao could be deemed to have
entered into a partnership. YES
Ratio:
There is a partnership between Lim, Chua and Yao. Petitioner Lim requested Yao who
was engaged in commercial fishing to join him, while Antonio Chua was already Yaos
partner. The three verbally agreed to acquire two fishing boats, FB Lourdes and FB
Nelson for the sum of 3.35 million. They also borrowed 3.25 million from Jesus Lim,
brother of petitioner Lim Tong Lim. They purchased the boats and later the nets and
floats, which constituted the main asets of the partnership and they agreed to divide tha
proceeds form the sale and operation thereof. The sale of the boats as well as the
division among the three of the balance remaining after the payment of their loans prove
that F/B Lourdes was not his own property but an asset of the partnership. Although the
corporation was never legally formed for unknown reasons, this fact alone does not
preclude the liabilities of the three as contracting parties in representation of it. Under the
law on estoppel, those acting on behalf of a corporation and those benefited by it,
knowing it to be without valid existence, are held liable as general partners. Having
reaped the benefits of the contract entered into by persons with whom he previously had
an existing relationship he is deemed to be part of said association and is covered by the
scope of the doctrine of corporation by estoppel.
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AGAD v. MABOLO and AGAD CO.

23 SCRA 1223 (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
(P14,000) and attorneys fees (P1000), petitioner prayed for the dissolution of the
partnership and winding up of its affairs.
Mabato denied the existence of the partnership alleging that Agad failed to pay his
P1000 contribution. He then filed a motion to dismiss on the ground of lack of cause of
action. The lower court dismissed the complaint finding a failure to state a cause of
action predicated upon the theory that the contract of partnership is null and void,
pursuant to Art. 1773 of our Civil Code, because an inventory of the fishpond referred in
said instrument had not been attached thereto.
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. NO
Ratio:
Based on the copy of the public instrument attached in the complaint, the partnership
was established to operate a fishpond", and not to "engage in a fishpond
business. Thus, Mabatos contention that it is really inconceivable how a partnership
engaged in the fishpond business could exist without said fishpond property (being)
contributed to the partnership is without merit. Their contributions were limited to P1000
each and neither a fishpond nor a real right thereto was contributed to the partnership.
Therefore, Article 1773 of the Civil Code finds no application in the case at bar. Case
remanded to the lower court for further proceedings.
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MORAN JR. v. COURT OF APPEALS

133 SCRA 88 (1984)
Facts:
Moran and Pecson agreed to contribute P15 000 each for the purpose of printing 95 000
posters of the delegates to the then 1971 Constitutional Commission. It was further
agreed that Pecson will receive a commission of P 1000 a month and that the
partnership is to be liquidated on December 15, 1971.
Pecson partially fulfilled his obligation when he issued P10k in favor of the partnership.
He gave the P10k to Moran as the managing partner. Moran however did not add
anything and, instead, he only used P4k out of the P10k in printing 2,000 posters. He
only printed 2,000 posters. All the posters were sold for a total of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court
of Appeals affirmed the decision but modified the same as it ordered Moran to pay
P47.5k for unrealized profit; P8k for Pecsons monthly commissions; P7k as return of
investment because the venture never took off; plus interest.
Issue: Whether or not the Court of Appeals erred in holding Moran liable to respondent
Pecson in the sum of P47,500 as the supposed expected profits due him.
Ratio:
The first question raised in this petition refers to the award of P47,500.00 as the private
respondent's share in the unrealized profits of the partnership. The award of speculative
damages has no basis in fact and law.
The rule is, when a partner who has undertaken to contribute a sum of money fails to do
so, he becomes a debtor of the partnership for whatever he may have promised to
contribute (Art. 1786, Civil Code) and for interests and damages from the time he should
have complied with his obligation (Art. 1788, Civil Code. In this case, there was mutual
breach. Private respondent failed to give his entire contribution in the amount of
P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any of
the amount expected of him. He further failed to comply with the agreement to print
95,000 copies of the posters. Instead, he printed only 2,000 copies.
There is no evidence whatsoever that the partnership between the petitioner and the
private respondent would have been a profitable venture. In fact, it was a failure doomed
from the start. There is therefore no basis for the award of speculative damages in favor
of the private respondent
Being a contract of partnership, each partner must share in the profits and losses of the
venture. That is the essence of a partnership. And even with an assurance made by one
of the partners that they would earn a huge amount of profits, in the absence of fraud,
the other partner cannot claim a right to recover the highly speculative profits
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FUE LEUNG v. INTERMEDIATE APPELLATE COURT

G.R. No. 70926 January 31, 1989
Facts:
The petitioner asks for the reversal of the decision of the then Intermediate Appellate
Court in AC-G.R. No. CV-00881 which affirmed the decision of the then Court of First
Instance of Manila, Branch II in Civil Case No. 116725 declaring private respondent
Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria
and ordering the petitioner to pay to the private respondent his share in the annual
profits of the said restaurant. This case originated from a complaint filed by respondent
Leung Yiu with the then Court of First Instance of Manila, Branch II to recover the sum
equivalent to twenty-two percent (22%) of the annual profits derived from the operation
of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung. The Sun
Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was
established sometime in October, 1955. It was registered as a single proprietorship and
its licenses and permits were issued to and in favor of petitioner Dan Fue Leung as the
sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to
show that Sun Wah Panciteria was actually a partnership and that he was one of the
partners having contributed P4,000.00 to its initial establishment. Furthermore, the
private respondent received from the petitioner the amount of P12,000.00 covered by
the latter's Equitable Banking Corporation Check No. 13389470-B from the profits of the
operation of the restaurant for the year 1974. The petitioner denied having received from
the private respondent the amount of P4,000.00. He contested and impugned the
genuineness of the receipt. To bolster his contention that he was the sole owner of the
restaurant, the petitioner presented various government licenses and permits showing
the Sun Wah Panciteria was and still is a single proprietorship solely owned and
operated by himself alone. Both the trial court and the appellate court found that the
private respondent is a partner of the petitioner in the setting up and operations of the
panciteria. While the dispositive portions merely ordered the payment of the respondents
share, there is no question from the factual findings that the respondent invested in the
business as a partner. Hence, the two courts declared that the private petitioner is
entitled to a share of the annual profits of the restaurant. The petitioner, however, claims
that this factual finding is erroneous. The petitioner also claims that it was an error for
the Hon. Intermediate Appellate Court to interpret or construe 'financial assistance' to
mean the contribution of capital by a partner to a partnership;"
Issue: Whether or not the private respondent is a partner of the petitioner in the
establishment of Sun Wah Panciteria YES
Ratio:
In essence, the private respondent alleged that when Sun Wah Panciteria was
established, he gave P4,000.00 to the petitioner with the understanding that he would be
entitled to twenty-two percent (22%) of the annual profit derived from the operation of the
said panciteria. These allegations, which were proved, make the private respondent and
the petitioner partners in the establishment of Sun Wah Panciteria because Article 1767
of the Civil Code provides that "By the contract of partnership two or more persons bind
themselves to contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves".Therefore, the lower courts did not err
in construing the complaint as one wherein the private respondent asserted his rights as
partner of the petitioner in the establishment of the Sun Wah Panciteria, notwithstanding
the use of the term financial assistance therein.
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RAMNANI v. COURT OF APPEALS

196 SCRA 731
Facts:
Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full
blood. Ishwar and his spouse Sonya had their main business based in New York.
Realizing the difficulty of managing their investments in the Philippines they executed a
general power of attorney appointing Navalrai and Choithram as attorneys-in-fact.
Choithram, entered into two agreements for the purchase of two parcels of land. Per
agreement, Choithram paid the down payment and installments on the lot with his
personal checks. A building was constructed thereon by Choithram in 1966. Three other
buildings were built thereon by Choithram through a loan of P100,000.00 obtained from
the Merchants Bank as well as the income derived from the first building. The buildings
were leased out by Choithram. Two of these buildings were later burned.
Sometime in 1970 Ishwar asked Choithram to account for the income and expenses.
However the latter failed and refused to render such accounting. As a consequence, on
February 4, 1971, Ishwar revoked the general power of attorney. Nevertheless,
Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of
Ishwar and Sonya in favor of his daughter-in-law, Nirmla Ramnani, on February 19,
1973. Upon complete payment of the lots, Ortigas executed the corresponding deeds of
sale in favor of Nirmla.6Exhibits and J. Transfer Certificates of Titlle Nos. 403150 and
403152 of the Register of Deeds of Rizal were issued in her favor.
Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for short) filed a
complaint.
Trial Court: Dismissed the decision
Appellate Court: Reversed the decision of Trial Court ordering defendant appellees to
pay the properties, rental income and building.
Issue: Whether or not defendant appellees should be liable for indemnification of the
whole property. NO
Ratio:
Verily, the acts of Choithram, et al. of disposing the properties subject of the litigation
disclose a scheme to defraud spouses Ishwar so they may not be able to recover at all,
given a judgment in their favor, thus requiring the issuance of the writ of attachment in
this instance.
Nevertheless, under the peculiar circumstances of this case, the Court cannot ignore the
fact that Choithram must have been motivated by a strong conviction that as the
industrial partner in the acquisition of said assets he has as much claim to said
properties as Ishwar, the capitalist partner in the joint venture. Through the industry and
genius of Choithram, Ishwars property was developed and improved into what it is
nowa valuable asset worth millions of pesos.
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. Wherefore,
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the property, income and building must be divided by .We agree with the appellate
court's observation to the effect that "... given its ordinary meaning, financial assistance
is the giving out of money to another without the expectation of any returns therefrom'. It
connotes an ex gratia dole out in favor of someone driven into a state of destitution. But
this circumstance under which the P4,000.00 was given to the petitioner does not obtain
in this case.' (p. 99, Rollo) The complaint explicitly stated that "as a return for such
financial assistance, plaintiff (private respondent) would be entitled to twenty-two
percentum (22%) of the annual profit derived from the operation of the said panciteria.'
(p. 107, Rollo) The well-settled doctrine is that the '"... nature of the action filed in court is
determined by the facts alleged in the complaint as constituting the cause of action."
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MARSMAN DRYSDALE LAND INC. v. PHIL GEOANALYTICS

G.R. No. 183374 June 29, 2010
Facts:
On February 12, 1997, Marsman Drysdale Land, Inc. (Marsman Drysdale) and Gotesco
Properties, Inc. (Gotesco) entered into a Joint Venture Agreement (JVA) for the
construction and development of an office building on a land owned by Marsman
Drysdale in Makati City. Via Technical Services Contract (TSC) dated July 14, 1997, the
joint venture engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide
subsurface soil exploration, laboratory testing, seismic study and geotechnical
engineering for the project. PGI, however, failed to conduct soil exploration and
laboratory testing, due to the failure on the part of the joint venture partners to clear the
area where the drilling was to be made. PGI was able to complete its seismic study
though. PGI then billed the joint venture for P284,553.50 representing the cost of partial
subsurface soil exploration; and for P250,800 representing the cost of the completed
seismic study.
Despite repeated demands from PGI, the joint venture failed to pay its
obligations.Meanwhile, due to unfavorable economic conditions at the time, the joint
venture was cut short and the planned building project was eventually shelved. PGI
subsequently filed a complaint for collection of sum of money and damages against
Marsman Drysdale and Gotesco.
Issue: Whether or not both joint venturers Marsman Drysdale and Gotesco bears the
liability to pay PGI its unpaid claims YES
Ratio:
Marsman Drysdale and Gotesco are jointly liable to PGI. PGI executed a technical
service contract with the joint venture and was never a party to the JVA. While the JVA
clearly spelled out, inter alia, the capital contributions of Marsman Drysdale (land) and
Gotesco (cash) as well as the funding and financing mechanism for the project, the
same cannot be used to defeat the lawful claim of PGI against the two joint venturerspartners. A joint venture being a form of partnership, it is to be governed by the laws on
partnership.
In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the proceeds of
the project. They did not provide for the splitting of losses, however. Applying the abovequoted provision of Article 1797 then, the same ratio applies in splitting the P535,353.50
obligation-loss of the joint venture.
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CAOILE v. COURT OF APPEALS

G.R. No. 106929 September 21, 1993
Facts:
De Jesus bought a residential lot from Sterling. In one of the installment payment
receipts, Caoile and Gatchalian signed as agents. Caoile is an accountant of Sterling
but not authorized to sell and was convicted of estafa for failing to deliver the TCT.
Gatchalian, a mere third grader, is a resident of Sterlings subdivision who pointed the
property to De Jesus.
Issue: Whether or not Gatchalian, an agent, is solidarily liable with Caoile. NO
Ratio:
An agent who signed the receipt as a witness but never received the alleged amount is
not liable. Undue emphasis and reliance were placed upon the word agent typed
below Gatchalians signature in the receipt. It was Caoile who prepared the receipt.
Gatchalian was asked by Caoile to sign the receipt for P61K as a witness. Gatchalian
did not sign any other receipts. There is as well no evidence to show that it was
Gatchalian who received the P61K. That De Jesus did not include Gatchalian as a corespondent of Caoile in the estafa case and did not demand reimbursement from
Gatchalian before filing the civil case are strong indications that the latter never received
anything on account of the subject transaction.
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CARAM v. LAURETA
G.R. No. L-28740 February 24, 1981
Facts:
Marcos Mata conveyed a large tract of agricultural land in favor of Claro Laureta, plaintiff
herein. The deed of absolute sale was not registered because at the time the sale was
executed, there was no authorized officer before whom the sale could be acknowledged
inasmuch as the civil government in Tagum, Davao was not as yet organized. However,
the defendant Marcos Mata delivered to Laureta the peaceful and lawful possession of
the premises of the land together with the pertinent papers thereof.
However, the same land was sold by Marcos Mata to Fermin Z. Caram, Jr., petitioner
herein. Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed a
petition for the issuance of a new Owner's Duplicate of Original Certificate of Title
alleging as ground therefor the loss of said title. Later, the second sale between Marcos
Mata and Fermin Caram, Jr. was registered and on the same date, Transfer Certificate
of Title No. 140 was issued in favor of Fermin Caram Jr.
Marcos Mata then filed his answer with counterclaim admitting the existence of a private
absolute deed of sale of his only property in favor of Claro L. Laureta but alleging that he
signed the same as he was subjected to duress, threat and intimidation. He also
admitted the existence of a record in the Registry of Deeds regarding a document
allegedly signed by him in favor of Fermin Caram, Jr. but denies that he ever signed the
document for he knew before hand that he had signed a deed of sale in favor of the
plaintiff and that the plaintiff was in possession of the certificate of title.
Issue: Which of the two sales should prevail? Laureta
Ratio:
The first sale in favor of Laureta prevails over the sale in favor of Caram. The facts of
record show that Mata, the vendor, and Caram, the second vendee had never met.
During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not know
Caram. Thus, the sale of the property could have only been through Caram's
representatives, Irespe and Aportadera.
There is also every reason to believe that Irespe and Atty. Aportadera had known of the
sale of the property in question to Laureta on the day Mata and Irespe, accompanied by
Leaning Mansaca, went to the office of Atty. Aportadera. When Leaning Mansaca
narrated to Atty. Aportadera the circumstances under which his property had been sold
to Laureta, he must have included in the narration the sale of the land of Mata, for the
two properties had been sold on the same occassion and under the same
circumstances.
Furthermore, even if Irespe and Aportadera did not have actual knowledge of the first
sale, still their actions have not satisfied the requirement of good faith. Bad faith is not
based solely on the fact that a vendee had knowledge of the defect or lack of title of his
vendor.
In the instant case, Irespe and Aportadera had knowledge of circumstances which ought
to have put them an inquiry. Both of them knew that Mata's certificate of title together
with other papers pertaining to the land was taken by soldiers under the command of
Col. Claro L. Laureta. Added to this is the fact that at the time of the second sale Laureta
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was already in possession of the land. Irespe and Aportadera should have investigated
the nature of Laureta's possession.
Also, it was of common knowledge that at the time the soldiers of Laureta took the
documents from Mata, the civil government of Tagum was not yet established and that
there were no officials to ratify contracts of sale and make them registerable. Obviously,
Aportadera and Irespe knew that even if Mata previously had sold the disputed land
such sale could not have been registered.
Therefore, there is no doubt then that Irespe and Aportadera, acting as agents of Caram,
purchased the property of Mata in bad faith. Applying the principle of agency, Caram as
principal, should also be deemed to have acted in bad faith.
Since Caram was a registrant in bad faith, the situation is as if there was no registration
at all.
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INLAND REALTY v. COURT OF APPEALS

GR No. 76969. June 9, 1997
Facts:
Plaintiff Inland Realty Investment Service, Inc. is a corporation engaged among others in
the real estate business and brokerages which sent proposal letters to prospective
buyers for their sales campaign. One such prospective buyer to whom a proposal letter
was sent to was Stanford Microsystems, Inc. which counter-proposed. Upon plaintiffs'
receipt of the said counter-proposal, it immediately wrote defendant a letter to register
Stanford Microsystems, Inc. as one of its prospective buyers. Defendant Araneta, Inc.,
thru its Assistant General Manager Eduque, replied that the price offered by Stanford
was too low and suggested that plaintiffs see if the price and terms of payment can be
improved upon by Stanford. The authority to sell given to plaintiffs by defendants was
extended several times until it expired. Plaintiffs finally sold the 9,800 shares of stock in
Architects Bldg., Inc. to Stanford Microsystems, Inc. for P13, 500,000.00. Plaintiffs
demanded formally from defendants, through a letter of demand, for payment of their 5%
broker's commission which was declined by defendants on the ground that the claim has
no factual or legal basis. Private respondent argues that after their authority to sell
expired, petitioners abandoned the sales transaction and were no longer privy to the
consummation and documentation thereof, Trial court dismissed petitioners' complaint
for collection. Respondent appellate court likewise dismissed petitioners' appeal.
Issues:
(1) Whether or not the agency contract and authority to sell were extended. NO
(2) Whether or not the broker is automatic entitlement to the stipulated commission
merely upon securing for, and introducing to, the seller, the particular buyer who
ultimately purchases from the former the object of the sale, regardless of the expiration
of the broker's contract of agency and authority to sell. NO
Ratio:
(1)Petitioners have conspicuously failed to attach a certified copy of the letter renewing
petitioner Inland Realty's authority to act as agent to sell. Such naivety, this court will not
tolerate.
(2)It is understandable why petitioners have resorted to a campaign for an automatic and
blanket entitlement to brokerage commission upon doing nothing but submitting to
private respondent Araneta, Inc., the name of Stanford as prospective buyer of the
latter's shares in Architects'. Of course petitioners would advocate as such because
precisely petitioners did nothing but submit Stanford's name as prospective
buyer. Petitioners did not succeed in outrightly selling said shares under the
predetermined terms and conditions set out by Araneta, Inc., e.g., that the price per
share is P1,500.00. when petitioners' authority to sell was subsisting, if at all, petitioners
had nothing to show that they actively served their principal's interests, pursued to sell
the shares in accordance with their principal's terms and conditions, and performed
substantial acts that proximately and causatively led to the consummation of the sale to
Stanford of Araneta, Inc.'s 9,800 shares in Architects'.The Court of Appeals cannot be
faulted for emphasizing the lapse of more than one (1) year and five (5) months between
the expiration of petitioners' authority to sell and the consummation of the sale to
Stanford, to be a significant index of petitioners' non-participation in the really critical
events leading to the consummation of said sale.
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LIM v. COURT OF APPEALS

G.R. No. 102784, 28 February, 1996
Facts:
An Information for Estafa was filed against petitioner Rosa Lim for allegedly defrauding
Victoria Suarez. Lim received from Suarez a 3.35-carat diamond ring and a bracelet to
be sold on commission basis; such agreement was reflected in a receipt. Later, Lim
returned to Suarez only the bracelet without the diamond ring nor the proceeds thereof if
sold. Suarez made verbal and written demands on Lim for the return of the diamond ring
but the latter responded that she had already returned both ring and bracelet to the
former, thus she had no longer any liability.
However, petitioner Lim averred that a certain Aurelia Nadera introduced her to Suarez,
that she received the two pieces of jewelry for her to consider buying them for her own
use and not to sell them on commission basis, and that she would inform Suarez of such
decision before she goes back to Cebu. She also said that since she was not yet ready
to buy, she asked Suarez to prepare a paper for her to sign and that she signed said
document on its upper portion and not at the bottom where a space was provided for the
signature of the person receiving the jewelry. Before departing, Lim informed Suarez that
she was no longer interested in buying the jewelry and the latter instructed her to give
them to Nadera which the former allegedly did. Petitioner asserts that she never
received the jewelry in trust or on commission basis since the real agreement between
them was a sale on credit.
Issue: Whether or not the real transaction between Lim and Suarez was a contract of
agency to sell on commission basis YES
Ratio:
The real transaction was a contract of agency to sell as evidenced by the receipt which
stated that Suarez compensation or commission would be the over-price on the value of
each jewelry and that she was prohibited from selling them on credit or by installment,
from giving for safekeeping, lending, pledging, or giving as security or guaranty. The fact
that Lims signature appeared on the upper portion of the receipt did not have the effect
of altering the terms of the transaction from a contract of agency to sell on commission
basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto
in Lims part which would otherwise render the contract void or voidable. The moment
Lim affixed her signature thereon, she became bound by all the terms stipulated in the
receipt. Article 1356 of the Civil Code pronounces, Contracts shall be obligatory in
whatever form they may have been entered into, provided all the essential requisites for
their validity are present. The exceptions to this rule are: 1) when form is required for
the validity of the contract; 2) when form is required to make the contract effective as
against third parties; and, 3) when form is required for the purpose of proving the
existence of the contract. A contract of agency to sell on commission basis does not
belong to any of these three categories; therefore, it is valid and enforceable in whatever
form it may be entered into. Furthermore, the only type of legal instrument where the law
strictly prescribes the location of the signature of the parties thereto is the notarial will.
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ORIENT-AIR SERVICES & HOTEL REPRESENTATIVES v. COURT OF APPEALS

G.R. No. 76933 May 29, 1991
Facts:
American Airlines, Inc. (American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel Representatives
(Orient Air), entered into a General Sales Agency Agreement (Agreement), whereby the
former authorized the latter to act as its exclusive general sales agent within the
Philippines for the sale of air passenger transportation. In the agreement, Orient Air shall
remit in United States dollars to American the ticket stock or exchange orders, less
commissions to which Orient Air Services is entitled, not less frequently than semimonthly. On the other hand, American will pay Orient Air Services commission on
transportation sold by Orient Air Services or its sub-agents. Thereafter, American
alleged 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 which authorize the termination of the thereof in case
Orient Air is unable to transfer to the United States the funds payable by Orient Air
Services to American. American Air instituted suit against Orient Air with the Court of
First Instance of Manila 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."
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. The trial court ruled in its favor which decision was
affirmed with modification by Court of Appeals. It held 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 transportation in the Philippines in
accordance with said GSA agreement.
Issue:Whether or not the Court of Appeals erred in ordering the reinstatement of the
defendant as its general sales agent for passenger transportation in the Philippines in
accordance with said GSA Agreement YES
Ratio:
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 agentprincipal 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. The Agreement itself between the parties states that "either party
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may terminate the Agreement without cause by giving the other 30 days' notice by letter,
telegram or cable." (emphasis supplied) We, therefore, set aside the portion of the ruling
of the respondent appellate court reinstating Orient Air as general sales agent of
American Air.
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RURAL BANK OF MILAOR v. OCFEMIA

G.R. No. 137686. February 8, 2000
Facts:
Several parcels of land were mortgaged by the respondents during the lifetime of the
respondents grandparents to the Rural bank of Milaor as shown by the Deed of Real
Estate Mortgage and the Promissory Note. Spouses Felicisimo Ocfemia and Juanita
Ocfemia, one of the respondents, were not able to redeem the mortgaged properties
consisting of seven parcels of land and so the mortgage was foreclosed and thereafter
ownership was transferred to the petitioner bank. Out of the seven parcels of land that
were foreclosed, five of them are in the possession of the respondents because these
five parcels of land were sold by the petitioner bank to the respondents as evidenced by
a Deed of Sale. However, the five parcels of land cannot be transferred in the name of
the parents of Merife Nino, one of the respondents, because there is a need to have the
document of sale registered. The Register of deeds, however, said that the document of
sale cannot be registered without the board resolution of the petitioner bank confirming
both the Deed of sale and the authority of the bank manager, Fe S. Tena, to enter such
transaction.
The petitioner bank refused her request for a board resolution and made many alibis.
Respondents initiated the present proceedings so that they could transfer to their names
the subject five parcel of land and subsequently mortgage said lots and to use the loan
proceeds for the medical expenses of their ailing mother.
Issue: Whether or not the Board of Directors of a rural banking corporation may be
compelled to confirm a deed of absolute sale of real property owned by the corporation
which deed of sale was executed by the bank manager without prior authority of the
board of directors of the rural banking corporation? YES
Ratio:
The bank acknowledges, by its own acts or failure to act, the authority of Fe S. Tena to
enter into binding contracts. After the execution of the Deed of Sale, respondents
occupied the properties in dispute and paid the real estate taxes. If the bank
management believed that it had title to the property, it should have taken measured to
prevent the infringement and invasion of title thereto and possession thereof.
Likewise, Tena had previously transacted business on behalf of the bank, and the latter
had acknowledged her authority. A bank is liable to innocent third persons where
representation is made in the course of its normal business by an agent like Manager
Tena even though such agent is abusing her authority.
Clearly, persons dealing with her could not be blamed for believing that she was
authorized to transact business for and on behalf of the bank.
The bank is estopped from questioning the authority of the bank to enter into contract of
sale. If a corporation knowingly permits one of its officers or any other agent to act within
the scope of an apparent authority, it holds the agent out to the public as possessing the
power to do those acts; thus, the corporation will, as against anyone who has in good
faith dealt with it through such agent, be estopped from denying the agents authority.
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SIREDY ENTERPRISES, INC. v. COURT OF APPEALS and CONRADO DE GUZMAN

G.R. No. 129039. September 17, 2002
Facts:
Conrado De Guzman is an architect-contractor doing business under the name and style
of Jigscon Construction. On the other hand, Siredy Enterprises, Inc. (hereafter Siredy) is
the owner and developer of Ysmael Village, a subdivision in Sta. Cruz, Marilao, Bulacan.
The primary corporate purpose of Siredy is to acquire lands, subdivide and develop
them, erect buildings and houses thereon, and sell, lease or otherwise dispose of said
properties to interested buyers.
Yanga, the President of Siredy executed an undated Letter of Authority, empowering Mr.
Hermogenes Santos to negotiate and enter into contract or contracts to build Housing
Units in Ysmael Village, among others.
Santos then entered into a Deed of Agreement with De Guzman for the construction of
housing units in Ysmael Village. De Guzman was able to construct 26 residential units
at Ysmael Village. Thirteen (13) of these were fully paid but the other 13 remained
unpaid. The total contractual price of these 13 unpaid houses is P412,154.93 which was
verified and confirmed to be correct by Santos, per an Accomplishment Billing that the
latter signed.
De Guzman tried but failed to collect the unpaid account from petitioner. Thus, he
instituted the action for specific performance against Siredy, Yanga, and Santos who all
denied liability. In its defense, Siredy presented a testimonial evidence to the effect that
Siredy had no contract with De Guzman and that it had not authorized Santos to enter
into a contract with anyone for the construction of housing units at Ysmael Village.
Issue:Whether or not Hermogenes B. Santos was a duly constituted agent of Siredy,
with authority to enter into contracts for the construction of residential units in Ysmael
Village and thus the capacity to bind Siredy to the Deed of Agreement. YES
Ratio:
By the relationship of agency, one party called the principal authorizes another called the
agent to act for and in his behalf in transactions with third persons. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act
of the principal if done within the scope of the authority.
In the case at bar, the instrument executed by Yanga clearly and unequivocally
constituted Santos to do and execute, among other things, the act of
negotiating and entering into contract or contracts to build Housing Units on our
subdivision lots in Ysmael Village. It was upon the authority of this document that De
Guzman transacted business with Santos that resulted in the construction contract
denominated as the Deed of Agreement.
Moreover, it cannot be said that such letter of authority runs counter to the nature of
Siredys business on the ground that it is not engaged in the business of constructing
housing units. Siredys Articles of Incorporation, duly approved by the Securities and
Exchange Commission, shows that Siredy may also undertake to erect buildings and
houses on the lots and sell, lease, or otherwise dispose of said properties to interested
buyers.Such Articles, coupled with the Letter of Authority, is sufficient to have
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given De Guzman reason to believe that Santos was duly authorized to represent
Siredy for the purpose stated in the Deed of Agreement. The self-serving contention
of petitioner cannot stand against the documentary evidence clearly showing the
companys liability to De Guzman.
There being no question that a valid agency was created between Siredy and Santos,
and the authority conferred upon the latter includes the power to enter into a
construction contract to build houses such as the Deed of Agreement between Santos
and De Guzmans Jigscon Construction, the inescapable conclusion is that Siredy is
bound by the contract through the representation of its agent Santos.
Even assuming arguendo that Santos mandate was only to sell subdivision lots as
Siredy asserts, the latter is still bound to pay De Guzman. Pursuant to Art 1900 of the
Civil Code, while third persons are bound to inquire into the extent or scope of the
agents authority, they are not required to go beyond the terms of the written
power of attorney. In fact, third persons cannot be adversely affected by an
understanding between the principal and his agent as to the limits of the latters
authority. De Guzman is considered a third party to the agency agreement who had
no knowledge of the specific instructions or agreements between Siredy and its
agent. What De Guzman only saw was the written Letter of Authority where Santos
appears to be duly authorized.
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VICTORIAS MILLING v. COURT OF APPEALS

G.R. No. 117356. June 19, 2000
Facts:
St. Therese Merchandising (STM) regularly bought sugar from petitioner Victorias Milling
Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR
No. 1214M covering 25,000 bags, which gave rise to the instant case. Subsequently,
STM sold to Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P
14,750,000.00. CSC issued four (4) checks as payment. CSC then 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
Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214x x x." CSC surrendered
SLDR No. 1214M to the petitioner's warehouse and was allowed to withdraw only 2,000
bags of sugar. VMC refused to allow further withdrawals of sugar against SLDR No.
1214M. CSC then sent petitioner a letter informing it that SLDR No. 1214M had been
"sold and endorsed" to it. VMC replied that it could not allow any further withdrawals
because STM had already withdrawn all the sugar covered by the cleared checks.
Issue: Whether or not CSC has become the agent of STM? NO
Ratio:
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; and 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.
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. Private respondent 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.
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YU ENG CHO v. PAN AMERICAN WORLD AIRWAYS

G.R. No. 123560 March 27, 2000
Facts:
Spouses Yu Eng Cho and Franciso Tao Yu bought Pan Am plane tickets for Hongkong,
Tokyo, San Francisco, U.S.A. from respondent Tagunicar who represented herself an
agent of respondent Tourist World Services, Inc. (TWSI). Only the San Francisco-New
York passage was confirmed, while that of Tokyo-San Francisco was still "on request."
Tagunicar later confirmed the second leg of the flight after calling respondent Canilao of
TWSI and attached confirmation stickers on the tickets. In Tokyo, petitioners were
informed by Pan Am that their names were not in the manifest. They took a ticket for
Taiwan but in Taipei they were forced to return to Manila because of lack of available
flights. Thus, the spouses filed an action for damages against respondents. The trial
court rendered judgment finding respondents, except Canilao, jointly and severally liable
to petitioners. On appeal, the appellate court reversed the decision of the trial court. It
found that Tagunicar was not an agent or representative of Pan Am, hence, Pan Am
cannot be held liable for her actions. Hence, this petition.
Issue:
Whether or not Tagunicar is an agent. NO
Ratio:
By the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter. The elements of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for himself; (4) the agent acts
within the scope of his authority. It is a settled rule that persons dealing with an assumed
agent are bound at their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. The declarations of the
agent alone are generally insufficient to establish the fact or extent of his authority.
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DY BUNCIO & COMPANY, INC. v. ONG GUAN CAN

G.R. No. L-40681 October 2, 1934
Facts:
A deed dated July 31, 1931 by Ong Guan Can, Jr. states that he, as agent of Ong Guan
Can, sells a rice-mill and camarin to Juan Tong and gives as his authority the power of
attorney dated May 23, 1928. The power of attorney is a limited one and does not give
the express power to alienate the properties in question. However, a general power of
attorney has previously been given to the same agent in 1920.
Issue: Whether or not Ong Guan Can, the judgment debtor, is still the owner of the ricemill and camarin? YES
Ratio:
The making and accepting of a new power of attorney, whether it enlarges or decreases
the power of the agent under a prior power of attorney, must be held to supplant and
revoke the latter when the two are inconsistent. The title of Ong Guan Can has not been
divested by the so-called deed of July 31, 1931. His properties are subject to attachment
and execution.
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VALENZUELA v. COURT OF APPEALS

G.R. No. 83122 October 19, 1990
Facts:
Arturo P. Valenzuela is a General Agent of Philippine American General Insurance
Company, Inc. since 1965. As such, he was authorized to solicit and sell in behalf of
Philamgen all kinds of non-life insurance, and in consideration of services rendered was
entitled to receive the full agent's commission of 32.5% from Philamgen under the
scheduled commission rates. From 1973 to 1975, Valenzuela solicited marine insurance
from one of his clients, the Delta Motors, Inc. in the amount of P4.4 Million from which he
was entitled to a commission of 32%. However, Valenzuela did not receive his full
commission which amounted to P1.6 Million from the P4.4 Million insurance coverage of
the Delta Motors. In 1977,Philamgen started to become interested in and expressed its
intent to share in the commission due Valenzuela on a fifty-fifty basis. Valenzuela
refused. Philamgen insisted on the sharing of the commission with Valenzuela. On June
16,1978, Valenzuela firmly reiterated his objection to the proposals of respondents.
Because of the refusal of Valenzuela, Philamgen took drastic action against Valenzuela.
All of these acts resulted in the decline of his business as an insurance agent. Then on
December 27, 1978, Philamgen terminated the General Agency Agreement of
Valenzuela. Thus, Valenzuela filed a complaint against Philamgen. The trial court ruled
in favor Valenzuela and ordered his reinstatement. On appeal, the Court of Appeals
modified the judgment in favor of Philamgen. Hence, this petition.
Issue: Whether or not Philamgen validly terminated the contract of agency. NO
Ratio:
As a general rule, an agency is revocable at will except when the agency has been given
not only for the interest of the principal but for the interest of third persons or for the
mutual interest of the principal and the agent. In these cases, it is evident that the
agency ceases to be freely revocable by the sole will of the principal. With the
termination of the General Agency Agreement, Valenzuela would no longer be entitled to
commission on the renewal of insurance policies of clients sourced from his agency.
Worse, Philamgen continued to hold Valenzuela jointly and severally liable with the
insured for unpaid premiums. Under these circumstances, it is clear that Valenzuela had
an interest in the continuation of the agency when it was unceremoniously terminated
not only because of the commissions he should continue to receive from the insurance
business he has solicited and procured but also for the fact that by the very acts of the
respondents, he was made liable to Philamgen in the event the insured fail to pay the
premiums due. They are estopped by their own positive averments and claims for
damages. Therefore, the respondents cannot state that the agency relationship between
Valenzuela and Philamgen is not coupled with interest. There may be cases in which an
agent has been induced to assume a responsibility or incur a liability, in reliance upon
the continuance of the authority under such circumstances that, if the authority be
withdrawn, the agent will be exposed to personal loss or liability.
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LIM v. SABAN
GR. No. 163720 December 16, 2004
Facts:
The late Eduardo Ybaez, the owner of a 1000 square meter lot in Cebu City entered
into an agency agreement with respondent Florencio Saban. Under the agency
agreement, Ybaez authorized Saban to look for a buyer of the lot for P200,000 and to
mark up the selling price to include the amounts needed for payment of taxes, transfer of
title and other expenses incident to the sale, as well as Sabans commission for the sale.
Through Sabans effort, Ybaez and his wife were able to sell the lot to petitioner
Genevieve Lim and the spouses Benjamin and Lourdes Lim. The price indicated in the
Deed of Absolute Sale was P200,000, however, it appears that the parties agreed to
purchase the lot for P600,000 inclusive of taxes and other expenses of the sale. Lim
remitted to Saban the amounts of P113,257.00 for the payment of taxes as well as
P50,000 as brokers commission. Lim also issued in the name of Saban four postdated
checks in the aggregate amount of P236,743.00. Subsequently, Ybaez sent letter to
him convincing her to cancel all the checks she issued in the name of Saban and pay
directly to him. Saban filed a complaint for the collection of sum of money and damages
against Ybaez and Lim with the RTC of Cebu City. Saban alleged that Ybaez
connived with Lim to deprive him of his sales commission by withholding the payment of
the checks. Ybaez for his part claimed that Saban was not entitled to any commission
because he concealed the actual selling price from him and because he was not a
licensed broker. Ybaez died during the pendency of the case. The case was dismissed
with respect to Ybaez and only the complaint against Lim was continued. The RTC of
Cebu dismissed the complaint of Saban. On appeal, the Court of Appeals ruled that the
revocation of the contract of agency by Ybaez was invalid because the agency was
coupled with interest and Ybaez effected the revocation in bad faith in order to deprive
Saban of his commission. Not satisfied with the decision of the Court of Appeals, Lim
filed the present petition. She further contends that she should not be liable for Ybaez
debt to Saban as she was not a party to the contract of agency between them.
Issues:
(1) Whether or not the contract of agency was revoked. NO
(2) Whether or not the contract of agency was coupled with interest. NO
Ratio:
(1) The agency was not revoked since Ybaez requested that Lim to make stop payment
orders for the checks issued to Saban only after the consummation of the sale. At that
time, Saban had already performed his obligation as Ybaezs agent when, through
Sabans efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and
Spouses Lim. To deprive Saban of his commission subsequent to the sale which was
consummated through his efforts would be a breach of contract of agency. Moreover,
the Court has sufficient basis to conclude that Ybaez and Lim connived with each other
to deprive Saban of his commissions by dealing with each other directly and reducing
the purchase price of the lot and leaving nothing for Saban to compensate him for his
efforts. Hence, it is proper that Lim pays Saban the amount due to him.
(2) An agency is deemed as one coupled with interest where it is established for the
mutual benefit of the principal and of third persons, and it cannot be revoked by the
principal so long as the interest of the agent or of third person subsists. In an agency
coupled with an interest, the agents interest must be in the subject matter of the power
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conferred and not merely an interest in the exercise of the power because it entitles him
to compensation. When the agents interest is confined to earning his agreed
compensation, the agency is not coupled with an interest, since the agents interest in
obtaining his compensation as such agent is an ordinary incident of the agency
relationship.
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PHILEX MINING CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 148187 April 16, 2008
Facts:
Petitioner Philex Mining Corporation entered into an agreement with Baguio Gold Mining
Corporation for the former to manage the latters mining claim know as the Sto. Mine.
The parties agreement was denominated as Power of Attorney. In the course of
managing and operating the project, petitioner made advances of cash and property in
accordance with their agreement. However, the mine suffered continuing losses over the
years, which resulted in petitioner's withdrawal as manager of the mine and in the
eventual cessation of mine operations. Thereafter, the parties executed a Compromise
Dation in Payment, wherein Baguio Gold admitted an indebtedness to petitioner
amounting to P259,137,245.00. Subsequently, petitioner wrote off in its books of account
the remaining outstanding indebtedness of Baguio Gold by charging P112,136,000.00 to
allowances and reserves. Then, petitioner deducted said amount from its gross income
in its annual tax income return as loss on the settlement of receivables from Baguio
Gold against reserves and allowances. BIR disallowed the amount as deduction for bad
debt. Petitioner claims that it entered a contract of agency evidenced by the power of
attorney executed by them and the advances made by petitioner is in the nature of a
loan and thus can be deducted from its gross income. Petitioner also claims that the
stipulation in their agreement with respect to non-revocation of advances showed that
what the parties entered into was actually a contract of agency coupled with an interest.
Court of Tax Appeals rejected the claim and held that it is a partnership rather than an
agency. Court of Appeals affirmed Court of Tax Appeals.
Issue: Whether or not the agreement is to form an agency. NO
Ratio:
The lower courts correctly held that the Power of Attorney (PA) is the instrument that is
material in determining the true nature of the business relationship between petitioner
and Baguio Gold. An examination of the said PA reveals that a partnership or joint
venture was indeed intended by the parties. While a corporation like the petitioner
cannot generally enter into a contract of partnership unless authorized by law or its
charter, it has been held that it may enter into a joint venture, which is akin to a particular
partnership. The PA indicates that the parties had intended to create a partnership and
establish a common fund for the purpose. They also had a joint interest in the profits of
the business as shown by the 50-50 sharing of income of the mine.
Moreover, in an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by the principal due to an interest of a third party that depends upon it or the
mutual interest of both principal and agent. In this case the non-revocation or nonwithdrawal under the PA applies to the advances made by the petitioner who is the
agent and not the principal under the contract. Thus, it cannot be inferred from the
stipulation that it is an agency.
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MENDOZA v. PAULE
G.R. No. 175885, 13 February 2009
Facts:
Engineer Eduardo M. Paule, the proprietor of E.M. Paule Construction and Trading
(EMPCT), executed on 24 May 1999 a special power of attorney (SPA) authorizing
Zenaida G. Mendoza to participate in the bidding of a National Irrigation Administration
(NIA) and to represent him in all transactions related thereto. The said project, which
involves construction of a road system, canal structures and drainage box culverts, was
later awarded to EMPCT through Mendoza. Mendoza entered into a lease contract
with Manuel Cruz for the heavy equipment to be used in the NIA project. Said lease
contract was entered into by Mendoza upon several meetings with Cruz and Paule.
Mendoza and Cruz signed job orders dated 2 and 22 December 1999. But on 27 April
2000, Paule revoked the SPA issued in favor of Mendoza so NIA refused to pay
Mendoza on her billings. Consequently, Cruz could not be paid for the rent of the
equipment and filed an action for collection sum of money.
Issue: Whether or not Mendoza acted beyond her authority, granted by Paule through
an SPA, when she contracted with Cruz for the lease of heavy equipment to be used in
the implementation of the NIA project. NO
Ratio:
Although the SPA limit Mendozas authority to such acts as representing EMPCT in its
business transactions with NIA, participating in the bidding of the project, receiving and
collecting payment in behalf of EMPCT, and performing other acts in furtherance thereof,
the evidence shows that when Mendoza and Cruz met and discussed the lease of the
latters heavy equipment for use in the project, PAULE was present and interposed no
objection to Mendozas actuations. Her actions were in accord with what she and Paule
originally agreed upon, as records show, as to division of labor and delineation of
functions within their partnership. Under the Civil Code, every partner is an agent of the
partnership for the purpose of its business; each one may separately execute all acts of
administration, unless a specification of their respective duties has been agreed upon, or
else it is stipulated that any one of them shall not act without the consent of all the
others. At any rate, Paule does not have any valid cause for opposition because his only
role in the partnership is to provide his contractors license and expertise, while the
sourcing of funds, materials, labor and equipment has been relegated to Mendoza.
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FRANCISCO A. TONGOY v. THE HONORABLE COURT OF APPEALS

123 SCRA 99June 28, 1983
Facts:
The case is basically an action for reconveyance respecting two (2) parcels of land in
Bacolod City namely Hacienda Pulo and Cuaycong property. On April 17, 1918,
Hacienda Pulo was mortgaged by its registered co-owners to the Philippine National
Bank (PNB), Bacolod Branch, as security for a loan of P11,000.00. The mortgagors
however were unable to keep up with the yearly amortisations, as a result of which the
PNB instituted judicial foreclosure proceedings over Hacienda Pulo on June 18, 1931.
To avoid foreclosure, one of the co-owners and mortgagors proposed to the PNB an
amortization plan that would enable them to liquidate their account, which was denied by
the latter.
In order to facilitate the restructuring agreement with PNB, the co-owners transferred
their interest through simulated sale to Luis D. Tongoy, father of Francisco Tongoy. On
the basis of the foregoing documents, Hacienda Pulo was placed on November 8, 1935
in the name of Luis D. Tongoy, married to Maria Rosario Araneta. In the following year,
the title of the adjacent Cuaycong property also came under the name of Luis D.
Tongoy.
On June 26, 1936, Luis D. Tongoy executed a real estate mortgage over the Cuaycong
property in favor of the PNB, Bacolod Branch, as security for loan of P4,500.00. Three
days thereafter, on June 29, 1936, he also executed a real estate mortgage over
Hacienda Pulo in favor of the same bank to secure an indebtedness of P21,000.00,
payable for a period of fifteen (15) years at 8% per annum.
After two decades, on April 17, 1956, Luis D. Tongoy paid off all his obligations with the
PNB, amounting to a balance of P34,410.00, including the mortgage obligations on the
Cuaycong property and Hacienda Pulo. However, it was only on April 22, 1958 that a
release of real estate mortgage was executed by the bank in favor of Luis D. Tongoy. On
February 5, 1966, Luis D. Tongoy died leaving as heirs his wife Maria Rosario Araneta
and his son Francisco A. Tongoy. Just before his death, however, Luis D. Tongoy
received a letter from other co-owners, dated January 26, 1966, demanding the return of
the shares in the properties to the co-owners. On June 2, 1966, the latter filed a action
for reconveyance pursuant to the trust arrangement.
Issues:
(1) Whether or not the conveyance respecting the questioned lots made in favor of Luis
Tongoy in 1934 and 1935 were conceived pursuant to a implied trust NO
(2) Whether or not the action to enforce it has prescribed.NO
Ratio:
(1)There is no implied trust that was generated by the simulated transfers; because
being fictitious or simulated, the transfers were null and void ab initiofrom the very
beginningand thus vested no rights whatsoever in favor of Luis Tongoy or his heirs.
That which is inexistent cannot give life to anything at all.
(2)As simulated contract: A void or inexistent contract is one which has no force and
effect from the very beginning, as if it had never Evidently, therefore, the deeds of
transfer executed in favor of Luis Tongoy were from the very beginning absolutely
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simulated or fictitious, since the same were made merely for the purpose of restructuring
the mortgage over the subject properties and thus preventing the foreclosure by the
PNB. Considering the law and jurisprudence on simulated or fictitious contracts as
aforestated, the within action for reconveyance instituted by herein respondents which is
anchored on the said simulated deeds of transfer cannot and should not be barred by
prescription been entered into, and which cannot be validated either by time or by
ratification.
As implied trust: But even assuming arguendo that such an implied trust exists
between Luis Tongoy as trustee and the private respondents as cestui que trust, still the
rights of private respondents to claim reconveyance is not barred by prescription or
laches.
While there are some decisions which hold that an action upon a trust is imprescriptible,
without distinguishing between express and implied trusts, the better rule, as laid down
by this Court in other decisions, is that prescription does supervene where the trust is
merely an implied one. Under Section 40 of the Old Code of Civil Procedure, all actions
for recovery of real property prescribe in ten years, excepting only actions based on
continuing or subsisting trusts that were considered by section 38 as
imprescriptible. However, the continuing or subsisting trusts contemplated in Sec. 38 of
the Code of Civil Procedure referred only to express unrepudiated trusts, and did not
include constructive trusts (that are imposed by law) where no fiduciary relation exists
and the trustee does not recognize the trust at all.
Considering that the implied trust resulted from the simulated sales which were made for
the purpose of enabling the transferee, Luis D. Tongoy, to save the properties from
foreclosure for the benefit of the co-owners, it would not do to apply the theory of
constructive notice resulting from the registration in the trustees name. Hence, the tenyear prescriptive period should not be counted from the date of registration in the name
of the trustee in 1935 and 1936. Rather, it should be counted from the date of recording
of the release of mortgage in the Registry of Deeds, on which dateMay 5, 1958the
cestui que trust were charged with the knowledge of the settlement of the mortgage
obligation, the attainment of the purpose for which the trust was constituted.
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CARAGAY-LAYNO v. COURT OF APPEALS

G.R. No. L-52064 December 26, 1984
Facts:
It was established by a relocation survey that the Disputed Portion is a 3,732 squaremeter-area of a bigger parcel of sugar and coconut landwith a total area of 8,752 square
meters. The entire parcel is covered by Original Certificate of Title No. 63, and includes
the adjoining Lots 2 and 3, issued on 11 September 1947 in the name of Mariano M. DE
VERA, who died in 1951 without issue.
His intestate estate was administered first by his widow and later by her nephew,
respondent Salvador Estrada.
Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first
cousins,both orphans, who lived together under one roof in the care of a common aunt.
As Administratrix, DE VERA's widow filed in Special Proceedings, an Inventory of all
properties of the deceased, which included a parcel of land in the
poblacion of Calasiao, Pangasinan, containing an area of 5,417 square meters, more or
less.
Because of the discrepancy in area mentioned in the Inventory as 5,147 square meters
(as filed by the widow), and that in the title as 8,752 square meters, ESTRADA repaired
to the Disputed Property and found that the northwestern portion, subsequently
surveyed to be 3,732 square meters, was occupied by petitioner-spouses Juliana
Caragay Layno and Benito Layno. ESTRADA demanded that they vacate the Disputed
Portion since it was titled in the name of the deceased DE VERA, but petitioners refused
claiming that the land belonged to them and, before them, to JULIANA'S father Juan
Caragay
ESTRADA then instituted suit against JULIANA for the
recovery of the Disputed Portion, which she resisted, mainly on the ground that the
Disputed Portion had been fraudulently or mistakenly included in OCT No. 63, so that an
implied or constructive trust existed in her favor. She then counterclaimed for
reconveyance of property in the sense that title be issued in her favor.
Issue: Whether or not Juliana Caragay's remedy for reconveyance has already
prescribed NO
Ratio:
The evidence discloses that the Disputed Portion was originally possessed openly,
continuously and uninterruptedly in the concept of an owner by Juan Caragay, the
deceased father of JULIANA, and had been declared in his name under Tax Declaration
No. 28694 beginning with the year 1921, later revised by Tax Declaration No. 2298 in
1951. Upon the demise of her father in 1914, JULIANA adjudicated the property to
herself as his sole heir in 1958 anddeclared it in her name under Tax Declaration No.
22522beginning with the year 1959, later cancelled by TD No. 3539 in 1966. Realty
taxes were also religiously paid from 1938 to 1972. Tacking the previous possession of
her father to her own, they had been in actual, open, continuous and uninterrupted
possession in the concept of owner for about forty five (45) years, until said possession
was disturbed in 1966 when ESTRADA informed JULIANA that the Disputed Portion
was registered in Mariano DE VERA's name.
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To substantiate her claim of fraud in the inclusion of the Disputed Portion in OCT No. 63,
JULIANA, an unlettered woman, declared that during his lifetime, DE VERA, her first
cousin, and whom she regarded as a father as he was much older, borrowed from her
the Tax Declaration of her land purportedly to be used as collateral for his loan and
sugar quota application; that relying on her cousin's assurances, she acceded to his
request and was made to sign some documents the contents of which she did not even
know because of her ignorance; that she discovered the fraudulent inclusion of the
Disputed Portion in OCT No. 63 only in1966 when ESTRADA so informed her and
sought to eject them.
Prescription cannot be invoked against JULIANA for the reason that as lawful possessor
and owner of the Disputed Portion, her cause of action for reconveyance which, in effect,
seeks to quiet title to the property, falls within settled jurisprudence that an action to quiet
title to property in one's possession is imprescriptible.Her undisturbed possession over a
period of fifty two (52) years gave her a continuing right to seek the aid of a Court of
equity to determine the nature of the adverse claim of a third party and the effect on her
own title.
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RUSTICO ADILLE v. COURT OF APPEALS

G.R. No. L-44546 January 29, 1988
FACTS:
The land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City with
an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as her own private
property; she married twice in her lifetime; the first, with one Bernabe Adille, with whom
she had as an only child, herein defendant Rustico Adille; in her second marriage with
one Procopio Asejo, her children were herein plaintiffs, now, sometime in 1939, said
Felisa sold the property in pacto de retro to certain 3rd persons, period of repurchase
being 3 years, but she died in 1942 without being able to redeem and after her death,
but during the period of redemption, herein defendant repurchased, by himself alone,
and after that, he executed a deed of extra-judicial partition representing himself to be
the only heir and child of his mother Felisa with the consequence that he was able to
secure title in his name alone also, so that OCT. No. 21137 in the name of his mother
was transferred to his name, that was in 1955; that was why after some efforts of
compromise had failed, his half-brothers and sisters, herein plaintiffs, filed present case
for partition with accounting on the position that he was only a trustee on an implied trust
when he redeemed,-and this is the evidence, but as it also turned out that one of
plaintiffs, Emeteria Asejo was occupying a portion, defendant counterclaimed for her to
vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant in his position that
he was and became absolute owner, he was not a trustee, and therefore, dismissed
case and also condemned plaintiff occupant, Emeteria to vacate. The respondent Court
of appeals reversed the trial Court.
Issues:
(1) May a co-owner acquire exclusive ownership over the property held in common?
NO
(2) Is petitioner a trustee of the property in behalf of the private respondents? YES
(3) Has prescription then, set in? NO
Ratio:
(1) The right of repurchase may be exercised by a co-owner with aspect to his share
alone. While the records show that the petitioner redeemed the property in its entirety,
shouldering the expenses therefor, that did not make him the owner of all of it. In other
words, it did not put to end the existing state of co-ownership.
(2)The petitioner must then be said to be a trustee of the property on behalf of the
private respondents. The Civil Code states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the registration of
the property. The petitioner's pretension that he was the sole heir to the land in the
affidavit of extrajudicial settlement he executed preliminary to the registration thereof
betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole
dominion over the property. The aforequoted provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the
property, did so either on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Article 2144 of the Civil Code, or
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for his exclusive benefit, in which case, he is guilty of fraud, and must act as
trustee, the private respondents being the beneficiaries, under the Article 1456.
The evidence, of course, points to the second alternative the petitioner having asserted
claims of exclusive ownership over the property and having acted in fraud of his coheirs. He cannot therefore be said to have assume the mere management of the
property abandoned by his co-heirs, the situation Article 2144 of the Code contemplates.
In any case, as the respondent Court itself affirms, the result would be the same whether
it is one or the other. The petitioner would remain liable to the Private respondents, his
co-heirs.
3. The instant case shows that the petitioner had not complied with these requisites. We
are not convinced that he had repudiated the co-ownership; on the contrary, he had
deliberately kept the private respondents in the dark by feigning sole heirship over the
estate under dispute. He cannot therefore be said to have "made known" his efforts to
deny the co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is
occupying a portion of the land up to the present, yet, the petitioner has not taken pains
to eject her therefrom. As a matter of fact, he sought to recover possession of that
portion Emeteria is occupying only as a counterclaim, and only after the private
respondents had first sought judicial relief.
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EULOGIO PEDRANO v. HEIRS OF BENEDICTINO PEDRANO

G.R. No. 159666 December 4, 2007
Facts:
Spouses Benedictino and Romana Pedrano owned a 525-square-meter lot, Lot No.
6416, located in Molave, Zamboange del Sur, sold to them by Dr. Isidro Hynson for
P315.02. On August 19, 1967, Benedictino passed away. Fourteen years later, petitioner
Eulogio Pedrano, son of Romana, alleged that he had bought the land himself for
P30,000 from Romana on or before December 31, 1982. Since Lot No. 6416 and
another lot (Lot No. 6409-A) was not yet titled, both became the subject of a cadastral
case for titling. On June 2, 1989, the former was awarded to petitioner and the latter lot
to Romana.
Respondents alleged that the P30,000 consideration for Lot No. 6416 had not yet been
paid, as stipulated in the December 22, 1982 Deed of Sale, which moved them to
recover the possession and ownership over the said lot with a writ of preliminary
injunction and restraining order and damages. Likewise, respondents averred that they
were unaware that petitioner instituted a cadastral case to have the land titled to himself.
Thus, respondents instituted the instant case to have the December 22 Deed of Sale
voided for want of consideration and for fraud.
The Trial Court ruled that prescription (10 years) to annul had already set in, and thus,
ordered the dismissal of the case. The Deed of Sale was executed on December 22,
1982 while the instant action was only filed on September 5, 1996.
The Court of Appeals reversed the ruling, stating that Art. 1144 of the New Civil Code
(prescription) was erroneously applied since the instant case involved an implied trust,
and thus Art. 1456 is the applicable law.
Issues:
(1) Whether or not prescription had set in. NO
(2) Whether the possession by petitioner of the land is an implied trust. YES
Ratio:
(1) An action for reconveyance of land based on implied or constructive trust prescribes
in 10 years from the date of registration of the deed or the date of the issuance of the
certificate of title of property. However, where no Original Certificate of Title was issued
despite an order from the court to title the lots, the date from when the prescriptive
period could be reckoned is unknown and thus it cannot be determined if indeed the
period has already lapsed or not. Thus, the Supreme Court agrees with the CA that
prescription had not yet set in.
(2) Petitioners possession of Lot No. 6416, owned by his parents, was an implied trust
constituted upon petitioner. The Court of Appeals correctly applied Art. 1456 on implied
trust which provides that, If property is acquired through MISTAKE OR FRAUD, the
person obtaining it is, by force of law, considered a TRUSTEE OF AN IMPLIED TRUST
for the benefit of the person from whom the property comes. Clearly, Romana was the
actual buyer of the lot from Dr. Hynson, who herself paid the price. Although petitioner
claims that he paid the P30,000 purchase price to Romana, he offered no proof of
payment.
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RICHARD LOPEZ v. COURT OF APPEALS

G.R. 157784 December 16, 2008
Facts:
Richard Lopez instituted an action for reconveyance in his capacity as trustee of the
estate of the late Juliana Lopez to recover from respondents several tracts of lands
allegedly belonging to the trust estate of Juliana.
The disputed properties consist of six parcels of land totaling more than 1,500 hectares
located in Batangas. On March 23, 1968, Juliana executed a notarial will, whereby she
expressed that she wished to constitute a trust fund for her paraphernal properties to be
administered by her husband. Juliana initiated the probate of her will five days before its
execution but she died on August 12, 1968 before petition could be heard. The petition
was pursued instead in special proceedings by her husband Jose who was the
designated executor in the will. On August 16, 1969, Jose filed a report which included a
proposed project of partition. He explained that as the only compulsory heir of Juliana,
he is entitled to of Julianas properties as his legitime while the other half will be for
the Fideicomiso, a trust fund to be administered by her husband. On August 25, 1969,
the probate court issued an order approving the project of partition. As to the properties
to be constituted in the Fideicomiso, the probate court ordered that the certificates be
cancelled, and new ones be instituted in favor of Jose as trustee of the Fideicomiso. On
September 15, 1969, the probate court directed that new certificates of title be issued in
favor of Jose as the registered owner.
Jose died on July 22, 1980 leaving a holographic will disposing of the disputed
properties to respondents. Consequently, the certificates of title of the disputed
properties were cancelled and new ones issued in the names of respondents.
Petitioners father, Enrique Lopez, assumed the trusteeship of Julianas estate. On
December 11, 1984, petitioner instituted an action for reconveyance of parcels of land
with sum of money before the RTC of Balayan against respondents. The complaint
alleged that the disputed properties were included in the inventory as if they formed part
of Joses estate when in fact Jose was holding them in trust for the trust estate of
Juliana.
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano, Jr.,
Narciso Manzano, Maria Cristina Manzano Rubio and Irene Monzon filed a joint answer
with counterclaim for damages. On September 10,1990, the RTC rendered a summary
judgment, dismissing the action on the ground of prescription. The Court of Appeals
affirmed the decision.
Issue:Whether or not the petitioners action of reconveyance has prescribed taking as
basis September 15, 1969 when the properties in dispute were transferred to the name
of the late Jose Lopez Manzano in relation to December 12, 1984 when the action for
reconveyance was filed YES
Ratio:
Evidently, Julianas testamentary intent was to constitute an express trust over her
paraphernal properties which was carried out when the Fideicomiso was established.
However, the disputed properties were expressly excluded from the Fideicomiso. On the
premise that the disputed properties were the paraphernal properties of Juliana which
should have been included in the Fideicomiso, their registration in the name of Jose
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would be erroneous and Joses possession would be that of a trustee in an implied trust.
Article 1456 states that, If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes. A constructive trust is created, not by any
word evincing a direct intention to create a trust, but by operation of law in order to
satisfy the demands of justice and to prevent unjust enrichment. The apparent mistake in
the adjudication of the disputed properties to Jose created a mere implied trust of the
constructive variety in favor of the beneficiaries of the Fideicomiso.
Having established the creation of a constructive trust, it is now time to settle the issue of
prescription. The right to seek reconveyance based on an implied or constructive trust is
not absolute. It is subject to extinctive prescription. An action for reconveyance based on
an implied or constructive trust prescribes in 10 years. This period is reckoned from the
date of the issuance of the original certificate of title or transfer certificate of title. Since
such issuance operates as a constructive notice to the whole world, the discovery of
fraud is deemed to have taken place at that time.
In the case at bar, the ten-year prescriptive period to recover the disputed property must
be counted from the date of its registration in the name of Jose on September 15, 1969,
when petitioner was charged with constructive notice that Jose adjudicated the disputed
properties to himself as the sole heir of Juliana and not as trustee of the Fideicomiso.
The act of repudiation was evidenced by the project of partition in which Jose indicated
that the disputed properties were conjugal in nature and thus excluded from the
Fideicomiso. However in constructive trust, no repudiation is needed for prescription to
supervene. Being a constructive trust, the registration in September 15, 1969
commenced the running of the prescription period and the filing of the action for
reconveyance was clearly beyond the prescriptive period.
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PERFECTO MACABABBAD JR. v. FERNANDO MASIRAG

G.R. No. 161237. January 14, 2009
Facts:
The deceased spouses Pedro Masirag and Pantaleona Tulauan (Pantaleona) were the
original registered owners of a parcel of land located in Tuguegarao.
The respondents (Heirs of Pedro and Pantaleona) allegedly did not know of the demise
of their respective parents; they only learned of the inheritance due from their parents in
the first week of March 1999 when their relative, Pilar Quinto, informed respondent
Fernando and his wife Barbara Balisi about it. They immediately hired a lawyer to
investigate the matter.
The investigation disclosed that the petitioners falsified a document entitled Extrajudicial Settlement with Simultaneous Sale of Portion of Registered Land
dated December 3, 1967 so that the respondents were deprived of their shares
in land. The document purportedly bore the respondents signatures, making them
appear to have participated in the execution of the document when they did not; they did
not even know the petitioners. Subsequently, Macababbad registered portions of the
land in his name and sold other portions to third parties. Respondents then filed a
complaint against the Petitioners.
The RTC dismissed the complaint on the grounds that: 1) the action, which was filed 32
years after the property was partitioned and after a portion was sold to Macababbad,
had already prescribed; and 2) there was failure to implead indispensable parties,
namely, the other heirs of Pedro and Pantaleona and the persons who have already
acquired title to portions of the subject property in good faith.
On appeal, the Court of Appeals reversed the ruling of RTC and applied the Civil Code
provision on implied trust, i.e., that a person who acquires a piece of property through
fraud is considered a trustee of an implied trust for the benefit of the person from whom
the property came. Reconciling this legal provision with Article 1409 (which defines void
contracts) and Article 1410 (which provides that an action to declare a contract null and
void is imprescriptible), the CA ruled that the respondents cause of action had not
prescribed, because in assailing the extrajudicial partition as void, the [respondents]
have the right to bring the action unfettered by a prescriptive period.
Respondents argued that the sale to the petitioners pursuant to the extrajudicial
settlement of estate and sale was void because it was carried out through fraud; thus,
the appropriate prescription period is four (4) years from the discovery of fraud. Under
this argument, respondents posit that their cause of action had not yet prescribed
because they only learned of the extrajudicial settlement of estate and sale in March
1999; they filed their complaint the following month.
The petitioners, on the other hand, argue that the relevant prescriptive period here is ten
(10) years from the date of the registration of title, this being an action for reconveyance
based on an implied or constructive trust.
Issue:Whether or not an action for the nullity of extrajudicial settlement of estate and
sale prescribes. NO
Ratio:
The Court held that the respondents amended complaint sufficiently pleaded a cause to
declare the nullity of the extrajudicial settlement of estate and sale, as they claimed. As
the nullity of the extrajudicial settlement of estate and sale has been raised and is the
55

2S 2012-2013
primary issue, the action to secure this result will not prescribe pursuant to Article 1410
of the Civil Code.
Applying the ruling of the Court in Ingjug-Tirocase, the issuance of a certificate of title
could not vest ownership of the entire property; neither could it validate the purchase
thereof which is null and void. Registration does not vest title; it is merely the evidence of
such title. Furthermore, in actions for reconveyance of the property predicated on the
fact that the conveyance complained of was null and void ab initio, a claim of
prescription of action would be unavailing. The action or defense for the declaration of
the inexistence of a contract does not prescribe.
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