ELMO MUASQUE v.

COURT OF APPEALS, CELESTINO GALAN, TROPICAL COMMERCIAL COMPANY and RAMON

PONS
G.R. No. L-39780, November 11, 1985, Gutierrez, Jr. J.

FACTS:

Muasque in behalf of the partnership of "Galan and Muasque" as Contractor entered into a written
contract with respondent Tropical for remodelling the respondent's Cebu branch building for P25,000, payable in
installments. Tropical issued a check in the name of Muasque in the amount of P7,000.00 as its first payment. Said
check was indorsed to Galan to enable the latter to deposit it in the bank and pay for the materials and labor used
in the project. However, instead of doing this, Galan spent P6,183.37 of the P7,000,00 for his own use so that when
the second check in the amount of P6,000.00 was issued by Tropical, he refused to indorse it to Galan. However,
Galan was able to encash the second check upon informing Tropical of the misunderstanding between him and
Muasque which prompted Tropical to change the name of the payee in the second check from Mu asque to
Galan and Associates.

Meanwhile, petitioner alleged that he continued the construction through his sole efforts, placing him in
great financial difficulty in his business and subjecting him to demands of creditors to pay for construction
materials, the payment of which should have been made from the P13,000.00 received by Galan. Because of the
unauthorized disbursement of P13,000, Muasque filed a complaint for payment of sum of money and damages
against Galan, Tropical and Pons (Tropicals Branch Manager). The business firms Cebu Southern Hardware
Company and Blue Diamond Glass Palace were allowed to intervene, both having legal interest in the matter in
litigation.

Both the trial and appellate courts not only absolved respondents Tropical and Pons, from any liability but
they also held the petitioner together with Galan, liable to the intervenors Cebu Southern Hardware Company and
Blue Diamond Glass Palace for the credit which the intervenors extended to the partnership of Muasque and
Galan. Muasque contends that the CA erred in holding that he and Galan were partners.

ISSUES:
Whether or not Muasque and Galan are solidarily liable.

RULING:

Yes. While it is true that under Article 1816 of the Civil Code, "AII partners, including industrial ones, shall
be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts
which may be entered into the name and for the account of the partnership, under its signature and by a person
authorized to act for the partnership. x x x", this provision should be construed together with Article 1824 which
provides that: "All partners are liable solidarily with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions entered
into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable
for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

The obligation is solidary because the law protects him, who in good faith relied upon the authority of a
partner, whether such authority is real or apparent. ln the case at bar the respondent Tropical had every reason to
believe that a partnership existed between the petitioner and Galan and no fault or error can be imputed against it
for making payments to "Galan and Associates" and delivering the same to Galan because as far as it was
concerned, Galan was a true partner with real authority to transact on behalf of the partnership with which it was
dealing. This is even more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace who
supplied materials on credit to the partnership. Thus, it is but fair that the consequences of any wrongful act
committed by any of the partners therein should be answered solidarily by all the partners and the partnership as a
whole.
PO YENG CHEO vs. LIM KA YAM
G.R. No. L-18707 December 9, 1922
STREET, J.:

FACTS:
The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, and as such Po Yeng Cheo inherited the
interest left by Po Gui Yao in a business conducted in Manila under the style of Kwong Cheong Tay. This business
had been in existence in Manila for many years prior to 1903, as a mercantile partnership, with a capitalization of
P160,000, engaged in the import and export trade; and after the death of Po Gui Yao the following seven persons
were interested therein as partners in the amounts set opposite their respective names, to wit: Po Yeng Cheo,
P60,000; Chua Chi Yek, P50,000; Lim Ka Yam, P10,000; Lee Kom Chuen, P10,000; Ley Wing Kwong, P10,000; Chan
Liong Chao, P10,000; Lee Ho Yuen, P10,000. The manager of Kwong Cheong Tay, for many years prior of its
complete cessation from business in 1910, was Lim Ka Yam, the original defendant herein.

Among the properties pertaining to Kwong Cheong Tay and consisting part of its assets were ten shares of a total
par value of P10,000 in an enterprise conducted under the name of Yut Siong Chyip Konski and certain shares to
the among of P1,000 in the Manila Electric Railroad and Light Company, of Manila.

In the year 1910 Kwong Cheong Tay ceased to do business, owing principally to the fact that the plaintiff ceased at
that time to transmit merchandise from Hongkong, where he then resided. Lim Ka Yam appears at no time to have
submitted to the partners any formal liquidation of the business, though repeated demands to that effect have
been made upon him by the plaintiff.

Upon trial (for the liquidation) the trial judge rendered judgment in favor of the plaintiff, Po Yeng Cheo, to recover
of the defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum of sixty thousand pesos (P60,000),
constituting the interest of the plaintiff in the capital of Kwong Cheong Tay, plus the plaintiff's proportional interest
in shares of the Yut Siong Chyip Konski and Manila Electric Railroad and Light Company, estimated at P11,000,
together with the costs. Aggrieved, defendant appealed the decision.

ISSUE:

Whether or not Po Yeng Cheo can recover from the managing partner the value of such his individual interest.

HELD:

NO. The managing partner of a mercantile enterprise is not a debtor to the shareholders for the capital embarked
by them in the business; and he can only be made liable for the capital when, upon liquidation of the business,
there are found to be assets in his hands applicable to capital account.

It is elementary that one partner, suing alone, cannot recover of the managing partner the value of such partner's
individual interest; and a liquidation of the business is an essential prerequisite.

It is true that in Lichauco vs. Lichauco (33 Phil., 350), this court permitted one partner to recover of the manager
the plaintiff's aliquot part of the proceeds of the business, then long since closed; but in that case the affairs of the
defunct concern had been actually liquidate by the manager to the extent that he had apparently converted all its
properties into money and had pocketed the same--which was admitted;--and nothing remained to be done except
to compel him to pay over the money to the persons in interest. In the present case, the shares referred to--
constituting the only assets of Kwong Cheong Tay--have not been converted into ready money and doubtless still
remain in the name of Kwong Cheong Tay as owner. Under these circumstances it is impossible to sustain a
judgment in favor of the plaintiff for his aliquot part of the par value of said shares, which would be equivalent to
allowing one of several coowners to recover from another, without process of division, a part of an undivided
property.

It is well settled that when a member of a mercantile partnership dies, the duty of liquidating its affair devolves
upon the surviving member, or members, of the firm, not upon the legal representative of the deceased partner.
(Wahl vs. Donaldson Sim & Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil., 744) And the same rule must be
equally applicable to a civil partnership clothed with the form of a commercial association (art. 1670, Civil Code;
Lichauco vs. Lichauco, 33 Phil., 350)

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., vs EDWIN CUIZON and ERWIN CUIZON

G.R. No. 167552 April 23, 2007

CHICO-NAZARIO, J.:

FACTS:

Petitioner has as one of its customers Impact Systems Sales (Impact Systems) which is a sole
proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to
ninety-one thousand three hundred thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to buy
from petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of
fifty thousand pesos (P50,000.00). When the sludge pump arrived from the United Kingdom, petitioner refused
to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus,
on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner.

Unknown to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to
collect from Toledo Power Company the amount of P365,135.29. Alarmed by this development, petitioner made
several demands upon respondents to pay their obligations. As a result, respondents were able to make partial
payments to petitioner. On 7 October 1996, petitioners counsel sent respondents a final demand letter wherein
it was stated that as of 11 June 1996, respondents total obligations stood at P295,000.00 excluding interests and
attorneys fees. Because of respondents failure to abide by said final demand letter, petitioner instituted a
complaint for sum of money, damages, with application for preliminary attachment against herein respondents
before the Regional Trial Court of Cebu City.

On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary
attachment.

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in
interest in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems,
in his transaction with petitioner and the latter was very much aware of this fact.
 The Court directed that defendant Edwin B. Cuizon be dropped as party defendant.

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals
which, however, affirmed the Order of the court a quo. Hence, this petition.

ISSUE:
Whether or not respondent Edwin Cuizon exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to petitioner.

HELD:

NO.

In a contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another with the latters consent. The underlying principle of the contract of agency is to accomplish
results by using the services of others to do a great variety of things like selling, buying, manufacturing, and
transporting. Its purpose is to extend the personality of the principal or the party for whom another acts and from
whom he or she derives the authority to act. It is said that the basis of agency is representation, that is, the agent
acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the principal. By this legal fiction, the actual or real absence of
the principal is converted into his legal or juridical presence qui facit per alium facit per se.

The elements of the contract 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.

In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as
principal and EDWIN as agent.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party
with whom he contracts. The same provision, however, presents two instances when an agent becomes personally
liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he
exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party sufficient
notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this
provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact
Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general agent or
manager; such a position presupposes a degree of confidence reposed and investiture with liberal
powers for the exercise of judgment and discretion in transactions and concerns which are incidental or
appurtenant to the business entrusted to his care and management. In the absence of an agreement to
the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or
requisite for the protection of the interests of his principal entrusted to his management. x x x.
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he
signed the Deed of Assignment. The significant amount of time spent on the negotiation for the sale of the sludge
pump underscores Impact Systems perseverance to get hold of the said equipment. There is, therefore, no doubt
in our mind that respondent EDWINs participation in the Deed of Assignment was reasonably necessary or was
required in order for him to protect the business of his principal. Had he not acted in the way he did, the
business of his principal would have been adversely affected and he would have violated his fiduciary relation
with his principal.

As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor
incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who
should be impleaded in this case. A real party in interest is one who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. In this respect, we sustain his exclusion as a
defendant in the suit before the court a quo.

APEX MINING CO., INC. vs. SOUTHEAST MINDANAO GOLD MINING CORP.
G.R. Nos. 152613 & 152628 2006-06-23
CHICO-NAZARIO, J.

FACTS:

On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No.
66 (DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as
non-forest lands and open to small-scale mining purposes and declared a portion of the contested area open to
small scale miners, several mining entities filed applications for Mineral Production Sharing Agreement (MPSA).

On 16 February 1994, Marcopper Mining Corporation (MMC) assigned Exploration Permit No. 133 (EP 133) to
Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is alleged to be a 100%
-owned subsidiary of MMC.

SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133. BMG accepted and registered
SEM's MPSA application and the Deed of Assignment over EP 133 executed in its favor by MMC. SEM's
application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEM's application,
several adverse claims or oppositions were filed.

To address the matter, the DENR constituted a Panel of Arbitrators (PA) who opined that EP 133 was valid and
subsisting.

The adverse claimants appealed to the Mines Adjudication Board (MAB) who brushed aside the issue of the
validity of EP 133 for being irrelevant and proceeded to treat SEM's MPSA application over the disputed area as
an entirely new and distinct application. It approved the MPSA application, excluding the area segregated by
DAO No. 66, which declared 729 hectares within the Diwalwal area as non-forest lands open for small-scale
mining.

Appeals were made to the SC which were remanded to the Court of Appeals for proper disposition.The Court of
Appeals consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.

The Court of Appeals affirmed in toto the decision of the PA and declared null and void the MAB decision.
The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its assignment of EP
133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133
was valid. It argued that since SEM is an agent of MMC, the assignment of EP 133 did not violate the condition
therein prohibiting its transfer except to MMC's duly designated agent. Thus, despite the non-renewal of EP 133 on
6 July 1994, the Court of Appeals deemed it relevant to declare EP 133 as valid since MMC's mining rights were
validly transferred to SEM prior to its expiration.

The CA granted the petition of Southeast Mindanao Gold Mining Corporation while the Petition of Rosendo
Villaflor, et al., was DENIED for lack of merit. The Decision of the Panel of Arbitrators dated 13 June 1997 is
AFFIRMED in toto and the assailed MAB Decision is hereby SET ASIDE and declared as NULL and VOID.

Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and
MAB.

ISSUE:
Whether or not the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well
as its transfer to SEM.

HELD:
At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133 pursuant to a Deed
of Assignment dated 16 February 1994.

EP 133 is subject to the following terms and conditions:

xxxx
6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall
be used for mineral exploration purposes only and for no other purpose.

Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its
duly authorized agents.

While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are
bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency
to exist, it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the
agent consents so as to act. In the case of Yu Eng Cho v. Pan American World Airways, Inc., this Court had the
occasion to set forth the elements of agency, viz:
(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.

The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The
burden of proving that agency is extant in a certain case rests in the party who sets forth such allegation. This is
based on the principle that he who alleges a fact has the burden of proving it. It must likewise be emphasized that
the evidence to prove this fact must be clear, positive and convincing.

In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists
between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor
submit proof that it is the designated agent of MMC to represent the latter in its business dealings or
undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from
it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the
permit in favor of SEM is null and void as it directly contravenes the terms and conditions of the grant of EP 133.
Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf
but on behalf of his principal. While in assignment, there is total transfer or relinquishment of right by the assignor
to the assignee. The assignee takes the place of the assignor and is no longer bound to the latter. The deed of
assignment clearly stipulates:
1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the
ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or
interest the ASSIGNOR may have in the area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental,
identified as Exploration Permit No. 133 and Application for a Permit to Prospect in Bunawan, Agusan del Sur
respectively.

Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is readily obvious
that the assignment by MMC of EP 133 in favor of SEM did not make the latter the former's agent. Such assignment
involved actual transfer of all rights and obligations MMC have under the permit in favor of SEM, thus, making SEM
the permittee. It is not a mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a total
abdication of MMC's rights over the permit. Hence, the assignment in question did not make SEM the authorized
agent of MMC to make use and benefit from EP 133.

WILLIAM FRESSEL, ET AL. vs. MARIANO UY CHACO SONS & COMPANY

G.R. No. L-10918 March 4, 1916

TRENT, J.:

FACTS:

Sometime in 1913, the Mariano Uy Chaco Sons & Company entered into a contract with one E. Merritt,
whereby Merritt undertook and agreed to build for the defendant a costly edifice in the city of Manila at the corner
of Calle Rosario and Plaza del Padre Moraga. In the contract it was agreed between the parties thereto, that the
defendant at any time, upon certain contingencies, before the completion of said edifice could take possession of
said edifice in the course of construction and of all the materials in the said premises acquired by Merritt for the
construction. That the plaintiffs delivered to Merritt certain materials of the value of P1,381.21, which Merritt
agreed to pay on the 1st day of September, 1914.

On August 28, 1914, the defendant under and by virtue of its contract with Merritt took possession of the
incomplete edifice together with all the materials on said premises including the materials delivered by plaintiffs
which neither Merritt nor the defendant has paid for the materials although payment has been demanded. The
plaintiffs demanded the return or permission to enter upon said premises and retake said materials which at that
time is still unused which was refused by defendant.

The appellants insist that Merritt acted as the agent of the defendant in purchasing the materials in
question and that the defendant, by taking over and using such materials, accepted and ratified the purchase,
thereby obligating itself to pay for the same.On the other hand, the appellee contends that Merritt, being "by the
very terms of the contract" an independent contractor, is the only person liable for the amount claimed.

ISSUE:

Whether or not Meritt is an agent of defendant.

HELD:
NO. The allegations do not even intimate that the relation existing between Merritt and the defendant was that of
principal and agent, but, on the contrary, they demonstrate that Merritt was an independent contractor and that
the materials were purchased by him as such contractor without the intervention of the defendant. The fact that
"the defendant entered into a contract with one E. Merritt, where by the said Merritt undertook and agreed with
the defendant to build for the defendant a costly edifice" shows that Merritt was authorized to do the work
according to his own method and without being subject to the defendant's control, except as to the result of the
work. He could purchase his materials and supplies from whom he pleased and at such prices as he desired to pay.

The mere fact that Merritt and the defendant had stipulated in their building contract that the latter could, "upon
certain contingencies," take possession of the incompleted building and all materials on the ground, did not change
Merritt from an independent contractor to an agent.

In the absence of a statute creating what is known as mechanics' liens, the owner of a building is not liable for the
value of materials purchased by an independent contractor either as such owner or as the assignee of the
contractor.

The allegation that Merritt was the agent of the defendant contradicts all the other allegations and is a mere
conclusion drawn from them. Such conclusion is not admitted, as we have said, by the demurrer.

The allegations in the complaint not being sufficient to constitute a cause of action against the defendant, the
judgment appealed from is affirmed, with costs against the appellants. So ordered.