Cases for Digest

1. Fernandez v De la Rosa 1 Phil 671

2. Evangelista v Collector of Internal Revenue 102 Phil 140

3. Tacoa v CA 342 Scra 21

4. Ang Pue & Co. v Sec. of Commerce and Industry 5 Scra 645

5. Afisco Insurance Corp. v CA 302 Scra 13

6. Oña v Commissioner of Internal Revenue 45 scra 74

7. Lim Tong Lim v Phil Fishing Gear Industries, Inc. 317 scra 728

8. Heirs of Tan Eng Kee v Court of Appeals 341 scra 740

9. Duterte v Rallos 2 Phil 509

10. Estanislao, Jr. v CA 160 scra 830

11. Borja v. Addison 44 Phil 885

FACTS:
Eulalio Belisario acquired the two parcels of land in question through information posesoria
proceedings, instituted in accordance with the provisions of articles 19-21 of the Royal Decree of
February 13, 1894, and recorded under the provision of the Mortgage Law. Belisario occupied and
began to cultivate the smaller parcel of land in 1880 and the larger one in 1882. Belisario was married to
Paula Ira when he took possession of the parcels which therefore probably were community property of
the marriage, but this fact does not appear from the record of the informacion posesoria proceedings or
from any other document presented in evidence. They had a son, Maximo Belisario. Paula Ira later died.

In 1909, Eulalio Belisario conveyed the two parcels mentioned to one Jose Castillo, reserving the right to
repurchase the lands for the sum of P550 within the term of five months and two days from the date of
the sale. Jose Castillo executed in favor of Eulalio Belisario a deed of resale of the two parcels of land
conveyed in the sale with right to repurchase. In 1917, Eulalio Belisario executed in favor of Basilio Borja
a deed of sale of the two parcels of land in question for P7,500, reserving the right to repurchase the
lands for the same price within the term of eighteen months.

Eulalio Belisario not having exercised his right of repurchase, the affidavit of Basilio Borja for the
consolidacion de dominio was presented for record in the registry of deeds and recorded in the registry.

ISSUE:
Whether or not Maximo Belisario the sole heir formed a partnership with his father after her mother
died for the management and control of the community property?

HELD:
No, though there is no reason in a law why the heirs of the deceased wife may not form a partnership
with the surviving husband for the management and control of the community property of the marriage
and conceivably such a partnership, or rather community of property, between the heirs and the
surviving husband might be formed without a written agreement. But, in the absence of the formalities
prescribed by the Code of Commerce or by articles 1667 and 1668 of the Civil Code, knowledge of the
existence of the new partnership or community of property must, at least, be brought home to third
persons dealing with the surviving husband in regard to community real property in order to bind them
by the community agreement.

In the present case the land was recorded in the real property register in the name of Eulalio Belisario
and there is not a scintilla of evidence to show that Basilio Borja, had any notice of the fact that Maximo
Belisario participated in the administration of the property or claimed any rights or ownership therein.
The case, therefore, falls squarely within the rule laid down in Nable Jose vs. Nable Jose (41 Phil., 713)
and Manuel and Laxamana vs. Losano (41 Phil., 855), that "in the absence of fraud and collusion, sales
or mortgages of community property, either real or personal, made by a husband-administrator clothed
with the insignia of ownership and in whose name the property is held, after the death of his spouse, are
valid and effective…” and the deed from Eulalio Belisario to Basilio Borja must be held to have conveyed
to the latter the whole fee of the land in question.
The decision appealed from is affirmed without costs. The registration of the land will be made subject
to the lien of P. W. Addison for the sums of money expended for the redemption of the land from the
forfeiture for nonpayment of taxes. So ordered.

11. Borja vs. Addison, G.R. No. L-18010, June 21, 1992

Facts:

Eulalio Belisario acquired the two parcels of land in question. He was married to Paula Ira,
whose son was Maximo Belisario, but such fact does not appear in the records. The property regime of
the spouses was that of community of property. Eulalio Belisario conveyed the two parcels of land to a
certain Jose Castillo, reserving the right to repurchase. After the death his wife, Eulalio and Maximo
Belisario occupied and administered the two parcels of land in common. A partnership was then created
between the Eulalio and his son Maximo. After some time, the lands were forfeited and confiscated for
non-payment of taxes.

A civil case was filed and order of attachment was issued against the lands. At public auction, said lands
were sold to McClure, represented by Addison. Said order and notice were served upon Maximo and
Eulalio; and the same was presented to the registry of deeds but no entries have been made. The
attached lands were thereafter sold to the judgment creditor, McClure, represented by Addison, but the
sale was not recorded.

Eulalio, without Maximo’s permission, executed in favor of Basilio Borja, who had no knowledge of the
common ownership, a deed of sale of two parcels of land in question, reserving the right to repurchase.
On March 30, 1917, Addison purchased the land at the sheriff’s execution sale. However, the sheriff’s
execution sales were fatally defective for want of sufficient publication of the notices of sale. Borja now
seeks registration of the land, against the opposition of the heirs of Maximo. The opposition claimed
that Eulalio had no right to sell Maximo’s share of the land.

Issue:

WON Borja can demand registration of the land in his name.

Held:

Yes, there may have been a partnership between Eulalio and Maximo, still this fact was
unknown to Borja. It was ruled that there is nothing in the law that requires that the partnership
between them be in writing for it to be valid. A surviving husband may form a partnership with the heirs
of the deceased wife for the management and control of the community property, but in the absence of
the formalities, knowledge of the existence of the new partnership or community of property must at
least be brought home to third persons dealing with the surviving husband in regard to the community
real property in order to bind them by the community agreement. Thus, the Supreme Court held that for
the partnership to be binding to third persons, and for Ferrer’s argument to be valid, such partnership
must be in accordance with the formalities of the Code of Commerce. In effect, the whole property was
conveyed to Borja in fee simple.
12. Red Men v. Veteran Army 7 Phil 685

FACTS:
Article 3 of the Constitution of the Veteran Army of the Philippines provides as follows:
The object of this association shall be to perpetuate the spirit of patriotism and fraternity those
men who upheld the Stars and Stripes in the Philippine Islands during the Spanish war and the Philippine
insurrection, and to promote the welfare of its members in every just and honorable way; to assist the
sick and afflicted and to bury the dead, to maintain among its members in time of peace the same union
and harmony with which they served their country in times of war and insurrection.
Article 5 provides that:
This association shall be composed of —
(a) A department.
(b) Two or more posts.
It is provided in article 6 that the department shall be composed of a department commander, fourteen
officers, and the commander of each post, or some member of the post appointed by him. Six members
of the department constitute a quorum for the transaction of business.

ISSUE:
WON THE ASSOCIATION OF VETERANS ARMY OF THE PHILIPPINES IS CONSIDERED PARTNERSHIP
IN THE ABSENCE OF PROFITAS THE REASON OF IT’S EXISTENCE?

RULING:
NO,The association of veterans army of the Philippines is not considered as Partnership.

In view of the definition of the term in article 1665 of the Civil Code. That article is as follows:
Partnership is a contract by which 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.

It seems to be the opinion of the commentators that where the society is not constituted for the
purpose of gain. it does not fall within this article of the Civil Code. Such an organization is fully covered
by the Law of Associations of 1887, but that law was never extended to the Philippine Islands.

Article 1695 of the Civil Code provides as follows:

Should no agreement have been made with regard to the form of management, the following rules shall
be observed:
1 All the partners shall be considered as agents, and whatever any one of them may do by himself shall
bind the partnership; but each one may oppose the act of the others before they may have produced
any legal effect.

One partner, therefore, is empowered to contract in the name of the partnership only when the articles
of partnership make no provision for the management of the partnership business. In the case at bar we
think that the articles of the Veteran Army of the Philippines do so provide. It is true that an express
disposition to that effect is not found therein, but we think one may be fairly deduced from the contents
of those articles.
13. Acosta v. Llacuna 59 Phil 540

Background:
This is an action brought by the plaintiff to recover from the defendant Pablo Arellano the sum of
P3,000, to require him to render an accounting of the lumber business in which both were partners, and
to pay him his share of the profits thereof. The other defendant was included as Arellano’s surety, and
judgment for the sum of PHP3,000.00 has been sought against him in case Arellano should prove to be
insolvent.

FACTS:
Plaintiff Acosta and defendant Arellano, by means of public instrument formed a partnership for the
purpose of engaging in the purchase and sale of lumber of various kinds. Acosta as capitalist partner
invested the PHP3,000.00 capital, and Arellano being an industrial partner wherein Nicolas Llacuna as
surety for the latter. The term for which said partnership was to exist has not been fixed.

There is an understanding that Arellano should invest the capital in the acquisition and sale of Philippine
lumber, without any intervention on the part of Acosta as to the price thereof. In addition, Arellano shall
also submit a liquidation of accounts at the end of every month in order to show the number of cubic
meters of lumber sold during the preceding month for Acosta to claim the sum of PHP5.00 as his profit
on every cubic meter of lumber sold, irrespective of the price at which it was disposed of.

Arellano invested the PHP3,000.00 capital to one hundred cubic meters of different kinds of lumber and
in the transportation. Arellano, has been selling lumber from the one hundred cubic meters in question,
but to date (filing of the complaint), Acosta has not yet received his profit of P5.00 on every cubic meter
of lumber sold.

Plaintiff brought an action to recover from the defendant Pablo Arellano the sum of P3,000, to require
him to render an accounting of the lumber business in which both were partners, and to pay him his
share of the profits thereof. The other defendant was included as Arellano's surety, and judgment for
the sum of P3,000 has been sought against him in case Arellano should prove to be insolvent.

The CFI held that the sum of P3,000 was contributed not as a common fund of a partnership but as a
loan to Arellano.

ISSUE:
Whether or not the nature of the contract entered into by Paulino Acosta and Pablo Arellano with
Nicolas Llacuna as the surety for Arellano is of a partnership?
HELD:
The Court held that the contract executed was one of civil partnership, the purpose of which was to
engage in the purchase and sale of lumber, with Paulino Acosta as capitalist partner, and Pablo Arellano
as industrial partner and Nicolas Llacuna as surety of the latter.
When the terms of a contract are susceptible of various interpretations and the intention of the
contracting parties is not clear, and when said parties have entered into a stipulation of facts which has
been submitted at the trial, such intention shall be determined by the contents of said stipulation
because the latter reflects their true intention as expressed by their subsequent act

The best way of interpreting the contract in question is to abide by the stipulation of facts entered into
by the parties because it reflects their true intention.

According to the said stipulation, there is no question that the contract executed was one of civil
partnership wherein Acosta alone contributed the capital of PHP3,000.00 and Arellano contributed his
industry and was mad the manager of the lumber business in which they were engaged. With respect to
Llacuna, his intervention was that of a mere surety who answered for the refund to Acosta by Arellano
of the capital contributed by Acosta. However, his liability should be determined after the liquidation of
the business operations of the partnership. If the partnership failed and the capital was lost in
consequence of legitimate business operations, there is not the least doubt but that the surety should
not be held liable, even subsidiary, for the refund of the capital in question.
14. Bastida v. Menzi 58 Phil 188

FACTS:
The defendant Menzi & Co., Inc is a corporation organized in 1921 for the purpose of importing and
selling general merchandise, including fertilizers and fertilizer ingredients. Francisco Bastida, the
plaintiff, is experienced in mixing and selling fertilizer. Bastida had a written contract with the Philippine
Sugar Centrals Agency for 1,250 tons of mixed fertilizers, and he could obtain other contracts, including
one from the Calamba Sugar Estates for 450 tons, but he did not have the money to buy the ingredients
to fill the order and carry on the business. As a result, Bastida offered to assign to Menzi & Co., Inc., his
contract with the Philippine Sugar Centrals Agency and supervise the mixing of the fertilizer to obtain
other orders for fifty percent of the net profits that Menzi & Co., Inc., might derive therefrom. Menzi &
Co. Inc., accepted the offer and proceeded to fill the order and Bastida supervised the mixing of the
fertilizer marked as Exhibit B.
Pursuant to the aforementioned verbal agreement, confirmed by the letter, Exhibit B, Menzi & Co., Inc.,
entered into a written contract with Bastida marked as Exhibit A on April 27, 1922 for a fixed period of
five years, which is the basis of the present action.
The fertilizer business was carried on by Menzi & Co., Inc., after the execution of Exhibit A in practically
the same manner as it was prior thereto. Bastida’s intervention is limited to supervising the mixing of
the fertilizers in Menzi & Co.'s, Inc., bodegas.
On May 3, 1924 Bastida made a contract with Menzi & Co., Inc., to furnish all the stems and scraps of
tobacco that it might need for its fertilizer business either in the Philippine Islands or for export to other
countries. This contract is referred to in the record as the "Vastago Contract". Menzi & Co., Inc.,
advanced Bastida large sums of money for buying and installing of machinery, paying the salaries of his
employees, and other expenses in performing his contract. Bastida collected from Menzi & Co., Inc., as
his share, 35 percent of the net profits of the fertilizer business. Prior to the expiration of the contract,
Exhibit A, the manager of Menzi & Co., Inc., notified Bastida that the contract for his services would not
be renewed. Bastida refused to agree to this. It argued, among others, that the written contract entered
into by the parties is a contract of general regular commercial partnership, wherein Menzi & Co., Inc.,
was the capitalist and Francisco Bastida is the industrial partner.
____
The defendant Menzi & Co., Inc is a corporation organized in 1921 for the purpose of importing and
selling general merchandise, including fertilizers and fertilizer ingredients. Bastida, the plaintiff, is
experienced in mixing and selling fertilizer. Bastida had a written contract with the Philippine Sugar
Centrals Agency (PSCA) for 1,250 tons of mixed fertilizers, and he could obtain other contracts, but he
did not have the money to buy the ingredients to fill the order and carry on the business. Bastida offered
to assign to Menzi & Co., Inc., his contract with the PSCA and supervise the mixing of the fertilizer to
obtain other orders for fifty percent of the net profits that Menzi & Co., Inc., might derive therefrom.
Menzi accepted the offer. Pursuant to the verbal agreement, they entered into a written contract for a
fixed period of five years, which is the basis of the present action.
Prior to the expiration of the contract, Exhibit A, the manager of Menzi & Co., Inc., notified Bastida that
the contract for his services would not be renewed. Bastida refused to agree to this. It argued, among
others, that the written contract entered into by the parties is a contract of general regular commercial
partnership, wherein Menzi & Co., Inc., was the capitalist and Francisco Bastida is the industrial partner.
ISSUE:
Whether or not the relationship between Franciso Bastida and Menzi & Co., Inc. is that of partners?

HELD:
No.
The relationship established between the defendant corporation and the plaintiff by their contract was
not that of partners, but that of employer and employee, whereby the plaintiff was to receive 35 per
cent of the net profits of the fertilizer business of the defendant corporation in compensation for his
services of supervising the mixing of the fertilizers. Neither the provisions of the contract nor the
conduct of the parties prior or subsequent to its execution justified the finding that it was a contract of
co-partnership.
____
The Court unanimously agreed of the opinion that under the facts of this case the relationship
established between Menzi & Co. Inc., and Francisco Bastida by the contract, Exhibit A, was not that of
partners, but that of employer and employee, whereby the Bastida was to receive 35 percent of the net
profits of the fertilizer business of Menzi & Co., Inc., in compensation for his services of supervising the
mixing of the fertilizers. Neither the provisions of the contract nor the conduct of the parties prior or
subsequent to its execution justified the finding that it was a contract of co-partnership. Exhibit A, as
appears from the statement of facts, was in effect a continuation of the verbal agreement between the
parties, whereby the plaintiff worked for the Menzi for one-half of the net profits derived by the
corporation from certain fertilizer contracts. Bastida was paid his share of the profits from those
transactions after Menzi & Co., Inc., had deducted the same items of expense which he now protests. In
Exhibit A, the phrase "en sociedad con" merely means en reunion con or in association with, and does
not carry the meaning of "in partnership with". Although the word "associated" in Exhibit A may be
related etymologically to the Spanish word "socio", meaning partner, it does not in its common
acceptation imply any partnership relation. In the Vastago contract, Exhibit A, Bastida clearly recognized
Menzi & Co., Inc., as the owners of the fertilizer business in question. The phrase in the written contract
“en sociedad con”, which is used as a basis of Bastida to prove partnership in this case, merely means
“en reunion con” or in association with. Although Menzi agreed to furnish the necessary financial aid for
the fertilizer business, it did not obligate itself to contribute any fixed sum as capital or to defray at its
own expense the cost of securing the necessary credit.
15. Aurbach v Sanitary Wares Manufacturing 180 scra 133

FACTS:
In 1961, Saniwares, a domestic corporation was incorporated for the primary purpose of manufacturing
and marketing sanitary wares.   On August 15, 1962, ASI, 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.  The parties agreed that the business operations in the Philippines shall be carried
on by an incorporated enterprise and that the name of the corporation shall initially be "Sanitary Wares
Manufacturing Corporation."
Later, the 30% capital stock of ASI was increased to 40%.  The corporation was also registered with the
Board of Investments for availment of incentives with the condition that at least 60% of the capital stock
of the corporation shall be owned by Philippine nationals.
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.  According to the Filipino group, a basic disagreement
was due to their desire to expand the export operations of the company to which ASI objected as it
apparently had other subsidiaries or joint venture groups in the countries where Philippine exports were
contemplated.  On March 8, 1983, the annual stockholders' meeting was held.  The meeting
was presided by Baldwin Young.  The minutes were taken by the Secretary, Avelino Cruz.  After disposing
of the preliminary items in the agenda, the stockholders then proceeded to the election  of the members
of the board of directors.  The ASI group nominated three persons namely; Wolfgang Aurbach, John
Griffin and David P. Whittingham.  The Philippine investors nominated six, namely; Ernesto Lagdameo,
Sr., Raul A. Boncan, Ernesto R. Lagdameo, Jr., George F. Lee, and Baldwin Young.  Mr. Eduardo
R. Ceniza then nominated Mr. Luciano E. Salazar, who in turn nominated Mr. Charles Chamsay.  
The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its
annual stockholders' meeting held on March 8, 1983.  
ISSUE:

Whether or not, the nature of business established between ASI Group and Saniware is a that of a joint
venture or a corporation?

HELD:
It is a joint venture not a corporation. 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 with the rules governing the interpretation and construction of
contracts.  (Terminal Shares, Inc. v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678; Universal Sales
Corp. v. California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
In the instant cases, the court examined the important provisions of the Agreement as well as the
testimonial evidence presented by the Lagdameo and Young Group shows that the parties agreed to
establish a joint venture and not a corporation.  The grant to ASI of the right to designate certain officers
of the corporation; the super-majority voting requirements for amendments of the articles and by-laws;
and most significantly to the issues of this case, the provision that ASI shall designate 3 out of the 9
directors and the other stockholders shall designate the other 6, clearly indicate that - 1) there are two
distinct groups in Saniwares, namely ASI, which owns 40% of the capital stock and the Philippine
National stockholders who own the balance of 60%, and that 2) ASI is given certain protections as the
minority stockholder.
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.   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.  

The Court affirmed the decisions of the SEC Hearing Officer and SEC and modified the decision of the
Court of Appeals. Wolfgang Aurbach, John Griffin, David Whittingham, Ernesto V. Lagdameo, Baldwin
Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee are declared as
the duly elected directors of Saniwares at the March 8, 1983 annual stockholders' meeting.  

Aurbach v Sanitary Wares

Facts:
 Saniwares, a domestic corporation was incorporated for the primary purpose of
manufacturing and marketing sanitary wares. ASI, 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.
 The joint enterprise thus entered into by the Filipino investors and the American
corporation prospered but their relationship deteriorated. Their basic disagreement was
due to their desire to expand the export operations of the company to which ASI
objected as it apparently had other subsidiaries of joint venture groups in the countries
where Philippine exports were contemplated.
 In their annual stockholder’s meeting, the ASI group nominated three persons while the
Philippine investors nominated six. The consistent practice of the parties during the past
annual stockholders' meetings to nominate only nine persons as nominees for the nine-
member board of directors, and the legal advice of Saniwares' legal counsel.
 These incidents triggered off the filing of separate petitions by the parties with the
Securities and Exchange Commission (SEC). The two petitions were consolidated and
tried jointly.
Issue:
 Whether the nature of the business established by the parties was a joint venture or a
corporation.
Held:
 In the instant cases, our 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 to establish a joint venture and not a corporation.
 Section 5 (a) of the agreement uses the word "designated" and not "nominated" or
"elected" in the selection of the nine directors on a six to three ratio. Each group is
assured of a fixed number of directors in the board.
 Moreover, ASI in its communications referred to the enterprise as joint venture. Baldwin
Young also testified that Section 16(c) of the Agreement that "Nothing herein contained
shall be construed to constitute any of the parties hereto partners or joint venturers in
respect of any transaction hereunder" was merely to obviate the possibility of the
enterprise being treated as partnership for tax purposes and liabilities to third parties.
 A corporation cannot enter into a partnership contract, it may however engage in a joint
venture with others.
 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.
 A partnership may be particular or universal, and a particular partnership may have for
its object a specific undertaking. (Art. 1783, Civil Code). 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.

16. Hong Kong Bank v Jurado & Co., 2 Phil 671

Principles:
PLEADING AND PRACTICE;. JOINDER OF PARTIES; PARTNER AS CODEFENDANT WITH FIRM. — In an
action against a partnership which is a juridical person, one partner is not entitled to be made a party as
an individual separate from the firm.

FACTS:

By the order of April 16, 1895, Don Ricardo Regidor was expressly included in the bankruptcy as a
general partner of Jurado & Co. No order setting aside this order has been called to the court’s
attention, except the order of December 12, 1898, dismissing the entire proceeding. The order of SApril
6, 1898, upon which Señor Regidor relies, simply decided that his motion, in which he claimed that he
was not properly included in the bankruptcy, should come up for hearing in the ordinary way. It
expressly stated that the merits of said motion were not passed upon. On the contrary, it appears from
the records of the court that, in the hearing on October 15, 1903, Señor Regidor as one of such partners,
in open court, appointed an attorney to argue for the firm the motion then before this court.

As a partner of Jurado & Co. he is represented by the firm and has no right to appear as an individual
separate from the firm. If he has this right, then every partner would have the same right. We see
nothing in the case to indicate that his rights will not be protected by the lawyers whom the firm may
see fit to employ. His motion to be made a codefendant is denied.

ISSUE:

Whether or not Señor Regidor as a partner of Jurado & Co. can be made a codefendant?

HELD:

No. As a partner of Jurado & Co. he is represented by the firm and has no right to appear as an
individual separate from the firm. If he has this right, then every partner would have the same right. We
see nothing in the case to indicate that his rights will not be protected by the lawyers whom the firm
may see fit to employ. His motion to be made a codefendant is denied.

17. Aguila, Jr. v CA 319 scra 246

FACTS:

Petitioner, Aguila Jr. is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending
activities. Felicidad S. Vda. de Abrogar , the 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., entered into a Memorandum of Agreement, a Deed of Absolute Sale
conveying the subject proper for and in consideration of the sum of Two Hundred Thousand Pesos
(P200,000.00) wherein the owners are given the option to repurchase the said property within a period
of ninety (90) days from its execution for the amount of TWO HUNDRED THIRTY THOUSAND PESOS
(P230,000.00), otherwise shall be obliged to deliver peacefully the possession of the property to the A.C
Aguila & Sons, Co. within fifteen (15) days after the expiration of the said 90 day grace period.

On 08 May 1991, Ruben Abrogar died in a vehicular accident and Felicidad find it hard to pay the loaned
amount. When Felicidad failed to redeem the property within the 90-day period as provided in the
agreement. Hence, pursuant to the special power of attorney, A.C. Aguila and Sons., caused the
cancellation of the title of the subject lot and petitioned for the issuance of the new certificate of title
under the name of the corporation. Felicidad was demanded to vacate the premises upon her refusal,
A.C. Aguila filed and ejectment case against Felicidad. On April 3, 1992 MTC ruled in favor of the
corporation on the ground that Felicidad did not redeem the subject property before the 90-day
expiration. Felicidad appealed to the RTC, the Court of Appeals and later to the Supreme Court but she
lost in all cases.

Felicidad then filed a petition for declaration of nullity of a Deed of Sale with the RTC on December 4,
1993 alledging that the signature of her husband on the deed was a forgery for the latter was already
dead 1 month and 2 days already when the deed was executed on June 11, 1991. However, the court
was convinced that the three required documents (Memorandum of Agreement, Special Power of
Attorney, and the Deed of Absolute Sale) were all signed by the parties on the same date on April 18,
1991. It is a common and accepted business practice of those engaged in money lending to prepare an
undated absolute deed of sale in loans of money secured by real estate. RTC dismissed the case. On
appeal, the Court of Appeals reversed RTC’s decision. It held that the transaction between the parties is
indubitably an equitable mortgage. It is well-settle that the presence of even one of the circumstance in
Article 1602 NCC is sufficient to declare a contract of sale with right to repurchase an equitable
mortgage for the plaintiff was paid for an inadequate price and has retained possession of the subject
property paying the realty taxes.

Aguila Jr. contends that the real property in interest is not his but of the corporation, the judgement in
the ejectment case is a bar to the filing of the complaint of nullity of the deed of sale and the contract is
a pacto de retro sale and not an equitable mortgage.

ISSUE:

Whether or not Aguilar Jr. as the manager of A.C. Aguila and Sons Corp., is the real party in interest?

HELD:
No, the petitioner is not the real party in interest against whom this action should be prosecuted makes
it unnecessary to discuss the other issues raised by him in this appeal. Rule 3, 2 of the Rules of Court
provided that every action must be prosecuted and defended in the name of the real party in interest. A
real party in interest in one who would be benefited or injured by the judgement, or who is entitled to
the avails of the suit. Hence a complaint filed against such person should be dismissed for failure to state
a cause of action.

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 juridical personality is being used for fraudulent,
unfair, or illegal purposes. The memorandum of agreement executed between the parties is with
consent. 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.

Hence, the decision of the Court of Appeals is reversed and complaint against petitioner is dismissed.

ALFREDO N. AGUILA, JR, petitioner, vs.

HONORABLE COURT OF APPEALS and
FELICIDAD S. VDA. DE ABROGAR, respondents.

Facts:

-AC Aguila & Sons Co. (a partnership) thru petitioner, entered into a contact of sale of certain
real property, with right to repurchase, with the private respondent and her late husband,
Ruben M. Abrogar.

-Private respondent failed to repurchase the property within the grace period. Hence, pursuant
to the special power of attorney executed by the respondent in the event she failed to redeem
the properry, 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.
-Upon demand by the petitioner, respondent refused to vacate the property which led the
petitioner to file an ejectment case against her in the MTC- Marikina, Metro Manila which
decided in favor of the petitioner.
-Respondent then filed a petition for declaration of nullity of a deed of sale against petitioner
Alfredo N. Aguila, Jr.(manager of Aguila & Sons) with the RTC-Marikina, Metro Manila, she
averred that the signature of her husband was forged.
-RTC dismissed the case, but the CA reversed the decision saying that the transaction between
plaintiff-appellant and defendant-appellee is indubitably an equitable mortgage.

Issue:
WON the partnership Aguila & Sons is not necessary to be pleaded in the petition for
annulment of Deed of Sale.

Held:
No, 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 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.

18. Fortis v Guttierez Hermanos 6 Phil 100

Principles:
PARTNERSHIP; MANAGER; BOOKKEEPER; CONTRACT; VALIDITY. — The general manager of a general
partnership has authority to employ a bookkeeper, and a contract thus made in 1900 was valid, though
not in writing.

CIVIL PROCEDURE; ACTION; PARTNERSHIP. — In an action against a partnership to recover a debt due
from it to the plaintiff, section 383, paragraph 7, of the Code of Civil Procedure does not prohibit the
plaintiff from testifying to a conversation between himself and a then partner who had died prior to the
trial of the action.

FACTS:
The plaintiff, John Fortiz is an employee of the defendant Gutierrez and Hermanos during the years
1900, 1901, and 1902. He alleged that he was entitled, as salary, to 5% percent of the net profits of the
business of the defendants for said year. The complaint also contained a cause of action for the sum of
600 pesos, money expended by Fortiz for the Gutierrez and Hermanos during the year 1903. The court
below, in its judgment, found that the contract had been made as claimed by the Fortiz. The court also
ordered judgment against the defendants for the 600 pesos mentioned in the complaint, and interest
thereon. The total judgment rendered against the Gutierrez and Hermanos in favor of the Fortiz,
reduced to Philippine currency, amounted to P13,025.40.
The defendants moved for a new trial, which was denied, and they have brought the case here by bill of
exceptions.

ISSUE:
Whether or not John Fortiz is a copartner of Gutierrez and Hermano?

HELD:
No. By the provisions of the articles of partnership Fortiz was made one of the managers of the
company, with full power to transact all of the business thereof. The contention that Fortiz is a
copartner cannot be sustained. It was a mere contract of employment. Fortiz had no voice nor vote in
the management of the affairs of the company. The fact that the compensation received by him was to
be determined with reference to the profits made by the defendants in their business did not in any
sense make by a partner therein.
The articles of partnership between the defendants provided that the profits should be divided among
the partners named in a certain proportion. The contract made between Fortiz and the defendant is
then of a manager of the defendant’s company.

In reference to the cause of action relating to the collection of the sum of 600 pesos, it appears that
Fortiz went to Hong Kong for about two (2) months at the defendant’s request looking after the business
of the defendants for a repair of a certain steamship. The contract of agency is supposed to be
gratuitous. Fortiz needs to be paid of the 600 not as a compensation for services but as a reimbursement
for money he expended in the course of business of the defendants. The article of the code that is
applicable is article 1728.
19. Lyons v Rosenstock 56 Phil 632

FACTS:

C.W. Rosenstock, the defendant, is an executor of H.W. Elser’s estate. Henry W. Elser had been a
resident of the City of Manila where he was engaged in buying, selling, and administering real estate. In
several ventures E. S. Lyons, had joined Elser in this of business and the profits being shared by the two
in equal parts. In April, 1919, Lyons, whose regular vocation was that of a missionary went on leave to
the United States and was gone for nearly a year and a half, returning on September 21, 1920. On the
eve of his departure Elser made a written statement showing that Lyons was, at that time, half owner
with Elser of three particular pieces of real property. Lyons also execute in favor of Elser a general power
of attorney empowering him to manage and dispose of said properties at will and to represent Lyons
fully and amply, to the mutual advantage of both. During the absence of Lyons two of the pieces of
property above referred to were sold by Elser, leaving in his hands a single piece of property located at
616-618 Carriedo Street, in the City of Manila, containing about 282 square meters of land, with the
improvements thereon.

Elser in 1920 got interested in a 1,500,000 square meters land, herein referred to as the San Juan Estate,
offered by its owners for P570,000. For the purpose of the further development of the property a
limited partnership had been organized by Elser and three associates, under the name of J. K. Pickering
& Company with Elser as the principal capitalist receiving a portion amount in the beginning to 3,290
shares.

Elser contemplated and hoped that Lyons might be induced to come in with him and supply part of the
means necessary to carry the enterprise through. Elser wrote Lyons and made an offer for a big
subdivision. Elser also cabled Lyons that he had bought the San Juan Estate and thought it advisable for
Lyons to resign in his position with the mission board in New York. But the enthusiasm of Elser did not
communicate any marked degree to Lyons joining in the purchase of the San Juan Estate.

To meet the finances Elser needs, he mortgaged to the Fidelity & Surety Co. the property owned by
himself and Lyons on Carriedo Street at which Elser expected that Lyons would come in on the purchase
of the San Juan Estate. But when he learned from the letter from Lyons that the latter had determined
not to come into this deal, Elser began to cast around for means to relieve the Carriedo property of the
encumbrance which he had placed upon it. Elser substitute his own property at 644 M. H. del Pilar
Street, Manila, and 1,000 shares of the J. K. Pickering & Company, in lieu of the Carriedo property, as
security.

The development of the San Juan Estate turned into a success. Elser paid the note of P50,000 to Uy
Siuliong the Elser had mortgaged the Carried property. Lyons did not know until after Elser's death that
the money obtained from Uy Siuliong had been used to held finance the purchase of the San Juan
Estate.

ISSUE:

Whether or not there was a partnership between Lyons and Elser arising from co-ownership of the
mortgaged Carriedo Property to Uy Siuliong?

HELD:

No, Art 1769 (2) on co-ownership or co-possession does not of itself establish a partnership, whether
such co-owners or co-possessors do or do not share any profits made by the use of the property.

The mortgaging of the Carriedo property to Uy Siuliong never resulted in damage to Lyons not even to
the extent of a single cent. It is also plain that no money actually deriving from this mortgage was ever
applied to the purchase of the San Juan Estate. What really happened was the Elser merely subjected
the property to a contingent liability, and no actual liability ever resulted therefrom. The financing of the
purchase of the San Juan Estate, apart from the modest financial participation of his three associates in
the San Juan deal, was the work of Elser accomplished entirely upon his own account. If Elser had used
any money actually belonging to Lyons in this deal, he would under article 1724 of the Civil Code and
article 264 of the Code of Commerce, be obligated to pay interest upon the money so applied to his own
use. Under the law prevailing in this jurisdiction a trust does not ordinarily attach with respect to
property acquired by a person who uses money belonging to another (Martinez vs. Martinez, 1 Phil.,
647; Enriquez vs. Olaguer, 25 Phil., 641.). It is clear that Elser, in buying the San Juan Estate, was not
acting for any partnership composed of himself and Lyons, and the law cannot be distorted into a
proposition which would make Lyons a participant in this deal contrary to his express determination. If
any damage had been caused to Lyons by the placing of the mortgage upon the equity of redemption in
the Carriedo property, Elser's estate would be liable for such damage. But it is evident that Lyons was
not prejudice by that act.

The judgment appealed from will be affirmed, and it is so ordered, with costs against the appellant.

20. Padilla v Tomas Lim C.A. L-163-R February 14, 1947