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1. LORENZO T.

OA and HEIRS OF JULIA


BUALES, namely: RODOLFO B. OA,
MARIANO B. OA, LUZ B. OA, VIRGINIA B.
OA and LORENZO B. OA, JR. vs. THE
COMMISSIONER OF INTERNAL REVENUE,
respondent.
Facts:
Julia Buales 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.
On April 14, 1949, the
administrator submitted the project of partition,
which was approved by the Court.
The project of partition shows that the heirs have
undivided one-half (1/2) interest in ten parcels of
land, six houses, and an undetermined amount to
be collected from the War Damage Commission.
This amount was not divided among them but
was used in the rehabilitation of properties owned
by them in common. Of the ten parcels of land
aforementioned, two were acquired after the
death of the decedent with money borrowed from
the Philippine Trust Company.
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 said investments and properties petitioners
derived such incomes as profits from installment
sales of subdivided lots, profits from sales of
stocks, dividends, rentals and interests. The said
incomes are recorded in the books of account
kept by Lorenzo T. Oa where the corresponding
shares of the petitioners in the net income for the
year are also known. Every year, petitioners
returned for income tax purposes their shares in
the net income derived from said properties and
securities and/or from transactions involving
them. 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 corporate income taxes
for 1955 and 1956. Petitioners protested against
the assessment and asked for reconsideration of
the ruling of respondent that they have formed
an unregistered partnership. Finding no merit in
petitioners' request, respondent denied it.
Issue:
Whether or not the petitioners are considered as
co-owners or formed an unregistered partnership
Held:
Partnership
At the start, or in the years 1944 to 1954, the
respondent Commissioner of Internal Revenue did
treat petitioners as co-owners, not liable to
corporate tax, and it was only from 1955 that he
considered
them
as
having
formed
an
unregistered partnership.
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.
It is but logical that in cases of inheritance, there
should be a period when the heirs can be
considered as co-owners rather than unregistered

co-partners within the contemplation of our


corporate tax laws aforementioned. Before the
partition and distribution of the estate of the
deceased, all the income thereof does belong
commonly to all the heirs, obviously, without
them becoming thereby unregistered co-partners,
but it does not necessarily follow that such status
as co-owners continues until the inheritance is
actually and physically distributed among the
heirs, for it is easily conceivable that after
knowing their respective shares in the partition,
they might decide to continue holding said shares
under the common management of the
administrator or executor or of anyone chosen by
them and engage in business on that basis.
From the moment of such partition, the heirs are
entitled already to their respective definite shares
of the estate and the incomes thereof, for each of
them to manage and dispose of as exclusively his
own without the intervention of the other heirs,
and, accordingly he becomes liable individually
for all taxes in connection therewith. If after such
partition, he allows his share to be held in
common with his co-heirs under a single
management to be used with the intent of
making profit thereby in proportion to his share,
there can be no doubt that, even if no document
or instrument were executed for the purpose, for
tax purposes, at least, an unregistered
partnership is formed. This is exactly what
happened to petitioners in this case.
Cost against petitioners.
2. TAI TONG CHUACHE & CO. vs. THE
INSURANCE COMMISSION and TRAVELLERS
MULTI-INDEMNITY CORPORATION
Facts:
Complainants acquired from a certain Rolando
Gonzales a parcel of land and a building located
at San Rafael Village, Davao City. Complainants
assumed the mortgage of the building in favor of
S.S.S., which building was insured with
respondent S.S.S. Accredited Group of Insurers for
P25,000.00.
On April 19, 1975, Azucena Palomo obtained a
loan from Tai Tong Chuache Inc. in the amount of
P100,000.00. To secure the payment of the loan,
a mortgage was executed over the land and the
building in favor of Tai Tong Chuache & Co. On
April 25, 1975, Arsenio Chua, representative of

Thai Tong Chuache & Co. insured the latter's


interest
with
Travellers
Multi-Indemnity
Corporation for P100,000.00
On June 11, 1975, Pedro Palomo secured a Fire
Insurance Policy No. F- 02500, covering the
building for P50,000.00 with respondent Zenith
Insurance Corporation. On July 16, 1975, another
Fire Insurance Policy No. 8459 was procured from
respondent
Philippine
British
Assurance
Company, covering the same building for
P50,000.00 and the contents thereof for
P70,000.00.
On July 31, 1975, the building and the contents
were totally razed by fire.
Based on the computation of the loss, including
the Travellers Multi- Indemnity, respondents,
Zenith Insurance, Phil. British Assurance and
S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Demand was
made from respondent Travellers Multi-Indemnity
for its share in the loss but the same was refused.
Hence, complainants demanded from the other
three (3) respondents the balance of each share
in the loss based on the computation of the
Adjustment Standards Report excluding Travellers
Multi-Indemnity but the same was refused, hence,
this action.
On May 31, 1977, Tai Tong Chuache & Co. filed a
complaint in intervention claiming the proceeds
of the fire Insurance Policy No. F-559 DV, issued
by respondent Travellers Multi-Indemnity.
Travellers Insurance, in answer to the complaint
in intervention, alleged that the Intervenor is not
entitled to indemnity under its Fire Insurance
Policy for lack of insurable interest before the loss
of the insured premises and that the
complainants, spouses Pedro and Azucena
Palomo, had already paid in full their mortgage
indebtedness to the intervenor
As adverted to above respondent Insurance
Commission
dismissed
spouses
Palomos'
complaint on the ground that the insurance policy
subject of the complaint was taken out by Tai
Tong Chuache & Company, petitioner herein, for
its own interest only as mortgagee of the insured
property and thus complainant as mortgagors of
the insured property have no right of action
against herein respondent. It likewise dismissed
petitioner's complaint in intervention.

Issue:
Whether or not the action was brought in the
name of the real party in interest.
Held:
Yes.

Respondent Insurance Commission absolved


respondent insurance company from liability on
the basis of the certification issued by the then
Court of First Instance of Davao, Branch II, that in
a certain civil action against the Palomos, Arsenio
Lopez Chua stands as the complainant and not
Tai Tong Chuache. From said evidence respondent
commission inferred that the credit extended by
herein petitioner to the Palomos secured by the
insured property must have been paid. Such is a
glaring error which this Court cannot sanction.
Respondent Commission's findings are based
upon a mere inference.
Public respondent argues that if the civil case
really stemmed from the loan granted to Azucena
Palomo by petitioner the same should have been
brought by Tai Tong Chuache or by its
representative in its own behalf. From the above
premise respondent concluded that the obligation
secured by the insured property must have been
paid.
The premise is correct but the conclusion is
wrong. Citing Rule 3, Sec. 2 10 respondent
pointed out that the action must be brought in
the name of the real party in interest. We agree.
However, it should be borne in mind that
petitioner being a partnership may sue and be
sued in its name or by its duly authorized
representative. The fact that Arsenio Lopez Chua
is the representative of petitioner is not
questioned. Petitioner's declaration that Arsenio
Lopez Chua acts as the managing partner of the
partnership was corroborated by respondent
insurance company. Thus Chua as the managing
partner of the partnership may execute all acts of
administration including the right to sue debtors
of the partnership in case of their failure to pay
their obligations when it became due and
demandable. Or at the very least, Chua being a
partner of petitioner Tai Tong Chuache &
Company is an agent of the partnership. Being an
agent, it is understood that he acted for and in

behalf of the firm. Public respondent's allegation


that the civil case flied by Arsenio Chua was in his
capacity as personal creditor of spouses Palomo
has no basis.
The respondent insurance company having
issued a policy in favor of herein petitioner which
policy was of legal force and effect at the time of
the fire, it is bound by its terms and conditions.
Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner,
respondent insurance company is and must be
held liable.

3. MARJORIE TOCAO and WILLIAM T. BELO


vs. COURT OF APPEALS and NENITA A. ANAY.
Facts:
Private respondent Nenita A. Anay met petitioner
William T. Belo, then the vice-president for
operations of Ultra Clean Water Purifier. Belo
introduced Anay to petitioner Marjorie Tocao, who
conveyed her desire to enter into a joint venture
with her for the importation and local distribution
of kitchen cookwares. Under the joint venture,
Belo acted as capitalist, Tocao as president and
general manager, and Anay as head of the
marketing department and later, vice-president
for sales. The parties agreed that Belos name
should not appear in any documents relating to
their transactions with West Bend Company.
Instead, they agreed to use Anays name in
securing distributorship of cookware from that
company. 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 agreement
was not reduced to writing on the strength of
Belos assurances that he was sincere,
dependable and honest when it came to financial
commitments. They operated under the name of
Geminesse Enterprise, a sole proprietorship
registered in Marjorie Tocaos name.
On October 7, 1987, in the presence of Anay,
Belo signed a memo entitling her to a thirtyseven percent (37%) commission for her personal
sales "up Dec 31/87. Belo explained to her that
said commission was apart from her ten percent

(10%) share in the profits. On October 9, 1987,


Anay learned that Marjorie Tocao had signed a
letter addressed to the Cubao sales office to the
effect that she was no longer the vice-president
of Geminesse Enterprise. The following day,
October 10, she received a note from Lina T. Cruz,
marketing manager, that Marjorie Tocao had
barred her from holding office and conducting
demonstrations in both Makati and Cubao offices.
Anay attempted to contact Belo but failed.
Anay still received her five percent (5%)
overriding commission up to December 1987. The
following year, 1988, she did not receive the
same commission.
Nenita A. Anay filed Civil Case No. 88-509, a
complaint for sum of money with damages[8]
against Marjorie D. Tocao and William Belo.
Marjorie Tocao and Belo asserted that the
alleged agreement with Anay that was neither
reduced in writing, nor ratified, was either
unenforceable or void or inexistent.
Issue:
Whether or
agreement

not

there

was

partnership

Held:
Yes.
A partnership may be constituted in any form; a
public instrument is necessary only where
immovable property or real rights are contributed
thereto.[16] This implies that since a contract of
partnership is consensual, an oral contract of
partnership is as good as a written one.
Petitioners admit that private respondent had the
expertise to engage in the business of
distributorship of cookware. Private respondent
contributed such expertise to the partnership and
hence, under the law, she was the industrial or
managing partner. It was through her reputation
with the West Bend Company that the
partnership was able to open the business of
distributorship of that companys cookware
products; it was through the same efforts that the
business was propelled to financial success.
On the other hand, petitioner Belos denial that
he financed the partnership rings hollow in the
face of the established fact that he presided over

meetings regarding matters affecting the


operation of the business. Moreover, his having
authorized in writing on October 7, 1987, on a
stationery of his own business firm, Wilcon
Builders Supply, that private respondent should
receive thirty-seven (37%) of the proceeds of her
personal sales, could not be interpreted otherwise
than that he had a proprietary interest in the
business.
Tocao was also a capitalist in the partnership. She
claimed that she herself financed the business.
Her and petitioner Belos roles as both capitalists
to the partnership with private respondent are
buttressed by petitioner Tocaos admissions that
petitioner Belo was her boyfriend and that the
partnership was not their only business venture
together.
The business venture operated under Geminesse
Enterprise did not result in an employer-employee
relationship between petitioners and private
respondent. In the first place, private respondent
had a voice in the management of the affairs of
the cookware distributorship, including selection
of people who would constitute the administrative
staff and the sales force. Secondly, petitioner
Tocaos admissions militate against an employeremployee relationship. She admitted that, like her
who owned Geminesse Enterprise, private
respondent received only commissions and
transportation and representation allowances and
not a fixed salary.
The fact that the cookware distributorship was
operated under the name of Geminesse
Enterprise, a sole proprietorship, is of no
moment. What was registered with the Bureau of
Domestic Trade on August 19, 1987 was merely
the name of that enterprise.
Her instruction to Lina Torda Cruz, marketing
manager, not to allow private respondent to hold
office in both the Makati and Cubao sales offices
concretely spoke of her perception that private
respondent was no longer necessary in the
business operation, and resulted in a falling out
between the two. However, a mere falling out or
misunderstanding between partners does not
convert the partnership into a sham organization.
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.
An unjustified dissolution by a partner can subject
him to action for damages because by the mutual
agency that arises in a partnership, the doctrine
of delectus personae allows the partners to have
the power, although not necessarily the right to
dissolve the partnership.
Petition is denied.
4. JOSE P. OBILLOS, JR., SARAH P. OBILLOS,
ROMEO P. OBILLOS and REMEDIOS P.
OBILLOS,
brothers
and
sisters
vs.
COMMISSIONER OF INTERNAL REVENUE and
COURT OF TAX APPEALS
Facts:
On March 2, 1973 Jose Obillos, Sr. completed
payment to Ortigas & Co., Ltd. on two lots with
areas of 1,124 and 963 square meters located at
Greenhills, San Juan, Rizal. The next day he
transferred his rights to his four children, the
petitioners, to enable them to build their
residences.
After having held the two lots for more than a
year, the petitioners resold them to the Walled
City Securities Corporation and Olga Cruz Canda.
They derived profits from the sale and treated the
it as a capital gain and paid an income tax on
one-half thereof.
One day before the expiration of the five-year
prescriptive period, the Commissioner of Internal
Revenue required the four petitioners to pay
corporate income tax on the total profit in
addition to individual income tax on their shares
thereof. Not only that. He considered the share of
the profits of each petitioner as a " taxable in full
and required them to pay deficiency income
taxes aggregating P56,707.20 including the 50%
fraud surcharge and the accumulated interest.
The Commissioner acted on the theory that the
four petitioners had formed an unregistered
partnership or joint venture.
The petitioners contested the assessments, was
denied. Hence this appeal.
Issue:
Whether or
partnership

not

the

petitioners

formed

Held:
No. They were simply co-owners.
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 co-ownership. 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. It had to be terminated
sooner or later.
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.

5. Philex Mining Corporation vs. CIR


Facts:
On April 16, 1971, petitioner Philex Mining
Corporation (Philex Mining), entered into an
agreement[4] with Baguio Gold Mining Company
(Baguio Gold) for the former to manage and
operate the latters mining claim, known as the
Sto. Nino mine, located in Atok and Tublay,
Benguet Province. The parties agreement was
denominated as Power of Attorney.
The mine suffered continuing losses over the
years which resulted to petitioners withdrawal as
manager of the mine on January 28, 1982 and in
the eventual cessation of mine operations on
February 20, 1982.
Thereafter, on September 27, 1982, the parties
executed a Compromise with Dation in Payment
and
subsequently
an
Amendment
to
Compromise with Dation in Payment wherein
Baguio Gold admitted an indebtedness to
petitioner and agreed to pay the same in
segments by first assigning Baguio Golds
tangible assets to petitioner, transferring to the
latter Baguio Golds equitable title in its Philodrill
assets and finally settling the remaining liability
through properties that Baguio Gold may acquire

in the future. The parties then ascertained that


Baguio Gold had a remaining outstanding
indebtedness to petitioner.
Subsequently, petitioner wrote off in its 1982
books of account the remaining outstanding
indebtedness of Baguio Gold.
In its 1982 annual income tax return, petitioner
deducted from its gross income the amount as
loss on settlement of receivables from Baguio
Gold against reserves and allowances. However,
the Bureau of Internal Revenue (BIR) disallowed
the amount as deduction for bad debt and
assessed petitioner a deficiency income.
Petitioner protested before the BIR arguing that
the deduction must be allowed since all requisites
for a bad debt deduction were satisfied. Petitioner
emphasized that the debt arose out of a valid
management contract it entered into with Baguio
Gold. Petitioner also asserted that due to Baguio
Golds irreversible losses, it became evident that
it would not be able to recover the advances and
payments it had made in behalf of Baguio Gold.
Petitioner insists that in determining the nature of
its business relationship with Baguio Gold, we
should not only rely on the Power of Attorney,
but also on the subsequent Compromise with
Dation in Payment and Amended Compromise
with Dation in Payment that the parties executed
in 1982. These documents, allegedly evinced the
parties intent to treat the advances and
payments as a loan and establish a creditordebtor relationship between them.
Issue:
Whether or not the Power of Attorney executed
by petitioner and Baguio Gold was actually a
partnership agreement.
Held:
Yes.
An examination of the Power of Attorney
reveals that a partnership or joint venture was
indeed intended by the parties. 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 a 50-50 sharing in the income of the
mine.

Under the Power of Attorney, petitioner and


Baguio Gold undertook to contribute money,
property and industry to the common fund known
as the Sto. Nio mine.petitioner and Baguio Gold
were to contribute equally to the joint venture
assets under their respective accounts. Baguio
Gold would contribute P11M under its owners
account plus any of its income that is left in the
project, in addition to its actual mining claim.
Meanwhile, petitioners contribution would consist
of its expertise in the management and operation
of mines, as well as the managers account which
is comprised of P11M in funds and property and
petitioners compensation as manager that
cannot be paid in cash.
It should be stressed that the main object of the
Power of Attorney was not to confer a power in
favor of petitioner to contract with third persons
on behalf of Baguio Gold but to create a business
relationship between petitioner and Baguio Gold,
in which the former was to manage and operate
the latters mine through the parties mutual
contribution of material resources and industry.
The essence of an agency, even one that is
coupled with interest, is the agents ability to
represent his principal and bring about business
relations between the latter and third persons.
Where representation for and in behalf of the
principal is merely incidental or necessary for the
proper discharge of ones paramount undertaking
under a contract, the latter may not necessarily
be a contract of agency, but some other
agreement
depending
on
the
ultimate
undertaking of the parties.
First, it does not appear that Baguio Gold was
unconditionally obligated to return the advances
made by petitioner under the agreement. As
pointed out by the Court of Tax Appeals,
petitioner was merely entitled to a proportionate
return of the mines assets upon dissolution of
the parties business relations.
There was
nothing in the agreement that would require
Baguio Gold to make payments of the advances
to petitioner as would be recognized as an item of
obligation or accounts payable for Baguio Gold.
Thus, the tax court correctly concluded that the
agreement provided for a distribution of assets of
the Sto. Nio mine upon termination, a provision
that is more consistent with a partnership than a
creditor-debtor relationship. It should be pointed
out that in a contract of loan, a person who

receives a loan or money or any fungible thing


acquires ownership thereof and is bound to pay
the creditor an equal amount of the same kind
and quality. In this case, however, there was no
stipulation for Baguio Gold to actually repay
petitioner the cash and property that it had
advanced, but only the return of an amount
pegged at a ratio which the managers account
had to the owners account.
Next, the tax court correctly observed that it was
unlikely for a business corporation to lend
hundreds of millions of pesos to another
corporation with neither security, or collateral,
nor a specific deed evidencing the terms and
conditions of such loans. The parties also did not
provide a specific maturity date for the advances
to become due and demandable, and the manner
of payment was unclear. All these point to the
inevitable conclusion that the advances were not
loans but capital contributions to a partnership.
The strongest indication that petitioner was a
partner in the Sto Nio mine is the fact that it
would receive 50% of the net profits as
compensation
under
paragraph
of
the
agreement.
The entirety of the parties
contractual stipulations simply leads to no other
conclusion than that petitioners compensation
is actually its share in the income of the joint
venture.
On this score, the tax court correctly noted that
petitioner was not an employee of Baguio Gold
who will be paid wages pursuant to an
employer-employee relationship. To begin with,
petitioner was the manager of the project and
had put substantial sums into the venture in
order to ensure its viability and profitability. By
pegging its compensation to profits, petitioner
also stood not to be remunerated in case the
mine had no income.
Petition denied.
6. INOCENCIA DELUAO and FELIPE DELUAO
vs. NICANOR CASTEEL and JUAN DEPRA,
NICANOR CASTEEL
Facts:
In 1940 Nicanor Casteel filed a fishpond
application for a big tract of swampy land in the
then Sitio of Malalag (now the Municipality of
Malalag), Municipality of Padada, Davao. No

action was taken thereon by the authorities


concerned. Upon investigation conducted by a
representative of the Bureau of Forestry, it was
discovered that the area applied for was still
needed for firewood production. Hence on May
13, 1946 this third application was disapproved.
Meanwhile, several applications were submitted
by other persons for portions of the area covered
by Casteel's application and they were granted.
On November 17, 1948 Felipe Deluao filed his
own fishpond application for the area covered by
Casteel's application.
Because of the threat poised upon his position by
the above applicants who entered upon and
spread themselves within the area, Casteel
realized the urgent necessity of expanding his
occupation thereof by constructing dikes and
cultivating marketable fishes, in order to prevent
old and new squatters from usurping the land.
But lacking financial resources at that time, he
sought financial aid from his uncle Felipe Deluao
who then extended loans totalling more or less
P27,000 with which to finance the needed
improvements on the fishpond. Hence, a wide
productive fishpond was built.
However, despite the finding made in the
investigation of the above administrative cases
that
Casteel
had
already
introduced
improvements on portions of the area applied for
by him in the form of dikes, fishpond gates,
clearings, etc., the Director of Fisheries
nevertheless rejected Casteel's application on
October 25, 1949, required him to remove all the
improvements which he had introduced on the
land, and ordered that the land be leased through
public auction. Failing to secure a favorable
resolution of his motion for reconsideration of the
Director's order, Casteel appealed to the
Secretary of Agriculture and Natural Resources.
On November 25, 1949 Inocencia Deluao (wife of
Felipe Deluao) as party of the first part, and
Nicanor Casteel as party of the second part,
executed a contract denominated a "contract
of service" - That the Party of the First Part in
consideration of the mutual covenants and
agreements made herein to the Party of the
Second Part, hereby enter into a contract of
service, whereby the Party of the First Part hires
and employs the Party of the Second Part.

On the same date the above contract was


entered into, Inocencia Deluao executed a special
power of attorney in favor of Jesus Donesa,
extending to the latter the authority "To represent
me in the administration of the fishpond.
On November 29, 1949 the Director of Fisheries
rejected the application filed by Felipe Deluao on
November 17, 1948. On September 15, 1950 the
Secretary of Agriculture and Natural Resources
issued a decision reinstating Nicanor Casteel and
cancelled and revoked the fishpond permit of
those who were accepted.
Sometime in January 1951 Nicanor Casteel
forbade
Inocencia
Deluao
from
further
administering the fishpond, and ejected the
latter's representative (encargado), Jesus Donesa,
from the premises.
Alleging violation of the contract of service
(exhibit A) entered into between Inocencia
Deluao and Nicanor Casteel, Felipe Deluao and
Inocencia Deluao on April 3, 1951 filed an action
in the Court of First Instance of Davao for specific
performance and damages against Nicanor
Casteel and Juan Depra. On April 18, 1951 the
plaintiffs filed an ex parte motion for the issuance
of a preliminary injunction.
On May 10, 1951 Casteel filed a motion to
dissolve the injunction, alleging among others,
that he was the owner, lawful applicant and
occupant of the fishpond in question.
Issue:
Whether or
agreement

not

there

was

partnership

Held:
Yes.
We shall therefore construe the contract as one of
partnership, divided into two parts namely, a
contract of partnership to exploit the fishpond
pending its award to either Felipe Deluao or
Nicanor Casteel, and a contract of partnership to
divide the fishpond between them after such
award. The first is valid, the second illegal.
The evidence preponderates in favor of the view
that the initial intention of the parties was not to
form a co-ownership but to establish a
partnership Inocencia Deluao as capitalist

partner and Casteel as industrial partner the


ultimate undertaking of which was to divide into
two equal parts such portion of the fishpond as
might have been developed by the amount
extended by the plaintiffs-appellees, with the
further provision that Casteel should reimburse
the expenses incurred by the appellees over onehalf of the fishpond that would pertain to him.
Further exchanges of letters between the parties
reveal the continuing intent to divide the
fishpond. In a letter,12 dated March 24, 1950, the
appellant suggested that they divide the fishpond
and the remaining capital, and offered to pay the
Deluaos a yearly installment of P3,000
presumably as reimbursement for the expenses
of the appellees for the development and
improvement of the one-half that would pertain
to the appellant. Two days later, the appellee
Felipe
Deluao
replied,13expressing
his
concurrence in the appellant's suggestion and
advising the latter to ask for a reconsideration of
the order of the Director of Fisheries disapproving
his (appellant's) application, so that if a favorable
decision was secured, then they would divide the
area.
Apparently relying on the partnership agreement,
the appellee Felipe Deluao saw no further need to
maintain his petition for the reinvestigation of
Casteel's application. Thus by letter14 dated
March 15, 1950 addressed to the Secretary of
Agriculture and Natural Resources, he withdrew
his petition.
Since the partnership had for its object the
division into two equal parts of the fishpond
between the appellees and the appellant after it
shall have been awarded to the latter, and
therefore it envisaged the unauthorized transfer
of one-half thereof to parties other than the
applicant Casteel, it was dissolved by the
approval of his application and the award to him
of the fishpond. The approval was an event which
made it unlawful for the business of the
partnership to be carried on or for the members
to carry it on in partnership.
However, pursuant to our holding that there was
a partnership between the parties for the
exploitation of the fishpond before it was awarded
to Casteel, this case should be remanded to the
lower court for the reception of evidence.

Patagoc vs csc
185 scra 411 1990
Facts: Patagoc was appointed City Engineer by
Zamboanga City Mayor to take the place of the
deceased city engineer. The appointment was in
the nature of a reinstatement. He was previously
employed by the city government, assigned with
the Bureau of Public Works Engineering District
and with the City Engineer's Office when the
Ministry of Public Works was reorganized and he
was phased out. He rose from Civil Engineering
Aide II to Supervising City Engineer 11.
Thereafter, for six (6) years before his
appointment as City Engineer, he was a
consultant with the Department of Public Works
and Highways and then with a private
construction firm. The incumbent Assistant City
Engineer, filed a protest against petitioner's
appointment with the Civil Service Regional Office
on the ground that he was next-in-rank. The Civil
Service Regional Director, in a decision finds the
protest meritorious hereby revoking Patagocs
appointment

Issue: what is the extent of the City Mayors


authority to appoint the City Engineer as when
the appointee and the protestant are both
qualified for the position, may the Civil Service
Commission disapprove the appointment of the
former and order the appointment of the
protestant?

Ruling: No according to the supreme court


Appointment is an essentially dictionary power
and must be performed by the officer in which it
is vested according to his best lights, the only
condition being that the appointee should the
cannot be faulted on the ground that there are
others better qualified qualifications required by
law. If he does, then the appointment who should
have been preferred. This is a political question
involving considerations of wisdom which only
the appointing authority can decide. It may be, as
alleged by the Commission, that Civil Service
Circular No. 5, s. 1983 provides as a condition for
appointment by reinstatement that "the vacancy
cannot be filled by promotion of qualified officers
and employees in the agency concerned, by
transfer of qualified officers or employees from
other government agencies, or there are no
eligibles in the appropriate register of the
Commission available for certification to the
vacancy." However, this circular cannot be
construed so as to effectively eliminate the
appointing power's discretion. At best, the
circular can be considered as a guide for the
appointing power's exercise of discretion.
Moreover, we note that the condition stated in
the circular is not even imposed in P.D. No. 807.
Should he choose not to fill the vacant position by
promotion, the decree, as stated earlier, gives the
appointing power several alternatives:
i e. ., the vacancy may be filled by transfer, by
reinstatement, by re-employment, or by an
original appointment [Sec. 19 (5)].

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