Yu v.

NLRC
Yu v. NLRC GR No. 97212, June 30, 1993

Facts:

Benjamin Yu used to be the Assistant General Manager of Jade Mountain, a partnership

engaged in marble quarrying and export business. The majority of the founding partners
sold their interests in said partnership to Willy Co and Emmanuel Zapanta without Yu’s
knowledge. Said new partnership continued operating under the same name and
continued the business’s operations. However, it transferred its main office from Makati
to Mandaluyong. Said new partnership did not anymore availed of the services of Yu.
Thus, he filed a complaint for illegal dismissal, recovery of unpaid wages and damages.

Ruling :

The legal effect of the changes in the membership of the partnership was the dissolution
of the old partnership which had hired Yu in 1984 and the emergence of a new firm
composed of Willy Co and Emmanuel Zapanta in 1987. The new partnership simply took
over the business enterprise owned by the preceeding partnership, and continued using
the old name of Jade Mountain Products Company Limited, without winding up the
business affairs of the old partnership, paying off its debts, liquidating and distributing
its net assets, and then re-assembling the said assets or most of them and opening a new
business enterprise. Not only the retiring partners but also the new partnership itself
which continued the business of the old, dissolved, one, are liable for the debts of the
preceding partnership.

JOSEFINA P. REALUBIT, G.R. No. 178782

Petitioner,

Present:

- versus - VELASCO, JR.,* J.,

BRION,**
Acting Chairperson,
ABAD,***
PEREZ, and
 SERENO, JJ.

PROSENCIO D. JASO and EDENG. Promulgated:

JASO,
Respondents.
September 21, 2011

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PEREZ, J.:

The validity as well as the consequences of an assignment of rights in a joint

venture are at issue in this petition for review filed pursuant to Rule 45 of the 1997 Rules
of Civil Procedure,[1] assailing the 30 April 2007 Decision[2] rendered by the Court of
Appeals (CA) then Twelfth Division in CA-G.R. CV No. 73861, [3] the dispositive portion
of which states:

WHEREFORE, the Decision appealed from is SET ASIDE and we order

the dissolution of the joint venture between defendant-appellant Josefina
Realubit and Francis Eric Amaury Biondo and the subsequent conduct of
accounting, liquidation of assets and division of shares of the joint venture
business.

Let a copy hereof and the records of the case be remanded to the trial
court for appropriate proceedings.[4]
 The Facts

On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a Joint Venture
Agreement with Francis Eric Amaury Biondo (Biondo), a French national, for the
operation of an ice manufacturing business. With Josefina as the industrial partner and
Biondo as the capitalist partner, the parties agreed that they would each receive 40% of
the net profit, with the remaining 20% to be used for the payment of the ice making
machine which was purchased for the business.[5] For and in consideration of the sum
of P500,000.00, however, Biondo subsequently executed a Deed of Assignment dated 27
June 1997, transferring all his rights and interests in the business in favor of respondent
Eden Jaso (Eden), the wife of respondent Prosencio Jaso. [6] With Biondos eventual
departure from the country, the Spouses Jaso caused their lawyer to send Josefina a
letter dated 19 February 1998, apprising her of their acquisition of said Frenchmans
share in the business and formally demanding an accounting and inventory thereof as
well as the remittance of their portion of its profits.[7]

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso
commenced the instant suit with the filing of their 3 August 1998 Complaint against
Josefina, her husband, Ike Realubit (Ike), and their alleged dummies, for specific
performance, accounting, examination, audit and inventory of assets and properties,
dissolution of the joint venture, appointment of a receiver and damages. Docketed as
Civil Case No. 98-0331 before respondent Branch 257 of the Regional Trial Court (RTC)
of Paraaque City, said complaint alleged, among other matters, that the Spouses Realubit
had no gainful occupation or business prior to their joint venture with Biondo; that with
the income of the business which earned not less than P3,000.00 per day, they were,
however, able to acquire the two-storey building as well as the land on which the joint
ventures ice plant stands, another building which they used as their office and/or
residence and six (6) delivery vans; and, that aside from appropriating for themselves the
income of the business, the Spouses Realubit have fraudulently concealed the funds and
assets thereof thru their relatives, associates or dummies.[8]

Served with summons, the Spouses Realubit filed their Answer dated 21 October
1998, specifically denying the material allegations of the foregoing complaint. Claiming
that they have been engaged in the tube ice trading business under a single
proprietorship even before their dealings with Biondo, the Spouses Realubit, in turn,
averred that their said business partner had left the country in May 1997 and could not
have executed the Deed of Assignment which bears a signature markedly different from
that which he affixed on their Joint Venture Agreement; that they refused the Spouses
Jasos demand in view of the dubious circumstances surrounding their acquisition of
Biondos share in the business which was established at Don Antonio Heights,
Commonwealth Avenue, Quezon City; that said business had already stopped operations
on 13 January 1996 when its plant shut down after its power supply was disconnected by
MERALCO for non-payment of utility bills; and, that it was their own tube ice trading
business which had been moved to 66-C Cenacle Drive, Sanville Subdivision, Project 6,
Quezon City that the Spouses Jaso mistook for the ice manufacturing business
established in partnership with Biondo.[9]
The issues thus joined and the mandatory pre-trial conference subsequently
terminated, the RTC went on to try the case on its merits and, thereafter, to render its
Decision dated 17 September 2001, discounting the existence of sufficient evidence from
which the income, assets and the supposed dissolution of the joint venture can be
adequately reckoned. Upon the finding, however, that the Spouses Jaso had been
nevertheless subrogated to Biondos rights in the business in view of their valid
acquisition of the latters share as capitalist partner,[10] the RTC disposed of the case in
the following wise:

WHEREFORE, defendants are ordered to submit to plaintiffs a complete

accounting and inventory of the assets and liabilities of the joint venture
from its inception to the present, to allow plaintiffs access to the books and
accounting records of the joint venture, to deliver to plaintiffs their share
in the profits, if any, and to pay the plaintiffs the amount of P20,000. for
moral damages. The claims for exemplary damages and attorneys fees are
denied for lack of basis.[11]

On appeal before the CA, the foregoing decision was set aside in the herein
assailed Decision dated 30 April 2007, upon the following findings and conclusions: (a)
the Spouses Jaso validly acquired Biondos share in the business which had been
transferred to and continued its operations at 66-C Cenacle Drive, Sanville Subdivision,
Project 6, Quezon City and not dissolved as claimed by the Spouses Realubit; (b) absent
showing of Josefinas knowledge and consent to the transfer of Biondos share, Eden
cannot be considered as a partner in the business, pursuant to Article 1813 of the Civil
Code of the Philippines; (c) while entitled to Biondos share in the profits of the business,
Eden cannot, however, interfere with the management of the partnership, require
information or account of its transactions and inspect its books; (d) the partnership
should first be dissolved before Eden can seek an accounting of its transactions and
demand Biondos share in the business; and, (e) the evidence adduced before the RTC do
not support the award of moral damages in favor of the Spouses Jaso.[12]

The Spouses Realubits motion for reconsideration of the foregoing decision was
denied for lack of merit in the CAs 28 June 2007 Resolution,[13] hence, this petition.
The Issues
 The Spouses Realubit urge the reversal of the assailed decision upon the negative
of the following issues, to wit:

A. WHETHER OR NOT THERE WAS A

VALID ASSIGNMENT OF RIGHTS TO THE JOINT
VENTURE.

B. WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA

REALUBIT] AS PARTNER IN THE JOINT VENTURE TO
RENDER [A]N ACCOUNTING TO ONE WHO IS NOT A
PARTNER IN SAID JOINT VENTURE.

C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE

ANY RIGHT IN THE JOINT VENTURE AND IN THE
SEPARATE ICE BUSINESS OF PETITIONER[S].[14]
The Courts Ruling
We find the petition bereft of merit.
The Spouses Realubit argue that, in upholding its validity, both the RTC and the
CA inordinately gave premium to the notarization of the 27 June 1997 Deed of
Assignmentexecuted by Biondo in favor of the Spouses Jaso. Calling attention to the
latters failure to present before the RTC said assignor or, at the very least, the witnesses
to said document, the Spouses Realubit maintain that the testimony of Rolando Diaz, the
Notary Public before whom the same was acknowledged, did not suffice to establish its
authenticity and/or validity. They insist that notarization did not automatically and
conclusively confer validity on said deed, since it is still entirely possible that Biondo did
not execute said deed or, for that matter, appear before said notary public. [15] The dearth
of merit in the Spouses Realubits position is, however, immediately evident from the
settled rule that documents acknowledged before notaries public are public documents
which are admissible in evidence without necessity of preliminary proof as to their
authenticity and due execution.[16]

It cannot be gainsaid that, as a public document, the Deed of Assignment Biondo

executed in favor of Eden not only enjoys a presumption of regularity [17] but is also
considered prima facie evidence of the facts therein stated. [18] A party assailing the
authenticity and due execution of a notarized document is, consequently, required to
present evidence that is clear, convincing and more than merely preponderant. [19] In view
of the Spouses Realubits failure to discharge this onus, we find that both the RTC and the
CA correctly upheld the authenticity and validity of said Deed of Assignment upon the
combined strength of the above-discussed disputable presumptions and the testimonies
elicited from Eden[20] and Notary Public Rolando Diaz.[21] As for the Spouses Realubits
bare assertion that Biondos signature on the same document appears to be forged, suffice
it to say that, like fraud,[22] forgery is never presumed and must likewise be proved by
clear and convincing evidence by the party alleging the same.[23] Aside from not being
borne out by a comparison of Biondos signatures on the Joint Venture Agreement[24] and
the Deed of Assignment,[25] said forgery is, moreover debunked by Biondos duly
authenticated certification dated 17 November 1998, confirming the transfer of his
interest in the business in favor of Eden.[26]

Generally understood to mean an organization formed for some temporary

purpose, a joint venture is likened to a particular partnership or one which has for its
object determinate things, their use or fruits, or a specific undertaking, or the exercise of
a profession or vocation.[27] The rule is settled that joint ventures are governed by the law
on partnerships[28] which are, in turn, based on mutual agency or delectus personae.
[29]
Insofar as a partners conveyance of the entirety of his interest in the partnership is
concerned, Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest in the

partnership does not itself dissolve the partnership, or, as against the
other partners in the absence of agreement, entitle the assignee, during
the continuance of the partnership, to interfere in the management or
administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to receive in
accordance with his contracts the profits to which the assigning partners
would otherwise be entitled. However, in case of fraud in the management
of the partnership, the assignee may avail himself of the usual remedies.

In the case of a dissolution of the partnership, the assignee is entitled to

receive his assignors interest and may require an account from the date
only of the last account agreed to by all the partners.

From the foregoing provision, it is evident that (t)he transfer by a partner of his
partnership interest does not make the assignee of such interest a partner of the firm, nor
entitle the assignee to interfere in the management of the partnership business or to
receive anything except the assignees profits. The assignment does not purport to transfer
an interest in the partnership, but only a future contingent right to a portion of the
ultimate residue as the assignor may become entitled to receive by virtue of his
proportionate interest in the capital.[30] Since a partners interest in the partnership
includes his share in the profits,[31] we find that the CA committed no reversible error in
ruling that the Spouses Jaso are entitled to Biondos share in the profits, despite Juanitas
lack of consent to the assignment of said Frenchmans interest in the joint
venture. Although Eden did not, moreover, become a partner as a consequence of the
assignment and/or acquire the right to require an accounting of the partnership business,
the CA correctly granted her prayer for dissolution of the joint venture conformably with
the right granted to the purchaser of a partners interest under Article 1831 of the Civil
Code.[32]

Considering that they involve questions of fact, neither are we inclined to

hospitably entertain the Spouses Realubits insistence on the supposed fact that Josefinas
joint venture with Biondo had already been dissolved and that the ice manufacturing
business at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City was merely
a continuation of the same business they previously operated under a single
proprietorship. It is well-entrenched doctrine that questions of fact are not proper
subjects of appeal bycertiorari under Rule 45 of the Rules of Court as this mode of
appeal is confined to questions of law.[33] Upon the principle that this Court is not a trier
of facts, we are not duty bound to examine the evidence introduced by the parties below
to determine if the trial and the appellate courts correctly assessed and evaluated the
evidence on record.[34]Absent showing that the factual findings complained of are devoid
of support by the evidence on record or the assailed judgment is based on
misapprehension of facts, the Court will limit itself to reviewing only errors of law.[35]

Based on the evidence on record, moreover, both the RTC [36] and the CA[37] ruled
out the dissolution of the joint venture and concluded that the ice manufacturing business
at the aforesaid address was the same one established by Juanita and Biondo. As a rule,
findings of fact of the CA are binding and conclusive upon this Court, [38] and will not be
reviewed or disturbed on appeal[39] unless the case falls under any of the following
recognized exceptions: (1) when the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when the CA, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee; (7) when the
findings are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners' main and reply briefs are not
disputed by the respondents; and, (10) when the findings of fact of the CA are premised
on the supposed absence of evidence and contradicted by the evidence on record.
[40]
Unfortunately for the Spouses Realubits cause, not one of the foregoing exceptions
applies to the case.

WHEREFORE, the petition is DENIED for lack of merit and the assailed CA
Decision dated 30 April 2007 is, accordingly, AFFIRMED in toto.
CASE DIGEST
JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDENG JASO
 G.R. No. 178782 September 21, 2011

FACTS
Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis
Eric Amaury Biondo, a French national, for the operation of an ice manufacturing
business. With Josefina as the industrial partner and Biondo as the capitalist partner, the
parties agreed that they would each receive 40% of the net profit, with the remaining
20% to be used for the payment of the ice making machine which was purchased for the
business. For and in consideration of the sum of P500,000.00, however, Biondo
subsequently executed a Deed of Assignment transferring all his rights and interests in
the business in favor of respondent Eden Jaso, the wife of respondent Prosencio
Jaso.With Biondo’s eventual departure from the country, the Spouses Jaso caused their
lawyer to send Josefina a letter apprising her of their acquisition of said Frenchmans
share in the business and formally demanding an accounting and inventory thereof as
well as the remittance of their portion of its profits.

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso
commenced the instant suit for specific performance, accounting, examination, audit and
inventory of assets and properties, dissolution of the joint venture, appointment of a
receiver and damages. The said complaint alleged that the Spouses Realubit had no
gainful occupation or business prior to their joint venture with Biondo and that aside
from appropriating for themselves the income of the business, they have fraudulently
concealed the funds and assets thereof thru their relatives, associates or dummies. The
Spouses Realubit claimed that they have been engaged in the tube ice trading business
under a single proprietorship even before their dealings with Biondo.

The RTC rendered its Decision discounting the existence of sufficient evidence
from which the income, assets and the supposed dissolution of the joint venture can be
adequately reckoned. Upon the finding, however, that the Spouses Jaso had been
nevertheless subrogated to Biondos rights in the business in view of their valid
acquisition of the latters share as capitalist partner. On appeal before the CA, the
foregoing decision was set aside
upon the following findings that the Spouses Jaso validly acquired Biondos share in the
business which had been transferred to and continued its operations and not dissolved as
claimed by the Spouses Realubit.

ISSUES
1. Whether there was a valid assignment or rights to the joint venture
2. Whether the joint venture is a contract of partnership
3. Whether Jaso acquired the title of being a partner based on the Deed of
Assignment

RULING
1. Yes. As a public document, the Deed of Assignment Biondo executed in favor
of Eden not only enjoys a presumption of regularity but is also considered prima
facie evidence of the facts therein stated. A party assailing the authenticity and due
execution of a notarized document is, consequently, required to present evidence that is
clear, convincing and more than merely preponderant. In view of the Spouses Realubits
failure to discharge this onus, we find that both the RTC and the CA correctly upheld the
authenticity and validity of said Deed of Assignment upon the combined strength of the
above-discussed disputable presumptions and the testimonies elicited from Edenand
Notary Public Rolando Diaz.

2. Yes. Generally understood to mean an organization formed for some temporary

purpose, a joint venture is likened to a particular partnership or one which has for its
object determinate things, their use or fruits, or a specific undertaking, or the exercise of
a profession or vocation. The rule is settled that joint ventures are governed by the law
on partnerships which are, in turn, based on mutual agency or delectus personae.

3. No. It is evident that the transfer by a partner of his partnership interest does not
make the assignee of such interest a partner of the firm, nor entitle the assignee to
interfere in the management of the partnership business or to receive anything except the
assignees profits. The assignment does not purport to transfer an interest in the
partnership, but only a future contingent right to a portion of the ultimate residue as the
assignor may become entitled to receive by virtue of his proportionate interest in the
capital. Since a partner’s interest in the partnership includes his share in the profits, we
find that the CA committed no reversible error in ruling that the Spouses Jaso are entitled
to Biondos share in the profits, despite Juanitas lack of consent to the assignment of said
Frenchmans interest in the joint venture. Although Eden did not, moreover, become a
partner as a consequence of the assignment and/or acquire the right to require an
accounting of the partnership business, the CA correctly granted her prayer for
dissolution of the joint venture conformably with the right granted to the purchaser of a
partner’s interest under Article 1831 of the Civil Code.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 187769 June 4, 2014
ALVIN PATRIMONIO, Petitioner,
vs.
NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III, Respondents.
DECISION
BRION, J.:
Assailed in this petition for review on certiorari 1 under Rule 45 of the Revised Rules of
Court is the decision2 dated September 24, 2008 and the resolution3 dated April 30, 2009
of the Court of Appeals (CA) in CA-G.R. CV No. 82301. The appellate court affirmed the
decision of the Regional Trial Court (RTC) of Quezon City, Branch 77, dismissing the
complaint for declaration of nullity of loan filed by petitioner Alvin Patrimonio and
ordering him to pay respondent Octavio Marasigan III (Marasigan) the sum
of P200,000.00.
The Factual Background
The facts of the case, as shown by the records, are briefly summarized below.
The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business
venture under the name of Slam Dunk Corporation (Slum Dunk), a production outfit that
produced mini-concerts and shows related to basketball. Petitioner was already then a
decorated professional basketball player while Gutierrez was a well-known sports
columnist.
In the course of their business, the petitioner pre-signed several checks to answer for the
expenses of Slam Dunk. Although signed, these checks had no payee’s name, date or
amount. The blank checks were entrusted to Gutierrez with the specific instruction not to
fill them out without previous notification to and approval by the petitioner. According to
petitioner, the arrangement was made so that he could verify the validity of the payment
and make the proper arrangements to fund the account.
In the middle of 1993, without the petitioner’s knowledge and consent, Gutierrez went to
Marasigan (the petitioner’s former teammate), to secure a loan in the amount
of P200,000.00 on the excuse that the petitioner needed the money for the construction of
his house. In addition to the payment of the principal, Gutierrez assured Marasigan that
he would be paid an interest of 5% per month from March to May 1994.
After much contemplation and taking into account his relationship with the petitioner and
Gutierrez, Marasigan acceded to Gutierrez’ request and gave him P200,000.00 sometime
in February 1994. Gutierrez simultaneously delivered to Marasigan one of the blank
checks the petitioner pre-signed with Pilipinas Bank, Greenhills Branch, Check No.
21001764 with the blank portions filled out with the words "Cash" "Two Hundred
Thousand Pesos Only", and the amount of "P200,000.00". The upper right portion of the
check corresponding to the date was also filled out with the words "May 23, 1994" but
the petitioner contended that the same was not written by Gutierrez.
On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason
"ACCOUNT CLOSED." It was later revealed that petitioner’s account with the bank had
been closed since May 28, 1993.
Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several
demand letters to the petitioner asking for the payment of P200,000.00, but his demands
likewise went unheeded. Consequently, he filed a criminal case for violation of B.P. 22
against the petitioner, docketed as Criminal Case No. 42816.
On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a
Complaint for Declaration of Nullity of Loan and Recovery of Damages against
Gutierrez and co-respondent Marasigan. He completely denied authorizing the loan or
the check’s negotiation, and asserted that he was not privy to the parties’ loan agreement.
Only Marasigan filed his answer to the complaint. In the RTC’s order dated December
22, 1997,Gutierrez was declared in default.
The Ruling of the RTC
The RTC ruled on February 3,2003 in favor of Marasigan. 4 It found that the petitioner, in
issuing the pre-signed blank checks, had the intention of issuing a negotiable instrument,
albeit with specific instructions to Gutierrez not to negotiate or issue the check without
his approval. While under Section 14 of the Negotiable Instruments Law Gutierrez had
the prima facie authority to complete the checks by filling up the blanks therein, the RTC
ruled that he deliberately violated petitioner’s specific instructions and took advantage
of the trust reposed in him by the latter.
Nonetheless, the RTC declared Marasigan as a holder in due course and accordingly
dismissed the petitioner’s complaint for declaration of nullity of the loan. It ordered the
petitioner to pay Marasigan the face value of the check with a right to claim
reimbursement from Gutierrez.
The petitioner elevated the case to the Court of Appeals (CA), insisting that Marasigan is
not a holder in due course. He contended that when Marasigan received the check, he
knew that the same was without a date, and hence, incomplete. He also alleged that the
loan was actually between Marasigan and Gutierrez with his check being used only as a
security.
The Ruling of the CA
On September 24, 2008, the CA affirmed the RTC ruling, although premised on different
factual findings. After careful analysis, the CA agreed with the petitioner that Marasigan
is not a holder in due course as he did not receive the check in good faith.
The CA also concluded that the check had been strictly filled out by Gutierrez in
accordance with the petitioner’s authority. It held that the loan may not be nullified since
it is grounded on an obligation arising from law and ruled that the petitioner is still
liable to pay Marasigan the sum of P200,000.00.
After the CA denied the subsequent motion for reconsideration that followed, the
petitioner filed the present petition for review on certiorari under Rule 45 of the Revised
Rules of Court.
The Petition
The petitioner argues that: (1) there was no loan between him and Marasigan since he
never authorized the borrowing of money nor the check’s negotiation to the latter; (2)
under Article 1878 of the Civil Code, a special power of attorney is necessary for an
individual to make a loan or borrow money in behalf of another; (3) the loan transaction
was between Gutierrez and Marasigan, with his check being used only as a security; (4)
the check had not been completely and strictly filled out in accordance with his authority
since the condition that the subject check can only be used provided there is prior
approval from him, was not complied with; (5) even if the check was strictly filled up as
instructed by the petitioner, Marasigan is still not entitled to claim the check’s value as he
was not a holder in due course; and (6) by reason of the bad faith in the dealings
between the respondents, he is entitled to claim for damages.
The Issues
Reduced to its basics, the case presents to us the following issues:
1. Whether the contract of loan in the amount of P200,000.00 granted by respondent
Marasigan to petitioner, through respondent Gutierrez, may be nullified for being void;
2. Whether there is basis to hold the petitioner liable for the payment of the P200,000.00
loan;
3. Whether respondent Gutierrez has completely filled out the subject check strictly under
the authority given by the petitioner; and
4. Whether Marasigan is a holder in due course.
The Court’s Ruling
The petition is impressed with merit.
We note at the outset that the issues raised in this petition are essentially factual in
nature. The main point of inquiry of whether the contract of loan may be nullified, hinges
on the very existence of the contract of loan – a question that, as presented, is essentially,
one of fact. Whether the petitioner authorized the borrowing; whether Gutierrez
completely filled out the subject check strictly under the petitioner’s authority; and
whether Marasigan is a holder in due course are also questions of fact, that, as a general
rule, are beyond the scope of a Rule 45 petition.
The rule that questions of fact are not the proper subject of an appeal by certiorari, as a
petition for review under Rule 45 is limited only to questions of law, is not an absolute
rule that admits of no exceptions. One notable exception is when the findings off act of
both the trial court and the CA are conflicting, making their review necessary. 5 In the
present case, the tribunals below arrived at two conflicting factual findings, albeit with
the same conclusion, i.e., dismissal of the complaint for nullity of the loan. Accordingly,
we will examine the parties’ evidence presented.
I. Liability Under the Contract of Loan
The petitioner seeks to nullify the contract of loan on the ground that he never authorized
the borrowing of money. He points to Article 1878, paragraph 7 of the Civil Code, which
explicitly requires a written authority when the loan is contracted through an agent. The
petitioner contends that absent such authority in writing, he should not be held liable for
the face value of the check because he was not a party or privy to the agreement.
Contracts of Agency May be Oral Unless The Law Requires a Specific Form
Article 1868 of the Civil Code defines a contract of agency as a contract whereby a
person "binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter." Agency may be express, or
implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without
authority.
As a general rule, a contract of agency may be oral. 6 However, it must be written when
the law requires a specific form, for example, in a sale of a piece of land or any interest
therein through an agent.
Article 1878 paragraph 7 of the Civil Code expressly requires a special power of
authority before an agent can loan or borrow money in behalf of the principal, to wit:
Art. 1878. Special powers of attorney are necessary in the following cases:
xxxx
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration. (emphasis supplied)
Article 1878 does not state that the authority be in writing. As long as the mandate is
express, such authority may be either oral or written. We unequivocably declared in Lim
Pin v. Liao Tian, et al.,7 that the requirement under Article 1878 of the Civil Code refers
to the nature of the authorization and not to its form. Be that as it may, the authority must
be duly established by competent and convincing evidence other than the self serving
assertion of the party claiming that such authority was verbally given, thus:
The requirements of a special power of attorney in Article 1878 of the Civil Code and of
a special authority in Rule 138 of the Rules of Court refer to the nature of the
authorization and not its form. The requirements are met if there is a clear mandate from
the principal specifically authorizing the performance of the act. As early as 1906, this
Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be
either oral or written, the one vital thing being that it shall be express. And more recently,
We stated that, if the special authority is not written, then it must be duly established by
evidence:
x x x the Rules require, for attorneys to compromise the litigation of their clients, a
special authority. And while the same does not state that the special authority be in
writing the Court has every reason to expect that, if not in writing, the same be duly
established by evidence other than the self-serving assertion of counsel himself that such
authority was verbally given him.(Home Insurance Company vs. United States lines
Company, et al., 21 SCRA 863; 866: Vicente vs. Geraldez, 52 SCRA 210; 225). (emphasis
supplied).
The Contract of Loan Entered Into by Gutierrez in Behalf of the Petitioner Should be
Nullified for Being Void; Petitioner is Not Bound by the Contract of Loan.
A review of the records reveals that Gutierrez did not have any authority to borrow
money in behalf of the petitioner.1âwphi1 Records do not show that the petitioner
executed any special power of attorney (SPA) in favor of Gutierrez. In fact, the
petitioner’s testimony confirmed that he never authorized Gutierrez (or anyone for that
matter), whether verbally or in writing, to borrow money in his behalf, nor was he aware
of any such transaction:
ALVIN PATRIMONIO (witness)
ATTY. DE VERA: Did you give Nap Gutierrez any Special Power of Attorney in writing
authorizing him to borrow using your money?
WITNESS: No, sir. (T.S.N., Alvin Patrimonio, Nov. 11, 1999, p. 105)8
xxxx
Marasigan however submits that the petitioner’s acts of pre-signing the blank checks and
releasing them to Gutierrez suffice to establish that the petitioner had authorized
Gutierrez to fill them out and contract the loan in his behalf.
Marasigan’s submission fails to persuade us.
In the absence of any authorization, Gutierrez could not enter into a contract of loan in
behalf of the petitioner. As held in Yasuma v. Heirs of De Villa, 9 involving a loan
contracted by de Villa secured by real estate mortgages in the name of East Cordillera
Mining Corporation, in the absence of an SPA conferring authority on de Villa, there is
no basis to hold the corporation liable, to wit:
The power to borrow money is one of those cases where corporate officers as agents of
the corporation need a special power of attorney. In the case at bar, no special power of
attorney conferring authority on de Villa was ever presented. x x x There was no showing
that respondent corporation ever authorized de Villa to obtain the loans on its behalf.
xxxx
Therefore, on the first issue, the loan was personal to de Villa. There was no basis to hold
the corporation liable since there was no authority, express, implied or apparent, given to
de Villa to borrow money from petitioner. Neither was there any subsequent ratification
of his act.
xxxx
The liability arising from the loan was the sole indebtedness of de Villa (or of his estate
after his death). (citations omitted; emphasis supplied).
This principle was also reiterated in the case of Gozun v. Mercado, 10 where this court
held:
Petitioner submits that his following testimony suffices to establish that respondent had
authorized Lilian to obtain a loan from him.
 xxxx
Petitioner’s testimony failed to categorically state, however, whether the loan was made
on behalf of respondent or of his wife. While petitioner claims that Lilian was authorized
by respondent, the statement of account marked as Exhibit "A" states that the amount was
received by Lilian "in behalf of Mrs. Annie Mercado.
It bears noting that Lilian signed in the receipt in her name alone, without indicating
therein that she was acting for and in behalf of respondent. She thus bound herself in her
personal capacity and not as an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage
on real property executed by an agent, it must upon its face purport to be made, signed
and sealed in the name of the principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal. x x x (emphasis supplied).
In the absence of any showing of any agency relations or special authority to act for and
in behalf of the petitioner, the loan agreement Gutierrez entered into with Marasigan is
null and void. Thus, the petitioner is not bound by the parties’ loan agreement.
Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not
legally sufficient because the authority to enter into a loan can never be presumed. The
contract of agency and the special fiduciary relationship inherent in this contract must
exist as a matter of fact. The person alleging it has the burden of proof to show, not only
the fact of agency, but also its nature and extent.11 As we held in People v. Yabut:12
Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut,
Jr., in Caloocan City cannot, contrary to the holding of the respondent Judges, be licitly
taken as delivery of the checks to the complainant Alicia P. Andan at Caloocan City to fix
the venue there. He did not take delivery of the checks as holder, i.e., as "payee" or
"indorsee." And there appears to beno contract of agency between Yambao and Andan so
as to bind the latter for the acts of the former. Alicia P. Andan declared in that sworn
testimony before the investigating fiscal that Yambao is but her "messenger" or "part-
time employee." There was no special fiduciary relationship that permeated their
dealings. For a contract of agency to exist, the consent of both parties is essential, the
principal consents that the other party, the agent, shall act on his behalf, and the agent
consents so to act. It must exist as a fact. The law makes no presumption thereof. The
person alleging it has the burden of proof to show, not only the fact of its existence, but
also its nature and extent. This is more imperative when it is considered that the
transaction dealt with involves checks, which are not legal tender, and the creditor may
validly refuse the same as payment of obligation.(at p. 630). (emphasis supplied)
The records show that Marasigan merely relied on the words of Gutierrez without
securing a copy of the SPA in favor of the latter and without verifying from the petitioner
whether he had authorized the borrowing of money or release of the check. He was thus
bound by the risk accompanying his trust on the mere assurances of Gutierrez.
No Contract of Loan Was Perfected Between Marasigan And Petitioner, as The Latter’s
Consent Was Not Obtained.
Another significant point that the lower courts failed to consider is that a contract of
loan, like any other contract, is subject to the rules governing the requisites and validity
of contracts in general.13 Article 1318 of the Civil Code14enumerates the essential
requisites for a valid contract, namely:
1. consent of the contracting parties;
2. object certain which is the subject matter of the contract; and
3. cause of the obligation which is established.
In this case, the petitioner denied liability on the ground that the contract lacked the
essential element of consent. We agree with the petitioner. As we explained above,
Gutierrez did not have the petitioner’s written/verbal authority to enter into a contract of
loan. While there may be a meeting of the minds between Gutierrez and Marasigan, such
agreement cannot bind the petitioner whose consent was not obtained and who was not
privy to the loan agreement. Hence, only Gutierrez is bound by the contract of loan.
True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell
into the hands of Marasigan. This act, however, does not constitute sufficient authority to
borrow money in his behalf and neither should it be construed as petitioner’s grant of
consent to the parties’ loan agreement. Without any evidence to prove Gutierrez’
authority, the petitioner’s signature in the check cannot be taken, even remotely, as
sufficient authorization, much less, consent to the contract of loan. Without the consent
given by one party in a purported contract, such contract could not have been perfected;
there simply was no contract to speak of.15
With the loan issue out of the way, we now proceed to determine whether the petitioner
can be made liable under the check he signed.
II. Liability Under the Instrument
The answer is supplied by the applicable statutory provision found in Section 14 of the
Negotiable Instruments Law (NIL) which states:
Sec. 14. Blanks; when may be filled.- Where the instrument is wanting in any material
particular, the person in possession thereof has a prima facie authority to complete it by
filling up the blanks therein. And a signature on a blank paper delivered by the person
making the signature in order that the paper may be converted into a negotiable
instrument operates as a prima facie authority to fill it up as such for any amount. In
order, however, that any such instrument when completed may be enforced against any
person who became a party thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable time. But if any such
instrument, after completion, is negotiated to a holder in due course, it is valid and
effectual for all purposes in his hands, and he may enforce it as if it had been filled up
strictly in accordance with the authority given and within a reasonable time.
This provision applies to an incomplete but delivered instrument. Under this rule, if the
maker or drawer delivers a pre-signed blank paper to another person for the purpose of
converting it into a negotiable instrument, that person is deemed to have prima facie
authority to fill it up. It merely requires that the instrument be in the possession of a
person other than the drawer or maker and from such possession, together with the fact
that the instrument is wanting in a material particular, the law presumes agency to fill up
the blanks.16
In order however that one who is not a holder in due course can enforce the instrument
against a party prior to the instrument’s completion, two requisites must exist: (1) that
the blank must be filled strictly in accordance with the authority given; and (2) it must be
filled up within a reasonable time. If it was proven that the instrument had not been filled
up strictly in accordance with the authority given and within a reasonable time, the
maker can set this up as a personal defense and avoid liability. However, if the holder is
a holder in due course, there is a conclusive presumption that authority to fill it up had
been given and that the same was not in excess of authority.17
In the present case, the petitioner contends that there is no legal basis to hold him liable
both under the contract and loan and under the check because: first, the subject check
was not completely filled out strictly under the authority he has given and second,
Marasigan was not a holder in due course.
Marasigan is Not a Holder in Due Course
The Negotiable Instruments Law (NIL) defines a holder in due course, thus:
Sec. 52 — A holder in due course is a holder who has taken the instrument under the
following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it had
been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.(emphasis supplied)
Section 52(c) of the NIL states that a holder in due course is one who takes the
instrument "in good faith and for value." It also provides in Section 52(d) that in order
that one may be a holder in due course, it is necessary that at the time it was negotiated
to him he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it.
Acquisition in good faith means taking without knowledge or notice of equities of any
sort which could beset up against a prior holder of the instrument. 18 It means that he
does not have any knowledge of fact which would render it dishonest for him to take a
negotiable paper. The absence of the defense, when the instrument was taken, is the
essential element of good faith.19
As held in De Ocampo v. Gatchalian:20
In order to show that the defendant had "knowledge of such facts that his action in taking
the instrument amounted to bad faith," it is not necessary to prove that the defendant
knew the exact fraud that was practiced upon the plaintiff by the defendant's assignor, it
being sufficient to show that the defendant had notice that there was something wrong
about his assignor's acquisition of title, although he did not have notice of the particular
wrong that was committed.
It is sufficient that the buyer of a note had notice or knowledge that the note was in some
way tainted with fraud. It is not necessary that he should know the particulars or even the
nature of the fraud, since all that is required is knowledge of such facts that his action in
taking the note amounted bad faith.
The term ‘bad faith’ does not necessarily involve furtive motives, but means bad faith in a
commercial sense. The manner in which the defendants conducted their Liberty Loan
department provided an easy way for thieves to dispose of their plunder. It was a case of
"no questions asked." Although gross negligence does not of itself constitute bad faith, it
is evidence from which bad faith may be inferred. The circumstances thrust the duty upon
the defendants to make further inquiries and they had no right to shut their eyes
deliberately to obvious facts. (emphasis supplied).
In the present case, Marasigan’s knowledge that the petitioner is not a party or a privy to
the contract of loan, and correspondingly had no obligation or liability to him, renders
him dishonest, hence, in bad faith. The following exchange is significant on this point:
WITNESS: AMBET NABUS
Q: Now, I refer to the second call… after your birthday. Tell us what you talked about?
A: Since I celebrated my birthday in that place where Nap and I live together with the
other crew, there were several visitors that included Danny Espiritu. So a week after my
birthday, Bong Marasigan called me up again and he was fuming mad. Nagmumura na
siya. Hinahanap niya si… hinahanap niya si Nap, dahil pinagtataguan na siya at sinabi
na niya na kailangan I-settle na niya yung utang ni Nap, dahil…
xxxx
WITNESS: Yes. Sinabi niya sa akin na kailangan ayusin na bago pa mauwi sa kung saan
ang tsekeng tumalbog… (He told me that we have to fix it up before it…) mauwi pa kung
saan…
xxxx
Q: What was your reply, if any?
A: I actually asked him. Kanino ba ang tseke na sinasabi mo?
(Whose check is it that you are referring to or talking about?)
Q: What was his answer?
A: It was Alvin’s check.
Q: What was your reply, if any?
A: I told him do you know that it is not really Alvin who borrowed money from you or
what you want to appear…
 xxxx
Q: What was his reply?
A: Yes, it was Nap, pero tseke pa rin ni Alvin ang hawak ko at si Alvin ang maiipit dito.
(T.S.N., Ambet Nabus, July 27, 2000; pp.65-71; emphasis supplied)21
Since he knew that the underlying obligation was not actually for the petitioner, the rule
that a possessor of the instrument is prima facie a holder in due course is inapplicable.
As correctly noted by the CA, his inaction and failure to verify, despite knowledge of that
the petitioner was not a party to the loan, may be construed as gross negligence
amounting to bad faith.
Yet, it does not follow that simply because he is not a holder in due course, Marasigan is
already totally barred from recovery. The NIL does not provide that a holder who is not a
holder in due course may not in any case recover on the instrument. 22 The only
disadvantage of a holder who is not in due course is that the negotiable instrument is
subject to defenses as if it were non-negotiable. 23 Among such defenses is the filling up
blank not within the authority.
On this point, the petitioner argues that the subject check was not filled up strictly on the
basis of the authority he gave. He points to his instruction not to use the check without
his prior approval and argues that the check was filled up in violation of said instruction.
Check Was Not Completed Strictly Under The Authority Given by The Petitioner
Our own examination of the records tells us that Gutierrez has exceeded the authority to
fill up the blanks and use the check.1âwphi1 To repeat, petitioner gave Gutierrez pre-
signed checks to be used in their business provided that he could only use them upon his
approval. His instruction could not be any clearer as Gutierrez’ authority was limited to
the use of the checks for the operation of their business, and on the condition that the
petitioner’s prior approval be first secured.
While under the law, Gutierrez had a prima facie authority to complete the check, such
prima facie authority does not extend to its use (i.e., subsequent transfer or
negotiation)once the check is completed. In other words, only the authority to complete
the check is presumed. Further, the law used the term "prima facie" to underscore the
fact that the authority which the law accords to a holder is a presumption juris
tantumonly; hence, subject to subject to contrary proof. Thus, evidence that there was no
authority or that the authority granted has been exceeded may be presented by the maker
in order to avoid liability under the instrument.
In the present case, no evidence is on record that Gutierrez ever secured prior approval
from the petitioner to fill up the blank or to use the check. In his testimony, petitioner
asserted that he never authorized nor approved the filling up of the blank checks, thus:
ATTY. DE VERA: Did you authorize anyone including Nap Gutierrez to write the date,
May 23, 1994?
WITNESS: No, sir.
Q: Did you authorize anyone including Nap Gutierrez to put the word cash? In the
check?
A: No, sir.
Q: Did you authorize anyone including Nap Gutierrez to write the figure P200,000 in this
check?
A: No, sir.
Q: And lastly, did you authorize anyone including Nap Gutierrez to write the
words P200,000 only xx in this check?
A: No, sir. (T.S.N., Alvin Patrimonio, November 11, 1999).24
Notably, Gutierrez was only authorized to use the check for business expenses; thus, he
exceeded the authority when he used the check to pay the loan he supposedly contracted
for the construction of petitioner's house. This is a clear violation of the petitioner's
instruction to use the checks for the expenses of Slam Dunk. It cannot therefore be validly
concluded that the check was completed strictly in accordance with the authority given
by the petitioner.
Considering that Marasigan is not a holder in due course, the petitioner can validly set
up the personal defense that the blanks were not filled up in accordance with the
authority he gave. Consequently, Marasigan has no right to enforce payment against the
petitioner and the latter cannot be obliged to pay the face value of the check.
WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the
petitioner Alvin Patrimonio's petition for review on certiorari. The appealed Decision
dated September 24, 2008 and the Resolution dated April 30, 2009 of the Court of
Appeals are consequently ANNULLED AND SET ASIDE. Costs against the respondents.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:

FORMER Philippine Basketball Association (PBA) player and San Mig Coffee Mixers
head manager Alvin Patrimonio has won a loan-related case against sports columnist
Napoleon “Nap” Gutierrez in 1994.
In a decision, the SC’s Second Division granted Patrimonio’s petition for review on
certiorari against the ruling of the Court of Appeals (CA) affirming the ruling of the
Regional Trial Court (RTC) of Quezon City, Branch 77, that dismissed the complaint for
declaration of nullity of loan filed by the petitioner and ordered him to pay respondent
Octavio Marasigan III the sum of P200,000.00.
“Wherefore, in view of the foregoing, judgment is hereby rendered granting
[Patrimonio’s] petition for review on certiorari. The appealed Decision dated September
24, 2008 and the Resolution dated April 30, 2009 of the Court of Appeals are
consequently annulled and set aside. Costs against the respondents,” the SC said.
Gutierrez entered into a business venture under the name of Slam Dunk Corporation, a
production outfit that produced mini-concerts and shows related to basketball.
Patrimonio was already then a decorated professional basketball player while Gutierrez
was a well-known sports columnist.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 97212 June 30, 1993

BENJAMIN YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN
PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL, LEA
BENDAL, CHIU SHIAN JENG and CHEN HO-FU, respondents.
Jose C. Guico for petitioner.
Wilfredo Cortez for private respondents.

FELICIANO, J.:
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership with the firm name of
"Jade Mountain Products Company Limited" ("Jade Mountain"). The partnership was
originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as general
partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of
China (Taiwan), as limited partners. The partnership business consisted of exploiting a
marble deposit found on land owned by the Sps. Ricardo and Guillerma Cruz, situated in
Bulacan Province, under a Memorandum Agreement dated 26 June 1984 with the Cruz
spouses. 1 The partnership had its main office in Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as
Assistant General Manager with a monthly salary of P4,000.00. According to petitioner
Yu, however, he actually received only half of his stipulated monthly salary, since he had
accepted the promise of the partners that the balance would be paid when the firm shall
have secured additional operating funds from abroad. Benjamin Yu actually managed the
operations and finances of the business; he had overall supervision of the workers at the
marble quarry in Bulacan and took charge of the preparation of papers relating to the
exportation of the firm's products.
Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea
Bendal and Rhodora Bendal sold and transferred their interests in the partnership to
private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a limited
partner, also sold and transferred his interest in the partnership to Willy Co. Between Mr.
Emmanuel Zapanta and himself, private respondent Willy Co acquired the great bulk of
the partnership interest. The partnership now constituted solely by Willy Co and
Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they
moved the firm's main office from Makati to Mandaluyong, Metropolitan Manila. A
Supplement to the Memorandum Agreement relating to the operation of the marble
quarry was entered into with the Cruz spouses in February of 1988. 2 The actual
operations of the business enterprise continued as before. All the employees of the
partnership continued working in the business, all, save petitioner Benjamin Yu as it
turned out.
On 16 November 1987, having learned of the transfer of the firm's main office from
Makati to Mandaluyong, petitioner Benjamin Yu reported to the Mandaluyong office for
work and there met private respondent Willy Co for the first time. Petitioner was
informed by Willy Co that the latter had bought the business from the original partners
and that it was for him to decide whether or not he was responsible for the obligations of
the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not
allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries
remained unpaid. 3
On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal and recovery
of unpaid salaries accruing from November 1984 to October 1988, moral and exemplary
damages and attorney's fees, against Jade Mountain, Mr. Willy Co and the other private
respondents. The partnership and Willy Co denied petitioner's charges, contending in the
main that Benjamin Yu was never hired as an employee by the present or new
partnership. 4
In due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that
petitioner had been illegally dismissed. The Labor Arbiter decreed his reinstatement and
awarded him his claim for unpaid salaries, backwages and attorney's fees. 5
On appeal, the National Labor Relations Commission ("NLRC") reversed the decision of
the Labor Arbiter and dismissed petitioner's complaint in a Resolution dated 29
November 1990. The NLRC held that a new partnership consisting of Mr. Willy Co and
Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new
partnership had not retained petitioner Yu in his original position as Assistant General
Manager, and that there was no law requiring the new partnership to absorb the
employees of the old partnership. Benjamin Yu, therefore, had not been illegally
dismissed by the new partnership which had simply declined to retain him in his former
managerial position or any other position. Finally, the NLRC held that Benjamin Yu's
claim for unpaid wages should be asserted against the original members of the preceding
partnership, but these though impleaded had, apparently, not been served with summons
in the proceedings before the Labor Arbiter. 6
Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us to
set aside and annul the Resolution of the NLRC as a product of grave abuse of discretion
amounting to lack or excess of jurisdiction.
The basic contention of petitioner is that the NLRC has overlooked the principle that a
partnership has a juridical personality separate and distinct from that of each of its
members. Such independent legal personality subsists, petitioner claims, notwithstanding
changes in the identities of the partners. Consequently, the employment contract between
Benjamin Yu and the partnership Jade Mountain could not have been affected by changes
in the latter's membership. 7
Two (2) main issues are thus posed for our consideration in the case at bar: (1) whether
the partnership which had hired petitioner Yu as Assistant General Manager had been
extinguished and replaced by a new partnerships composed of Willy Co and Emmanuel
Zapanta; and (2) if indeed a new partnership had come into existence, whether petitioner
Yu could nonetheless assert his rights under his employment contract as against the new
partnership.
In respect of the first issue, we agree with the result reached by the NLRC, that is, that the
legal effect of the changes in the membership of the partnership was the dissolution of the
old partnership which had hired petitioner in 1984 and the emergence of a new firm
composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable law in this connection — of which the NLRC seemed quite unaware — is
found in the Civil Code provisions relating to partnerships. Article 1828 of the Civil Code
provides as follows:
Art. 1828. The dissolution of a partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business. (Emphasis supplied)
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx xxx xxx
(b) by the express will of any partner, who must act in good faith, when no definite term
or particular undertaking is specified;
xxx xxx xxx
(2) in contravention of the agreement between the partners, where the circumstances do
not permit a dissolution under any other provision of this article, by the express will of
any partner at any time;
xxx xxx xxx
(Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests
(amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel
Zapanta. The record does not show what happened to the remaining 18% of the original
partnership interest. The acquisition of 82% of the partnership interest by new partners,
coupled with the retirement or withdrawal of the partners who had originally owned such
82% interest, was enough to constitute a new partnership.
The occurrence of events which precipitate the legal consequence of dissolution of a
partnership do not, however, automatically result in the termination of the legal
personality of the old partnership. Article 1829 of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but continues until the winding up of
partnership affairs is completed.
In the ordinary course of events, the legal personality of the expiring partnership persists
for the limited purpose of winding up and closing of the affairs of the partnership. In the
case at bar, it is important to underscore the fact that the business of the old partnership
was simply continued by the new partners, without the old partnership undergoing the
procedures relating to dissolution and winding up of its business affairs. In other words,
the new partnership simply took over the business enterprise owned by the preceeding
partnership, and continued using the old name of Jade Mountain Products Company
Limited, without winding up the business affairs of the old partnership, paying off its
debts, liquidating and distributing its net assets, and then re-assembling the said assets
or most of them and opening a new business enterprise. There were, no doubt, powerful
tax considerations which underlay such an informal approach to business on the part of
the retiring and the incoming partners. It is not, however, necessary to inquire into such
matters.
What is important for present purposes is that, under the above described situation, not
only the retiring partners (Rhodora Bendal, et al.) but also the new partnership itself
which continued the business of the old, dissolved, one, are liable for the debts of the
preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, 8 the Court held that
under facts very similar to those in the case at bar, a withdrawing partner remains liable
to a third party creditor of the old partnership. 9 The liability of the new partnership,
upon the other hand, in the set of circumstances obtaining in the case at bar, is
established in Article 1840 of the Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved partnership are also creditors
of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when any partner
retires and assigns (or the representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to one or more of the partners
and one or more third persons, if the business is continued without liquidation of the
partnership affairs;
(2) When all but one partner retire and assign (or the representative of a deceased
partner assigns) their rights in partnership property to the remaining partner,
who continues the business without liquidation of partnership affairs, either alone or
with others;
(3) When any Partner retires or dies and the business of the dissolved partnership is
continued as set forth in Nos. 1 and 2 of this Article, with the consent of the retired
partners or the representative of the deceased partner, but without any assignment of his
right in partnership property;
(4) When all the partners or their representatives assign their rights in partnership
property to one or more third persons who promise to pay the debts and who continue the
business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and remaining partners continue
the businessunder the provisions of article 1837, second paragraph, No. 2, either alone
or with others, andwithout liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business either
alone or with others without liquidation of the partnership affairs;
The liability of a third person becoming a partner in the partnership continuing the
business, under this article, to the creditors of the dissolved partnership shall be satisfied
out of the partnership property only, unless there is a stipulation to the contrary.
When the business of a partnership after dissolution is continued under any conditions
set forth in this article the creditors of the retiring or deceased partner or the
representative of the deceased partner, have a prior right to any claim of the retired
partner or the representative of the deceased partner against the person or partnership
continuing the business on account of the retired or deceased partner's interest in the
dissolved partnership or on account of any consideration promised for such interest or
for his right in partnership property.
Nothing in this article shall be held to modify any right of creditors to set assignment on
the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the
new Jade Mountain which continued the business of the old one without liquidation of
the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner
Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-visany
claim of any retired or previous partner insofar as such retired partner's interest in the
dissolved partnership is concerned. It is not necessary for the Court to determine under
which one or mare of the above six (6) paragraphs, the case at bar would fall, if only
because the facts on record are not detailed with sufficient precision to permit such
determination. It is, however, clear to the Court that under Article 1840 above, Benjamin
Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to
his employment with the previous partnership, against the new Jade Mountain.
It is at the same time also evident to the Court that the new partnership was entitled to
appoint and hire a new general or assistant general manager to run the affairs of the
business enterprise take over. An assistant general manager belongs to the most senior
ranks of management and a new partnership is entitled to appoint a top manager of its
own choice and confidence. The non-retention of Benjamin Yu as Assistant General
Manager did not therefore constitute unlawful termination, or termination without just or
authorized cause. We think that the precise authorized cause for termination in the case
at bar was redundancy. 10 The new partnership had its own new General Manager,
apparently Mr. Willy Co, the principal new owner himself, who personally ran the
business of Jade Mountain. Benjamin Yu's old position as Assistant General Manager
thus became superfluous or redundant. 11 It follows that petitioner Benjamin Yu is entitled
to separation pay at the rate of one month's pay for each year of service that he had
rendered to the old partnership, a fraction of at least six (6) months being considered as
a whole year.
While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu in
its employ, we consider that Benjamin Yu was very shabbily treated by the new
partnership. The old partnership certainly benefitted from the services of Benjamin Yu
who, as noted, previously ran the whole marble quarrying, processing and exporting
enterprise. His work constituted value-added to the business itself and therefore, the new
partnership similarly benefitted from the labors of Benjamin Yu. It is worthy of note that
the new partnership did not try to suggest that there was any cause consisting of some
blameworthy act or omission on the part of Mr. Yu which compelled the new partnership
to terminate his services. Nonetheless, the new Jade Mountain did not notify him of the
change in ownership of the business, the relocation of the main office of Jade Mountain
from Makati to Mandaluyong and the assumption by Mr. Willy Co of control of
operations. The treatment (including the refusal to honor his claim for unpaid wages)
accorded to Assistant General Manager Benjamin Yu was so summary and cavalier as to
amount to arbitrary, bad faith treatment, for which the new Jade Mountain may
legitimately be required to respond by paying moral damages. This Court, exercising its
discretion and in view of all the circumstances of this case, believes that an indemnity for
moral damages in the amount of P20,000.00 is proper and reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal
rate of six percent (6%) per annum on the amount of unpaid wages, and of his separation
pay, computed from the date of promulgation of the award of the Labor Arbiter. Finally,
because the new Jade Mountain compelled Benjamin Yu to resort to litigation to protect
his rights in the premises, he is entitled to attorney's fees in the amount of ten percent
(10%) of the total amount due from private respondent Jade Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE
COURSE, the Comment filed by private respondents is treated as their Answer to the
Petition for Certiorari, and the Decision of the NLRC dated 29 November 1990 is hereby
NULLIFIED and SET ASIDE. A new Decision is hereby ENTERED requiring private
respondent Jade Mountain Products Company Limited to pay to petitioner Benjamin Yu
the following amounts:
(a) for unpaid wages which, as found by the Labor Arbiter, shall be computed at the rate
of P2,000.00 per month multiplied by thirty-six (36) months (November 1984 to
December 1987) in the total amount of P72,000.00;
(b) separation pay computed at the rate of P4,000.00 monthly pay multiplied by three (3)
years of service or a total of P12,000.00;
(c) indemnity for moral damages in the amount of P20,000.00;
(d) six percent (6%) per annum legal interest computed on items (a) and (b) above,
commencing on 26 December 1989 and until fully paid; and
(e) ten percent (10%) attorney's fees on the total amount due from private respondent
Jade Mountain.
Costs against private respondents.
SO ORDERED.
Bidin, Davide, Jr., Romero