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#71 Torres vs. CA

Topic: Art. 1767, 1773

Facts:
Sometime in the 1980’s (walang date nakasulat, sorry), PETITIONERS Antonia Torres and
Emeteria Baring entered into a joint venture agreement with RESPONDENT Manuel Torres for the
development of a parcel of land into a subdivision. Thus, they executed a Deed of Sale in favor of Manuel
covering the property in question, who then mortgaged the property to Equitable Bank for a P40,000 loan,
which would be then used for the development of the land. All 3 agreed to share the proceeds of the sale
of the subdivided lots.

But things did not go as planned, as the project didn’t push through and the land was foreclosed
by Bank. Then Antonia and Emeteria filed a criminal complaint for estafa against Manuel, which was then
dismissed. Being persistent, they then filed a civil case against Manuel, alleging that Manuel used the
P40,000 loan in furtherance of his own company, the Universal Umbrella Company. They also claim that
there was no partnership or joint venture formed due to certain missing requirements under the law such
as inventory of properties, no implementation of the plans of the joint venture agreement, and that Manuel
made no contributions to the supposed partnership. They also claim that the consideration of the said
joint venture was illegal as it was the result of a sale of land for no consideration. Manuel on the other
hand stated that he used and shouldered the expenses for the preparation of the land for the subdivision
plan and its publication, and that the subdivision plan failed because of Antonia and Emeteria’s relatives
filing adverse claims over the land, thus scaring away potential buyers.

Trial court found for Manuel, dismissing the complaint. The CA upheld the trial court’s decision,
stating that the parties had formed a partnership and that each party should suffer by the losses due to
the partnership. Also, such losses shall be borne out in proportion to the amount they contributed into the
said partnership, in the absence of any stipulation stating a different percentage.

Issue:
W/N the said joint venture agreement resulted in a partnership;

Held:
Yes. A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides:

Art. 1767. By the contract of partnership two or more persons bind

themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves.

Under the Joint Venture Agreement, Antonia and Emeteria would contribute property to the
partnership in the form of land which was to be developed into a subdivision; while Manuel would
contribute his industry and the amount needed for general expenses and other costs. Also, the income
from the said project would be divided according to the stipulated percentage. Clearly, the contract
manifested the intention of the parties to form a partnership.

The joint venture agreement is in a form of a contract, which is perfected by mere consent of the
parties and binding to them even if the consequences are not favourable to them. Courts are not
authorized to extricate parties from the necessary consequences of their acts, and the fact that the
contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of
their obligations. They cannot now disavow the relationship formed from such agreement due to their
supposed misunderstanding of its terms.

The requirement of Art. 1773 regarding an inventory of immovable properties of the partnership
(signed by the parties) attached to a public instrument was intended to protect the third persons dealing

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with the partnership from fraud. With no such inventory they cannot be subject to inscription in the
Registry of Property, and their contribution cannot prejudice third persons. This will result in fraud to those
who contract with the partnership in the belief [in] the efficacy of the guaranty in which the immovables
may consist. But no such third persons are involved in this case, thus it cannot render the said joint
venture agreement void in this case.

The sale of the land in this case was not without consideration. The agreement clearly states that
the consideration for the sale was the expectation of profits from the subdivision project.

Finally, Manuel cannot be made to pay damages to Antonia and Emeteria, for the latter failed to
prove their allegations of Manuel’s fault in the failure of the partnership, even if the CA cleared Antonia
and Emeteria of blame for the said failure.

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#72 Tocao v. Bello

(Tommy)

Facts:

Nenita Anay met William Belo through her former employer in Bangkok. Marjorie Tocao on the other
hand was introduced by Belo to Anay. Tocao proposed to Anay that they create a joint venture for the
importation and local distribution of kitchen furniture. Belo was to act as capitalist without his name being
mentioned in any document, Anay who was head of Marketing and later n VP while Tocao had the duty to
hire and fire employees, determine commissions and/or salaries of the employees and assigning the
employees to different branches.

The parties agreed that Anay would be entitled to 10% of the annual profits of the business, 6%
overriding commission of the overall weekly production, 30% of the sales she would make and 2% for her
demonstration services. The agreement however was not put into writing on the strength of Belo’s
assurance that he was honest, sincere and dependable when it comes to financial commitments.

It was agreed that Anay’s name would be used to secure the distributorship agreement with West Bend
Company since she had a good working experience with the company. The company was registered
under the name Geminesse Enterprise (sole proprietorship) registered to Marjorie Tocao with office at
Rufino Building, Ayala Avenue, Makati City.

Anay was sent to the US by the company to attend to a seminar as evidenced by the endorsement to the
visa sectionmade by Tocao. When Anay got back, she undertook the task of saving the Makati and
Cubao offices and as a result for a job well done, she received a plaque of appreciation form the
administrative and sales people of the company through Tocao. Belo even signed memo entitling Anay
to a 37% commission for her personal sales. Belo explained that the said commission was apart from her
10% share in the profits.

Anay later on learned the Tocao signed a memo addressed to the Cubao sales office that she was no
longer VP of Geminese Enterprise and the following day she received a not e from Lina Cruz the
marketing manager that she was barred from entering the office. Hence, Anay wrote a written demand
for her commissions and the audit of the company to determine her net share in the profits. The company
did not answer, even after it was Anay’s lawyer that sent the demand.

Anay then filed an actin for damages for the failure of Geminese to pay her overriding commission plus
damages, also praying for the audit of the company in order to determine her 10% share in the net profits
and that she be paid a 5% commission on the remaining cookware sets.

Tocao and Bello argues that there was no agreement in writing and that there was no partnership at all as
clearly shown by the registration of the business as sole proprietorship under the name of Tocao. They
further claim that the action was that for dismissal and should have been lodged with the Department of
Labor and not the regular court.

TC Æ there was an oral partnership based on the following requirements: 1) there was an intention to
create a partnership 2) a common fund was established through contributions consisting of money and
industry; and 3) there was a joint interest in the profit. The TC further held that under Art. 1771 no
particular form is needed to constitute a partnership.

CA Æ dismissed the appeal.

Issue:

1) WON an oral partnership can exist.

2) WON the partnership sitil exists.

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Held:

1) Yes!

To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or
more persons bind themselves to contribute money, property or industry to a common fund;
and (2) intention on the part of the partners to divide the profits among themselves. It may be
constituted in any form; a public instrument is necessary only where immovable property or
real rights are contributed thereto. This implies that since a contract of partnership is consensual,
an oral contract of partnership is as good as a written one. Where no immovable property or real
rights are involved, what matters is that the parties have complied with the requisites of a partnership.
The fact that there appears to be no record in the Securities and Exchange Commission of a public
instrument embodying the partnership agreement pursuant to Article 1772 of the Civil Code did not
cause the nullification of the partnership. The pertinent provision of the Civil Code on the matter
states:

Art. 1768. The partnership has a juridical personality separate and distinct from that
of each of the partners, even in case of failure to comply with the requirements of
article 1772, first paragraph.

2) Yes!

Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to reap
for herself and/or for petitioner Belo financial gains resulting from private respondent’s efforts to make
the business venture a success. Thus, as petitioner Tocao became adept in the business operation,
she started to assert herself to the extent that she would even shout at private respondent in front of
other people. 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. Thus:

“x x x. The right to choose with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with each partner’s
capability to give it, and the absence of cause for dissolution provided by the law itself.
Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good faith, not that the attendance of bad
faith can prevent the dissolution of the partnership but that it can result in a liability for
damages.”

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.

In this case, petitioner Tocao’s unilateral exclusion of private respondent from the partnership is
shown by her memo to the Cubao office plainly stating that private respondent was, as of October 9,
1987, no longer the vice-president for sales of Geminesse Enterprise. By that memo, petitioner
Tocao effected her own withdrawal from the partnership and considered herself as having

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ceased to be associated with the partnership in the carrying on of the business. Nevertheless,
the partnership was not terminated thereby; it continues until the winding up of the business.

The winding up of partnership affairs has not yet been undertaken by the partnership. This is manifest
in petitioners’ claim for stocks that had been entrusted to private respondent in the pursuit of the
partnership business.

NB: According to the case, Marjorie Tocao, a former ramp model is the girlfriend of William Belo the
owner of Wilcon Builders.

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#73 Heirs Of Tan Eng Kee Vs. Court Of Appeals And Benguet Lumber Company, Represented By
Its President Tan Eng Lay
(Barney)

Facts:

Following the death of Tan Eng Kee on September 13, 1984, his heirs (children and common law spouse)
filed suit against the decedent's brother TAN ENG LAY on February 19, 1990. The complaint, was for
accounting, liquidation and winding up of the alleged partnership formed after World War II between Tan
Eng Kee and Tan Eng Lay. On March 18, 1991, the heirs filed an amended complaint impleading
BENGUET LUMBER COMPANY, as represented by Tan Eng Lay. The amended complaint principally
alleged that after the second World War, Tan Eng Kee and Tan Eng Lay, pooling their resources and
industry together, entered into a partnership engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until
Tan Eng Kee's death. Petitioners herein averred that the business prospered due to the hard work and
thrift of the alleged partners. However, they claimed that in 1981, Tan Eng Lay and his children caused
the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company."The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their rightful
participation in the profits of the business. Petitioners prayed for accounting of the partnership assets, and
the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet
Lumber.

Issue: Was there a partnership?

Held: None.

These are not evidences supporting the existence of a partnership:

1) That Kee was living in a bunk house just across the lumber store, and then in a room in the bunk
house in Trinidad, but within the compound of the lumber establishment.
2) That both Lay and Kee were seated on a table and were "commanding people"
3) That both were supervising the laborers,
4) That Dionisio Peralta was supposedly being told by Kee that the proceeds of the 80 pieces of the
G.I. sheets were added to the business.

Partnership presupposes the following elements:

1) a contract, either oral or written. However, if it involves real property or where the capital is
P3,000.00 or more, the execution of a contract is necessary;
2) the capacity of the parties to execute the contract;
3) money property or industry contribution;
4) community of funds and interest, mentioning equality of the partners or one having a
proportionate share in the benefits; and
5) intention to divide the profits, being the true test of the partnership. The intention to join in the
business venture for the purpose of obtaining profits thereafter to be divided, must be
established.

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The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber. A
contract of partnership is defined by law as one where two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits among
themselves.

Thus, in order to constitute a partnership, it must be established that (1) two or more persons bound
themselves to contribute money, property, or industry to a common fund, and (2) they intend to divide the
profits among themselves. The agreement need not be formally reduced into writing, since statute allows
the oral constitution of a partnership, save in two instances: (1) when immovable property or real rights
are contributed, and (2) when the partnership has a capital of three thousand pesos or more. In both
cases, a public instrument is required. An inventory to be signed by the parties and attached to the public
instrument is also indispensable to the validity of the partnership whenever immovable property is
contributed to the partnership.

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture, which it
said is akin to a particular partnership. A particular partnership is distinguished from a joint adventure,
to wit: (a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal
partnership, with no firm name and no legal personality. In a joint account, the participating merchants
can transact business under their own name, and can be individually liable therefor. (b) Usually, but not
necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing
to a successful termination may continue for a number of years; a partnership generally relates
to a continuing business of various transactions of a certain kind. A joint venture "presupposes generally
a parity of standing between the joint co-ventures or partners, in which each party has an equal
proprietary interest in the capital or property contributed, and where each party exercises equal rights in
the conduct of the business. Besides, it is indeed odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses. Each has the right to demand an
accounting as long as the partnership exists. We have allowed a scenario wherein if excellent relations
exist among the partners at the start of the business and all the partners are more interested in seeing the
firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly plausible. But
in the situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A person is
presumed to take ordinary care of his concerns.

Article 1769 of the Civil Code provides: In determining whether a partnership exists, these
rules shall apply: (1) Except as provided by Article 1825, persons who are not partners as to each other
are not partners as to third persons; (2) Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not share any profits made by
the use of the property; (3) 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 which the returns
are derived; (4) The receipt by a person of a share of the profits of a business is a prima facie evidence
that he is a partner in the business, but no such inference shall be drawn if such profits were received in
payment: (a) As a debt by installment or otherwise; (b) As wages of an employee or rent to a landlord; (c)
As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the
amount of payment vary with the profits of the business; (e) As the consideration for the sale of a goodwill
of a business or other property by installments or otherwise. In the light of the aforequoted legal provision,
we conclude that Tan Eng Kee was only an employee, not a partner. Even if the payrolls as evidence
were discarded, petitioners would still be back to square one, so to speak, since they did not present and
offer evidence that would show that Tan Eng Kee received amounts of money allegedly representing his
share in the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng Kee,

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received, if any, as his share in the profits of Benguet Lumber Company for any particular period. Hence,
they failed to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the business
between themselves, which is one of the essential features of a partnership.

There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of.

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