PAT LESSON 1 REVIEWER

1. LIM TONG LIM v. PHILIPPINE FISHING GEAR INDUSTRIES, INC .

Facts  Lim Tong Lim invited Peter Yao and Antonio Chua who were already engaged in commercial fishing to
join him.
 They borrowed P3.25 million from Jesus Lim, the brother of Lim Tong Lim, in order to buy 2 fishing
boats worth P3.35 million from CMF Fishing Corporation. The Deed of Sale was executed in favor of Lim
Tong Lim only to serve as a security of the loan extended by his brother.
 The three agreed that the other expenses like refurbishing, repairing, among others, will be covered by
Chua and Yao because Jesus Lim again extended a loan to the partnership of P1 million secured by a
check. Because of this, the ownership of the two boats were entrusted to Lim Tong Lim.
 In pursuance of the business agreement, Yao and Chua bought nets and floats under the name “Ocean
Quest Fishing Corporation”.
 In the Compromise Agreement, it was indicated that they intended to pay back the loan with the
proceeds of the sale of the boats and to divide equally among them the excess or loss.
 Philippine Fishing Gear Industries Inc., filed a case against the three in their capacities as general
partners a collection suit with writ of preliminary attachment for failure to pay the fishing nets and
floats.
 Lim Tong Lim filed a counterclaim and crossclaim and moved for the lifting of the Writ of Attachment,
claiming that there was no partnership among them and that he was a lessor, not a partner. Lim Tong
Lim claimed that he merely leased to Chua and Yao the boat and that the purchase of the fishing nets
was done only by Chua and Yao without him.
 Lim Tong Lim additionally claimed that under the doctrine of corporation by estoppel, liability can only
be imputed against Chua and Yao.

Issue/s 1. WON the doctrine of corporation by estoppel holds only Chua and Yao liable.
2. WON Lim Tong is jointly liable with Chua and Yao.
Ruling 1. No. Petitioner is incorrect in claiming that those who dealt in the name of the ostensible corporation are
the only ones who should be held liable. Although the corporation was never legally formed, it does not
preclude the liabilities of the 3 as contracting parties. Under the law on estoppel, those acting on behalf of a
corporation and those benefited by it, knowing it to be valid existence, are held liable as general partners.

2. Yes. While it is true that Lim Tong Lim did not directly act on behalf of the corporation, he had reaped the
benefits of the contract entered into by the person with whom he previously had an existing relationship.
He is deemed to be part of said association and is covered by the scope of the doctrine of corporation by
estoppel.

 The fishing nets and floats were essential to fishing and were obviously for the furtherance of their
business.
 They purchased the boats, which constituted the main assets of the partnership and they agreed that
the proceeds from the sales and operations would be divided among them.

2. EUFEMIA EVANGELISTA v. COLLECTOR OF INTERNAL REVENUE

Facts
 Siblings Eufemia, Manuela and Francisca purchased 4 parcels of land using money borrowed from their
father in addition to their personal monies with the intention of leasing and renting them for profit.
 They appointed their brother Simeon to manage their properties with full power to lease, to collect
and receive rents, to issue receipts, to sign all letters and contracts in their behalf, etc.
 They had realized income from the business.
 On September 1954, the Collector of Internal Revenue demanded payment of income tax on
corporations, real estate dealer’s fixed tax and corporation residence tax for the years 1945-1949.
 Petitioners insist that they are mere co-owners, not copartners.

Issue/s WON the siblings entered into a partnership subject to income tax on corporations
Ruling Yes. The elements of a partnership are present: 1) agreement to contribute to a common fund; 2) Intent to
divide the profits among contracting parties

1) Common fund was not something they found already in existence. They created it purposely by jointly
borrowing a substantial portion thereof in order to establish the common fund and invested the same in a
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series of transactions. The character of habitually peculiar to business transactions engaged in the purpose
of gain.

2) The properties were under the management of one person. This showing that the properties are
handled as if the same belonged to a corporation or business or enterprise operated for profit.

 In the purview of the National Internal Revenue Code and the Commonwealth Act No. 465, the terms
corporation and partnership are used with substantially the same meaning. Consequently, petitioners
are subject to residence tax for corporations.

3. ELIGIO ESTANISLAO JR v. COURT OF APPEALS

Facts  The petitioner and respondents are siblings who are co-owners of lots which were being leased to the
Shell Company of the Philippines Limited (SHELL). They agreed to open and operate a gas station with
an initial investment of P15,000 to be taken from the advance rentals due to them from shell for the
occupancy of the lots.
 Eligio was made to operate and manage the gas station upon the agreement of the siblings. Since
SHELL only allowed sole proprietorship, only Eligio applied for the dealership, as agreed by the siblings.
 An additional cash pledge was made wherein it was noted that Eligio deposited P10,000 to Shell to
secure the purchase of Shell petroleum products, and to increase the credit limit they have with shell
to P25,000. It was stipulated that the P15,000 lacking would be taken from the advance rentals of Shell
to the siblings.
 Because Eligio was managing the gas station, he submitted financial statements regarding the
operation of the business to his siblings but after a while, he failed to do so.
 The siblings Remedios, Emilio and Leocadio then filed a complaint praying the Eligio execute a public
document embodying all provisions of the partnership agreement, render a formal accounting of the
business operations, and pay their lawful shares and participation in the net profits of the business.

Issue/s WON a partnership was establish among the siblings as regards the ownership and operation of the gas
station business.
Ruling Yes. The second document “Additional Cash Pledge Agreement”, although stipulated that it cancelled the
previous Joint Affidavit, did not dissolve the partnership. Although the partnership was not mentioned in
the second document, the P15,000 indicated in the document represents the “capital investment” of the
parties.

The document only mentioned Eligio as the sole dealer simply because it is the policy of Shell that there is
only one dealer. It does not indicate the sole proprietorship of the business.

4. HEIRS OF JOSE LIM v. JULIET VILLA LIM

Facts  The heirs of Jose Lim: Cresencia (widow), Elenito, Evelia, Imelda, Edelyna, and Edison
 Juliet Lim: widow of Elfledo lim, the eldest son of Jose and Cresencia
 Heirs alleged that Jose entered into a partnership with Jimmy Yu and Norberto Uy to engage in a
trucking business with a contribution of P50,000 each (1980). They further allege that Jose manages
the operations until his death on 1981. Afterwhich, Elfledo took his place and managed the business.
They add that the shares in the partnership profits and income that formed part of the estate of Jose
were held in trust by Elfledo, that he was never a partner or an investor, and merely supervised the
purchase of additional trucks, which were all registered under his name.
 Heirs further allege: that when Elfledo died, Juliet, his sole surviving heir, took over the administration
of the properties without their consent and approval. They claimed that they were all co-owners of the
properties.
 Juliet on the other hand, claimed that Elfledo was a partner of Norberto and Jimmy. That sometime in
1980, as proven by the testimony of Cresencia, Jose gave Elfledo P50,000 as the latter’s capital in an
informal partnership with Jimmy and Norberto. She added that it was through the efforts of Elfledo
that the business flourished, and that the spouses also engaged in other business ventures.
 Further, she said that when Elfledo died in 1995, she talked to Jimmy and the heirs of Norberto (he was
killed), saying that she can no longer run the business. Jimmy suggested that 3 out of the 9 trucks be
given to him as his share. Juliet bought the 3 trucks as share of the heirs of Norberto. Further, she
stated that Jose left no properties that Elfledo could have held in trust. The properties to her husband’s
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names were acquired through her and her husband’s hard work, form part of the conjugal properties
and she has the right to refuse the demand of the heirs of Jose.

Issue/s Who between Jose and Elfledo was the partner in the business?
Ruling
Elfledo. The business flourished after the death of Jose. It was therefore through the efforts of Elfledo that
the properties were acquired. Elfledo ran the affairs of the partnership, all of the properties were under
the name of Elfledo, Jimmy testified that Elfledo did not receive wages ro salaries from the partnership,
and none of the theirs demanded periodic accounting from Elfledo during his lifetime.

Elfledo was not just a hired help, but one of the partners In the trucking business, active and visible in the
running of its affairs. It is apparent that the other partners only contributed in the initial capital but had no
say thereafter on how the business was ran. It was through Elfledo’s efforts and hard work that the
partnership was able to acquire more trucks.

Cresencia also testified that Jose gave Elfledo P50,000 on a date that coincided with the payment of the
initial capital in the partnership.

5. DR. CARLOS SEVILLA v. COURT OF APPEALS

Facts
 Tourist World Service Inc., leased the premises belonging to Noguera to use a branch office. Sevilla ran
the the branch office, payable to TWS. Any sale brought on the efforts of Sevilla, 4% would go to her,
and 3% to TWS.
 Upon TWS hearing that Sevilla was connected with a rival firm, TWS considered closing down its office.
The contract with Sevilla for the usage of the premises was terminated. Canilao, corporate secretary,
padlocked the premises so neither Sevilla nor any of her employees may enter.
 Sevilla filed a case claiming that she was not a mere employee, that it was a joint venture.

Issue/s WON the contract entered into by the parties were one of joint venture
Ruling No. It was a contract of agency. The fact that Sevilla was designated as branch manager does not make her
TWS’ employee. However, considering the nature of the relationship, it was not one of joint
venture/partnership either. Sevilla recognized that TWS has the right to stop the operation of their branch
office.

Sevilla was a travel agent herself, her interest is not to the commissions she earned as a result of her
business transactions, but one that extends to the subject matter of the power of management delegated
to her. It is an agency that cannot be revoked at the pleasure of the principal.

Joint venture – presupposes generally of standing between the joint co-venturers, in which each part has
an equal proprietary interest in the capital or property contributed.

6. ANTONIA TORRES v. COURT OF APPEALS

Facts  Sisters Antonia and Emeteria entered in to a joint venture agreement with Manuel Torres for the
development of a parcel of land into a subdivision.
 They executed a Deed of Sale in favor of Torres who then had it registered in his name. By mortgaging
the property, Torres obtained a loan of P40,000 for the development of the subdivision.
 The three agreed to share the proceeds from the sale of the subdivided lots.
 The project did not push through and Torres & Baring claimed that Manuel used the loan in
furtherance of his own company.
 Manuel on the other hand, claimed that he used the loan to implement the agreement, he was able to
survey the lots and subdivide them, construct road, etc. And said that the project failed because the
petitioners and their relatives caused the annotation of adverse claimed on the title to the land which
scared prospective buyers.
 Manuel filed a case against Antonia and Emeteria to share the burden of the losses of the project.
Issue/s 1) WON there was a partnership
2) WON all partners are equally liable

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Ruling 1) Yes. Petitioners contributed property to the partnership in the form of land which was to be developed
into a subdivision; respondent gave, in addition to his industry, the amount needed for general expenses
and other costs.

2. The losses and profits shall be distributed in conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of each in the losses shall be in the same
proportion.

7. VICENTE SY v. COURT OF APPEALS

Facts
 Jaime Sahot started working as a truck helper for the Sy family’s trucking business in 1958. In 1965, he
became a truck driver and continued to be for 36 years. The company went through many phases and
changes in name.
 In 1994, Sahot was incurring absences because of various ailments. He inquired about his medical and
retirement benefit with the SSS but he discovered that his premium payments were not properly
remitted by his employer.
 In 1994, Sahot filed for a week-long leave because he had been feeling ill. He was diagnosed with a
myriad of illnesses including presleyopia, hypertensive retinopathy, osteoarthritis and heart
enlargement. He then requested for an extension of leave for a month however, he was allegedly
threatened termination of his employment if he does not return to work.
 Sahot could no longer work because of his illness. He was then dismissed by the family.
 Sahot filed a complaint for illegal dismissal and prayed for recovery of separation pay.
 Sy family alleged that he was not illegally dismissed because he was an industrial partner when the
company started. And that Sahot only started being an employee in 1994 when the SBT Trucking
Corporation was established.

Issue/s WON Sahot was an industrial partner.

Ruling No. In a 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.

There was no written agreement to prove the partnership between the parties. Sahot did not contribute
money, property, or industry for the purpose of engaging in the supposed business. There is no proof that
he was receiving a share in the profits. Neither is there any proof that he had actively participated in the
management, administration and adoption of policies of the business.

8. WOLFGAND AURBACH v. SANITARY WARED MANUFACTURING CORPORATION

Facts  ASI, an American corporation, entered into an agreement with Saniwares and some Filipino investors.
 It was agreed that the business of manufacturing would be in the Philippines, selling here and abroad.
 In the Articles of Incorporation, it stated that ASI must be protected as a minority group (40%) and that
they have veto powers over a number of corporate acts including the right to designate 3 out of 9 of
the directors and stockholders in the company.
 During the 1983 annual stockholder’s meeting, ASI nominated 3 persons, while the Filipino group
nominated a total of 8.
 Young who presided the meeting called the last two nominations as out of order, saying that the
practice was to only nominate 9. He then carried the motion of the nomination of the first 9 persons
and adjourned the meeting.
 ASI and some Filipino stockholders did not agree with the adjournment and continued the meeting at
the elevator lobby without the other investors. ASI nominated 4 people, and the other 5 was certified
by the acting secretary Gatmaitan.
 This incident triggered the filing of separate petitions by the parties with the SEC.
Issue/s Who were the duly elected directors of Saniwares for the year 1983
Ruling The Young group (first 9). It was being contended that the stockholders were being prohibited from
exercising their voting rights. In determining which vote is valid, it must first be established whether it was
a joint venture or some other relation.

ASI group contended that the intention of the parties should be viewed strictly that they were to form a
corporation, and not a joint venture.
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Young group contended that the agreement did not express the true intent of the parties.

The SC ruled that it was a joint venture. Under the agreement, there are two groups of stockholders who
established a corporation. ASI was given a designating power to select 3 out of the 9 directors. Indicating
that it is a fixed number.

The court should recognize and uphold the division of the stockholders into two groups, an at the same
time uphold the right of the stockholders within each group to cumulative voting in the process of
determining who the group’s nominees would be.
Under PH law, a joint venture is a form of partnership and should thus be governed by the law of
partnerships. A corporation cannot enter into a partnership contract, it may however engage in a joint
venture with others.

9. MARJORIE TOCAO v. COURT OF APPEALS

Facts
 Nenita Anay met Marjorie Tacao through William Belo, and they planned to enter into a joint venture
for the importation and local distribution of kitchen cookware.
 Belo: financed the venture; name did not appear in the documents
 Tacao: president and general manager; hired and fired employees
 Nenita: head of marketing and later the VP for sales; organized the administrative staff and sales force;
name was indicated in the distributorship; received commissions and percentage in annual net profits
 They operated under the name of Geminesse Enterprise; with Tacao registered as the sole
proprietorship.
 After Nenita returned from the US representing Geminesse Enterprise, she was surprised to find that
she had been relieved from her position as VP.
 She then files a complaint for sum of money with damages, praying that her share in the net profits be
determined.
 Belo and Tacao claimed that the alleged agreement was not written nor ratified, making it void or
inexistent; and that Nenita was only a marketing demonstrator of the Geminesse Enterprise for an
agreed renumeration.
Issue/s WON Nenita Anay was a partner of Tacao and Belo.
Ruling
Yes. There was an oral partnership among the three of them. Anay contributed her expertise, making her
an industrial / managing partner. Without her expertise, the business would not have flourished.

10. FERNANDO SANTOS v. SPOUSES ARSENIO & NIEVES REYES

Facts
 Fernando Santos and Nieves Reyes were introduced to each other through Meliton Zabat to form a
lending venture proposed by Nieves.
 Santos: financier
 Nieves and Zabat: in charge of solicitation of members and collection of loan payments.
 Gragera was introduced to Santos by Nieves. He was the chairman of Monte Maria and sought for
short term loans for the members of his corporation. Nieves kept the books as representative of
Santos and Arsenio, her husband, acted as credit investigator.
 Zabat was expelled from the partnership for being engaged in a competitor business.
 Santos filed a complaint for recovery of sum of money and damages alleging that Nieves and Arsenio in
their capacities as employees misappropriated the funds intended for Gragera, upon discovery that
there was P1.5 million unaccounted for.
 Nieves and Arsenio alleged that they were partners and not mere employees, and that the case was
filed to preempt and prevent them from claiming their rightful share to the profits of the partnership
Issue/s WON the spouses were partners with Santos.
Ruling Yes. Both the trial court and CA decided as well that the spouses were not mere employees but were
partners of Santos.
Nieves: brought the idea to Santos to start the money-ending business and introduced him to Gragera
Arsenio: took the place of Zabat in the partnership, also received dividends / profit-shares
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