EULOGIO M. PEDRANO vs. HEIRS OF BENEDICTO PEDRANO and HEIRS OF NORBERTO M. PEDRANO,539 SCRA 401. G.R. No. 159666 December 4, 2007Facts:Romana Pedrano acquired Lot No. 6416 located at Zamboanga del Sur from Dr. Hynson who sold it to the former for PhP 315.02. Romana was married to Benedicto Pedrano. Fourteen years later, petitioner Eulogio M. Pedrano, a son of Romana, alleged that he had bought the land himself for PhP 30,000 from Romana, payable on or before 31 December 1982 as shown in the Deed of Sale. Lot No. 6416 became a subject for a cadastral case for titling and the RTC rendered a Decision adjudicating Lot No. 6416 to petitioner; however, no Original Certificate of Title has been issued. Alleging that petitioner had not paid the purchase price on its due date, respondents filed an action asking for the annulment of the Deed of Sale, and the recovery of the possession and ownership of Lot No. 6416. According to respondents, Romana informed petitioner that the former was canceling the sale and petitioner should have Dr. Hynsons name in the title replaced with her name. Respondents averred they were unaware that petitioner instituted a cadastral case to have the land titled to himself. Petitioner denied all allegations and averred that respondents action was barred by the decision of the RTC in the Cadastral Case which had long become final and executor, and he also insisted that he had paid respondents for the land. The RTC ruled in favor of petitioner for reason that the prescription of the cause of action has set in. However, the CA ruled in favor of respondents by reason that Article 1144 of the Civil Code was erroneously applied by the RTC because the instant case involves an implied trust, and that Art. 1456 of the Civil Code was the applicable law.

Issue:WON the possession of the land by petitioner was an implied or express trust

Held:The SC ruled that petitioner occupied Lot No. 6416 as implied trustee. The facts of the case belie petitioners claims. Petitioner showed no proof that he indeed bought the land from and paid the purchase price of PhP 315.02 to Dr. Hynson. He who alleges a fact has the burden of proof and mere allegation is not evidence. Besides, the Deed of Sale, duly notarized, explicitly shows it was Romana who paid Dr. Hynson PhP 315.02 for the land. Moreover, petitioner had not adduced evidence that he indeed paid the PhP 30,000 consideration for Lot No. 6416. Hence, petitioners possession of Lot No. 6416, owned by his parents, was an implied trust constituted upon the former. The CA is correct in applying Article 1456 on implied trust to this case. Furthermore, prescription has not set in. An action for the reconveyance of a parcel of land based on implied or constructive trust prescribes in 10 years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title of the property. In the instant case, no OCT has yet been issued to Lot No. 6416 despite a court order. Without an OCT, the date from whence the prescriptive period could be reckoned is unknown and it could not be determined if indeed the period had already lapsed or not. From the foregoing discussion, the Court ruled that Lot No. 6416 is part of the estate of the spouses Benedicto and Romana and is held by petitioner as an implied trust. Petitioner is co-heir among six (6) compulsory heirs of Romana and Benedicto.Inland Realty vs CA Facts: Herein petitioners Inland Realty Investment Service, Inc. and Roman M. de los Reyes seek the reversal of the Decision of the Intermediate Appellate Court affirmed the trial court's dismissal of petitioners' claim for unpaid agent's commission for brokering the sales transaction involving 9,800 shares of stock in Architects' Bldg., Inc. between private respondent Gregorio Araneta, Inc. as seller and Stanford Microsystems, Inc. as buyer.Petitioners come to us with a two-fold agenda: (1) to obtain from us a declaration that the trial court and the respondent appellate court gravely erred when appreciating the facts of the case by disregarding a letter dated October 28, 1976 signed by Araneta, renewing petitioners' authority to act as sales agent for a period of thirty (30) days; and (2) to obtain from us a categorical ruling that a broker is automatically entitled to the stipulated commission merely upon securing for, and introducing to, the seller the particular buyer who ultimately purchases from the former the object of the sale, regardless of the expiration of the broker's contract of agency and authority to sell. From the evidence, the following facts appear undisputed: On September 16, 1975, defendant corporation thru its co-defendant Assistant General Manager J. Armando Eduque, granted to plaintiffs a 30-day authority to sell its x x x 9,800 shares of stock in Architects' Bldg., Inc. Private respondents contend that after their authority to sell expired thirty (30) days , petitioners abandoned the sales transaction and were no longer privy to the consummation and documentation thereof, the trial court dismissed petitioners' complaint for collection of unpaid broker's commission.

Issue: Whether or not plaintiff was instrumental in the final consummation of the sale to Stanford

Ruling: Petitioners take exception to the finding of the respondent Court of Appeals that their contract of agency and authority to sell expired thirty (30) days from its last renewal on December 2, 1975. They insist that, in the Letter dated October 28, 1976, Gregorio Araneta III, in behalf of Araneta, Inc., renewed petitioner Inland Realty's authority to act as agent to sell the former's 9,800 shares in Architects' for another thirty (30) days from same date. This claim is a blatant lie. In the first place, petitioners have conspicuously failed to attach a certified copy of this Letter. They have, in fact, not attached even a machine copy thereof. All they gave this court is their word that said Letter does exist, and on that basis, they expect us to accordingly rule in their favor. Such naivety, this court will not tolerate. Needless to say, this blatant attempt to mislead this court, is contemptuous conduct that we sternly condemn. The Letter dated November 16, 1976, has no probative value, considering that its very existence remains under a heavy cloud of doubt and that hypothetically assuming its existence, its alleged content, namely, a listing of four (4) other prospective buyers, does not at all prove that the agency contract and authority to sell in favor of petitioners was renewed or revived after it expired. The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale to Stanford, to be a significant index of petitioners' non-participation in the really critical events leading to the consummation of said sale. Certainly, when the lapse of the period of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale, is viewed in the context of the utter lack of evidence of petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during that period and in the subsequent processing of the documents pertinent to said sale, it becomes undeniable that the respondent Court of Appeals did not at all err in affirming the trial court's dismissal of petitioners' claim for unpaid brokerage commission.VALENZUALA V CA

Facts: Arturo Valenzuela was a general agent of Philamgen. He was authorized to solicit and sell non-life insurance in behalf of the latter and was entitled to full agent's commission. From 1973-1975, he solicited marine insurance from Delta Motors. However, he did not receive his commission. For the next 2 years, premium payments were paid directly to Philamgen and he still did not receive commission. In 1977, Philamgen expressed its intent to share with Valenzuela's commission on a 50-5- basis. It was followed by several proposals from Philamgen's President but Valenzuela consistently objected. As a result, Philamgen didn't credit the commissions due Valenzuela; placed the agency transaction on a cash and carry basis; and leaked the news that Valenzuela had substantial accounts with Delta. Philamgen later terminated the General Agency Agreement. Valenzuela filed a complaint. The trial court ruled that the termination was not justified because the principal cause was the refusal to share commission. On appeal, CA ordered Valenzuela to pay Philamgen for unpaid premium payments.

Issues: WON Philamgen is liable to pay damages for termination.

WON the agency is coupled with interest.

Held:

1. Yes. The principal cause of termination was the refusal in sharing the commission. Bad faith on the part of Philamgen was shown in its succeeding actions.

2. Yes. Valenzuela had interest in the continuation of the agency The wrongful termination resulted to the following:

a. Philamgen appropriated the entire insurance business of Valenzuela

b. Valenzuela was not entitled to the renewal of insurance policies of his clients

c. Valenzuela was made solidary liable with his clients for unpaid premiums

GENEVIEVE LIM vs. FLORENCIO SABAN

G.R. No. 163720

Facts: Ybaez, owner of a lot entered into an Agency agreement with Saban authorizing the latter to look for a buyer of the Lot, with 200k as selling price which he can mark up to cover commission and transfer expenses. Saban sold the lot to Lim in the amount of 600k. Lim issued four checks to Saban but Ybaez asked Lim to cancel said checks and pay the remaining amount directly to Ybaez. Saban filed a case against Ybaez and Lim. Pending case, Ybaez died without being substituted. RTC dismissed Sabans complaint, the four checks issued by Lim were stale and non-negotiable and the Latter was absolved. CA reversed the decision.ISSUE: Whether or not as agent, Saban is entitled to receive his commission and Lim should pay the same.RULING: The court affirms the CAs finding that agency was not revoked since Ybaez requested that Lim stop payment of the checks payable to Saban only after the consummation of the sale. At that time, Saban had already performed his obligation as agent when the Deed of Absolute Sale was executed. To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency.The logical conclusion of Court is that Lim changed her mind in agreeing to purchase the lot at 600k after talking to Ybaez and realizing that Sabans commission was higher than the share of the owner. It was sufficient to conclude Ybaez and Lim connived to deprive Saban of his commission by dealing with each other directly and reducing the price and leaving nothing to compensate Saban for his effort.

DY BUNCIO & COMPANY, INC., vs. ONG GUAN CAN, ET AL., JUAN TONG and PUA GIOK ENG

Facts: This is a suit over a rice mill and camarin situated at Dao, Province of Capiz. Plaintiff claims that the property belongs to its judgment debtor, Ong Guan Can, while defendants Juan Tong and Pua Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr.

After trial the Court of First Instance of Capiz held that the deed was invalid and that the property was subject to the execution which has been levied on said properties by the judgment creditor of the owner. Defendants Juan Tong and Pua Giok bring this appeal and insist that the deed of the 31st of July, 1931, is valid.

The first recital of the deed is that Ong Guan Can, Jr., as agent of Ong Guan Can, the proprietor of the commercial firm of Ong Guan Can & Sons, sells the rice-mill and camarin for P13,000 and gives as his authority the power of attorney dated the 23d of May, 1928, a copy of this public instrument being attached to the deed and recorded with the deed in the office of the register of deeds of Capiz. The receipt of the money acknowledged in the deed was to the agent, and the deed was signed by the agent in his own name and without any words indicating that he was signing it for the principal.

Leaving aside the irregularities of the deed and coming to the power of attorney referred to in the deed and registered therewith, it is at once seen that it is not a general power of attorney but a limited one and does not give the express power to alienate the properties in question.

Issue: Whether or not Ong Guan Can Jr. acted beyond his power as an agent.

Held: Article 1732 of the Civil Code is silent over the partial termination of an agency. The making and accepting of a new power of attorney, whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke the latter when the two are inconsistent. If the new appointment with limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture.

The title of Ong Guan Can not having been divested by the so-called deed of July 31, 1931, his properties are subject to attachment and execution.

Caragay-Layno vs. Court of Appeals

G.R. No. L-52064 December 26, 1984

Facts: The Disputed Portion is a 3,732 square-meter-area of a bigger parcel of sugar and coconut land, with a total area of 8,752 square meters, situated at Calasiao, Pangasinan. The entire parcel is covered by Original Certificate of Title No. 63 issued on 11 September 1947 in the name of Mariano M. DE VERA, who died in 1951. His intestate estate was administered first by his widow and later by her nephew, respondent Salvador Estrada.

Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first cousins, "both orphans, who lived together under one roof in the care of a common aunt."

As Administratrix, DE VERA's widow filed in Special Proceedings an Inventory of all properties of the deceased, which included "a parcel of land in the poblacion of Calasiao, Pangasinan, containing an area of 5,417 square meters, more or less. Because of the discrepancy in area mentioned in the Inventory and that in the title, ESTRADA repaired to the Disputed Property and found that the northwestern portion, subsequently surveyed to be 3,732 square meters, was occupied by petitioner-spouses Juliana Caragay Layno and Benito Layno. ESTRADA demanded that they vacate the Disputed Portion since it was titled in the name of the deceased DE VERA, but petitioners refused claiming that the land belonged to them and, before them, to JULIANA's father Juan Caragay. ESTRADA then instituted suit against JULIANA for the recovery of the Disputed Portion, which she resisted, mainly on the ground that the Disputed Portion had been fraudulently or mistakenly included in OCT No. 63, so that an implied or constructive trust existed in her favor. She then counterclaimed for reconveyance of property in the sense that title be issued in her favor. The Trial Court rendered judgment ordering JULIANA to vacate the Disputed Portion. On appeal respondent Appellate Court affirmed the Decision in toto.

Issue: Whether Juliana Caragays claim for reconveyance based on implied or constructive trust has prescribed

Held: As disclosed by the evidence, that for 20 years from the date of registration of title in 1947 up to 1967 when this suit for recovery of possession was instituted, neither the deceased DE VERA up to the time of his death in 1951, nor his successors-in-interest, had taken steps to possess or lay adverse claim to the Disputed Portion. They may, therefore be said to be guilty of laches as would effectively derail their cause of action. Administrator ESTRADA took interest in recovering the said portion only when he noticed the discrepancy in areas in the Inventory of Property and in the title. JULIANA, whose property had been wrongfully registered in the name of another, but which had not yet passed into the hands of third parties, can properly seek its reconveyance.

Prescription cannot be invoked against JULIANA for the reason that as lawful possessor and owner of the Disputed Portion, her cause of action for reconveyance which, in effect, seeks to quiet title to the property, falls within settled jurisprudence that an action to quiet title to property in one's possession is imprescriptible. Her undisturbed possession over a period of 52 years gave her a continuing right to seek the aid of a Court of equity to determine the nature of the adverse claim of a third party and the effect on her own title.

Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance, and to annul OCT. No. 63 accrued only in 1966 when she was made aware of a claim adverse to her own. It was only then that the statutory period of prescription may be said to have commenced to run against her.

CASE:MARSMAN DRYSDALE LAND, INC vs PHILIPPINE GEOANALYTICS, INC.

GR No. 183374

June 29, 2010

Carpio-Morales, J.

FACTS:

Marsman and Gotesco Properties, Inc. entered into a joint venture agreement for the construction of a building on a land owned by Marsman in Makati. The agreement called for a 50:50 investment on the project. The joint venture engaged the services of PGI to provide technical services. PGI billed the joint venture but the latter failed to pay its obligations until such time when the joint venture itself was cut short due to unfavourable economic conditions. A complaint for collection of sum of money and damages was filed by PGI against the petitioners. Marsman argued that Gotesco, under the JVA, was solely liable for monetary expenses of the project. On the other hand, Gotesco averred that PGI had yet to complete the services and that Marsman failed to clear the property of debris which prevented PGI to complete its work. The RTC ruled in favor of PGI and Marsmans motion for partial reconsideration was denied. Upon appeal, the CA affirmed with modification the decision of the trial court and held that the JV cannot avoid payment to PGI since the JVA could not affect third persons like PGI because of the basic civil law principle of relativity of contracts which provide that contracts can only bind the parties who entered into it, and it cannot favor nor prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.

ISSUE:

Which between Marsman and Gotesco bears the liability to pay PGI its unpaid claims?

HELD:

The SC affirmed with modification the order of the CA in that the order of reimbursement by Gotesco to Marsman is deleted.

The Court found Marsman and Gotesco jointly liable to PGI.

The only time that the JVA may be made to apply in the present petitions is when the liability of the joint venturers to each other would set in. A JV, being a form of partnership, is to be governed by the laws on partnership. In the JVA, Marsman and Gotesco agreed on a 50-50 ratio on the proceeds of the project. They did not provide for the splitting of losses. Applying Article 1797 of the Civil Code, the same ratio applies in splitting the obligation-loss of the JV. Being jointly liable, there is no need for Gotesco to reimburse Marsman for the 50% aggregate sum due to PGI. Allowing Marsman to recover from Gotesco what it paid would not only be contrary to the law on partnership on division of losses but would partake of a clear case of unjust enrichment at Gotescos expense.

Mendoza v Paule

G.R. No. 175885

Facts: Engineer Eduardo M. Paule is the proprietor of E.M. Paule Construction and Trading (EMPCT). On May 24, 1999, Paule executed a special power of attorney (SPA) authorizing Zenaida G. Mendoza to participate in the pre-qualification and bidding of a National Irrigation Administration (NIA) project and to represent him in all transactions related thereto. EMPCT, through Mendoza, participated in the bidding of the NIA-Casecnan Multi-Purpose Irrigation and Power Project (NIA-CMIPP) and was awarded Packages A-10 and B-11 of the NIA-CMIPP Schedule A. When Manuel de la Cruz learned that Mendoza is in need of heavy equipment for use in the NIA project, he met up with Mendoza in Bayuga, Muoz, Nueva Ecija, in an apartment where the latter was holding office under an EMPCT sign board. On April 27, 2000, PAULE revoked the SPA he previously issued in favor of Mendoza; consequently, NIA refused to make payment to Mendoza on her billings. Cruz, therefore, could not be paid for the rent of the equipment. Upon advice of Mendoza, Cruz addressed his demands for payment of lease rentals directly to NIA but the latter refused to acknowledge the same and informed Cruz that it would be remitting payment only to EMPCT as the winning contractor for the project. However, without resolving Mendozas motion to declare Paule non-suited, and without granting her the opportunity to present her evidence ex parte, the trial court rendered its decision holding Paule liable. Mendoza was duly constituted as EMPCTs agent for purposes of the NIA project and that Mendoza validly contracted with Cruz for the rental of heavy equipment that was to be used there for. It found unavailing Paules assertion that Mendoza merely borrowed and used his contractors license in exchange for a consideration of 3% of the aggregate amount of the project.

The trial court held that through the SPA she executed, Paule clothed Mendoza with apparent authority and held her out to the public as his agent; as principal, Paule must comply with the obligations which Mendoza contracted within the scope of her authority and for his benefit. Furthermore, Paule knew of the transactions which Mendoza entered into since at various times when she and Cruz met at the EMPCT office, Paule was present and offered no objections. The trial court declared that it would be unfair to allow Paule to enrich himself and disown his acts at the expense of Cruz.The appellate court held that the SPAs issued in Mendozas favor did not grant the latter the authority to enter into contract with Cruz for hauling services; the SPAs limit Mendozas authority to only represent EMPCT in its business transactions with NIA, to participate in the bidding of the project, to receive and collect payment in behalf of EMPCT, and to perform such acts a smay be necessary and/or required to make the said authority effective. Thus, the engagement of Cruz hauling services was done beyond the scope of Mendozas authority.

Issue: Whether or not an agency may be revoke when a bilateral contract depends it.

Held: Records show that Paule and Mendoza had entered into a partnership in regard to the NIA project. Paules contribution thereto is his contractors license and expertise, while Mendoza would provide and secure the needed funds for labor, materials and services; deal with the suppliers and sub-contractors; and in general and together with Paule, oversee the effective implementation of the project. For this, Paule would receive as his share three per cent (3%) of the project cost while the rest of the profits shall go to Mendoza. Paule admits to this arrangement in all his pleadings. Although the SPAs limit Mendozas authority to such acts as representing EMPCT in its business transactions with NIA, participating in the bidding of the project, receiving and collecting payment in behalf of EMPCT, and performing otheracts in furtherance thereof, the evidence shows that when Mendoza and Cruz met and discussed (at the EMPCT office in Bayuga, Muoz, Nueva Ecija) the lease of the latters heavy equipment for use in the project, Paule was present and interposed no objection to Mendozas actuations. In his pleadings, Paule does not even deny this. Quite the contrary, Mendozas actions were in accord with what she and Paule originally agreed upon, as to division of labor and delineation of functions within their partnership.

Under the Civil Code, every partner is an agent of the partnership for the purpose of its business; each one may separately execute all acts of administration, unless a specification of their respective duties has been agreed upon, or else it is stipulated that any one of them shall not act without the consent of all the others. At any rate, Paule does not have any valid cause for opposition because his only role in the partnership is to provide his contractors license and expertise, while the sourcing of funds, materials, labor and equipment has been relegated to Mendoza. Moreover, it does not speak well for Paule that he reinstated Mendoza as his attorney-in-fact, this time with broader powers to implement, execute, administer and supervise the NIA project, to collect checks and other payments due on said project, and act as the Project Manager for EMPCT, even after Cruz has already filed his complaint. Despite knowledge that he was already being sued on the SPAs, he proceeded to execute another in Mendozas favor, and even granted her broaderpowers of administration than in those being sued upon. If he truly believed that Mendoza exceeded her authority with respect to the initial SPA, then he would not have issued anotherSPA. If he thought that his trust had been violated, then he should not have executed another SPA in favor of Mendoza, much less grant her broader authority. There was no valid reason for Paule to revoke Mendozas SPAs. Since Mendoza took care of the funding and sourcing of labor, materials and equipment for the project, it is only logical that she controls the finances, which means that the SPAs issued to herwere necessary for the proper performance of her role in the partnership, and to discharge the obligations she had already contracted prior to revocation. Without the SPAs, she could not collect from NIA, because as far as it is concerned, EMPCT and not the Paule-Mendoza partnership is the entity it had contracted with. Without these payments from NIA, there would be no source of funds to complete the project and to pay off obligations incurred. As Mendoza correctly argues, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.ADILLE VS. COURT OF APPEALS. G.R. No. L-44546; 157 SCRA 455; January 29, 1988

Ponente: Justice Sarmiento

FACTS: Feliza Alzul originally owned Lot No. 14694 with an area of 11,325 sq. m. in Legaspi City. During her lifetime, she married twice. Her first marriage was with Bernabe Adille, where she had a son named Rustico Adille. Her second marriage was with Procopio Asejo where she had 5 children including Emeteria Asejo. In 1939, Feliza Alzul sold the property in pacto de retro to certain 3rd persons with a 3-year redemption period. However, in 1942, Feliza died and wasnt able to redeem the lot. During the redemption period, Rustico Adille repurchased by him alone, and after that, executed a deed of extra-judicial partition representing his own self to be the only heir and child of his mother Feliza. Thereafter, Adille secured the title in 1955. Compromise between Adille and the Asejos failed. The Asejos then filed a case for partition contending that Adille was only a trustee in an implied trust. The trial court ruled in favor of Adille holding that he became the absolute owner of the land. The Court of Appeals reversed the ruling in favor of the Asejos. Adille appealed to the Supreme Court contending that the claim of the Asejos are barred by prescription as the land was titled under Adilles name on 1955 and that the claim was filed only in 1974.

ISSUE: Whether or not prescription will bar the claim of the Asejos.

HELD: NO, prescription is not at a bar. Prescription, as a mode of terminating a relation of co-ownership, must have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive, and (4) he has been in possession through open, continuous, exclusive, and notorious possession of the property for the period required by law.

The court is not convinced that he had repudiated the co-ownership; on the contrary, he had deliberately kept the private respondents in the dark by feigning sole heirship over the estate under dispute. He cannot therefore be said to have "made known" his efforts to deny the co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the petitioner has not taken pains to eject her therefrom. As a matter of fact, he sought to recover possession of that portion Emeteria is occupying only as a counterclaim, and only after the private respondents had first sought judicial relief.

The Torrens title does not furnish a shield for fraud. It is therefore no argument to say that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of title. While actions to enforce a constructive trust prescribes in ten years, reckoned from the date of the registration of the property, the Court is not prepared to count the period from such a date in this case. the petitioner's sub rosa efforts to get hold of the property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is the only heir and child of his mother Feliza with the consequence that he was able to secure title in his name also. Accordingly, the Court holds that the right of the private respondents commenced from the time they actually discovered the petitioner's act of defraudation, only during the litigation.

Philex Mining Corporation vs CIR.

G.R. No. 148187April 16, 2008

FACTS: Petitioner Philex Mining Corp.entered into an agreement with Baguio Gold Mining Company, where the former agreed to manage the mining operations of the latter, known as the Sto. Nino mine, located inAtok and Tublay, Benguet Province.The agreement was evidenced by a Power of Attorney.It was indicated in the said document, that Baguio Gold would contribute P11M under its owner's account plus any of its income that is left in the project, in addition to its actual mining claim. Meanwhile, petitioner's contribution would consist of its expertise in the management and operation of mines, and of the manager's account which is comprised of P11M in funds. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the Sto. Nino project before income tax.

In the course of managing and operating the project, Philex Mining made advances of cash and property in accordance with the agreement.However, the mine suffered continuing losses over the years which resulted to petitioners withdrawal as manager of the mine and the eventual cessation of mine operations. Thereafter, the parties executed a "Compromise with Dation in Payment" wherein Baguio Gold admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to pay the same in three segments by first assigning Baguio Golds tangible assets to petitioner, transferring to the latter Baguio Golds equitable title in its Philodrill assets and finally settling the remaining liability through properties that Baguio Gold may acquire in the future.

The CIR assessed Philex Mining for tax deficiencies. It stressed that Philex entered into a partnership with Baguio Gold. Petitioner denied the allegations of the CIR and maintained that its advances of money and property to Baguio Gold were in a nature of a loan as evidenced by the compromise agreement. The CTA characterized the advances as petitioners investment in a partnership with Baguio Gold for the development and exploitation of the Sto. Nino mine. The CTA held that the "Power of Attorney" executed by petitioner and Baguio Gold was actually a partnership agreement. The Court of Appeals affirmed the decision of the CTA.

ISSUE: WON the parties entered into a contract of agency coupled with an interest which is not revocable at will

HELD: No. An examination of the "Power of Attorney" reveals that a partnership or joint venture was indeed intended by the parties.Perusal of the agreement denominated as the "Power of Attorney" indicates that the parties had intended to create a partnership and establish a common fund for the purpose. They also had a joint interest in the profits of the business as shown by a 50-50 sharing in the income of the mine.

In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the principal due to an interest of a third party that depends upon it, or the mutual interest of both principal and agent. In this case, the non-revocation or non-withdrawal under paragraph 5(c) applies to the advances made by petitioner who is supposedly the agent and not the principal under the contract. Thus, it cannot be inferred from the stipulation that the parties relation under the agreement is one of agency coupled with an interest and not a partnership. Neither can paragraph 16 of the agreement be taken as an indication that the relationship of the parties was one of agency and not a partnership. Although the said provision states that this Agency shall be irrevocable while any obligation of the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS account, it does not necessarily follow that the parties entered into an agency contract coupled with an interest that cannot be withdrawn by Baguio Gold.

The main object of the Power of Attorney was not to confer a power in favor of petitioner to contract with third persons on behalf of Baguio Gold but to create a business relationship between petitioner and Baguio Gold, in which the former was to manage and operate the latters mine through the parties mutual contribution of material resources and industry. The essence of an agency, even one that is coupled with interest, is the agents ability to represent his principal and bring about business relations between the latter and third persons.

The strongest indication that petitioner was a partner in the Sto. Nino Mine is the fact that it would receive 50% of the net profits as compensation under paragraph 12 of the agreement. The entirety of the parties contractual stipulations simply leads to no other conclusion than that petitioners compensation is actually its share in the income of the joint venture. Article 1769 (4) of the Civil Code explicitly provides that the receipt by a person of a share in the profits of a business is prima facie evidence that he is a partner in the business.

While a corporation, like the petitioner, cannot generally enter into a contract of partnership unless authorized by law or its charter, it has been held that it may enter into a joint venture which is akin to a particular partnership: under Philippine law, a joint venture is a form of partnership and should be governed by the law of partnerships

Heirs of Tang Eng Kee vs. CA

G.R. No. 126881; October 3, 2000FACTS:

Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, the common-law spouse of the decedent, joined by their children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known as herein petitioners HEIRS OF TAN ENG KEE, filed suit against the decedent's brother TAN ENG LAY on February 19, 1990. The complaint,3docketed as Civil Case No. 1983-R in the Regional Trial Court of Baguio City 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 petitioners filed an amended complaint4impleading private respondent herein BENGUET LUMBER COMPANY, as represented by Tan Eng Lay. The amended complaint was admitted by the trial court in its Order dated May 3, 1991.5The 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: Whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber

HELD: In determining whether a partnership exists, these rules in 1769 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 aprima facieevidence 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 afore-quoted 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, 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.

AFISCO Insurance Corporation vs. Court of Appeals302 SCRA 1 (January 25, 1999)

Facts: AFISCO and 40 other non-life insurance companies entered into a Quota Share Reinsurance Treaties with Munich, a non-resident foreign insurance corporation, to cover for All Risk Insurance Policies over machinery erection, breakdown and boiler explosion. The reinsurance treaties required them to form an insurance pool or clearing house in order to facilitate the handling of the business they contracted with Munich. The CIR assessed the insurance pool deficiency corporate taxes and withholding taxes on dividends paid on Munich and to the petitioners respectively. The assessments were protested by the petitioners.

The CA ruled that the insurance pool was a partnership taxable as a corporation and that the latters collection of premiums on behalf of its members was taxable income.

The petitioners belie the existence of a partnership because, according to them, the reinsurers did not share the same risk or solidary liability, there was no common fund, the executive board of the pool did not exercise control and management of its funds and the pool was not engaged in business of reinsurance from which it could have derived income for itself.

Issue: Whether or not the insurance pool may be deemed a partnership or an association that is taxable as a corporation.

Ruling: The pool is taxable as a corporation. In the present case, the ceding companies entered into a Pool Agreement or an association that would handle all the insurance businesses covered under their quota-sharing reinsurance treaty and surplus reinsurance treaty with Munich. There are unmistakable indicators that it is a partnership or an association covered by NIRC.

a. The pool has a common fund, consisting of money and other valuables that are deposited in the name and credit of the pool.

b. The pool functions through an executive board which resembles the BOD of a corporation.

c. Though the pool itself is not a reinsurer, its work is indispensable, beneficial and economically useful to the business of the ceding companies and Munich because without it they would not have received their premiums. Profit motive or business is therefore the primordial reason for the pools formation.

The fact that the pool does not retain any profit or income does not obliterate an antecedent fact that of the pool is being used in the transaction of business for profit. It is apparent, and petitioners admit that their association or co-action was indispensable to the transaction of the business. If together they have conducted business, profit must have been the object as indeed, profit was earned. Though the profit was apportioned among the members, this is one a matter of consequence as it implies that profit actually resulted.

Petitioners' reliance on Pascual v. Commissioner is misplaced, because the facts obtaining therein are not on all fours with the present case. In Pascual, there was no unregistered partnership, but merely a co-ownership which took up only 2 isolated transactions. The CA did not err in applying Evangelista, which involved a partnership that engaged in a series of transactions spanning more than 10 years, as in the case before us.

Orient Air Services & Hotel Representatives versus Court of Appeals

G.R. No. 76933, May 29, 1991

Facts:American Airlines Inc. entered into a General Sales Agency Agreement with Orient Air Services and Hotel Representatives on 15 January 1977. Orient is tasked to act as American Airs exclusive general sales agent within the Philippines for the sale of air passenger transportation. In return, Orient is to receive two commissions namely a sales agency commission ranging from 7-8% and another for an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air services. The agreement included a provision that says American Air may terminate the agreement on two days notice xxx. Orient defaulted in remittance for three months and thereafter without notice, American Air terminated the agreement. A suit was filed by American Air against Orient for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order. Orient contested in reply stating that even after application of the commissions in issue, American Air still owed Orient a balance composed of unpaid overriding commissions. The Regional Trial Court ruled in favour of Orient Air and ordered for the latters reinstatement as a general sales agent. American Air escalated the issue to the Court of Appeals. The Appellate Court affirmed the decision of the lower court with modified monetary awards. Unsatisfied with the decision, American Air and Orient Air appealed to the Supreme Court in a consolidated petition.

Issue:Whether or not the Court of Appeals was correct in affirming the decision of the Regional Trial Court regarding the reinstatement of Orient Air.

Held: No. In as much as there was wrongful termination in the case at bar due to American Airs non-compliance with the 2-days notice indicated in the Agency Agreement, nothing, even the courts and laws, can compel the reinstatement of Orient Air as an agent. Agency is defined by law as a contract where 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. To reinstate Orient through a court decision is a violation of the essence of the definition of an agency since there is no consent at all from the principal.Tongoy vs. Court of Appeals 123 SCRA 99

Facts: Hacienda Pulo, a parcel of land owned by the Tongoys in co-equal shares, was in danger of foreclosure. The heirs of the surviving owners of Hacienda Pulo, Francisco and Jovita Tongoy, had in separate documents transferred their rights to Hacienda Pulo to Luis D. Tongoy, heir of Francisco Tongoy.

On November 8, 1935, based on the documents, Hacienda Pulo was placed in the name of Luis D. Tongoy, married to Maria Rosario Araneta. In the following year, the title of the adjacent Cuaycong property also came under the name of Luis D. Tongoy, married to Maria Rosario Araneta by virtue of an "Escritura de Venta" executed in his favor by the owner Basilisa Cuaycong on June 22, 1936 purportedly for P4,000.00.

After two decades, on April 17, 1956, Luis D. Tongoy paid off all his obligations with the PNB. However, it was only on April 22, 1958 that a release of real estate mortgage was executed by the bank in favor of Luis D. Tongoy.

On February 5, 1966, 8 years after the release of real estate mortgage was executed, Luis D. Tongoy died at the Lourdes Hospital in Manila, leaving as heirs his wife Maria Rosario Araneta and his son Francisco A. Tongoy. Just before his death, however, Luis D. Tongoy received a letter from Jesus T. Sonora, dated January 26, 1966, demanding the return of the shares in the properties to the co-owners.

The other heirs of Tongoy, now that Hacienda Pulo is now free of mortgage obligations, file a petition for their rights to the shares of and income generated by Hacienda Pulo. The respondents allege that their interests on the two lots in question were transferred to Luis D. Tongoy by means of simulated sales, pursuant to a trust arrangement whereby the latter would return such interests after the mortgage obligations thereon had been settled.

Francisco A. Tongoy and Ma. Rosario Vda. de Tongoy filed separate answers, denying in effect plaintiffs' causes of action, and maintaining, among others, that the sale to Luis D. Tongoy of the two lots in question was genuine and for a valuable consideration, and that no trust agreement of whatever nature existed between him and the plaintiffs. As affirmative defenses, defendants also raised laches, prescription, estoppel, and the statute of frauds against plaintiffs. Answering defendants counter claimed for damages against plaintiffs for allegedly bringing an unfounded and malicious complaint.

After trial on the merits, the lower court rendered its decision on October 15, 1968 finding the existence of an implied trust in favor of plaintiffs, but at the same time holding their action for reconveyance barred by prescription, except in the case of select Tongoy heirs who were adjudged entitled to reconveyance of their corresponding shares in the property, they having been excluded therefrom in the partition during their minority, and not having otherwise signed any deed of transfer over such shares.

Both parties appealed the decision. The respondents questioned, among others, the lower court's decision dismissing their complaint on ground of prescription, and assailed it insofar as it held that the agreement created among the Tongoy-Sonora family in 1931 was an implied, and not an express trust. For their part, the petitioners not only refuted the errors assigned by respondents, but also assailed, among others, the findings that there was preponderance of evidence in support of the existence of an implied trust.

The appellate court ruled against Francisco A. Tongoy and ordered him to reconvey the respective shares of the Plaintiffs-appellants, render to them an accounting with respect to the income of Hacienda Pulo and the Cuaycong property from May 5, 1958 up to the time the reconveyances as herein directed are made, and pay them their proportionate shares of the income with legal interest.

In the case before the Court, the petitioners filed for review on certiorari claiming the following: that there was no trust constituted on Hacienda Pulo and the Cuaycong Property; even if there was an implied trust, the rights of the respondents have prescribed or are barred by laches;

Issue: Was there an implied trust? Have the rights of the respondents prescribed or are barred by Laches?

Held: No. The Court of Appeals found enough convincing evidence to support that the transfers made by the co-owners in favor of Luis D. Tongoy were simulated. Based on Articles 1409 and 1410 of the New Civil Code, such contracts are inexistent, void from the beginning, and The action or defense for the declaration of the inexistence of a contract does not prescribe.

Evidently, the deeds of transfer executed in favor of Luis Tongoy were from the very beginning absolutely simulated or fictitious, since the same were made merely for the purpose of restructuring the mortgage over the subject properties and thus preventing the foreclosure by the PNB. Thus, the action for reconveyance instituted by herein respondents which is anchored on the said simulated deeds of transfer cannot and should not be barred by prescription.

There is no implied trust that was generated by the simulated transfers, because being fictitious or simulated, the transfers were null and void ab initio-from the very beginning and thus vested no rights whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give life to anything at all. Thus, the other heirs of Tongoy are indeed entitled to their shares of the estate and any income generated.

But even assuming that such an implied trust exists between Luis Tongoy as trustee and the private respondents as cestui que trust, the rights of private respondents to claim reconveyance is still not barred by prescription or laches. The Court, based on jurisprudence, holds that implied or constructive trusts prescribe in ten years, and an action for reconveyance based on implied or constructive trust, prescribes in ten years. The said prescriptive period is to run not from the time the properties were registered under the trustees name by from the time the properties registration of the release of the mortgage obligation, the latter being the only by that time could plaintiffs-appellants be charged with constructive knowledge of the liquidation of the mortgage obligations. Since the petition was filed within this ten year period (June 1966), their action has not prescribed.