DELUAO VS.

CASTEEL
26 SCRA 475
FACTS:
Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of Malalag
(now the Municipality of Malalag), Municipality of Padada, Davao for three times since 1940 but no
action was taken thereon by the authorities concerned. Despite the said rejection, Casteel did not lose
interest. Meanwhile, several applications were submitted by other persons for portions of the area covered
by Casteel's application, one of them was Felipe Deluao, uncle of Casteel.
Because of the threat poised upon his position by the above applicants who entered upon and spread
themselves within the area, Casteel sought financial aid from his uncle Deluao with which to finance the
needed improvements on the fishpond. Hence, a wide productive fishpond was built. But despite the
improvements introduced, Casteels application was still rejected. He then appealed the rejection made
with the Secretary of Agriculture and Natural Resources.
Pending appeal, Inocencia Deluao (wife of Felipe Deluao) and Nicanor Casteel executed a contract
denominated as contract of service whereby Deluao hires and employs the Casteel. The latter will be
the Manager and sole buyer of all the produce of the fish that will be produced from said fishpond while
the former will be the administrator of the same she having financed the construction and improvement of
said fishpond. At the same time, Inocencia Deluao executed a special power of attorney in favor of Jesus
Donesa, extending to the latter the authority to represent her in the administration of the fishpond.
Meanwhile, the Secretary of Agriculture and Natural Resources issued a decision stating that Nicanor
Casteel should be, as hereby it is, reinstated and given due course for the area applied for. Nicanor Casteel
then forbade Inocencia Deluao from further administering the fishpond, and ejected the latter's
representative, Donesa, from the premises.
Alleging violation of the contract of service entered into between Deluao and Casteel, Deluao filed an
action in the CFI for specific performance and damages against Casteel and one Juan Depra (who, they
alleged, instigated Casteel to violate his contract).
ISSUES:
1) Whether the agreement made by the parties created a contract of co-ownership or partnership.
2) Whether the reinstatement of Casteel over the subject land constitute a dissolution of the
partnership between him and Deluao.
HELD:
The evidence preponderates in favor of the view that the initial intention of the parties was not to form a
co-ownership but to establish a partnership Inocencia Deluao as capitalist partner and Casteel as
industrial partner the ultimate undertaking of which was to divide into two equal parts such portion of
the fishpond as might have been developed by the amount extended by the plaintiffs-appellees, with the
further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of
the fishpond that would pertain to him. This can be gleaned, among others, from the letter of Casteel to
Felipe Deluao showing the intention to divide the fishpond.
On the second issue, the Supreme Court ruled that the arrangement under the so-called "contract of
service" continued until the decision issued by the Secretary of Agriculture and Natural Resources. This
development, by itself, brought about the dissolution of the partnership. Since the partnership had for its
object the division into two equal parts of the fishpond between the appellees and the appellant after it

shall have been awarded to the latter, and therefore it envisaged the unauthorized transfer of one half
thereof to parties other than the applicant Casteel, it was dissolved by the approval of his application and
the award to him of the fishpond.

PIONEER INSURANCE & SECURITY CORP. VS. CA

175 SCRA 668
FACTS:
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced
Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute funds and to buy two aircrafts which would form
part a corporation which will be the expansion of Southern Air Lines. Maglana et al then contributed and
delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of
Maglana et al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which
were brought in installment from Japan Domestic Airlines (JDA) using said aircrafts as security. So when
Lim defaulted from paying JDA, the two aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE:
Whether or not Maglana et al must share in the loss as general partners.
HELD:
No. There was no de facto partnership. Ordinarily, when co-investors agreed to do business through a
corporation but failed to incorporate, a de facto partnership would have been formed, and as such, all
must share in the losses and/or gains of the venture in proportion to their contribution. But in this case, it
was shown that Lim did not have the intent to form a corporation with Maglana et al. This can be inferred
from acts of unilaterally taking out a surety from Pioneer Insurance and not using the funds he got from
Maglana et al. The record shows that Lim was acting on his own and not in behalf of his other would-be
incorporators in transacting the sale of the airplanes and spare parts.

MAGDUSA VS. ALBARAN

5 SCRA 511
FACTS:
Appellant and appellees, together with various other persons, had verbally formed a partnership de facto
forthe sale of general merchandise in Surigao, to which appellant contributed P2,000 as capital, and the
others contributed their labor, under the condition that out of the net profits of the business 25% would be
added to the original capital, and the remaining 75% would be divided among the members in proportion
to the length of service of each.
The appellees expressed their desire to withdraw from the partnership, and appellant thereupon made a
computation (exhibit C) to determine the value of the partners' shares to that date.

Appellees thereafter made demands upon appellant for payment, but appellant having refused, they filed
the initial complaint in the court.
ISSUE:
The main argument of appellant is that the appellees' action cannot be entertained, because in the
distribution of all or part of a partnership's assets, all the partners have no interest and are
indispensable parties without whose intervention no decree of distribution can be validly entered.
Held:
A partner's share cannot be returned without first dissolving and liquidating the partnership (Po Yeng
Cheo vs. Lim Ka Yam, 44 Phil. 177), for the return is dependent on the discharge of the creditors, whose
claims enjoy preference over those of the partners; and it is self-evident that all members of the
partnership are interested in his assets and business, and are entitled to be heard in the matter of the firm's
liquidation and the distribution of its property. The liquidation (exhibit C) is not signed by the other
members of the partnership besides appellees and appellant; it does not appear that they have approved,
authorized, or ratified the same, and, therefore, it is not binding upon them. At the very least, they are
entitled to be heard upon its correctness.
In addition, unless a proper accounting and liquidation of the partnership affairs is first had, the capital
shares of the appellees, as retiring partners, cannot be repaid, for the firm's outside creditors have
preference over the assets of the enterprise (Civ. Code, Art. 1839), and the firm's property cannot be
diminished to their prejudice. Finally, the appellant cannot be held liable in his personal capacity for the
payment of partners' shares for he does not hold them except as manager of, or trustee for, the partnership.
It is the latter that must refund their shares to the retiring partners. Since not all the members of the
partnership have been impleaded, no judgment for refund can be rendered, and the action should have
been dismissed.

SEVILLA VS. CA
160 SCRA 171
FACTS:
On the strength of a contract entered into by and between Mrs. Segundina Noguera and the Tourist World
Service, Inc., the latter leased the premises belonging to Noguera at Mabini St., Manila for the formers
use as a branch office. When the branch office was opened, the same was run by Una 0. Sevilla payable to
Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4%
was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
The Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a
rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist
World Service considered closing down its office. This was firmed up by two resolutions of the board of
directors of Tourist World Service, the first abolishing the office of the manager and vice-president of the
Tourist World Service, Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive
the properties of the Tourist World Service then located at the said branch office. It further appears that
the contract for the use of the Branch Office premises was terminated and no longer used it. Because of
this, and to comply with the mandate of the Tourist World Service, the corporate secretary went over to
the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises to protect the interests of the Tourist World Service. When neither the appellant

Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the
herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction.
The trial court held for the private respondent, Tourist World Service, Inc., being the true lessee, it was
within its prerogative to terminate the lease and padlock the premises. It likewise found Lina Sevilla, to
be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her
employer. The respondent Court of Appeal rendered an affirmance.
ISSUE:
Whether the contract entered into was of employment or partnership or agency?
HELD:
Lina Sevilla is not employee of Tourist World Service, Inc. The right-of-control test and certain economic
parameters were not established. In rejecting Tourist World Service, Inc.'s arguments however, we are not,
as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or
otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation.
A joint venture, including a partnership, presupposes generally a of standing between the joint coventurers or partners, in which each party has an equal proprietary interest in the capital or property
contributed 15 and where each party exercises equal rights in the conduct of the business. Furthermore,
the parties did not hold themselves out as partners, and the building itself was embellished with the
electric sign "Tourist World Service, Inc. in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services "in representation or on behalf of
another.In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her
principal's authority as owner of the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal
agent relationship, rather than a joint managament or a partnership.
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with
the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for mutual interest, of the agent and the principal. It appears that Lina Sevilla
is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to
her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily
liable for the payment of rentals. She continued the business, using her own name, after Tourist World had
stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her
business transactions, but one that extends to the very subject matter of the power of management
delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.

CABALLERO VS. DEIPARINE

60 SCRA 136
FACTS:
This involves a dispute over a parcel of land and the acts committed by the plaintiff lawyer which were
not intended by his client, the plaintiff.

During the lifetime of Bucao she with her second husband acquired by joint purchase a parcel of land
from the Talisay-Minglanilla Estate.
Bucao and Tomas then executed jointly a notarial instrument identified as Annex "B" wherein they
acknowledged that Antonio Caballero had contributed the amount therein stated for the purchase of the
property and they sold 1/4 of the lot to him; when the title to said lot was issued, VicentaBucao and
Tomas Raga held it in trust for their co-owner.
The portion mentioned as sold to plaintiff Antonio Caballero remained unsegregated from Lot 2072 and
the deed of sale, Annex "B" of the Complaint; nor had it been registered in the Register of Deeds; but he,
had been in occupation of a portion of this lot peacefully until the present.
Bucao sold her undivided 1/2 of the above parcel to her co-owner, Tomas Raga.
Defendants Olimpio Raga, Adriano Raga, Magdalena Raga and Tomas Raga executed an instrument
known as "Declaration and confirmation of sale" without the participation of plaintiffs Antonio Caballero
and Concordia Caballero, wherein they stated that they are the heirs of Vicenta Bucao of the 1/2 of the
property to Tomas Raga, a certified true copy of which document is identified as Annex "E" in the
Complaint.
Alma Deiparine acquired in good faith, with a just title and for a valuable consideration, the whole of Lot
2072 from Tomas Raga as per deed of absolute sale identified as Annex "C" in the complaint which
cancelled Transfer Certificate of Title No. RT-2482 (T-17232) and the issuance in her name of Transfer
Certificate of Title No. 9934 on April 1, 1963, a certified true copy of which is identified as Annex "D" in
the complaint;
defendant Alma Deiparine came to know only of Annex "B" when it was presented by plaintiff Antonio
Caballero at the trial of an ejectment case filed by the former in the Municipal Court of Talisay.
This case was decided in favor of Antonio Caballero but the decision was appealed by Alma Deiparine to
the Court of First Instance of Cebu which affirmed the decision for Caballero. The case is now in the
Court of Appeals on appeal by Alma Deiparine.
Caballero and the defendant parties entered into a compromise agreement. And the lawyer of Caballero
admitted to certain facts without the authority of his client, Caballero.
ISSUE:
Is the compromise valid, considering that the lawyer admitted to facts which were not authorized
by his client to make?
HELD:
No.
A reading of the stipulation of facts convinced the court that it is a compromise agreement of the parties.
The stipulation concludes with this prayer: "WHEREFORE, it is most respectfully prayed that the
foregoing Stipulation of Facts be approved and that a decision be handed down on the legal issues
submitted on the basis of said Stipulation of Facts." Apparently it is intended to terminate the case.
Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in
writing, and in taking appeals, and in all matters of ordinary judicial procedure. But they cannot, without

special authority, compromise their client's litigation, or receive anything in discharge of a client's claim
but the full amount in cash
It may be true that during the pre-trial hearing held on February 3, 1968, the parties concerned agreed to
execute a stipulation of facts but it does not mean that the respective counsels of the contending parties
can prepare a stipulation of facts the contents of which is prejudicial to the interest of their clients and
sign it themselves without the intervention of their clients.
Counsel for plaintiffs-appellants, Atty. Melecio C. Guba, agreed that defendant-appellee Alma Deiparine
bought the land in question in good faith and for a valuable consideration; that during the lifetime of their
mother VicentaBucao, she, with the conformity of her husband, sold her undivided of the land in
question to her co-owner and son, Tomas Raga.
All these adverse facts were made the basis of the appealed decision against the plaintiffs. No further
evidence was presented as there was no hearing.
The attorney for the plaintiffs in making such admission went beyond the scope of his authority as
counsel and practically gave away the plaintiffs' case. The admission does not refer to a matter of judicial
procedure related to the enforcement of the remedy. It related to the very subject matter of the cause of
action, or to a matter on which the client alone can make the admission binding on him.
The broad implied or apparent powers of an attorney with respect to the conduct or control of litigation
are, however, limited to matters which relate only to the procedure or remedy.
The employment of itself confers upon the attorney no implied or power or authority over the subject
matter of the cause of action or defense; and, unless the attorney has expressly been granted authority
with respect thereto, the power to deal with or surrender these matters is regarded as remaining
exclusively in the client.

U.S. VS. REYES

36 PHIL. 791
FACTS:
R. B. Blackman, a surveyor in Pangasinan had an oral agreement with Domingo Reyes. The latter would
collect in behalf of Blackman amounts due from 12 individuals in connection with the survey of their
lands totaling to Php 860.00. He only succeeded in collecting Php 540 and delivered Php 368 to
Blackman, retaining the balance of Php 172.00. Both parties had different claims. Blackman said that the
agreement was 10% commission for Reyes. But Reyes insisted it was 20%. If the Court would accept
Blackmans claims, Reyes would be entitled to Php 54.00 therefore Php 172.00 misappropriated or Php
118.00 if commission was deducted. On the other hand, if the Court accepts Reyes claims which was
20% then 20% of the amount supposed to be collected was Php 172.00. Reyes was found guilty of estafa.
ISSUES:
1) Whether there was a contract of agency between the parties?
2) Whether its terms and conditions are complied with?
HELD:
There was a contract of agency. But with the terms and conditions are not complied with. On the onset
there was a contract of agency through an oral agreement. Reyes was bound to pay the principal all he

received from the collecting dues as stated by Blackman. In view of the discrepancy in the evidence the
court was not disposed to set up judgment as superior to that of the trial court. Also conceding that Reyes
was to receive 20%, this unless some contrary and express stipulation was included would not entitle him
in advance to 20% of the amount actually collected. The right to receive a commission of either 10% or
20% did not make to hold out any sum he chose. Since for all practical purposes the agency was
terminated the agent was under the obligation to turn over to the principal the amount collected, minus his
commission or that amount.