Professional Documents
Culture Documents
Realubit v. Jaso
Facts: Realubit (as industrial partner) entered into a JVA with Biondo (as capitalist partner) for the operation of
an ice manufacturing business. They agreed that they would each receive 40% of the net profit, with the
remaining 20% to be used for the payment of the ice making machine which was purchased for the business.
Biondo subsequently assigned his rights and interests in the business in favor of Jaso. Jaso demanded an
accounting and inventory thereof as well as the remittance of their portion of its profits. Jaso filed complaint for
specific performance and dissolution of the JV.
Issue: WON the Court may order Realubit as partner in JV to render an accounting to one who is not a partner in
said JV? No.
Ruling:
Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a
particular partnership or one which has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation.
The rule is settled that joint ventures are governed by the law on partnerships which are, in turn, based on mutual
agency or delectus personae.
Insofar as a partners conveyance of the entirety of his interest in the partnership is concerned, Article 1813
provides that the transfer by a partner of his partnership interest does not make the assignee of such interest a
partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to
receive anything except the assignees profits.
The assignment does not purport to transfer an interest in the partnership, but only a future contingent right to a
portion of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate
interest in the capital.
Since a partners interest in the partnership includes his share in the profits, Spouses Jaso are entitled to
Biondos share in the profits, despite Juanitas lack of consent to the assignment of said Biondos interest in the
joint venture.
Issue: WON the assignee may ask for the dissolution of the JV?
Ruling: Although Jaso did not become a partner as a consequence of the assignment and/or acquire the right to
require an accounting of the partnership business, she may ask for the dissolution of the joint venture
conformably with the right granted to the purchaser of a partners interest under Article 1831 of the Civil Code.
Narra Nickel Mining and Dev. Corp. v. Redmont Consolidated Mines Corp
Facts: Redmont Mines took interest in mining in Palawan. It learned from the DENR that the areas where it
wanted to undertake exploration and mining activities were already covered by Mineral Production Sharing
Agreement (MPSA) applications of Narra Nickel, Tesoro, and McArthur. Redmont petitioned for the denial of
Narra Nickels applications for MPSA, alleging that at least 60% of the capital stock of McArthur, Tesoro and
Narra are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont
reasoned that since MBMI is a considerable stockholder of petitioners, it was the driving force behind petitioners
filing of the MPSAs over the areas covered by applications since it knows that it can only participate in mining
activities through corporations which are deemed Filipino citizens. Redmont argued that given that petitioners
capital stocks were mostly owned by MBMI, they were likewise disqualified from engaging in mining activities
through MPSAs, which are reserved only for Filipino citizens. Petitioners averred that their nationality as
applicants is immaterial because they also applied for Financial or Technical Assistance Agreements (FTAA),
which are granted to foreign-owned corporations. In determining the nationality of petitioners, the CA looked into
their corporate structures and their corresponding common shareholders. Using the grandfather rule, the CA
discovered that MBMI in effect owned majority of the common stocks of the petitioners as well as at least 60%
equity interest of other majority shareholders of petitioners through joint venture agreements. The CA found that
through a web of corporate layering, it is clear that one common controlling investor in all mining corporations
involved is MBMI. Thus, is concluded that petitioners McArthur, Tesoro and Narra are also in a partnership with,
or privies-in-interest of, MBMI.
Issue: WON CAs ruling that Narra, Tesoro and McArthur are foreign corporations based on the Grandfather
Rule is contrary to the Foreign Investments Act?
Ruling: No.
Two acknowledged tests in determining the nationality of a corporation: the control test and the
grandfather rule.
DOJ Opinion: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the
corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall
be counted as of Philippine nationality.
Corporate layering is admittedly allowed by the FIA; but if it is used to circumvent the Constitution and pertinent
laws, then it becomes illegal.
Petitioners McArthur, Tesoro and Narra are not Filipino since MBMI, a 100% Canadian corporation, owns 60% or
more of their equity interests. Such conclusion is derived from grandfathering petitioners corporate owners,
namely: MMI, SMMI and PLMDC. The control test is still the prevailing mode of determining whether or not a
corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution entitled to
undertake the exploration, development and utilization of the natural resources of the Philippines. When in the
mind of the Court there is doubt, based on the attendant facts and circumstances of the case, in the 60-40
Filipino-equity ownership in the corporation, then it may apply the grandfather rule.
Petitioners claim that the CA erred in applying Sec. 29, Rule 130 of the Rules by stating that by entering into a
joint venture, MBMI have a joint interest with Narra, Tesoro and McArthur.
Issue: WON a partnership was created? Yes.
A partnership is defined as two or more persons who bind themselves to contribute money, property, or industry
to a common fund with the intention of dividing the profits among themselves. On the other hand, joint ventures
have been deemed to be akin to partnerships since it is difficult to distinguish between joint ventures and
partnerships.
Secs. 29 and 31, Rule 130 of the Revised Rules of Court provide:
Section 29. Admission by co-partner or agent. The act or declaration of a partner or agent of the party within
the scope of his authority and during the existence of the partnership or agency, may be given in evidence
against such party after the partnership or agency is shown by evidence other than such act or declaration. The
same rule applies to the act or declaration of a joint owner, joint debtor, or other person jointly interested with the
party. (26a)
Section 31. Admission by privies. Where one derives title to property from another, the act, declaration, or
omission of the latter, while holding the title, in relation to the property, is evidence against the former. (28)
The relationship between joint venturers, like that existing between partners, is fiduciary in character and
imposes upon all the participants the obligation of loyalty to the joint concern and of the utmost good faith,
fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise; It has
already been pointed out that the rights, duties, and liabilities of joint venturers are governed, in general, by rules
which are similar or analogous to those which govern the corresponding rights, duties, and liabilities of partners,
except as they are limited by the fact that the scope of a joint venture is narrower than that of the ordinary
partnership.
Guiang Notes Cases on Joint Ventures 2
As in the case of partners, joint venturers may be jointly and severally liable to third parties for the debts of the
venture; It has also been held that the liability for torts of parties to a joint venture agreement is governed by the
law applicable to partnerships.
As a rule, corporations are prohibited from entering into partnership agreements; consequently, corporations
enter into joint venture agreements with other corporations or partnerships for certain transactions in order to
form pseudo-partnerships. Obviously, as the intricate web of ventures entered into by and among petitioners and
MBMI was executed to circumvent the legal prohibition against corporations entering into partnerships, then the
relationship created should be deemed as partnerships, and the laws on partnership should be applied.
Thus, a joint venture agreement between and among corporations may be seen as similar to partnerships since
the elements of partnership are present. Thus, CA is justified in applying Sec. 29, Rule 130 of the Rules by
stating that by entering into a joint venture, MBMI have a joint interest with Narra, Tesoro and McArthur.
a.
b.
c.
d.
e.
f.
g.
h.
Torres v CA
Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent
Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed
a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name. By
mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint
Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to
share the proceeds from the sale of the subdivided lots. The project did not push through, and the land was
subsequently foreclosed by the bank. According to petitioners, the project failed because of "respondent's lack of
funds or means and skills." They add that respondent used the loan not for the development of the subdivision,
but in furtherance of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With the said amount,
he was able to effect the survey and the subdivision of the lots. He secured the Lapu Lapu City Council's
approval of the subdivision project which he advertised in a local newspaper. He also caused the construction of
roads, curbs and gutters. Likewise, he entered into a contract with an engineering firm for the building of sixty
low-cost housing units and actually even set up a model house on one of the subdivision lots. He did all of these
for a total expense of P85,000. Respondent claimed that the subdivision project failed, however, because
petitioners and their relatives had separately caused the annotations of adverse claims on the title to the land,
which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing
of the claims, thereby forcing him to give up on the project.
Petitioners deny having formed a partnership with respondent. They contend that the Joint Venture Agreement
and the earlier Deed of Sale, both of which were the bases of the appellate court's finding of a partnership, were
void.
In the same breath, however, they assert that under those very same contracts, respondent is liable for his failure
to implement the project. Because the agreement entitled them to receive 60 percent of the proceeds from the
sale of the subdivision lots, they pray that respondent pay them damages equivalent to 60 percent of the value of
the property.
Issue: Whether or not a partnership exists between the petitioners and respondent? Yes.
Under the above-quoted Agreement, petitioners would contribute property to the partnership in the form of land
which was to be developed into a subdivision; while respondent would give, in addition to his industry, the
amount needed for general expenses and other costs. Furthermore, 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. It should be stressed that the parties implemented the contract.
Issue: WON the partnership is void?
First, they argue that the Joint Venture Agreement is void under Article 1422 of the Civil Code, because it is the
direct result of an earlier illegal contract, which was for the sale of the land without valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first stipulation states that petitioners did not actually
receive payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause,
can take different forms, such as the prestation or promise of a thing or service by another.
Second, petitioners argue that the Joint Venture Agreement is void under Article 1773.
First, Article 1773 was intended primarily to protect third persons. Thus, the eminent Arturo M. Tolentino states
that under the aforecited provision which is a complement of Article 1771, "The execution of a public instrument
would be useless if there is no inventory of the property contributed, because without its designation and
description, 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. Thus, the contract is declared void by the law
when no such inventory is made." The case at bar does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that respondent should
pay them 60 percent of the value of the property. They cannot in one breath deny the contract and in another
recognize it, depending on what momentarily suits their purpose. In short, the alleged nullity of the
partnership will not prevent courts from considering the Joint Venture Agreement an ordinary contract
from which the parties' rights and obligations to each other may be inferred and enforced. 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.
however, that the same law also limits the election of aliens as members of the board of directors
in proportion to their allowance participation of said entity. In the instant case, the foreign Group ASI was
limited to designate three directors.
JG Summit Holdings, Inc. v. Court of Appeals
Partners: National Investment and Development Corporation (NIDC), a government corporation, and Kawasaki
Heavy Industries.
Project: Construction, operation and management of the Philippine Shipyard and Engineering Corporation
(PHILSECO).
Terms: NIDC and KAWASAKI (Japanese company) will contribute money for the capitalization of PHILSECO
(60% and 40%, respectively). The JVA granted to the parties of the right of first refusal should either of them
decide to sell, assign or transfer its interest in the joint venture.
Conflict: NIDC transferred all its rights, title and interest in PHILSECO to PNB, who in turn, transferred such to
the National Government pursuant to an Administrative Order. Asset Privatization Trust (APT) was established to
take title to, and possession of, conserve, manage and dispose of non-performing assets of the National
Government; it was named the trustee of the National Government's share in PHILSECO. As a result of a quasireorganization of PHILSECO to settle its huge obligations to PNB, the National Government's shareholdings in
PHILSECO increased to 97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.
In the interest of the national economy, the APT deemed it best to sell the National Government's share in
PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they agreed that
KAWASAKIs right of first refusal under the JVA be "exchanged" for the right to top by five percent (5%) the
highest bid for the said shares (thru PHI).
At the pre-bidding conference, interested bidders were given copies of the JVA between NIDC and KAWASAKI,
and of the Asset Specific Bidding Rules (ASBR) drafted for the National Government's 87.6% equity share in
PHILSECO. At the public bidding, J.G. Summit Holdings, Inc. submitted the highest bid with an acknowledgment
of KAWASAKI/[PHILYARDS'] right to top, and the sales was approved subject to Kawasakis right to top.
J.G. Summit Holdings informed APT that it was protesting the offer of PHI to top its bid.
Issue: WON KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA considering that
PHILSECO owned land until the time of the bidding and KAWASAKI already held 40% of PHILSECOs equity?
Held: YES. Nothing in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECOs total
capitalization.
Moreover, the right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under
the terms of their JVA. This right allows them to purchase the shares of their co-shareholder before they are
offered to a third party. The agreement of co-shareholders to mutually grant this right to each other, by itself,
does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino
corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly
assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does not
amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer could be made
either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do
business with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising
its right of first refusal, can exceed 40% of PHILSECOs equity. In fact, it can even be said that if the foreign
shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders ownership of the
shares which is adversely affected but the capacity of the corporation to own land that is, the corporation
becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation
and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the
shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns
land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing
shares in a landholding corporation even if the latter will exceed the allowed foreign equity; what the law
disqualifies is the corporation from owning land.