1. LORENZO T. OA and HEIRS OF JULIA BUALES, namely:
Petitioners protested against the assessment and asked
RODOLFO B. OA, MARIANO B. OA, LUZ B. OA, VIRGINIA
B. OA and LORENZO B. OA, JR. vs. THE COMMISSIONER
OF INTERNAL REVENUE, respondent.
Facts:
Julia Buales died on March 23, 1944, leaving as heirs her
surviving spouse, Lorenzo T. Oa and her five children.
Lorenzo T. Oa the surviving spouse was appointed
administrator of the estate of said deceased. On April 14,
1949, the administrator submitted the project of partition,
which was approved by the Court.
The project of partition shows that the heirs have undivided
one-half (1/2) interest in ten parcels of land, six houses, and
an undetermined amount to be collected from the War
Damage Commission. This amount was not divided among
them but was used in the rehabilitation of properties owned
by them in common. Of the ten parcels of land
aforementioned, two were acquired after the death of the
decedent with money borrowed from the Philippine Trust
Company.
Although the project of partition was approved by the Court
on May 16, 1949, no attempt was made to divide the
properties therein listed. Instead, the properties remained
under the management of Lorenzo T. Oa who used said
properties in business by leasing or selling them and investing
the income derived therefrom and the proceeds from the
sales thereof in real properties and securities. As a result,
petitioners' properties and investments gradually increased.
From said investments and properties petitioners derived
such incomes as profits from installment sales of subdivided
lots, profits from sales of stocks, dividends, rentals and
interests. The said incomes are recorded in the books of
account kept by Lorenzo T. Oa where the corresponding
shares of the petitioners in the net income for the year are
also known. Every year, petitioners returned for income tax
purposes their shares in the net income derived from said
properties and securities and/or from transactions involving
them. However, petitioners did not actually receive their
shares in the yearly income. The income was always left in
the hands of Lorenzo T. Oa who, as heretofore pointed out,
invested them in real properties and securities.
On the basis of the foregoing facts, respondent
(Commissioner of Internal Revenue) decided that petitioners
formed an unregistered partnership and therefore, subject to
the corporate income tax, pursuant to Section 24, in relation
to Section 84(b), of the Tax Code. Accordingly, he assessed
against the petitioners corporate income taxes for 1955 and
1956.
for reconsideration of the ruling of respondent that they have
formed an unregistered partnership. Finding no merit in
petitioners' request, respondent denied it.
Issue:
Whether or not the petitioners are considered as co-owners
or formed an unregistered partnership
Held:
Partnership
At the start, or in the years 1944 to 1954, the respondent
Commissioner of Internal Revenue did treat petitioners as co-
owners, not liable to corporate tax, and it was only from 1955
that he considered them as having formed an unregistered
partnership.
It is thus incontrovertible that petitioners did not, contrary to
their contention, merely limit themselves to holding the
properties inherited by them. Indeed, it is admitted that
during the material years herein involved, some of the said
properties were sold at considerable profit, and that with said
profit, petitioners engaged, thru Lorenzo T. Oa, in the
purchase and sale of corporate securities. It is likewise
admitted that all the profits from these ventures were
divided among petitioners proportionately in accordance
with their respective shares in the inheritance. In these
circumstances, it is Our considered view that from the
moment petitioners allowed not only the incomes from their
respective shares of the inheritance but even the inherited
properties themselves to be used by Lorenzo T. Oa as a
common fund in undertaking several transactions or in
business, with the intention of deriving profit to be shared by
them proportionally, such act was tantamount to actually
contributing such incomes to a common fund.
It is but logical that in cases of inheritance, there should be a
period when the heirs can be considered as co-owners rather
than unregistered co-partners within the contemplation of
our corporate tax laws aforementioned. Before the partition
and distribution of the estate of the deceased, all the income
thereof does belong commonly to all the heirs, obviously,
without them becoming thereby unregistered co-partners,
but it does not necessarily follow that such status as co-
owners continues until the inheritance is actually and
physically distributed among the heirs, for it is easily
conceivable that after knowing their respective shares in the
partition, they might decide to continue holding said shares
under the common management of the administrator or
executor or of anyone chosen by them and engage in
business on that basis.
From the moment of such partition, the heirs are entitled
already to their respective definite shares of the estate and
the incomes thereof, for each of them to manage and dispose
of as exclusively his own without the intervention of the
other heirs, and, accordingly he becomes liable individually
for all taxes in connection therewith. If after such partition,
he allows his share to be held in common with his co-heirs
under a single management to be used with the intent of
making profit thereby in proportion to his share, there can be
no doubt that, even if no document or instrument were
executed for the purpose, for tax purposes, at least, an
unregistered partnership is formed. This is exactly what
happened to petitioners in this case.
Cost against petitioners.
2. TAI TONG CHUACHE & CO. vs. THE INSURANCE
COMMISSION and TRAVELLERS MULTI-INDEMNITY
CORPORATION
Facts:
Complainants acquired from a certain Rolando Gonzales a
parcel of land and a building located at San Rafael Village,
Davao City. Complainants assumed the mortgage of the
building in favor of S.S.S., which building was insured with
respondent S.S.S. Accredited Group of Insurers for
P25,000.00.
On April 19, 1975, Azucena Palomo obtained a loan from Tai
Tong Chuache Inc. in the amount of P100,000.00. To secure
the payment of the loan, a mortgage was executed over the
land and the building in favor of Tai Tong Chuache & Co. On
April 25, 1975, Arsenio Chua, representative of Thai Tong
Chuache & Co. insured the latter's interest with Travellers
Multi-Indemnity Corporation for P100,000.00
On June 11, 1975, Pedro Palomo secured a Fire Insurance
Policy No. F- 02500, covering the building for P50,000.00 with
respondent Zenith Insurance Corporation. On July 16, 1975,
another Fire Insurance Policy No. 8459 was procured from
respondent Philippine British Assurance Company, covering
the same building for P50,000.00 and the contents thereof
for P70,000.00.
On July 31, 1975, the building and the contents were totally
razed by fire.
Based on the computation of the loss, including the Travellers
Multi- Indemnity, respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Demand was made from
respondent Travellers Multi-Indemnity for its share in the loss
but the same was refused. Hence, complainants demanded
from the other three (3) respondents the balance of each
share in the loss based on the computation of the Adjustment
Standards Report excluding Travellers Multi-Indemnity but
the same was refused, hence, this action.
On May 31, 1977, Tai Tong Chuache & Co. filed a complaint in
intervention claiming the proceeds of the fire Insurance
Policy No. F-559 DV, issued by respondent Travellers Multi-
Indemnity.
Travellers Insurance, in answer to the complaint in
intervention, alleged that the Intervenor is not entitled to
indemnity under its Fire Insurance Policy for lack of insurable
interest before the loss of the insured premises and that the
complainants, spouses Pedro and Azucena Palomo, had
already paid in full their mortgage indebtedness to the
intervenor
As adverted to above respondent Insurance Commission
dismissed spouses Palomos' complaint on the ground that the
insurance policy subject of the complaint was taken out by
Tai Tong Chuache & Company, petitioner herein, for its own
interest only as mortgagee of the insured property and thus
complainant as mortgagors of the insured property have no
right of action against herein respondent. It likewise
dismissed petitioner's complaint in intervention.
Issue:
Whether or not the action was brought in the name of the
real party in interest.
Held:
Yes.
Respondent Insurance Commission absolved respondent
insurance company from liability on the basis of the
certification issued by the then Court of First Instance of
Davao, Branch II, that in a certain civil action against the
Palomos, Arsenio Lopez Chua stands as the complainant and
not Tai Tong Chuache. From said evidence respondent
commission inferred that the credit extended by herein
petitioner to the Palomos secured by the insured property
must have been paid. Such is a glaring error which this Court
cannot sanction. Respondent Commission's findings are
based upon a mere inference.
Public respondent argues that if the civil case really stemmed
from the loan granted to Azucena Palomo by petitioner the
same should have been brought by Tai Tong Chuache or by its
representative in its own behalf. From the above premise
respondent concluded that the obligation secured by the
insured property must have been paid.
The premise is correct but the conclusion is wrong. Citing
Rule 3, Sec. 2 10 respondent pointed out that the action must
be brought in the name of the real party in interest. We
agree. However, it should be borne in mind that petitioner
being a partnership may sue and be sued in its name or by its
duly authorized representative. The fact that Arsenio Lopez
Chua is the representative of petitioner is not questioned.
Petitioner's declaration that Arsenio Lopez Chua acts as the
managing partner of the partnership was corroborated by
respondent insurance company. Thus Chua as the managing
partner of the partnership may execute all acts of
administration including the right to sue debtors of the
partnership in case of their failure to pay their obligations
when it became due and demandable. Or at the very least,
Chua being a partner of petitioner Tai Tong Chuache &
Company is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm. Public
respondent's allegation that the civil case flied by Arsenio
Chua was in his capacity as personal creditor of spouses
Palomo has no basis.
The respondent insurance company having issued a policy in
favor of herein petitioner which policy was of legal force and
effect at the time of the fire, it is bound by its terms and
conditions. Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner, respondent
insurance company is and must be held liable.
3. MARJORIE TOCAO and WILLIAM T. BELO vs. COURT OF
APPEALS and NENITA A. ANAY.
Facts:
Private respondent Nenita A. Anay met petitioner William T.
Belo, then the vice-president for operations of Ultra Clean
Water Purifier. Belo introduced Anay to petitioner Marjorie
Tocao, who conveyed her desire to enter into a joint venture
with her for the importation and local distribution of kitchen
cookwares. Under the joint venture, Belo acted as capitalist,
Tocao as president and general manager, and Anay as head of
the marketing department and later, vice-president for sales.
The parties agreed that Belos name should not appear in any
documents relating to their transactions with West Bend
Company. Instead, they agreed to use Anays name in
securing distributorship of cookware from that company. The
parties agreed further that Anay would be entitled to: (1) ten
percent (10%) of the annual net profits of the business; (2)
overriding commission of six percent (6%) of the overall
weekly production; (3) thirty percent (30%) of the sales she
would make; and (4) two percent (2%) for her demonstration
services. The agreement was not reduced to writing on the
strength of Belos assurances that he was sincere,
dependable and honest when it came to financial
commitments. They operated under the name of Geminesse
Enterprise, a sole proprietorship registered in Marjorie
Tocaos name.
On October 7, 1987, in the presence of Anay, Belo signed a
memo entitling her to a thirty-seven percent (37%)
commission for her personal sales "up Dec 31/87. Belo
explained to her that said commission was apart from her ten
percent (10%) share in the profits. On October 9, 1987, Anay
learned that Marjorie Tocao had signed a letter addressed to
the Cubao sales office to the effect that she was no longer
the vice-president of Geminesse Enterprise. The following
day, October 10, she received a note from Lina T. Cruz,
marketing manager, that Marjorie Tocao had barred her from
holding office and conducting demonstrations in both Makati
and Cubao offices. Anay attempted to contact Belo but failed.
Anay still received her five percent (5%) overriding
commission up to December 1987. The following year, 1988,
she did not receive the same commission.
Nenita A. Anay filed Civil Case No. 88-509, a complaint for
sum of money with damages[8] against Marjorie D. Tocao
and William Belo.
Marjorie Tocao and Belo asserted that the alleged
agreement with Anay that was neither reduced in writing,
nor ratified, was either unenforceable or void or
inexistent.
Issue:
Whether or not there was a partnership agreement
Held:
Yes.
A partnership may be constituted in any form; a public
instrument is necessary only where immovable property or
real rights are contributed thereto.[16] This implies that since
a contract of partnership is consensual, an oral contract of
partnership is as good as a written one.
Petitioners admit that private respondent had the expertise
to engage in the business of distributorship of cookware.
Private respondent contributed such expertise to the
partnership and hence, under the law, she was the industrial
or managing partner. It was through her reputation with the
West Bend Company that the partnership was able to open
the business of distributorship of that companys cookware
products; it was through the same efforts that the business
was propelled to financial success.
On the other hand, petitioner Belos denial that he financed
the partnership rings hollow in the face of the established
fact that he presided over meetings regarding matters
affecting the operation of the business. Moreover, his having
authorized in writing on October 7, 1987, on a stationery of
his own business firm, Wilcon Builders Supply, that private
respondent should receive thirty-seven (37%) of the proceeds
of her personal sales, could not be interpreted otherwise
than that he had a proprietary interest in the business.
Tocao was also a capitalist in the partnership. She claimed
that she herself financed the business. Her and petitioner
Belos roles as both capitalists to the partnership with private
respondent are buttressed by petitioner Tocaos admissions
that petitioner Belo was her boyfriend and that the
partnership was not their only business venture together.
The business venture operated under Geminesse Enterprise
did not result in an employer-employee relationship between
petitioners and private respondent. In the first place, private
respondent had a voice in the management of the affairs of
the cookware distributorship, including selection of people
who would constitute the administrative staff and the sales
force. Secondly, petitioner Tocaos admissions militate
against an employer-employee relationship. She admitted
that, like her who owned Geminesse Enterprise, private
respondent received only commissions and transportation
and representation allowances and not a fixed salary.
The fact that the cookware distributorship was operated
under the name of Geminesse Enterprise, a sole
proprietorship, is of no moment. What was registered with
the Bureau of Domestic Trade on August 19, 1987 was merely
the name of that enterprise.
Her instruction to Lina Torda Cruz, marketing manager, not to
allow private respondent to hold office in both the Makati
and Cubao sales offices concretely spoke of her perception
that private respondent was no longer necessary in the
business operation, and resulted in a falling out between the
two. However, a mere falling out or misunderstanding
between partners does not convert the partnership into a
sham organization. The partnership exists until dissolved
under the law. Since the partnership created by petitioners
and private respondent has no fixed term and is therefore a
partnership at will predicated on their mutual desire and
consent, it may be dissolved by the will of a partner.
An unjustified dissolution by a partner can subject him to
action for damages because by the mutual agency that arises
in a partnership, the doctrine of delectus personae allows the
partners to have the power, although not necessarily the
right to dissolve the partnership.
Petition is denied.
4. JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P.
OBILLOS and REMEDIOS P. OBILLOS, brothers and sisters vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX
APPEALS
Facts:
On March 2, 1973 Jose Obillos, Sr. completed payment to
Ortigas & Co., Ltd. on two lots with areas of 1,124 and 963
square meters located at Greenhills, San Juan, Rizal. The next
day he transferred his rights to his four children, the
petitioners, to enable them to build their residences.
After having held the two lots for more than a year, the
petitioners resold them to the Walled City Securities
Corporation and Olga Cruz Canda. They derived profits from
the sale and treated the it as a capital gain and paid an
income tax on one-half thereof.
One day before the expiration of the five-year prescriptive
period, the Commissioner of Internal Revenue required the
four petitioners to pay corporate income tax on the total
profit in addition to individual income tax on their shares
thereof. Not only that. He considered the share of the profits
of each petitioner as a " taxable in full and required them to
pay deficiency income taxes aggregating P56,707.20 including
the 50% fraud surcharge and the accumulated interest. The
Commissioner acted on the theory that the four petitioners
had formed an unregistered partnership or joint venture.
The petitioners contested the assessments, was denied.
Hence this appeal.
Issue:
Whether or not the petitioners formed a partnership
Held:
No. They were simply co-owners.
Their original purpose was to divide the lots for residential
purposes. If later on they found it not feasible to build their
residences on the lots because of the high cost of
construction, then they had no choice but to resell the same
to dissolve the co-ownership. The division of the profit was
merely incidental to the dissolution of the co-ownership
which was in the nature of things a temporary state. It had to
be terminated sooner or later.
Article 1769(3) of the Civil Code provides that "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 from which the
returns are derived". There must be an unmistakable
intention to form a partnership or joint venture.
5. Philex Mining Corporation vs. CIR
Facts:
On April 16, 1971, petitioner Philex Mining Corporation
(Philex Mining), entered into an agreement[4] with Baguio
Gold Mining Company (Baguio Gold) for the former to
manage and operate the latters mining claim, known as the
Sto. Nino mine, located in Atok and Tublay, Benguet Province.
The parties agreement was denominated as Power of
Attorney.
The mine suffered continuing losses over the years which
resulted to petitioners withdrawal as manager of the mine
on January 28, 1982 and in the eventual cessation of mine
operations on February 20, 1982.
Thereafter, on September 27, 1982, the parties executed a
Compromise with Dation in Payment and subsequently an
Amendment to Compromise with Dation in Payment
wherein Baguio Gold admitted an indebtedness to petitioner
and agreed to pay the same in 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 parties then
ascertained that Baguio Gold had a remaining outstanding
indebtedness to petitioner.
Subsequently, petitioner wrote off in its 1982 books of
account the remaining outstanding indebtedness of Baguio
Gold.
In its 1982 annual income tax return, petitioner deducted
from its gross income the amount as loss on settlement of
receivables from Baguio Gold against reserves and
allowances. However, the Bureau of Internal Revenue (BIR)
disallowed the amount as deduction for bad debt and
assessed petitioner a deficiency income.
Petitioner protested before the BIR arguing that the
deduction must be allowed since all requisites for a bad debt
deduction were satisfied. Petitioner emphasized that the
debt arose out of a valid management contract it entered
into with Baguio Gold. Petitioner also asserted that due to
Baguio Golds irreversible losses, it became evident that it
would not be able to recover the advances and payments it
had made in behalf of Baguio Gold.
Petitioner insists that in determining the nature of its
business relationship with Baguio Gold, we should not only
rely on the Power of Attorney, but also on the subsequent
Compromise with Dation in Payment and Amended
Compromise with Dation in Payment that the parties
executed in 1982. These documents, allegedly evinced the
parties intent to treat the advances and payments as a loan
and establish a creditor-debtor relationship between them.
Issue:
Whether or not the Power of Attorney executed by
petitioner and Baguio Gold was actually a partnership
agreement.
Held:
Yes.
An examination of the Power of Attorney reveals that a
partnership or joint venture was indeed intended by the
parties. 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.
Under the Power of Attorney, petitioner and Baguio Gold
undertook to contribute money, property and industry to the
common fund known as the Sto. Nio mine.petitioner and
Baguio Gold were to contribute equally to the joint venture
assets under their respective accounts. Baguio Gold would
contribute P11M under its owners account plus any of its
income that is left in the project, in addition to its actual
mining claim. Meanwhile, petitioners contribution would
consist of its expertise in the management and operation of
mines, as well as the managers account which is comprised
of P11M in funds and property and petitioners
compensation as manager that cannot be paid in cash.
It should be stressed that 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. Where representation
for and in behalf of the principal is merely incidental or
necessary for the proper discharge of ones paramount
undertaking under a contract, the latter may not necessarily
be a contract of agency, but some other agreement
depending on the ultimate undertaking of the parties.
First, it does not appear that Baguio Gold was unconditionally
obligated to return the advances made by petitioner under
the agreement. As pointed out by the Court of Tax Appeals,
petitioner was merely entitled to a proportionate return of
the mines assets upon dissolution of the parties business
relations. There was nothing in the agreement that would
require Baguio Gold to make payments of the advances to
petitioner as would be recognized as an item of obligation or
accounts payable for Baguio Gold.
Thus, the tax court correctly concluded that the agreement
provided for a distribution of assets of the Sto. Nio mine
upon termination, a provision that is more consistent with a
partnership than a creditor-debtor relationship. It should be
pointed out that in a contract of loan, a person who receives
a loan or money or any fungible thing acquires ownership
thereof and is bound to pay the creditor an equal amount of
the same kind and quality. In this case, however, there was
no stipulation for Baguio Gold to actually repay petitioner the
cash and property that it had advanced, but only the return
of an amount pegged at a ratio which the managers account
had to the owners account.
Next, the tax court correctly observed that it was unlikely for
a business corporation to lend hundreds of millions of pesos
to another corporation with neither security, or collateral,
nor a specific deed evidencing the terms and conditions of
such loans. The parties also did not provide a specific
maturity date for the advances to become due and
demandable, and the manner of payment was unclear. All
these point to the inevitable conclusion that the advances
were not loans but capital contributions to a partnership.
The strongest indication that petitioner was a partner in the
Sto Nio mine is the fact that it would receive 50% of the net
profits as compensation under paragraph 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.
On this score, the tax court correctly noted that petitioner
was not an employee of Baguio Gold who will be paid
wages pursuant to an employer-employee relationship. To
begin with, petitioner was the manager of the project and
had put substantial sums into the venture in order to ensure
its viability and profitability. By pegging its compensation to
profits, petitioner also stood not to be remunerated in case
the mine had no income.
Petition denied.
6. INOCENCIA DELUAO and FELIPE DELUAO vs. NICANOR
CASTEEL and JUAN DEPRA, NICANOR CASTEEL
Facts:
In 1940 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. No
action was taken thereon by the authorities concerned. Upon
investigation conducted by a representative of the Bureau of
Forestry, it was discovered that the area applied for was still
needed for firewood production. Hence on May 13, 1946 this
third application was disapproved.
Meanwhile, several applications were submitted by other
persons for portions of the area covered by Casteel's
application and they were granted. On November 17, 1948
Felipe Deluao filed his own fishpond application for the area
covered by Casteel's application.
Because of the threat poised upon his position by the above
applicants who entered upon and spread themselves within
the area, Casteel realized the urgent necessity of expanding
his occupation thereof by constructing dikes and cultivating
marketable fishes, in order to prevent old and new squatters
from usurping the land. But lacking financial resources at that
time, he sought financial aid from his uncle Felipe Deluao
who then extended loans totalling more or less P27,000 with
which to finance the needed improvements on the fishpond.
Hence, a wide productive fishpond was built.
However, despite the finding made in the investigation of the
above administrative cases that Casteel had already
introduced improvements on portions of the area applied for
by him in the form of dikes, fishpond gates, clearings, etc.,
the Director of Fisheries nevertheless rejected Casteel's
application on October 25, 1949, required him to remove all
the improvements which he had introduced on the land, and
ordered that the land be leased through public auction.
Failing to secure a favorable resolution of his motion for
reconsideration of the Director's order, Casteel appealed to
the Secretary of Agriculture and Natural Resources.
On November 25, 1949 Inocencia Deluao (wife of Felipe
Deluao) as party of the first part, and Nicanor Casteel as party
of the second part, executed a contract denominated a
"contract of service" - That the Party of the First Part in
consideration of the mutual covenants and agreements made
herein to the Party of the Second Part, hereby enter into a
contract of service, whereby the Party of the First Part hires
and employs the Party of the Second Part.
On the same date the above contract was entered into,
Inocencia Deluao executed a special power of attorney in
favor of Jesus Donesa, extending to the latter the authority
"To represent me in the administration of the fishpond.
On November 29, 1949 the Director of Fisheries rejected the
application filed by Felipe Deluao on November 17, 1948. On
September 15, 1950 the Secretary of Agriculture and Natural
Resources issued a decision reinstating Nicanor Casteel and
cancelled and revoked the fishpond permit of those who
were accepted.
Sometime in January 1951 Nicanor Casteel forbade Inocencia
Deluao from further administering the fishpond, and ejected
the latter's representative (encargado), Jesus Donesa, from
the premises.
Alleging violation of the contract of service (exhibit A)
entered into between Inocencia Deluao and Nicanor Casteel,
Felipe Deluao and Inocencia Deluao on April 3, 1951 filed an
action in the Court of First Instance of Davao for specific
performance and damages against Nicanor Casteel and Juan
Depra. On April 18, 1951 the plaintiffs filed an ex parte
motion for the issuance of a preliminary injunction.
On May 10, 1951 Casteel filed a motion to dissolve the
injunction, alleging among others, that he was the owner,
lawful applicant and occupant of the fishpond in question.
Issue:
Whether or not there was a partnership agreement
Held:
Yes.
We shall therefore construe the contract as one of
partnership, divided into two parts namely, a contract of
partnership to exploit the fishpond pending its award to
either Felipe Deluao or Nicanor Casteel, and a contract of
partnership to divide the fishpond between them after such
award. The first is valid, the second illegal.
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.
Further exchanges of letters between the parties reveal the
continuing intent to divide the fishpond. In a letter,12 dated
March 24, 1950, the appellant suggested that they divide the
fishpond and the remaining capital, and offered to pay the
Deluaos a yearly installment of P3,000 presumably as
reimbursement for the expenses of the appellees for the
development and improvement of the one-half that would
pertain to the appellant. Two days later, the appellee Felipe
Deluao replied,13expressing his concurrence in the
appellant's suggestion and advising the latter to ask for a
reconsideration of the order of the Director of Fisheries
disapproving his (appellant's) application, so that if a
favorable decision was secured, then they would divide the
area.
Apparently relying on the partnership agreement, the
appellee Felipe Deluao saw no further need to maintain his
petition for the reinvestigation of Casteel's application. Thus
by letter14 dated March 15, 1950 addressed to the Secretary
of Agriculture and Natural Resources, he withdrew his
petition.
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. The approval was an event which made
it unlawful for the business of the partnership to be carried
on or for the members to carry it on in partnership.
However, pursuant to our holding that there was a
partnership between the parties for the exploitation of the
fishpond before it was awarded to Casteel, this case should
be remanded to the lower court for the reception of
evidence.
Patagoc vs csc not even imposed in P.D. No. 807. Should he choose not to fill
the vacant position by promotion, the decree, as stated
185 scra 411 1990 earlier, gives the appointing power several alternatives:

Facts: Patagoc was appointed City Engineer by Zamboanga i e. ., the vacancy may be filled by transfer, by reinstatement,
City Mayor to take the place of the deceased city engineer. by re-employment, or by an original appointment [Sec. 19
The appointment was in the nature of a reinstatement. He (5)].
was previously employed by the city government, assigned
with the Bureau of Public Works Engineering District and with
the City Engineer's Office when the Ministry of Public Works
was reorganized and he was phased out. He rose from Civil
Engineering Aide II to Supervising City Engineer 11.
Thereafter, for six (6) years before his appointment as City
Engineer, he was a consultant with the Department of Public
Works and Highways and then with a private construction
firm. The incumbent Assistant City Engineer, filed a protest
against petitioner's appointment with the Civil Service
Regional Office on the ground that he was next-in-rank. The
Civil Service Regional Director, in a decision finds the

protest meritorious hereby revoking Patagocs appointment

Issue: what is the extent of the City Mayors authority to

appoint the City Engineer as when the appointee and the
protestant are both qualified for the position, may the Civil
Service Commission disapprove the appointment of the
former and order the appointment of the protestant?

Ruling: No according to the supreme court Appointment is an

essentially dictionary power and must be performed by the
officer in which it is vested according to his best lights, the
only condition being that the appointee should the cannot be
faulted on the ground that there are others better qualified
qualifications required by law. If he does, then the
appointment who should have been preferred. This is a
political question involving considerations of wisdom which
only the appointing authority can decide. It may be, as
alleged by the Commission, that Civil Service Circular No. 5, s.
1983 provides as a condition for appointment by
reinstatement that "the vacancy cannot be filled by
promotion of qualified officers and employees in the agency
concerned, by transfer of qualified officers or employees
from other government agencies, or there are no eligibles in
the appropriate register of the Commission available for
certification to the vacancy." However, this circular cannot be
construed so as to effectively eliminate the appointing
power's discretion. At best, the circular can be considered as
a guide for the appointing power's exercise of discretion.
Moreover, we note that the condition stated in the circular is