ATP

CASE DIGESTS (1) RACHEL ANDRELEE I. ACAL

LIM v. LIM

-Jose was the liaison of cer of Interwood Sawmill in Cagsiay, Mauban, Quezon. Sometime in 1980, Jose,
together with his friends Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a partnership to engage in
the trucking business. Initially, with a contribution of P50,000.00 each, they purchased a truck to be used
in the hauling and transport of lumber of the sawmill.
-Jose's heirs, including Elfledo, and partners agreed to continue the business under the management of
Elfledo. The shares in the partnership pro ts and income that formed part of the estate of Jose were held in
trust by Elfledo, with petitioners' authority for Elfledo to use, purchase or acquire properties using said funds.
-On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners claimed that
respondent took over the administration of the aforementioned properties, which belonged to the estate of
Jose, without their consent and approval.
-Claiming that they are co-owners of the properties, petitioners required respondent to submit an accounting
of all income, profits and rentals received from the estate of Elfledo, and to surrender the administration
thereof. Respondent refused; thus, the filing of this case.
-Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of Norberto
and Jimmy. Respondent also claimed that per testimony of Cresencia, sometime in 1980, Jose gave Elfledo
P50,000.00 as the latter's capital in an informal partnership with Jimmy and Norberto.
-Respondent also alleged that when Jose died in 1981, he left no known assets, and the partnership with
Jimmy and Norberto ceased upon his demise.

ISSUE: Who between Jose and Elfledo was the “partner” in the trucking business.

-The Supreme Court affirmed the CA decision ruling in favor of the respondent and declared Elfledo as the
partner in the trucking business.
-A partnership exists when two or more persons agree to place their money, effects, labor, and skill in lawful
commerce or business, with the understanding that there shall be a proportionate sharing of the profits and
losses among them.
-A contract of partnership is de ned by the Civil Code as one where two or more persons bind themselves
to contribute money, property, or industry to a common fund, with the intention of dividing the profits among
themselves.
-Applying Art. 1769, the following circumstances tend to prove that Elfledo was himself the partner of Jimmy
and Norberto:
1) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a
date that coincided with the payment of the initial capital in the partnership;
2) Elfledo ran the affairs of the partnership, wielding absolute control, power and authority,
without any intervention or opposition whatsoever from any of petitioners herein;
3) All of the properties, particularly the nine trucks of the partnership, were registered in the
name of Elfledo;
4) Jimmy testified that Elfledo did not receive wages or salaries from the partnership,
indicating that what he actually received were shares of the profits of the business; and
5) None of the petitioners, as heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime.
-As repeatedly stressed in Heirs of Tan Eng Kee, a demand for periodic accounting is evidence of a
partnership. PETITION DENIED.








 ATP CASE DIGESTS (1) RACHEL ANDRELEE I. ACAL

MARSMAN DRYSDALE LAND, INC. v. PHIL. GEOANALYTICS

- On February 1997 Marsman and Gotesco Propereties entered into a Joint Venture Agreement for the
construction and development of an office building on a land owned by Marsman in Makati.
-The JVA provided that the parties agree on investing in the project on a 50-50% basis. The contribution of
Marsman being the property valued at P420,000,000.00, where the building would rise. And the contribution
of Gotesco being P420,000,000.00 in cash.
-The JVA hired the respondent Phil. Geoanalytics (PGI) to provide the subsurface soil exploration,
laboratory testing, seismic study and geotechnical engineering for the project.
-On November 1997 and later on January 1998, PGI billed the JVA. Despite repeated demands, the JVA
failed to pay its obligations.
-The JVA was later cut short and the building project was shelved due to unfavorable economic conditions.
-PGI then filed a complaint for collection at the RTC of QC against the petitioners.
-In its Answer with Counterclaim and Cross-claim, Marsman Drysdale passed the responsibility of paying
PGI to Gotesco which, under the JVA, was solely liable for the monetary expenses of the project.
-Marsman contends that Gotesco is solely liable to PGI since under the JVA the construction funding for
the project was to be obtained from latter’s cash contribution and the former’s participation was limited to
the land.
-Gotesco contends however that it has no liability to PGI since it was due to Marsman that PGI was unable
to complete its undertaking having failed to clear the property for drilling.

ISSUE: Whether the petitioners should be jointly liable to PGI.

- YES. The Supreme Court held that PGI executed a technical service contract with the joint venture and
was never a party to the JVA. While the JVA clearly spelled out, inter alia, the capital contributions of
Marsman Drysdale (land) and Gotesco (cash) as well as the funding and nancing mechanism for the
project, the same cannot be used to defeat the lawful claim of PGI against the two joint venturers-partners.
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 joint venture being a form of partnership, it is to be governed by the laws on partnership. The Supreme
Court applied Art. 1797. In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the
proceeds of the project. They did not provide for the splitting of losses, however. Applying the above-quoted
provision of Article 1797 then, the same ratio applies in splitting the P535,353.50 obligation-loss of the joint
venture.
-The appellate court's decision must be modi ed, however. Marsman Drysdale and Gotesco being jointly
liable, there is no need for Gotesco to reimburse Marsman Drysdale for "50% of the aggregate sum due"
to PGI. CA DECISION AFFIRMED WITH MODIFICATION.




 ATP CASE DIGESTS (1) RACHEL ANDRELEE I. ACAL

JARANTILLA JR. v. JARANTILLA

-The case stems from the complaint filed by the respondent Antonieta Jarantilla against the petitioners. The
respondent claims that in 1946, she entered into an agreement to engage in business through the execution
of a document denominated as “Acknowledgment of Participating Capital”. She then claimed for the
accounting of the assets and income of the co-ownership, for its partition and the delivery of her share
corresponding to 8% and damages.
-Antonieta further claimed co-ownership over certain real properties in the name of the petitioners alleging
that these were purchased through the partnership.
-But during the course of the trial at the RTC, Federico Jarantilla Jr.—one of the original defendants, entered
into a compromise agreement with the respondent, supporting the latter’s claims and asserting that he too
was entitled to 6% of the supposed partnership.

ISSUE: Whether or not the partnership subject of the “Acknowledgment of Participating Capital”
funded the subject real properties.

-Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership:
(a) an agreement to contribute money, property or industry to a common fund; and
(b) intent to divide the profits among the contracting parties
-The first element is undoubtedly present in the case at bar, for, admittedly, all the parties in this case have
agreed to, and did, contribute money and property to a common fund.
Hence, the issue narrows down to their intent in acting as they did.
-It is not denied that all the parties in this case have agreed to contribute capital to a common fund to be
able to later on share its profits. They have admitted this fact, agreed to its veracity, and even submitted
one common documentary evidence to prove such partnership - the Acknowledgement of Participating
Capital.
-The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of Participating
Capital. However, petitioner fails to realize that this document specifically enumerated the businesses
covered by the partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading
in Cotabato City. Since there was a clear agreement that the capital the partners contributed went to the
three businesses, then there is no reason to deviate from such agreement and go beyond the stipulations
in the document.
-There is no evidence that the subject real properties were assets of the partnership referred to in the
Acknowledgement of Participating Capital. PETITION DENIED.



















 ATP CASE DIGESTS (1) RACHEL ANDRELEE I. ACAL

AURBACK v. SANITARY WARES

-On August 15, 1962, respondent Sanitary Wares—a domestic corporation, and American Standard Inc.
(ASI)—a foreign corporation, entered into an agreement for the international expansion of the former’s
business. In their agreement, it was stipulated that ASI agrees to participate in the ownership of an
enterprise which would engage primarily in manufacturing in the Philippines and selling in the Philippines
and abroad. Furthermore, the business operation in the Philippines shall be through an incorporated
enterprise with initial name of “Sanitary Wares Manufacturing Corp.”
-It was stipulated that 3 of the 9 directors shall be designated by ASI while 6 shall be designated by Sanitary
Wares.
- ASI later invoked their right to cumulative voting and nominated another candidate, hence the dispute
ensued.
-A case was filed as to who Sanitary Wares’ duly elected board of directors are.

ISSUE: Whether or not the nature of the business established by the parties was a
joint venture. (YES)

-The Supreme Court ruled that in determining the nature of the business, the actual intention of the parties
must be looked into, in accordance with the governing rules on the interpretation and construction of
contracts. And in the examination of the provisions of the agreement as well as the evidence presented,
the court found that the parties agreed to establish a joint venture and not a corporation.
-The legal concept of a joint venture is of common law origin. It has no precise legal definition but it has
been generally understood to mean an organization formed for some temporary purpose. It is in fact hardly
distinguishable from the partnership, since their elements are similar community of interest in the business,
sharing of profits and losses, and a mutual right of control.
- The main distinction cited by most opinions in common law jurisdictions is that, in partnership, it
contemplates a general business with some degree of continuity. On the other hand, a joint venture is
formed for the execution of a single transaction, and is therefore, temporary in nature.

 ATP CASE DIGESTS (1) RACHEL ANDRELEE I. ACAL

PIONEER INSURANCE v. COURT OF APPEALS

- The private respondent Jacob Lim was the owner of Southern Airlines—a single proprietorship. In 1965,
Lim convinced Constancio Maglana among others to contribute funds in order to buy two aircrafts which
would form part a corporation—the expansion of Southern Airlines. Maglana et. al. contrubuted and
delivered their money to Lim.
-But the money was never used to purchase aircrafts. Instead, Lim, without the knowledge of Maglana and
others, made an agreement with the petitioner Pioneer for the insurance of the two aircrafts bought in
installment from Japan Domestic Airlines (JDA).
-The aircrafts were used as security so when Lim defaulted from paying JDA, these were foreclosed by the
petitioner.
-No corporation was formally formed between Lim and Maglana and others.

ISSUE: Whether or not Maglana et. al. must share in the loss as general partners.

- NO. The Supreme Court held that there was no de facto partnership. The court explained that ordinarily,
when co-investors agree 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 gains of the venture in
proportion of their contribution.
- But in the case at bar, it was ruled that Lim did not intend to form a corporation with the others. This was
inferred from the acts of unilaterally taking out a surety from the petitioner.
- The records show that Lim was acting on his own and not in behalf of his other would-be incorporators in
transacting the sale of airplanes and spare parts.
CA DECISION AFFIRMED.