Professional Documents
Culture Documents
A. LAW ON AGENCY
I. NATURE AND OBJECT OF AGENCY
1. Definition (Art. 1868); Parties in an Agency Relationship
Under Article 1868 of the Civil Code, a contract of agency is one whereby “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.” 2
The Spanish term for “principal” is “mandante”; and among the terms used for “agent” are
“mandatario”, “factor”, “attorney-in-fact”, “proxy”, “delegate” or “representative.”
4
Urban Bank, Inc. v. Peña, 659 SCRA 418 (2011).
5
Amon Trading Corp. v. Court of Appeals, 477 SCRA 552 (2005).
6
A unilateral contract has been defined as “A contract in which one party makes a promise or undertakes a performance.” Thus, it
was observed that “[M]any unilateral contacts are in reality gratuitous promises enforced for good reason with no element of
bargain.” [BLACK’S LAW DICTIONARY 326 (1990)] It is perhaps in this sense that agency is unilateral because it is the agent who
undertakes the performance of the agency. However, one must not forget that agency is still a contract with a bilateral character.
Manresa explains: “As regards whether the agency has a unilateral or bilateral character, it is evident, in our considered opinion,
from the point of view of the Code, that the totality of cases involving agency will always be bilateral, not because, as one ordinarily
supposes, there will be obligations exclusively for the agent and rights exclusively for the principal. It is clear that at times it
happens this way, but what is common in agency with other contracts is the mutuality and the reciprocity that arises from the
existence of an obligation against another obligation, a right against another right.” 11 MANRESA. COMENTARIOS AL CODIGO CIVIL
ESPAÑOL 443 (1950)
7
Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006); Villoria v. Continental Airlines, Inc., 663 SCRA 57 (2012).
8
Country Bankers Insurance Corp. v Keppel Cebu Shipyard, 673 SCRA 427 (2012).
9
Reiterated in Phil. Healthcare Providers (Maxicare) v. Estrada, 542 SCRA 616 (2008).
10
Woodschild Holdings, Inc. v. Roxas Electric and Construction Co., Inc., 436 SCRA 235 (2004); Manila Memorial Park Cemetery,
Inc. v. Linsangan, 443 SCRA 377 (2004); Umipig v. People, 677 SCRA 53 (2012);Recio v. Heirs of the Spouses Altamirano, 702
SCRA 137 (2013).
2. Kinds of Agency
a. Based on Business or Transactions Encompassed (Art. 1876)
(1) General or Universal Agency
An agent may be (1) universal; (2) general, or (3) special. A universal agent is one
authorized to do all acts for his principal which can lawfully be delegated to an agent; such an
agent may be said to have universal authority. A general agent is one authorized to do all acts
pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a
business of a particular class or series. He has usually authority either expressly conferred in
general terms or in effect made general by the usages, customs or nature of the business
which he is authorized to transact. An agent, therefore, who is empowered to transact all the
business of his principal of a particular kind or in a particular place, would for this reason, be
ordinarily deemed a general agent. A special agent is one authorized to do some particular
act or to act upon some particular occasion; he acts usually in accordance with specific
instructions or under limitations necessarily implied from the nature of the act to be done.
Siasat v. IAC, 139 SCRA 238 (1985).
(2) Special or Particular Agency
The right of an agent to indorse commercial paper (check) is a very responsible power and
will not be lightly inferred. A salesman with authority to collect money for his principal does not
have the implied authority to indorse checks received in payment. Any person taking checks
made payable to a corporation which can act only by agents does so at his peril, and must
abide by the consequence if the agent who indorses the same is without authority. Insular
Drug v. PNB, 58 Phil. 684 (1933).
b. Whether It Covers Legal Matters
(1) Attorney-at-Law
Only the employee, not his counsel, can impugn the consideration of the compromise as
being unconscionable. The relation of attorney and client is in many respects one of agency,
and the general rules of agency apply to such relation—the circumstances of this case indicate
that the employee’s counsel acted beyond the scope of his authority in questioning the
compromise agreement. Although a client has undoubtedly the right to compromise a suit
without the intervention of his lawyer, the same cannot be done to defraud the lawyer of the
earned attorney’s fees. J-Phil Marine, Inc. v. NLRC, 561 SCRA 675 (2008).
An attorney cannot, without a client’s authorization, settle the action or subject matter of the
litigation even when he believes that such a settlement will best serve his client’s interest.
Philippine Aluminum Wheels, Inc. v. FASGI Enterprises, Inc., 342 SCRA 722 (2000).
(2) Attorney-in-Fact
The relationship of attorney and client is in many respects one of agency, and the general
rules of agency apply to such relation. The acts of an agent are deemed the acts of the
principal only if the agent acts within the scope of his authority. Thus, when the lawyer files an
opposition to the compromise agreement that has been validly entered into by his client, he is
acting beyond the scope of his authority. TJ-Phil. Marine, Inc. v. NLRC, 561 SCRA 675 (2008).
c. Whether It Covers Acts of Administration or Acts of Dominion: “Powers of Attorney”
(1) Form of Powers of Attorney
In a case involving authority to act in baranggay conciliation cases covering an ejectment
for failure to pay rentals: “A power of attorney is an instrument in writing by which one person,
as principal, appoints another as his agent and confers upon him the authority to perform
certain specified acts or kinds of acts on behalf of the principal. The written authorization itself
is the power of attorney, and this is clearly indicated by the fact that it has also been called a
“letter of attorney.” Wee v. De Castro, 562 SCRA 695 (2008).
The Letter dated January 16, 1996 relied upon by the petitioners was signed by respondent
Fernandez alone, without any authority from the respondents-owners. There is no actuation of
respondent Fernandez in connection with her dealings with the petitioners. As such, said letter
11
Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. v. Pajo-Reyes, 632 SCRA 400 (2010); Recio v. Heirs of the
Spouses Altamirano, 702 SCRA 137 (2013);
12
AF Realty & Dev., Inc. v. Dieselman Freight Services Co., 373 SCRA 385 (2002); Firme v. Bukal Enterprises and Dev. Corp.,
414 SCRA 190 (2003).
13
Gozun v. Mercado 511 SCRA 305 (2006).
6. Rule on Liability When Two or More Agents Appointed by the Same Principal
a. Responsibility of Two or More Agents Not Solidary (Art. 1894)
(1) Compare: Two principals with common agent - Each Principal Solidarily Liable (Art.
1915)
When two letters of attorney are issued simultaneously to two different attorneys-in-fact, but
covering the same powers shows that it was not the principal’s intention that they should act
jointly in order to make their acts valid; the separate act of one of the attorney-in-fact, even
when not consented to by the other attorney in fact, is valid and binding on the principal,
especially the principal did not only repudiate the act done, but continued to retain the said
attorney-in-fact. Municipal Council of Iloilo v. Evangelista, 55 Phil. 290 (1930).
b. Where Two or More Agents Agree to Be Solidarily Bound (Art. 1895)
7. Rule on Liability to Third Parties: Agent Not Bound to Third Party (Art. 1897)
The settlement/adjustment agent in the Philippines of a New York insurance company is no
different from any other agent from the point of view of his responsibility: whenever he adjusts or
settles a claim, he does it in behalf of his principal, and his action is binding not upon himself but
upon his principal, and the agent does not assume any personal liability, and he cannot be sued
on his own right; the recourse of the insured is to press his claim against the principal. Salonga v.
Warner Barnes, 88 Phil 125 (1951).
In the same manner, a resident agent, as a representative of the foreign insurance company,
is tasked only to receive legal processes on behalf of its principal and not to answer personally for
the any insurance claims. Smith Bell v. Court of Appeals, 267 SCRA 530 (1997).
a. Principal Is the One Bound
An insurance agent who acts for fully disclosed foreign insurance companies cannot be made
personally liable for the claims arising from the contracts of insurance made on behalf of the
principals. E Macias & Co. v. Warner, Barnes & Co., 43 Phil 155 (1922).
A promissory note and two mortgages executed by the agent for and on behalf of his principal,
in accordance with a power of attorney executed by the principal in favor of the agent, are valid,
and as provided by article 1727 of the Civil Code, the principal must fulfill the obligations
contracted by the agent. National Bank v. Palma Gil, 55 Phil. 639 (1931).
When the buyer of shares of stock, pursuant to the terms of the deed of sale, effects payment
of part of the purchase price to one of the seller’s creditors, then there is no subrogation that
takes place, as the buyer then merely acts as an agent of the seller effecting payment of money
that was due to the seller in favor of a third-party creditor. Chemphil Export v. Court of
Appeals, 251 SCRA 217 (1995).
14
This reiterates the ruling in People v. Nepomuceno, CA 46 O.G. 6128 (1949); Lim v. Court of Appeals, 271 SCRA 12 (1997);
People v. Trinidad, CA 53 O.G. 732 (1956).
b. When Done Within Agent’s Scope of Authority: Principal Bound (Art. 1897)
In investment management account, where the written instrument provides that the bank shall
purchase debt securities on behalf of the client and will handle the accounts in accordance with
the instructions of the client, creates a principal-agent relationship, and not a trust relationship or
an ordinary bank deposit account. Consequently, under Article 1910, the client assumed all
obligations or inherent risks entailed by transactions emanating from the arrangement, and the
bank may be held liable, as an agent, only when it exceeds its authority, or acts with fraud,
negligence or bad faith. Principals are solely obliged to observe the solemnity of the transaction
entered into by the agent on their behalf, absent any proof that the latter acted beyond its
authority, and concomitant to this obligation is that the principal also assumes the risks that may
arise from the transaction. Panlilio v. Citibank,, 539 SCRA 69 (2007).
c. When Done Outside of Agent’s Authority: Principal Not Bound (Art. 1910)
Where the memorial park company has authorized its agent to solicit and remit offers to
purchase internment spaces obtained on forms provided by the company, then the terms of the
offer to purchase, therefore, are contained in such forms and, when signed by the buyer and an
authorized officer of the company, becomes binding on both the company and said buyer. And the
fact that the buyer and the agent had an agreement different from that contained in the forms
accepted does not bind the company, since the same were made obviously outside the agent’s
authority. When the power of the agent to sell are governed by the written form, it is beyond the
authority of the agent as a fact that is deemed known and accepted by the third person, to offer
terms and conditions outside of those provided in writing. Manila Memorial Park Cemetery v.
Linsangan, 443 SCRA 377 (2004).
c. EXCEPT:
(1) When Principal Ratifies, Expressly or Impliedly (Art. 1901)
Since the general rule is that the principal is bound by the acts of his agent in the scope of
the agency, therefore when the agent had full authority to make the tax returns and file them,
together with the check payments, with the Collector of Internal Revenue on behalf of the
principal, then the effects of dishonesty of the agent must be borne by the principal, not by an
innocent third party who has dealt with the dishonest agent in good faith. Lim Chai Seng v.
Trinidad, 41 Phil. 544 (1921).
A person with whom an agent has contracted in the name of his principal, has a right of
action against the purported principal, even when the latter denies the commission or authority
of the agent, in which case the party suing has the burden of proving the existence of the
agency notwithstanding the purported principal’s denial thereof. If the agency relation is
proved, then the principal shall be held liable, and the agent who is made a party to the suit
cannot be held personally liable. On the other hand, if the agency relationship is not proven, it
would be the agent who would become liable personally on the contract entered into. Nantes
v. Madriguera, 42 Phil. 389 (1921).
Where a sale of land is effected through an agent who made misrepresentations to the
buyer that the property can be delivered physically to the control of the buyer when in fact it
was in adverse possession of third parties, the seller-principal is bound for such
3. Two or More Principals to Agent Appointed for Common Transactions (Art. 1915)
a. Obligation of the Principals Is Solidary Because of Their Common Interest
When the law expressly provides for solidarity of the obligation, as in the liability of co-
principals in a contract of agency, each obligor may be compelled to pay the entire obligation. The
agent may recover the whole compensation from any one of the co-principals, as in this case.
De Castro v. Court of Appeals, 384 SCRA 607 (2002).
b. Compare Art. 1894: Two or More Agents with One Principal – Agent’s Obligation Is
Solidary
c. Right of Each Principal to Revoke Authority of Common Agent (Art. 1925)
4. Rights of Persons Who Contracted for Same Thing, One With Principal and the Other
With Agent (Art. 1916)
5. Liability of Principal and Agent to Third Persons Whose Contract Must Be Rejected
Pursuant to Art. 1916 (Art. 1917)
a. If Agent in Good Faith – Principal Liable
b. If Agent in Bad Faith – Agent alone Liable
V. EXTINGUISHMENT OF AGENCY
1. How and When Agency Extinguished (Art. 1919)
a. By Principal’s Revocation of Agency (Express or Implied)
b. By Agent’s Withdrawal from Agency
c. By Death, Civil Interdiction, Insanity or Insolvency of the Principal or the Agent
d. By Dissolution of the Juridical Entity Which Entrusted or Accepted the Agency
e. By the Accomplishment of the Object or Purpose of Agency
f. By the Expiration of the Period for Which Agency Was Constituted
3. Implied Revocation
a. Appointment of New Agent for Same Business/Transaction (Art. 1923)
(1) Impliedly Revoked as to Agent Only
(2) As to Third Persons, Notice to Them Is Necessary (Art. 1922)
18
Also Barrameda v. Barbara, 90 Phil. 718 (1952); Caisip v. Hon. Cabangon, 109 Phil. 150 (1952).
B. BUSINESS TRUSTS
I. NATURE AND CLASSIFICATION OF TRUSTS
1. Definition and Essential Characteristic of Trust (Art. 1440)
A trust is a “fiduciary relationship with respect to property which involves the existence of
equitable duties imposed upon the holder of the title to the property to deal with it for the benefit
of another.” DBP v. COA, 422 SCRA 459 (2004).19
A trust is the legal relationship between one person having an equitable ownership in property
and another person owning the legal title to such property, the equitable ownership of the former
19
Also Huang v. Court of Appeals, 236 SCRA 429 (1994); Tala Realty Services Corp. v. Banco Filipino Savings and Mortgage
Bank, 392 SCRA 506 (2002); Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, 587 SCRA 417 (2009); Advent Capital and
Finance Corporation v. Alcantara, 664 SCRA 224 (2012).
2. Kinds of Trust: (a) Express Trusts; and (b) Implied Trusts (Art. 1441)
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary. Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties, while an implied trust
comes into being by operation of law. Torbela v. Rosario, 661 SCRA 633 (2011).21
20
Reiterated in Miguel v. Court of Appeals, 29 SCRA 760 (1969); Spouses Rosario v. Court of Appeals, 310 SCRA 464 (1999).
21
Vda. De Esconde v. CA, 253 SCRA 66 (1996); Spouses Rosario v. Court of Appeals, 310 SCRA 464 (1999); DBP v. COA, 422
SCRA 459 (2004); Metropolitan Bank v. Board of Trustees of Riverside Mills Corp. Provident and Retirement Fund, 630 SCRA 350
(2010).
22
Reiterated in Spouses Rosario v. Court of Appeals, 310 SCRA 464 (1999); Cañezo v. Rojas, 538 SCRA 242 (2007); Peñalber v.
Ramos, 577 SCRA 509 (2009); DBP v. COA, DBP v. COA, 422 SCRA 459 (2004).
27
Cañezo v. Rojas, 538 SCRA 242 (2007).
28
Pilapil v. Heirs of Maximino R. Briones, 514 SCRA 197 (2007); Cañezo v. Rojas, 538 SCRA 242 (2007).
40
Also Tigno v. Court of Appeals, 280 SCRA 262 (1997); Morales v. Court of Appeals, 274 SCRA 282 (1997).
5. Several Persons Jointly Purchase Property, Places Title In One of Them (Art. 1452)
7. Donation of Property to a Donee Who Shall Have No Beneficial Title (Art. 1449)
Where the father donates a piece of land in the name of the daughter but with verbal notice
that the other half would be held by her for the benefit of a younger brother, coupled with a deed
of waiver later on executed by the daughter that she held the land for the common benefit of her
brother, created an implied trust in favor of the brother under Article 1449 of the Civil Code.
Adaza v. Court of Appeals, 171 SCRA 369 (1989).
8. Land Passes By Succession But Heir Places Title in a Trustee (Art. 1451).
When the eldest sibling in the family had registered land inherited from the parents in his
name, he was acting in a trust capacity and as representative of all his brothers and sisters. As a
consequence he is now holding the registered title thereto in a trust capacity, and it is proper for
the court to declare that the plaintiffs are entitled to their several pro rata shares, notwithstanding
the fact that the certificate of registration is in the name of the defendant alone, in accordance
with the doctrine held in Severino v. Severino, 44 Phil. 343 (1923). Castro v. Castro, 57 Phil. 675
(1932).
In a situation where a Chinese resident had caused land to be placed in the name of the
trustee who was bound to hold the same for the benefit of the trustor and his family in the event of
death, the application of the doctrine of implied trust under Article 1451 by the heirs of the trustor
cannot be upheld. “This contention must fail because the prohibition against an alien from owning
lands of the public domain is absolute and not even an implied trust can be permitted to arise on
equity consideration.” Ting Ho, Jr. v. Teng Gui, 558 SCRA 421 (2008).
We also see no trust, express or implied, created between the petitioners and the spouses
Perez over the subject property. A trust by operation of law is the right to the beneficial enjoyment
of a property whose legal title is vested in another. A property between two parties, one having
the rightful ownership and property owned by one party is separate and distinct from that which
has been registered in another’s name. Chu, Jr. vs. Caparas, 696 SCRA 325 (2013).
By fraudulently causing the transfer of the registration of title over the disputed property in his
name, the petitioner holds the title to this disputed property in trust for the benefit of the
respondent as the true owner; registration does not vest title but merely confirms or records title
already existing and vested. Leoveras v. Valdez, 652 SCRA 61 (2011).
Co-heirs or co-owners cannot acquire by acquisitive prescription the share of the other co-
heirs or co-owners absent a clear repudiation of the co ownership. In addition, when Hilaria and
Felipa registered the lot in their names to the exclusion of Emilia, an implied trust was created by
force of law and the two of them were considered a trustee of the respondent's undivided share.
As trustees, they cannot be permitted to repudiate the trust by relying on the registration.
Figuracion v. Figuracion-Gerilla, 690 SCRA 495 (2013).
The decedent during his lifetime had married legitimately three successive times, but without
liquidation of the conjugal partnerships formed during the first and second marriages. The only
male issue managed to convince his co-heirs that he should act as administrator of the properties
left by the decedent, but instead obtained a certificate of title in his own name to the valuable
piece of property of the estate. Held: Where the son, through fraud was able to secure a title in
his own name to the exclusion of his co-heirs who equally have the right to a share of the land
covered by the title, an implied trust was created in favor of said co-heirs, and that said son was
deemed to merely hold the property for their and his benefit. Gonzales v. Jimenez, Sr., 13 SCRA
73 (1964).
The rules are well-settled that when a person through fraud succeeds in registering the
property in his name, the law creates what is called a “constructive or implied trust” in favor of the
defrauded party and grants the latter the right o recover the property fraudulently registered
within a period of ten years. (See Ruiz v. Court of Appeals, 79 SCRA 525).” Heirs of Tanak
Pangaaran Patiwayon v. Martinez, 142 SCRA 252 (1986).
Where the land is decreed in the name of a person through fraud or mistake, such person is
by operation of law [Article 1456] considered a trustee of an implied trust for the benefit of the
persons from whom the property comes. The beneficiary shall have the right to enforce the trust,
notwithstanding the irrevocability of the Torrens title and the trustee and his successors-in-
interest are bound to execute the deed of reconveyance. (Pacheco v. Arro, 85 Phil. 505; Escobar
v. Locsin, 74 Phil. 86).” Municipality of Victorias v. Court of Appeals, 149 SCRA 32 (1987).
When property is registered in one person, but who expressly acknowledged that the right of
his siblings thereto, it is a situation of an implied trust covered under Article 1456 of the Civil
Code, which states that “if property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.” It is well settled that an action for reconveyance of real property to
enforce an implied trust prescribes in ten year, the period reckoned from the issuance of the
adverse title to the property which operates as a constructive notice. Gonzales v. Intermediate
Appellate Court, 204 SCRA106 (1991).
If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property
comes. Pedrano v. Heirs of Benedicto Pedrano, 539 SCRA 401 (2007).
C. PARTNERSHIPS
I. HISTORICAL BACKGROUND
1. Old Branches of Partnership Law
Civil Partnerships - not pursued in mercantile manner, non-habitual or “not pursued in the
regular course of business”
Commercial Partnerships - in pursuit of industry or commerce; characterized by
habituality or “in the regular pursuit of business”
Distinguishing between civil and commercial partnerships was critical under the old set-up
because it determined the applicable rules for registration, personal liability of members, and the
rights and manner of dissolution. Compañia Agricola de Ultramar v. Reyes, 4 Phil. 2 (1904).
(a) Commercial partnerships were deemed to be, and subject to Code of Commerce
provisions for, merchants:
A commercial partnership is distinguished from a civil one by the object to which it is
devoted and not by the manner with which it is organized. A commercial partnership has for its
object the pursuit of industry or commerce, and is then a “merchant” that must be governed by,
and comply with the registration requirements of, the Code of Commerce to lawfully come into
existence; it cannot choose to be organized under the Civil Code to make it a civil partnership.
Prautch v. Hernandez, 1 Phil. 705 (1903).
Contra: “We are inclined to the belief that the respective codes, Civil and Commercial,
have adopted a complete system for the organization, control, continuance, liabilities,
dissolutions, and juristic personalities of associations organized under each. . . . that
associations organized under the different codes are governed by the provisions of the
respective codes.” Compañia Agricola de Ultramar v. Reyes, 4 Phil. 2 (1904).
A commercial partnership that fails to register its articles in the mercantile registry under
Art. 119 of the Code of Commerce, does not become a juridical person with a personality
distinct from those of the individuals who composed it. Hung-Man-Yoc v.Kieng-Chiong-Seng, 6
Phil. 498 (1906); Bourns v. Carman, 7 Phil. 117 (1906); Ang Seng Quen v. Te Chico, 7 Phil.
541 (1907).
Consequently:
It cannot maintain an action in its name. Prautch v. Hernandez, 1 Phil. 705 (1903).
Neither in the name of one nor more of the members on behalf of his associates;
nevertheless the individual members may sue jointly as individuals, and persons dealing
with them in their joint capacity will not be permitted to deny their right to do so. Prautch
v. Jones, 8 Phil. 1 (1907); Ang Seng Quen v. Te Chico, 12 Phil. 547 (1909).
Without a separate juridical personality, what was applicable was Art. 120 which made
“persons in charge of the management of the association” liable for the debts incurred
by such “partnership de facto”. Kwong-Wo-Sing v. Kieng-Chiong-Seng, 6 Phil. 498
(1906).
(b) Registration was the key element for commercial partnerships (Arts. 118-119, Code
of Commerce) coming into existence/becoming juridical persons; While it was mere
perfection of the contract for civil partnerships:
A partnership business that is in laundry is a civil partnership and governed by the
provisions of the Civil Code, and it existed validly even when no formal partnership agreement
was entered into and registered, and thereby the obligations of the partners for partnership
debts would be pro rata. Dietrich v. Freeman, 18 Phil. 341 (1911).
(c) For partnership debts, commercial partners were solidarily liable, albeit subsidiarily,
while civil partners were primarily but only jointly liable:
In a civil partnership, each member is not bound to pay all the debts of the concern, but
simply his pro rata share, Co-Pitco v. Yulo, 8 Phil. 544 (1907).
4. Kinds of Partnerships
a. As to Object (Art. 1776, 1st par.)
i. Universal Partnership (Arts. 1777 to 1782)
- Deemed a “Universal Partnership of Profits” when articles do not specify the
partnership’s nature. (Art. 1781)
- Persons who are prohibited from giving each other any donation or advantage
cannot enter into a universal partnership. (Art. 1782)
IV. PARTNERSHIP AS A JURIDICAL PERSON (Articles 44(3), 45, 1768 and 1784)
1. Consequences as a Juridical Person:
a. Legal Capacity to Enter into Contracts and Incur Obligations (Art. 46)
b. May Acquire Properties in Its Own Name (Arts. 46 and 1774)
c. May Sue and Be Sued in Its Firm Name (Art. 46)
In a bankruptcy proceeding against a general partner, since the partnership is a separate
juridical person one partner is not entitled to be made a party as an individual separate from the
firm; and, yet precisely because a partnership is a juridical person, there can be proper service to
the firm of court notices upon service to any partner of the partnership found within the jurisdiction
of the court. Hongkong Bank v. Jurado & Co., 2 Phil. 671 (1903).
The death of a partner does not constitute a ground for dismissal of the suit against the
partnership, since the partnership has a separate juridical personality. Ngo Tian Tek v. Phil.
Education Co., 78 Phil. 275 (1947); Wahl v. Donaldson Sim & Co., 5 Phil. 11 (1905).
“[I]t has been the universal practice in the Philippine Islands since American occupation, and
was the practice prior to that time, to treat companies of the class to which the plaintiff belongs as
legal or juridical entities and to permit them to sue and be sued in the name of the company, the
summons being served solely on the managing agent or other official of the company by the
section of the Code of Civil Procedure.” Vargas & Co. v. Chan, 29 Phil. 446 (1915).
A partnership may sue and be sued in its name or by its duly authorized representative, and
when it has a designated managing partner, he may execute all acts of administration including
the right to sue debtors of the partnership. Tai Tong Chuache & Co. v. Insurance Commission,
158 SCRA 366 (1988).
d. Has Domicile: Place where their legal representation is established or where they
exercise their principal functions (Art. 51)
e. Taxable as a Corporate Taxpayer. Tan v. Del Rosario, 237 SCRA 234 (1994).
f. May Be Declared Insolvent Even If Its Partners Are Not
A limited partnership that commits acts of insolvency may be the subject of an involuntary
petition for insolvency, even when its general partners are very much still solvent. This is on the
basis that a limited partnership has a separate juridical personality from its partners. Campos
Rueda & Co. v. Pacific Commercial & Co., 44 Phil. 916 (1923).
In view of the separate juridical personality possessed by the partnership, the partners cannot
be sued personally under a contract entered into in the name of the partnership, unless it is
shown that the legal fiction is being used for a fraudulent, unfair or illegal purpose, or when
partnership assets have been exhausted to make partners personally liable for partnership debts
as provided in Art. 1816. Aguila, Jr. v. Court of Appeals, 316 SCRA 246 (1999).
g. Is a Person Entitled to Constitutional Rights
2. Registration Requirements
Old Civil Code and Code of Commerce: Third parties without knowledge of the existence of
the partnership who deal with the property still registered in the name of one of the partners have
a right to expect full effectivity of such transaction on the property, in spite of the protestation of
the other partners and perhaps even the partnership creditors. Borja v. Addison, 44 Phil. 895
(1922).
a. When Capital is P3,000 or More (Art. 1772)
The agreement to the contribution to a common fund and the division of profits and losses
would bring about the existence of a partnership. Mere failure to register the contract of
partnership with the SEC does not invalidate a contract that has the essential requisites of
partnership – a partnership may exist even if the partners do not use the words “partner” or
“partnership”. Angeles v. Secretary of Justice, 465 SCRA 106 (2005).
An unregistered contract of partnership is valid as among the partners, so long as it has the
essential requisites, because the main purpose of registration is to give notice to third parties.
The failure to register the contract does not affect the liability of the partnership and of the
partners to third persons, and that neither does such failure affect the partnership’s juridical
personality; and it can be assumed that the members themselves knew of the contents of their
contract. Ma v. Fernandez, Jr., 625 SCRA 566 (2010).
b. When Immovable Property Contributed (Arts. 1771 and 1773)
The execution of a written agreement was not necessary in order to give efficacy to the verbal
contract of partnership as a civil contract, the contributions of the partners not having been in the
form of immovables or rights therein. The special provision cited, requiring the execution of a
public writing in the single case mentioned and dispensing with all formal requirements in other
cases, renders inapplicable to this species of contract the general provisions of Art. 1280 of the
old Civil Code. Fernandez v. Dela Rosa, 1 Phil. 671 (1902).
When the articles of partnership provide that the venture is established “to operate a fishpond,”
it does not necessarily mean that immovable properties or real rights have been contributed into
the partnership which would trigger the operation of Article 1773. Agad v. Mabato, 23 SCRA 1223
(1968).
Failure to prepare an inventory of the immovable property is contributed, in spite of Art. 1773
declaring the partnership void, would not render the partnership void when: (a) No third-party is
involved since Art. 1773 was intended for the protection of third-parties; and (b) the partners have
made a claim on the partnership agreement which is deemed binding between them as any other
contract. Torres v. Court of Appeals, 320 SCRA 428 (1999).
While the sale of land appearing in a private deed is binding between the parties, it cannot be
considered binding on third persons if it is not embodied in a public instrument and recorded in
the Registry of Deeds. When it comes to contributions of real estate to a partnership, especially
when it covers registered land, then the peremptory provisions of the Property Registration
Decree (P.D. 1459) will prevail as to who has a better claim, right or lien on the property, since
43
Reiterated in Moran, Jr. v. Court of Appeals, 133 SCRA 88 (1984).
44
citing Paras, Civil Code of the Philippines, Vol. V, 7th ed., p. 516.
45
Idos v. Court of Appeals, 296 SCRA 194 (1998).
a. General Partner (Art. 1850) Allen v. Steinberg, 223 A. d 240 (1966); Mist Properties, Inc. v.
Fitzsimmons Realty Co., 228 N.Y.S. d 406 (1962).
D. JOINT VENTURES
I. JOINT VENTURES ARE SPECIES OF PARTNERSHIP
When a Contract of Lease mandates contribution into the venture on the part of the purported
lessee, and makes the lessee participate not only in the revenues generated from the venture, and
in fact absorb most of the risks involved therein, then a joint venture arrangement has really been
constituted between the purported lessor and lessee, since under the Law on Partnership, whenever
there is an agreement to contribute money, property or industry to a common fund, with an
agreement to share the profits and losses therein, then a partnership arises. Kilosbayan, Inc. v.
Guingona, Jr., 232 SCRA 110 (1994).
In the Philippines, the prevailing school of though is that a joint venture is a species of
partnership. Heirs of Tan Eng Kee v. Court of Appeals, 341 SCRA 740 (2000).46
When the purported primary venturer in a consortium (which is an association of corporation
bound in a joint venture arrangement) declares unilaterally that the other four members are part of a
consortium, but there is no affirmation from any of the other members, nor is there a showing of a
community of interest, a sharing of risks, profits and losses in the project bidded for, then there is
really no joint venture constituted among them, lacking the essential elements of what makes a
partnership. Information Technology Foundation of the Philippines v. COMELEC, 419 SCRA
141 (2004).
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. Realubit v. Jaso, 658 SCRA 146 (2011).
—oOo—
47
http://www.neda.gov.ph/references/Guidelines/2013%20Revised%20JV%20Guidelines.pdf