LITONJUA vs.

LITONJUA Benguet Lumber has been around even before World War II but during the war, its stocks
(G.R. No. 166299-300, December 13, 2005) were confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee
pooled their resources in order to revive the business. In 1981, Tan Eng Lay caused the
conversion of Benguet Lumber into a corporation called Benguet Lumber and Hardware
FACTS: Company, with him and his family as the incorporators. In 1983, Tan Eng Kee died.
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that  Eduardo entered into a Thereafter, the heirs of Tan Eng Kee demanded for an accounting and the liquidation of the
contract of partnership with him. Aurelio showed as evidence a letter sent to him by Eduardo partnership.
that the latter is allowing Aurelio to manage their family business (if Eduardo’s away) and in Tan Eng Lay denied that there was a partnership between him and his brother. He said that
exchange thereof he will be giving Aurelio P1 million or 10% equity, whichever is higher. A Tan Eng Kee was merely an employee of Benguet Lumber. He showed evidence consisting of
memorandum was subsequently made for the said partnership agreement. The Tan Eng Kee’s payroll; his SSS as an employee and Benguet Lumber being the employee. As a
memorandum this time stated that in exchange of Aurelio, who just got married, retaining result of the presentation of said evidence, the heirs of Tan Eng Kee filed a criminal case
his share in the family business (movie theatres, shipping and land development) and some against Tan Eng Lay for allegedly fabricating those evidence. Said criminal case was however
other immovable properties, he will be given P1 Million or 10% equity in all these businesses dismissed for lack of evidence.
and those to be subsequently acquired by them whichever is greater.
In 1992 however, the relationship between the brothers went sour. And so Aurelio ISSUE:
demanded an accounting and the liquidation of his share in the partnership. Eduardo did not Whether or not Tan Eng Kee is a partner.
heed and so Aurelio sued Eduardo.
HELD:
ISSUE: No. There was no certificate of partnership between the brothers. The heirs were not able to
Whether or not there exists a partnership. show what was the agreement between the brothers as to the sharing of profits. All they
presented were circumstantial evidence which in no way proved partnership.
HELD: It is obvious that there was no partnership whatsoever.  Except for a firm name, there was no
No. The partnership is void and legally nonexistent. The documentary evidence presented by firm account, no firm letterheads submitted as evidence, no certificate of partnership, no
Aurelio, i.e. the letter from Eduardo and the Memorandum, did not prove partnership. agreement as to profits and losses, and no time fixed for the duration of the partnership. 
There was even no attempt to submit an accounting corresponding to the period after the
The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone, but war until Kee’s death in 1984.  It had no business book, no written account nor any
is unsigned and undated. As an unsigned document, there can be no quibbling that said letter memorandum for that matter and no license mentioning the existence of a partnership.
does not meet the public instrumentation requirements exacted under Article 1771 (how In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship.
partnership is constituted) of the Civil Code. Moreover, being unsigned and doubtless He registered the same as such in 1954; that Kee was just an employee based on the latter’s
referring to a partnership involving more than P3,000.00 in money or property, said letter payroll and SSS coverage, and other records indicating Tan Eng Lay as the proprietor.
cannot be presented for notarization, let alone registered with the Securities and Exchange Also, the business definitely amounted to more P3,000.00 hence if there was a partnership, it
Commission (SEC), as called for under the Article 1772 (capitalization of a partnership) of the should have been made in a public instrument.
Code. And inasmuch as the inventory requirement under the succeeding Article 1773 goes But the business was started after the war (1945) prior to the publication of the New Civil
into the matter of validity when immovable property is contributed to the partnership, the Code in 1950?
next logical point of inquiry turns on the nature of Aurelio’s contribution, if any, to the Even so, nothing prevented the parties from complying with this requirement.
supposed partnership. Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the profits and losses.
The Memorandum is also not a proof of the partnership for the same is not a public Each has the right to demand an accounting as long as the partnership exists. Even if it can be
instrument and again, no inventory was made of the immovable property and no inventory speculated that a scenario wherein “if excellent relations exist among the partners at the
was attached to the Memorandum. Article 1773 of the Civil Code requires that if immovable start of the business and all the partners are more interested in seeing the firm grow rather
property is contributed to the partnership an inventory shall be had and attached to the than get immediate returns, a deferment of sharing in the profits is perfectly plausible.” But
contract. in the situation in the case at bar, the deferment, if any, had gone on too long to be
plausible.  A person is presumed to take ordinary care of his concerns. A demand for periodic
accounting is evidence of a partnership which Kee never did. (REFER TO ART. 1769)
HEIRS OF TAN ENG KEE vs. COURT OF APPEALS
(G.R. No. 126881, October 3, 2000)

FACTS:
 Private respondent Jaime Sahot started working as a truck helper for petitioners’ family-
owned trucking business named Vicente Sy Trucking.  Throughout all the changes in names
and for 36 years, private respondent continuously served the trucking business of petitioners.
When Sahot was already 59 years old, he had been incurring absences as he was suffering
JARANTILLA, JR. vs. JARANTILLA from various ailments.  Particularly causing him pain was his left thigh, which greatly affected
(G.R. No. 154486, December 1, 2010) the performance of his task as a driver.  Sahot had filed a week-long leave sometime in May
1994.  On May 27th, he was medically examined and treated for EOR, presleyopia,
hypertensive retinopathy G II), HPM, UTI, Osteoarthritis and heart enlargement. On said
grounds, Belen Paulino of the SBT Trucking Service management told him to file a formal
request for extension of his leave.  At the end of his week-long absence, Sahot applied for
extension of his leave for the whole month of June, 1994.  It was at this time when
petitioners allegedly threatened to terminate his employment should he refuse to go back to
work. They carried out their threat and dismissed him from work, effective June 30, 1994. He
ended up sick, jobless and penniless.

On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for
illegal dismissal for recovery of separation pay against Vicente Sy and Trinidad Paulino-Sy,
Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6B’s Trucking and SBT
Trucking, herein petitioners.

Petitioners, on their part, claimed that sometime prior to June 1, 1994, Sahot went on leave
and was not able to report for work for almost seven days.  On June 1, 1994, Sahot asked
permission to extend his leave of absence until June 30, 1994.  It appeared that from the
expiration of his leave, private respondent never reported back to work nor did he file an
extension of his leave.  Instead, he filed the complaint for illegal dismissal against the trucking
company and its owners. Petitioners add that due to Sahot’s refusal to work after the
expiration of his authorized leave of absence, he should be deemed to have voluntarily
resigned from his work.  They contended that Sahot had all the time to extend his leave or at
least inform petitioners of his health condition. 

The Labor Arbiter ruled in favor of the company. It held that Sahot failed to return to work.
However, upon appeal, the NLRC modified the LA’s decision, ruling that Sahot did not
abandon his job but his employment was terminated on account of his illness, pursuant to
Article 284 of the Labor Code.

ISSUE:
Whether or not there was valid termination of employment due to his illness.

HELD:
The SC held that although illness can be a valid ground for terminating an employee, the
dismissal was invalid. Article 284 of the Labor Code authorizes an employer to terminate an
employee on the ground of disease. However, in order to validly terminate employment on
this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code
requires:
SY vs. COURT OF APPEALS
(G.R. No. 142293, February 27, 2003)
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his
FACTS:
co-employees, the employer shall not terminate his employment unless there is a
certification by competent public health authority that the disease is of such nature or at They again borrowed money and they agreed to purchase fishing nets and other fishing
such a stage that it cannot be cured within a period of six (6) months even with proper equipments. Now, Yao and Chua represented themselves as acting in behalf of “Ocean Quest
medical treatment. If the disease or ailment can be cured within the period, the employer Fishing Corporation” (OQFC) they contracted with Philippine Fishing Gear Industries (PFGI)
shall not terminate the employee but shall ask the employee to take a leave. The employer for the purchase of fishing nets amounting to more than P500k.
shall reinstate such employee to his former position immediately upon the restoration of his They were however unable to pay PFGI and so they were sued in their own names because
normal health. apparently OQFC is a non-existent corporation. Chua admitted liability and asked for some
time to pay. Yao waived his rights. Lim Tong Lim however argued that he’s not liable because
The requirement for a medical certificate under Article 284 of the Labor Code cannot be he was not aware that Chua and Yao represented themselves as a corporation; that the two
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by acted without his knowledge and consent.
the employer of the gravity or extent of the employee’s illness and thus defeat the public
policy in the protection of labor. ISSUE:
Whether or not Lim Tong Lim is liable.
In the case at bar, the employer clearly did not comply with the medical certificate
requirement before Sahot’s dismissal was effected. Since the burden of proving the validity HELD:
of the dismissal of the employee rests on the employer, the latter should likewise bear the Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had
burden of showing that the requisites for a valid dismissal due to a disease have been decided to engage in a fishing business, which they started by buying boats worth P3.35
complied with. In the absence of the required certification by a competent public health million, financed by a loan secured from Jesus Lim. In their Compromise Agreement, they
authority, this Court has ruled against the validity of the employee’s dismissal. It is therefore subsequently revealed their intention to pay the loan with the proceeds of the sale of the
incumbent upon the private respondents to prove by the quantum of evidence required by boats, and to divide equally among them the excess or loss. These boats, the purchase and
law that petitioner was not dismissed, or if dismissed, that the dismissal was not illegal; the repair of which were financed with borrowed money, fell under the term “common fund”
otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal under Article 1767. The contribution to such fund need not be cash or fixed assets; it could
premised on mere conjectures and suspicions, the evidence must be substantial and not be an intangible like credit or industry. That the parties agreed that any loss or profit from
arbitrary and must be founded on clearly established facts sufficient to warrant his the sale and operation of the boats would be divided equally among them also shows that
separation from work. they had indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be
In addition, we must likewise determine if the procedural aspect of due process had been imputed to Yao and Chua. Unquestionably, Lim Tong Lim benefited from the use of the nets
complied with by the employer. From the records, it clearly appears that procedural due found in his boats, the boat which has earlier been proven to be an asset of the partnership.
process was not observed in the separation of private respondent by the management of the Lim, Chua and Yao decided to form a corporation. Although it was never legally formed for
trucking company. The employer is required to furnish an employee with two written notices unknown reasons, this fact alone does not preclude the liabilities of the three as contracting
before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a
omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the corporation and those benefited by it, knowing it to be without valid existence,  are held
notice informing the employee of his dismissal, to be issued after the employee has been liable as general partners.
given reasonable opportunity to answer and to be heard on his defense. These, the
petitioners failed to do, even only for record purposes. What management did was to
threaten the employee with dismissal, then actually implement the threat when the occasion SANTOS vs. SPS. REYES
presented itself because of private respondent’s painful left thigh. (G.R. No. 135813, October 25, 2001)

All told, both the substantive and procedural aspects of due process were violated. Clearly, FACTS:
therefore, Sahot’s dismissal is tainted with invalidity. In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally
Petition is denied. instituted a partnership with them as partners. Their venture is to set up a lending business
where it was agreed that Santos shall be financier and that Nieves and Zabat shall contribute
their industry. **The percentages after their names denote their share in the profit.
LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC. Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of a
(G.R. No. 136448, November 3, 1999) corporation. It was agreed that the partnership shall provide loans to the employees of
Gragera’s corporation and Gragera shall earn commission from loan payments.
FACTS: In August 1986, the three partners put into writing their verbal agreement to form the
It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing partnership. As earlier agreed, Santos shall finance and Nieves shall do the daily cash flow
with him and one Antonio Chua. The three agreed to purchase two fishing boats but since more particularly from their dealings with Gragera, Zabat on the other hand shall be a loan
they do not have the money they borrowed from one Jesus Lim (brother of Lim Tong Lim).
investigator. But then later, Nieves and Santos found out that Zabat was engaged in another
lending business which competes with their partnership hence Zabat was expelled.
The two continued with the partnership and they took with them Nieves’ husband, Arsenio,
who became their loan investigator.
Later, Santos accused the spouses of not remitting Gragera’s commissions to the latter. He
sued them for collection of sum of money. The spouses countered that Santos merely filed
the complaint because he did not want the spouses to get their shares in the profits. Santos
argued that the spouses, insofar as the dealing with Gragera is concerned, are merely his
employees. Santos alleged that there is a distinct partnership between him and Gragera
which is separate from the partnership formed between him, Zabat and Nieves.
The trial court as well as the Court of Appeals ruled against Santos and ordered the latter to
pay the shares of the spouses.

ISSUE:
Whether or not the spouses are partners.

HELD:
Yes. Though it is true that the original partnership between Zabat, Santos and Nieves was
terminated when Zabat was expelled, the said partnership was however considered
continued when Nieves and Santos continued engaging as usual in the lending business even
getting Nieves’ husband, who resigned from the Asian Development Bank, to be their loan
investigator – who, in effect, substituted Zabat.
There is no separate partnership between Santos and Gragera. The latter being merely a
commission agent of the partnership. This is even though the partnership was formalized
shortly after Gragera met with Santos (Note that Nieves was even the one who introduced
Gragera to Santos exactly for the purpose of setting up a lending agreement between the
corporation and the partnership).
HOWEVER, the order of the Court of Appeals directing Santos to give the spouses their shares
in the profit is premature. The accounting made by the trial court is based on the “total
income” of the partnership. Such total income calculated by the trial court did not consider
the expenses sustained by the partnership. All expenses incurred by the money-lending
enterprise of the parties must first be deducted from the “total income” in order to arrive at
the “net profit” of the partnership. The share of each one of them should be based on this
“net profit” and not from the “gross income” or “total income”.