Aurbach v.
Sanitary Wares Manufacturing Corporation
G.R. No. 75875, 15 December 1989
FACTS:
Saniwares (domestic corporation) and ASI (foreign corporation) entered into an agreement to
engage primarily in the business of manufacturing in the Philippines and selling here and
abroad vitreous china and sanitary wares.They also agreed that the business operations in the
Philippines shall be carried on by an incorporated enterprise and that the name of the
corporation shall initially be “Sanitary Wares Manufacturing Corp.”
Unfortunately, with the business successes came the deterioration of the initially harmonious
relationship between the two. The disagreement was allegedly due to Saniwares desire to
expand the export operations which was objected by ASI as it apparently had other
subsidiaries of joint venture groups in countries contemplated by Saniwares.
Several incidents in the annual stockholders’ meeting triggered the ling of separate petitions
by the parties, both parties claiming to be the legitimate directors of the corporation.
According to Aurbach, the actual intention of the parties should be viewed from the agreement
wherein it is clearly stated that the parties’ intention was to form a corporation and not a joint
venture. No other evidence should be admitted on the ground that it contravenes the parol
evidence rule under sec. 7, Rule 130, Revised Rules of Court. Saniwares on the other hand
alleged that the agreement failed to express the true intent of the parties.
ISSUE:
Whether or not the business established by the parties was a joint venture or a corporation.
RULING:
It was a joint venture. The rule is that whether the parties to a particular contract have thereby
established among themselves a joint venture or some other relation depends upon their actual
intention which is determined in accordance with the rules governing the interpretation and
construction of contracts. In the instant cases, our examination of important provisions of the
Agreement as well as the testimonial evidence presented by the Lagdameo and Young Group
shows that the parties agreed to establish a joint venture and not a corporation. The history of
the organization of Saniwares and the unusual arrangements which govern its policy making
body are all consistent with a joint venture and not with an ordinary corporation.
According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement
with ASI in behalf of the Philippine nationals. He testi ed that ASI agreed to accept the role of
minority vis-a-vis the Philippine National group of investors, on the condition that the
Agreement should contain provisions to protect ASI as the minority.
The legal concept of a joint venture is of common law origin. It has no precise legal de nition
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 pro ts and losses, and a mutual right of
control. The main distinction cited by most opinions in common law jurisdictions is that the
partnership contemplates a general business with some degree of continuity, while the joint
venture is formed for the execution of a single transaction, and is thus of a temporary nature.
This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a
partnership may be particular or universal, and a particular partnership may have for its object
a speci c undertaking. (Art. 1783, Civil Code).
It would seem therefore that under Philippine law, a joint venture is a form of partnership and
should thus be governed by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it may however engage in a joint venture
with others.
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