​Aurbach vs. Sanitary Wares Manufacturing Corporation (189 SCRA 130)

 Facts:
Saniwares, a domestic corporation entered into an agreement with American Standard Inc., a foreign group and some Filipino investors, in order to expand their business internationally. The parties agreed that the business operations in the Philippines shall be carried on by an incorporated enterprise and will be named “Sanitary Wares Manufacturing Corporation.” Unfortunately, there came a deterioration of relations between the Filipino group of investors led by Lagdameo and American group of investors regarding the export operations of the company. Thereafter, the annual stockholder’s meeting was held with its primary agenda is to elect the members of the board of directors. In the election of their board members, they agreed that 3 of the 9 directors shall be designated by ASI while the other 6 shall be designated by the Filipino stockholders. Dispute ensued when ASI invoked their right to cumulative voting and nominated another candidate. This incident led the 2 groups to file before the SEC in determining who were the duly elected directors of Saniwares. ASI group they have the right to vote their additional equity under the Sec. 24 of the Corporation Code and further contend that the actual intention of the parties was to form a corporation and not a joint venture. The Lagdameo group argued otherwise and contend that they intended to enter into a joint venture.

Issue:
Whether or not Section 24 of the Corporation Code is applicable to Joint Venture

Held:
No. 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 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 specific 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.