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1 - G.R. No. 109248 July 3, 1995
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and
BENJAMIN T. BACORRO, petitioners, vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION and JOAQUIN L. MISA,respondents.
FACTS: The law firm of ROSS, LAWRENCE, SELPH and
CARRASCOSO, its name, was changed to BITO, MISA & LOZADA
on June 7, 1977. On 19 December 1980, [Joaquin L. Misa]
appellees Jesus B. Bito and Mariano M. Lozada associated
themselves together, as senior partners with respondents-
appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and
Benjamin Bacorro, as junior partners.
On 30 June 1988, petitioner filed with this Commission's Securities
Investigation and Clearing Department (SICD) a petition for
dissolution and liquidation of partnership. On 31 March 1989, the
hearing officer rendered a decision against their favor. On appeal,
the SEC en banc reversed the decision of the Hearing Officer. The
Court of Appeals, finding no reversible error on the part of
respondent Commission, AFFIRMED in toto the SEC decision.
ISSUE: 1. Whether or not the Court of Appeals has erred in
holding that the partnership of Bito, Misa & Lozada (now Bito,
Lozada, Ortega & Castillo) is a partnership at will. No.
2. Whether or not the Court of Appeals has erred in holding that
the withdrawal of private respondent dissolved the partnership
regardless of his good or bad faith. No.
Ruling: (1) A partnership that does not fix its term is a
partnership at will. That the law firm "Bito, Misa & Lozada," and
now "Bito, Lozada, Ortega and Castillo," is indeed such a
partnership need not be unduly belabored. The partnership
agreement does not provide for a specified period or undertaking.
The "DURATION" clause simply states, "The partnership shall
continue so long as mutually satisfactory and upon the death or
legal incapacity of one of the partners, shall be continued by the
surviving partners."
The "purpose" of the partnership is not the specific undertaking
referred to in the law. Otherwise, all partnerships, which
necessarily must have a purpose, would all be considered as
partnerships for a definite undertaking. There would therefore be
no need to provide for articles on partnership at will as none
would so exist. Apparently what the law contemplates, is a specific
undertaking or "project" which has a definite or definable period of
completion.
(2) The birth and life of a partnership at will is predicated on the
mutual desire and consent of the partners. The right to choose
with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued
existence is, in turn, dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the
absence of a cause for dissolution provided by the law itself.
Verily, any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must, however, act in
good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership 4 but that it can result in a liability
for damages.
In passing, neither would the presence of a period for its specific
duration or the statement of a particular purpose for its creation
prevent the dissolution of any partnership by an act or will of a
partner. 6 Among partners, 7 mutual agency arises and the
doctrine of delectus personae allows them to have the power,
although not necessarily the right, to dissolve the partnership. An
unjustified dissolution by the partner can subject him to a possible
action for damages.
The dissolution of a partnership is the change in the relation of the
parties caused by any partner ceasing to be associated in the
carrying on, as might be distinguished from the winding up of, the
business. 8 Upon its dissolution, the partnership continues and its
legal personality is retained until the complete winding up of its
business culminating in its termination.
2 WILLIAM UY v BARTOLOME PUZON (GR No. L-19819
Oct. 26 1977)
FACTS: Bartolome Puzon had a contract with the Republic of the
Philippines for the construction of the Ganyangan Bato Section of
the Pagadian Zamboanga City Road, province of Zamboanga del
Sur and of five (5) bridges in the Malangas-Ganyangan Road.
Finding difficulty in accomplishing both projects, Bartolome Puzon
sought the financial assistance of the plaintiff, William Uy. It
resulted in the formation of the "U.P. Construction Company"
which was subsequently engaged as subcontractor of the
construction projects.
The partners agreed that the capital of the partnership would be
P100,000.00 of which each partner shall contribute the amount of
P50,000.00 in cash. But, as heretofore stated, Puzon was short of
cash and he promised to contribute his share in the partnership
capital as soon as his application for a loan with the Philippine
National Bank in the amount of P150,000.00 shall have been
approved. However, before his loan application could be acted
upon, he had to clear his collaterals of its incumbrances first. For
this purpose, on October 24, 1956, William Uy gave Bartolome
Puzon the amount of P10,000.00 as advance contribution of his
share in the partnership to be organized between them under the
firm name U.P. CONSTRUCTION COMPANY which amount
mentioned above will be used by Puzon to pay his obligations with
the Philippine National Bank to effect the release of his mortgages
with the said Bank. On October 29, 1956, William Uy again gave
Puzon the amount of P30,000.00 as his partial contribution to the
proposed partnership and which the said Puzon was to use in
payment of his obligation to the Rehabilitation Finance
Corporation. Puzon promised William Uy that the amount of
P150,000.00 would be given to the partnership to be applied
thusly: P40,000.00, as reimbursement of the capital contribution of
William Uy which the said Uy had advanced to clear the title of
Puzon's property; P50,000.00, as Puzon's contribution to the
partnership; and the balance of P60,000.00 as Puzon's personal
loan to the partnership.
As time passed and the financial demands of the projects
increased, William Uy, who supervised the said projects, found
difficulty in obtaining the necessary funds with which to pursue the
construction projects. William Uy correspondingly called on
Bartolome Puzon to comply with his obligations under the terms of
their partnership agreement and to place, at lest, his capital
contribution at the disposal of the partnership. Despite several
promises, Puzon, however, failed to do so. Realizing that his verbal
demands were to no avail, William Uy consequently wrote
Bartolome Puzon formal letters of demand, to which Puzon replied
that he is unable to put in additional capital to continue with the
projects.
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Failing to reach an agreement with William Uy, Bartolome Puzon,
as prime contractor of the construction projects, wrote the
subcontractor, U.P. Construction Company, on November 20,
1957, advising the partnership, of which he is also a partner, that
unless they presented an immediate solution and capacity to
prosecute the work effectively, he would be constrained to
consider the sub-contract terminated and, thereafter, to assume
all responsibilities in the construction of the projects in accordance
with his original contract with the Bureau of Public Highways. 20
On November 27, 1957, Bartolome Puzon again wrote the
U.P.Construction Company finally terminating their subcontract
agreement as of December 1, 1957.
ISSUE: W/N Puzon is liable to the partnership thus must
reimburse Uy. YES
HELD: The findings of the trial court that the appellant failed to
contribute his share in the capital of the partnership is clear
incontrovertible. The record shows that after the appellant's loan
the amount of P150,000.00 was approved by the Philippin National
Bank in November, 1956, he gave the amount P60,000.00 to the
appellee who was then managing the construction projects. Of this
amount, P40,000.00 was to be applied a reimbursement of the
appellee's contribution to the partnership which was used to clear
the title to the appellant's property, and th balance of P20,000.00,
as Puzon's contribution to the partnership. Thereafter, the
appellant failed to make any further contributions the partnership
funds as shown in his letters to the appellee wherein he confessed
his inability to put in additional capital to continue with the
projects.
Parenthetically, the claim of the appellant that the appellee is
equally guilty of not contributing his share in the partnership
capital inasmuch as the amount of P40,000.00, allegedly given to
him in October, 1956 as partial contribution of the appellee is
merely a personal loan of the appellant which he had paid to the
appellee, is plainly untenable. The terms of the receipts signed by
the appellant are clear and unequivocal that the sums of money
given by the appellee are appellee's partial contributions to the
partnership capital.
Thus, in the receipt for P10,000.00 dated October 24, 1956, 25
the appellant stated:
Received from Mr. William Uy the sum of TEN THOUSAND PESOS
(P10,000.00) in Check No. SC 423285 Equitable Banking
Corporation, dated October 24, 1956, as advance contribution of
the share of said William Uy in the partnership to be organized
between us under the firm name U.P. CONSTRUCTION COMPANY
which amount mentioned above will be used by the undersigned
to pay his obligations with the Philippine National Bank to effect
the release of his mortgages with the said bank. (Emphasis
supplied)
In the receipt for the amount of P30,000.00 dated October 29,
1956, 26 the appellant also said:
Received from William Uy the sum of THIRTY THOUSAND PESOS
(P30,000.00) in Check No. SC423287, of the Equitable Banking
Corporation, as partial contribution of the share of the said William
Uy to the U.P. CONSTRUCTION COMPANY for which the
undersigned will use the said amount in payment of his obligation
to the Rehabilitation Finance Corporation. (Emphasis supplied)
The findings of the trial court that the appellant misapplied
partnership funds is, likewise, sustained by competent evidence. It
is of record that the appellant assigned to the Philippine National
Bank all the payments to be received on account of the contracts
with the Bureau of Public Highways for the construction of the
aforementioned projects to guarantee the repayment of the bank.
By virtue of the said appellant's personal loan with the said bank
assignment, the Bureau of Public Highways paid the money due on
the partial accomplishments on the construction projects in
question to the Philippine National Bank who, in turn, applied
portions of it in payment of the appellant's loan.
That the assignment to the Philippine National Bank prejudicial to
the partnership cannot be denied. The record show that during the
period from March, 1957 to September, 1959, the appellant
Bartolome Puzon received from the Bureau of Public highways, in
payment of the work accomplished on the construction projects,
the amount of P1,047,181.01, which amount rightfully and legally
belongs to the partnership by virtue of the subcontract
agreements between the appellant and the U.P. Construction
Company. In view of the assignemt made by Puzon to the
Philippine National Bank, the latter withheld and applied the
amount of P332,539,60 in payment of the appellant's personal
loan with the said bank. The balance was deposited in Puzon's
current account and only the amount of P27,820.80 was deposited
in the current account of the partnership. For sure, if the appellant
gave to the partnership all that were earnd and due it under the
subcontract agreements, the money would have been used as a
safe reserve for the discharge of all obligations of the firm and the
partnership would have been able to successfully and profitably
prosecute the projects it subcontracted.
When did the appellant make the reimbursement claimed by him?
For the same period, the appellant actually disbursed for the
partnership, in connection with the construction projects, the
amount of P952,839.77. 31 Since the appellant received from the
Bureau of Public Highways the sum of P1,047,181.01, the
appellant has a deficit balance of P94,342.24. The appellant,
therefore, did not make complete restitution.
The findings of the trial court that the appellee has been ousted
from the management of the partnership is also based upon
persuasive evidence. The appellee testified that after he had
demanded from the appellant payment of the latter's contribution
to the partnership capital, the said appellant did not allow him to
hold office in the U.P. Construction Company and his authority to
deal with the Bureau of Public Highways was revoked by the
appellant.
Since the defendant appellant was at fault, the trial court properly
ordered him to reimburse the plaintiff-appellee whatever amount
latter had invested in or spent for the partnership on account of
construction projects.
3 ISABELO MORAN, JR v. THE HON. COURT OF APPEALS
and MARIANO E. PECSON
FACTS: On February 22, 1971 Pecson and Moran entered into an
agreement whereby both would contribute P15,000 each for the
purpose of printing 95,000 posters (featuring the delegates to the
1971 Constitutional Convention), with Moran actually supervising
the work; that Pecson would receive a commission of P l,000 a
month starting on April 15, 1971 up to December 15, 1971; that
on December 15, 1971, a liquidation of the accounts in the
distribution and printing of the 95,000 posters would be made,
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that Pecson gave Moran P10,000 for which the latter issued a
receipt; that only a few posters were printed; that on or about
May 28, 1971, Moran executed in favor of Pecson a promissory
note in the amount of P20,000 payable in two equal installments,
the whole sum becoming due upon default in the payment of the
first installment on the date due, complete with the costs of
collection.
Private respondent Pecson filed with the CFI an action for the
recovery of a sum of money and alleged in his complaint: (1) on
the alleged partnership agreement, the return of his contribution
of P10,000.00, payment of his share in the profits that the
partnership would have earned, and, payment of unpaid
commission; (2) on the alleged promissory note, payment of the
sum of P20,000.00;
Court of First Instance ruled that by virtue of the partnership
agreement entered into by the parties-plaintiff and defendant the
plaintiff did contribute 10k, and another sum of 7kfor the Voice of
the Veteran or Delegate Magazine. Of the expected 95,000 copies
of the posters, the defendant was able to print 2,000 copies only
authorized of which, however, were sold at P5.00 each.
Nothing more was done after this and it can be said that the
venture did not really get off the ground. On the other hand, the
plaintiff failed to give his full contribution of P15,000.00. Thus,
each party is entitled to rescind the contract. CFI ordered
defendant Moran to return to plaintiff Mariano E. Pecson the sum
of 17k.
Both parties appealed to CA. CA ordered Moran to pay Pecson: a)
P47,500 (the amount that could have accrued to Pecson under
their agreement);(b) P8,000, (the commission for eight
months);(c) P7,000 (as a return of Pecson's investment for the
Veteran's Project);
ISSUES: 1. W/N Moran is liable to Pecson in the sum of P47,500
as the supposed expected profits due him.
2. W/N Moran is liable to Pecson in the sum of 8k as supposed
commission in the partnership arising out of Pecsons investment.
NO
3. W/N Moran is liable to Pecson in the sum of 7k as a supposed
return of investment in a magazine venture.
RULING: The first question raised in this petition refers to the
award of P47,500.00 as the private respondent's share in the
unrealized profits of the partnership. The petitioner contends that
the award is highly speculative. The petitioner maintains that the
respondent court did not take into account the great risks involved
in the business undertaking.
We agree with the petitioner that the award of speculative
damages has no basis in fact and law.
There is no dispute over the nature of the agreement between the
petitioner and the private respondent. It is a contract of
partnership. The latter in his complaint alleged that he was
induced by the petitioner to enter into a partnership with him.
The petitioner on the other hand admitted in his answer the
existence of the partnership.
The rule is, when a partner who has undertaken to contribute a
sum of money fails to do so, he becomes a debtor of the
partnership for whatever he may have promised to contribute (Art.
1786, Civil Code) and for interests and damages from the time he
should have complied with his obligation (Art. 1788, Civil Code).
Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of
the Civil Code of the Philippines, we allowed a total of P200,000.00
compensatory damages in favor of the appellee because the
appellant therein was remiss in his obligations as a partner and as
prime contractor of the construction projects in question. This case
was decided on a particular set of facts. We awarded
compensatory damages in the Uy case because there was a
finding that the constructing business is a profitable one and that
the UP construction company derived some profits from its
contractors in the construction of roads and bridges despite its
deficient capital." Besides, there was evidence to show that the
partnership made some profits during the periods from July 2,
1956 to December 31, 1957 and from January 1, 1958 up to
September 30, 1959. The profits on two government contracts
worth P2,327,335.76 were not speculative. In the instant case,
there is no evidence whatsoever that the partnership between the
petitioner and the private respondent would have been a profitable
venture. In fact, it was a failure doomed from the start. There is
therefore no basis for the award of speculative damages in favor
of the private respondent.
Furthermore, in the Uy case, only Puzon failed to give his full
contribution while Uy contributed much more than what was
expected of him. In this case, however, there was mutual breach.
Private respondent failed to give his entire contribution in the
amount of P15,000.00. He contributed only P10,000.00. The
petitioner likewise failed to give any of the amount expected of
him. He further failed to comply with the agreement to print
95,000 copies of the posters. Instead, he printed only 2,000
copies.
Article 1797 of the Civil Code provides:
The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has
been agreed upon, the share of each in the losses shall be in the
same proportion.
Being a contract of partnership, each partner must share in the
profits and losses of the venture. That is the essence of a
partnership. And even with an assurance made by one of the
partners that they would earn a huge amount of profits, in the
absence of fraud, the other partner cannot claim a right to recover
the highly speculative profits. It is a rare business venture
guaranteed to give 100% profits. In this case, on an investment of
P15,000.00, the respondent was supposed to earn a guaranteed
P1,000.00 a month for eight months and around P142,500.00 on
95,000 posters costing P2.00 each but 2,000 of which were sold at
P5.00 each. The fantastic nature of expected profits is obvious. We
have to take various factors into account. The failure of the
Commission on Elections to proclaim all the 320 candidates of the
Constitutional Convention on time was a major factor. The
petitioner undesirable his best business judgment and felt that it
would be a losing venture to go on with the printing of the agreed
95,000 copies of the posters. Hidden risks in any business venture
have to be considered.
It does not follow however that the private respondent is not
entitled to recover any amount from the petitioner. This net profit
of P6,000.00 should be divided between the petitioner and the
private respondent. And since only P4,000.00 was undesirable by
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the petitioner in printing the 2,000 copies, the remaining
P6,000.00 should therefore be returned to the private respondent.
We agree with the petitioner that the award of P8,000.00 as
Pecson's supposed commission has no justifiable basis in law.
The partnership agreement stipulated that the petitioner would
give the private respondent a monthly commission of Pl,000.00
from April 15, 1971 to December 15, 1971 for a total of eight (8)
monthly commissions. The agreement does not state the basis of
the commission. The payment of the commission could only have
been predicated on relatively extravagant profits. The parties could
not have intended the giving of a commission inspite of loss or
failure of the venture. Since the venture was a failure, the private
respondent is not entitled to the P8,000.00 commission.
Anent the third assigned error, the petitioner maintains that the
respondent Court of Appeals erred in holding him liable to the
private respondent in the sum of P7,000.00 as a supposed return
of investment in a magazine venture.
In this case, there is misapprehension of facts. The evidence of
the private respondent himself shows that his investment in the
"Voice of Veterans" project amounted to only P3,000.00. The
remaining P4,000.00 was the amount of profit that the private
respondent expected to receive.
The respondent court erred when it concluded that the project
never left the ground because the project did take place. Only it
failed. It was the private respondent himself who presented a copy
of the book entitled "Voice of the Veterans" in the lower court as
Exhibit "L". Therefore, it would be error to state that the project
never took place and on this basis decree the return of the private
respondent's investment.
As already mentioned, there are risks in any business venture and
the failure of the undertaking cannot entirely be blamed on the
managing partner alone, specially if the latter exercised his best
business judgment, which seems to be true in this case.
4 EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR.,
CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD
SABTOS, petitioners,
vs.
ESTRELLA ABAD SANTOS, respondent.
Facts: On October 9, 1954 a co-partnership was formed under
the name of "Evangelista & Co." On June 7, 1955, the Articles of
Co-partnership was amended as to include herein respondent,
Estrella Abad Santos, as industrial partner, with herein petitioners
Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and
Conchita P. Navarro, the original capitalist partners, remaining in
that capacity, with a contribution of P17,500 each. The amended
Articles provided, inter alia, that "the contribution of Estrella Abad
Santos consists of her industry being an industrial partner", and
that the profits and losses "shall be divided and distributed among
the partners ... in the proportion of 70% for the first three
partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and
Leonardo Atienza Abad Santos to be divided among them equally;
and 30% for the fourth partner Estrella Abad Santos."
On December 17, 1963 herein respondent filed suit against the
three other partners in the Court of First Instance of Manila,
alleging that the partnership, which was also made a party-
defendant, had been paying dividends to the partners except to
her; and that notwithstanding her demands the defendants had
refused and continued to refuse and let her examine the
partnership books or to give her information regarding the
partnership affairs to pay her any share in the dividends declared
by the partnership. She therefore prayed that the defendants be
ordered to render accounting to her of the partnership business
and to pay her corresponding share in the partnership profits after
such accounting, plus attorney's fees and costs.
The defendants, among others, denied ever having declared
dividends or distributed profits of the partnership; denied likewise
that the plaintiff ever demanded that she be allowed to examine
the partnership books; and alleged that the amended Articles of
Co-partnership did not express the true agreement of the parties,
which was that the plaintiff was not an industrial partner; that she
did not in fact contribute industry to the partnership; They also
claimed that since before the execution of the amended articles of
partnership, Estrella Abad Santos has been, and up to the present
time still is, one of the judges of the City Court of Manila, devoting
all her time to the performance of the duties of her public office.
This fact proves beyond peradventure that it was never
contemplated between the parties, for she could not lawfully
contribute her full time and industry which is the obligation of an
industrial partner pursuant to Art. 1789 of the Civil Code.
Issue: WON Estrella Abad Santos is an industrial partner. YES.
Held: One cannot read appellee's testimony just quoted
without gaining the very definite impression that, even as she was
and still is a Judge of the City Court of Manila, she has rendered
services for appellants without which they would not have had the
wherewithal to operate the business for which appellant company
was organized.
Article 1767 of the New Civil Code which provides that "By
contract of partnership 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, 'does not
specify the kind of industry that a partner may thus contribute,
hence the said services may legitimately be considered as
appellee's contribution to the common fund.
Another article of the same Code relied upon appellants reads:
ART. 1789. An industrial partner cannot engage in business for
himself, unless the partnership expressly permits him to do so;
and if he should do so, the capitalist partners may either exclude
him from the firm or avail themselves of the benefits which he
may have obtained in violation of this provision, with a right to
damages in either case.'
It is not disputed that the provision against the industrial partner
engaging in business for himself seeks to prevent any conflict of
interest between the industrial partner and the partnership, and to
insure faithful compliance by said partner with this prestation.
There is no pretense, however, even on the part of the appellee is
engaged in any business antagonistic to that of appellant
company, since being a Judge of one of the branches of the City
Court of Manila can hardly be characterized as a business.
That appellee has faithfully complied with her prestation with
respect to appellants is clearly shown by the fact that it was only
after filing of the complaint in this case and the answer thereto
appellants exercised their right of exclusion under the codal art
just mentioned by alleging in their Supplemental Answer dated
June 29, 1964 or after around nine (9) years from June 7, 1955
subsequent to the filing of defendants' answer to the complaint,
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defendants reached an agreement whereby the herein plaintiff
been excluded from, and deprived of, her alleged share, interests
or participation, as an alleged industrial partner, in the defendant
partnership and/or in its net profits or income, on the ground
plaintiff has never contributed her industry to the partnership,
instead she has been and still is a judge of the City Court (formerly
Municipal Court) of the City of Manila, devoting her time to
performance of her duties as such judge and enjoying the privilege
and emoluments appertaining to the said office, aside from
teaching in law school in Manila, without the express consent of
the herein defendants.
Thus, appellee is an industrial partner of appellant company, with
the right to demand for a formal accounting and to receive her
share in the net profit that may result from such an accounting.
5 MARTINEZ v. ONG PONG COArellano, CJ (1910)
http://www.scribd.com/doc/111188629/Agency-and-Partnership-
Digests-8
MARTINEZ delivered to Ong Pong Co and Ong Lay (ONGS)
thesum of P1,500. The ONGS, in a private document,
acknowledgedthat they had received the money with the
agreement that theywill invest it in a store, and the profits or
losses therefrom was tobe divided with MARTINEZ in equal shares
Later, MARTINEZ filed a complaint in order to compel the ONGSto
render him an accounting of the partnership, or else to refundhim
the P1,500 that he had given them
Ong Pong Co alone appeared to answer the complaint.
Headmitted the fact of the agreement, but he alleged that Ong
Lay(deceased) was the one who had managed the business, and
that nothing had resulted therefrom except the loss of the capital
of P1,500, to which loss MARTINEZ agreed to bear
CFI rendered decision ordering Ong Pong Co to return
toMARTINEZ one-half of the capital of P1,500 (P750) plus P90
asone-half of the profits, calculated at the rate of 12% per
annumfor the six months that the store was supposed to have
been open(total of P840) with legal interest of 6% until the full
payment,with costs. Hence, this appeal by Ong Pong Co
ISSUE: WON MARTINEZ is entitled to the capital hecontributed to
the partnership
HELD: YES. The ONGS failed to fulfill their obligation as partners
who, acting as MARTINEZs agents in receiving money, did not render proper
accounting therefor. Such renders them jointly liable for the
losses, solidarity not having been established.CFI decision is
AFFRIMED in this regard but REVERSED inasmuchas it found that
the capital invested earned profits. Thus, the CFIruling awarding
MARTINEZ another P840 is DELETED. Ong PongCo is only liable to
pay MARTINEZ half of the capital, or P750, representing half of
the loss which both ONGS should jointly bear due to their
omission, to earn legal interest of 6% from time of filing this
complaint, and costs
RATIO: In his defense, Ong Pong Co raised the issue of the
closure/failureof the store by virtue of ejectment proceedings
instituted against them. THIS, however, has no real significance in
the determination of the merits of this case
To be sure, the whole action is based upon the fact that the
ONGS received capital from MARTINEZ for the purpose of
organizing a store. The ONGS, according to the agreement, were
to handle the said money and invest it in a store which was the
object of the association
The ONGS had no special agreement vesting in one sole person
the management of the business. Thus, both ONGS were the
actual administrators thereof; and as such administrators, they
were the agents of the company and incurred the liabilities
peculiar to every agent, among which is that of rendering
account to the principal of their transactions, and paying him
everything they may have received by virtue of the mandatum
Since neither of them has rendered such account nor proven the
losses, they are therefore obliged to refund the money that they
received for the purpose of establishing the said store
There is no evidence presented that the entire capital or any
part thereof was lost. Without proof, the allegation that the effects
of the store were ejected is, as earlier mentioned, of no moment.
Even if we assume this to be true, it could still not be inferred
that the ejectment was due to the fact that no rents were paid,
and that the rent was not paid on account of the loss of the capital
belonging to the partnership
With regard to the CFIs finding of profits, it appears that the
same was based on the statements of Ong Pong Co, to the
effect that "there were some profits, but not large ones."
This, however, was never proven. And even we admit the same,
such statement still does not make it possible to estimate the
alleged profits. As such, the CFI ruling on this point is REVERSED
Inasmuch as in this case nothing appears other than the failure
to fulfill an obligation on the part of a partner who acted as agent
in receiving money for a given purpose, for which he has rendered
no accounting, such agent is responsible only for the losses which,
by a violation of the provisions of the law, he incurred. This being
an obligation to pay in cash, there are no other losses than the
legal interest, which interest is not due except from the time of the
judicial demand, or, in the present case, from the filing of the
complaint
Art. 1688 is NOT applicable in this case, in so far as it provides
"that the partnership is liable to every partner for the amounts he
may have disbursed on account of the same and for the proper
interest," for the reason that no other money than that contributed
as is involved Art. 1138, CC is also NOT applicable here as this
deals with debts of a partnership where the obligation is NOT
joint. Likewise, Art 1723 regarding the liability of two or more
agents with respect to the return of the money that they received
from their principal is NOT applicable. No showing of solidarity
having been established, their liability is JOINT!
6 - G.R. No. L-2484 April 11, 1906
JOHN FORTIS,Plaintiff-Appellee, vs. GUTIERREZ
HERMANOS,Defendants-Appellants.
Facts: The plaintiff worked for the defendants during the year
1902 under a contract by which he was to receive as
compensation 5 per cent of the net profits of the business. The
contract was made on the part of the defendants by Miguel Alonzo
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Gutierrez. By the provisions of the articles of partnership he was
made one of the managers of the company, with full power
to transact all of the business thereof. As such manager he had
authority to make a contract of employment with the plaintiff.
Issue: W/N plaintiff was a co-partner
Ruling: No. It is claimed by the appellants that the contract
alleged in the complaint made the plaintiff a copartner of the
defendants in the business which they were carrying on. This
contention can not be sustained. It was a mere contract of
employnent. The plaintiff had no voice nor vote in the
management of the affairs of the company. The fact that the
compensation received by him was to be determined with
reference to the profits made by the defendants in their business
did not in any sense make by a partner therein. The articles of
partnership between the defendants provided that the profits
should be divided among the partners named in a certain
proportion. The contract made between the plaintiff and the then
manager of the defendant partnership did not in any way vary or
modify this provision of the articles of partnership. The profits of
the business could not be determined until all of the expenses had
been paid. A part of the expenses to be paid for the year 1902
was the salary of the plaintiff. That salary had to be deducted
before the net profits of the business, which were to be divided
among the partners, could be ascertained. It was undoubtedly
necessary in order to determine what the salary of the plaintiff
was, to determine what the profits of the business were, after
paying all of the expenses except his, but that determination was
not the final determination of the net profits of the business. It
was made for the purpose of fixing the basis upon which his
compensation should be determined. Furthermore, the court rules
that it was not necessary that the contract between the plaintiff
and the defendants should be made in writing (Thunga Chui vs.
Que Bentec).
7 - TAI TONG CHUACHE vs. THE INSURANCE COMMISSION
G.R. No. L-55397
February 29, 1988
GANCAYCO, J.
On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong
Chuache Inc. in the amount of P100,000.00. To secure the
payment of the loan, a mortgage was executed over the land and
the building in favor of Tai Tong Chuache & Co. Arsenio Chua,
representative of Thai Tong Chuache & Co. insured the latter's
interest with Travellers Multi-Indemnity Corporation for
P100,000.00.
On July 31, 1975, the building and the contents were totally razed
by fire.
Demand was made from respondent Travellers Multi-Indemnity for
its share in the loss but the same was refused. Travellers
Insurance alleged that Thai Tong Chuache & Co. is not entitled to
indemnity under its Fire Insurance Policy for lack of insurable
interest before the loss of the insured premises. It was based on
the inference that the credit secured by the mortgaged property
was already paid by the Palomos before the said property was
gutted down by fire.
Now, the Insurance Commission supported this contention. Its
foregoing conclusion was arrived at on the basis of the certification
issued by the then Court of First Instance of Davao, Branch II that
in a certain civil action against the Palomos, Arsenio Lopez Chua
stands as the complainant and not petitioner Tai Tong Chuache &
Company. However, it was proven in the Court, later on that
petitioner's claim that the loan extended to the Palomos has not
yet been paid. Moreover, Travellers failed to prove the lack of
insurable interest of Tai Tong.
The former argues, now, that if the civil case really stemmed from
the loan granted to Azucena Palomo by petitioner the same should
have been brought by Tai Tong Chuache or by its representative in
its own behalf. From the above premise respondent concluded that
the obligation secured by the insured property must have been
paid.
The premise is correct but the conclusion is wrong. Citing Rule 3,
Sec. 2 10 respondent pointed out that the action must be brought
in the name of the real party in interest. We agree. However, it
should be borne in mind that petitioner being a partnership may
sue and be sued in its name or by its duly authorized
representative. The fact that Arsenio Lopez Chua is the
representative of petitioner is not questioned. Petitioner's
declaration that Arsenio Lopez Chua acts as the managing partner
of the partnership was corroborated by respondent insurance
company. 11 Thus Chua as the managing partner of the
partnership may execute all acts of administration 12 including the
right to sue debtors of the partnership in case of their failure to
pay their obligations when it became due and demandable. Or at
the very least, Chua being a partner of petitioner Tai Tong
Chuache & Company is an agent of the partnership. Being an
agent, it is understood that he acted for and in behalf of the firm.
13 Public respondent's allegation that the civil case flied by Arsenio
Chua was in his capacity as personal creditor of spouses Palomo
has no basis. The respondent insurance company having issued a
policy in favor of herein petitioner which policy was of legal force
and effect at the time of the fire, it is bound by its terms and
conditions. Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner, respondent
insurance company is and must be held liable.
8 - E. M. BACHRACH vs. "LA PROTECTORA", ET AL.
Barba, with 4 other individuals formed a civil partnership, called
"La Protectora," for the purpose of engaging in the business of
transporting passengers and freight. Barba, acting as manager,
negotiated the purchase of two automobile trucks from the
plaintiff Bachrach. The other four partners executed a document in
which they declared that they were members of the firm "La
Protectora" and that they had granted to its president (Barba) full
authority "in the name and representation of said partnership to
contract for the purchase of two automobiles". This document was
apparently executed for the purpose of evidencing the authority of
Barba to bind the partnership by the purchase.
Later, Bachrach foreclosed a chattel mortgage which he had
retained on the trucks in order to secure the purchase price. This
was insufficient to cover the entire debt so Bachrach filed a
collection case against the partnership (La Protectora), Barba, and
the other four partners.
The 4 partners alleged that they are not liable as the document
they executed was intended merely as an authority to enable
Barba to bind the partnership and not to confer upon Barba an
authority to bind them personally.
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ISSUE: WON the 4 partners are liable for the partnership debt.
YES.
HELD: The business conducted under the name of "La
Protectora" was evidently that of a civil partnership; and the
liability of the partners to this association must be determined
under the provisions of the Civil Code. The authority of Marcelo
Barba to bind the partnership, in the purchase of the trucks, is
fully established by the document executed by the four appellants.
The transaction by which Barba secured these trucks was in
conformity with the tenor of this document. The promissory notes
constitute the obligation exclusively of "La Protectora" and of
Marcelo Barba; and they do not in any sense constitute an
obligation directly binding on the four appellants. Their liability is
based on the fact that they are members of the civil partnership
and as such are liable for its debts. It is true that article 1698 of
the Civil Code declares that a member of a civil partnership is not
liable in solidum (solidariamente) with his fellows for its entire
indebtedness; but it results from this article, in connection with
article 1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness.
No member of the partnership can bind the others by a personal
act if they have not given him authority to do so. We think that
the document referred to was intended merely as an authority to
enable Barba to bind the partnership and that the parties to that
instrument did not intend thereby to confer upon Barba an
authority to bind them personally. It is obvious that the contract
which Barba in fact executed in pursuance of that authority did not
by its terms profess to bind the appellants personally at all, but
only the partnership and himself. It follows that the four partners
cannot be held to have been personally obligated by that
instrument; but, as we have already seen, their liability rests upon
the general principles underlying partnership liability. Their liability
upon this account is, however, no less obvious than upon the debt
incurred by the purchase of the trucks; and such liability is derived
from the fact that the debt was lawfully incurred in the
prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if
any, was made with regard to the form of management. Under
these circumstances it is declared in article 1695 of the Civil Code
that all the partners are considered agents of the partnership.
Barba therefore must be held to have had authority to incur these
expenses. But in addition to this he is shown to have been in fact
the president or manager, and there can be no doubt that he had
actual authority to incur this obligation. From what has been said it
results that the appellants are severally liable for their respective
shares of the entire indebtedness found to be due.
SC said that each of the four partners shall be liable only for the
one-fifth part of the remainder unpaid.
9 FULLTEXT
G.R. No. 1011 May 13, 1903
JOSE MACHUCA, plaintiff-appellee,
vs.
CHUIDIAN, BUENAVENTURA & CO., defendants-appellants.
LADD, J.:
Most of the allegations of the complaint were admitted by the
defendant at the hearing, and the judgment of the court below is
based on the state of facts appearing from such admissions, no
evidence having been taken.
The defendants are a regular general partnership, organized in
Manila, December 29, 1882, as a continuation of a prior
partnership of the same name. The original partners constituting
the partnership of 1882 were D. Telesforo Chuidian, Doa
Raymunda Chuidian, Doa Candelaria Chuidian, and D. Mariano
Buenaventura. The capital was fixed in the partnership agreement
at 16,000 pesos, of which the first three partners named
contributed 50,000 pesos each, and the last named 10,000 pesos,
and it was stipulated that the liability of the partners should be
"limited to the amounts brought in by them to form the
partnership stock."
In addition to the amounts contributed by the partners to the
capital, it appears from the partnership agreement that each one
of them had advanced money to the preexisting partnership,
which advances were assumed or accounts-current aggregated
something over 665,000 pesos, of which sum about 569,000 pesos
represented the advances from the Chuidians and the balance that
balance that from D. Mariano Buenaventura.
Doa Raymunda Chuidian retired from the partnership November
4, 1885. On January 1, 1888, the partnership went into liquidation,
and it does not appear that the liquidation had been terminated
when this action was brought.
Down to the time the partnership went into liquidation the
accounts-current of D. Telesforo Chuidian and Doa Candelaria
Chuidian had been diminished in an amount aggregating about
288,000 pesos, while that of D. Mariano Buenaventura had been
increased about 51,000 pesos. During the period from the
commencement of the liquidation down to January 1, 1896, the
account-current of each of the Chuidians had been still further
decreased, while that of D. Mariano Buenaventura had been still
further increased.
On January 1, 1894, D. Mariano Buenaventura died, his estate
passing by will to his children, among whom was D. Vicente
Buenaventura. Upon the partition of the estate the amount of the
interest of D. Vicente Buenaventura in his father's account-current
and in the capital was ascertained and recorded in the books of
the firm.
On December 15, 1898, D. Vicente Buenaventura executed a
public instrument in which for a valuable consideration he "assigns
to D. Jose Gervasio Garcia . . . a 25 per cent share in all that may
be obtained by whatever right in whatever form from the
liquidation of the partnership of Chuidian, Buenaventura & Co., in
the part pertaining to him in said partnership, . . . the assignee,
being expressly empowered to do in his own name, and as a part
owner, by virtue of this assignment in the assets of the
partnership, whatever things may be necessary for the purpose of
accelerating the liquidation, and of obtaining on judicially or
extrajudicially the payment of the deposits account-current
pertaining to the assignor, it being understood that D. Jose
Gervasio Garcia is to receive the 25 per cent assigned to him, in
the same form in which it may be obtained from said partnership,
whether in cash, credits, goods, movables or immovables, and on
the date when Messrs. Chuidian, Buenaventura & Co., in
liquidation, shall have effected the operations necessary in order
to satisfy the credits and the share in the partnership capital
hereinbefore mentioned."
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The plaintiff claims under Garcia by virtue of a subsequent
assignment, which has been notified to the liquidator of the
partnership.
The liquidator of the partnership having declined to record in the
books of the partnership the plaintiff's claim under the assignment
as a credit due from the concern to him this action is brought to
compel such record to be made, and the plaintiff further asks that
he be adjudicated to be a creditor of the partnership in an amount
equal to 25 per cent of D. Vicente Buenaventura's share in his
father's account-current, as ascertained when the record was
made in the books of the partnership upon the partition of the
latters estate, with interest, less the liability to which the plaintiff is
subject by reason of his share in the capital; that the necessary
liquidation being first had, the partnership pay to the plaintiff the
balance which may be found to be due him; and that if the
partnership has no funds with which to discharge this obligation an
adjudication of bankruptcy be made. He also asks to recover the
damages caused by reason of the failure of the liquidator to record
his credit in the books of partnership.
The judgment of the court below goes beyond the relief asked by
the plaintiff in the complaint, the plaintiff being held entitled not
only to have the credit assigned him recorded in the books of the
partnership but also to receive forthwith 25 per cent of an amount
representing the share of D. Vicente Buenaventura in the account-
current at the time of the partition of his father's estate, with
interest, the payment of the 25 percent of Buenaventura's share in
the capital to be postponed till the termination of the liquidation.
This point has not, however, been taken by counsel, and we have
therefore considered the case upon its merits.
The underlying question in the case relates to the construction of
clause 19 of the partnership agreement, by which it was stipulated
that "upon the dissolution of the company, the pending obligations
in favor of outside parties should be satisfied, the funds of the
minors Jose and Francisco Chuidian [it does not appear what their
interest in the partnership was or when or how it was acquired]
should be taken out, and afterwards the resulting balance of the
account-current of each one of those who had put in money
(imponentes) should be paid."
Our construction of this clause is that it establishes a a basis for
the final adjustment of the affairs of the partnership; that that
basis is that the liabilities to noncompartners are to be first
discharged; that the claims of the Chuidian minors are to be next
satisfied; and that what is due to the respective partners on
account of their advances to the firm is to be paid last of all,
leaving the ultimate residue, of course, if there be any, to be
distributed, among the partners in the proportions in which they
may be entitled thereto.
Although in a sense the partners, being at the same time creditors,
were "outside parties," it is clear that a distinction is made in this
clause between creditors who were partners and creditors who
were not partners, and that the expression "outside parties" refers
to the latter class. And the words "pending obligations," we think,
clearly comprehend outstanding obligations of every kind in favor
of such outside parties, and do not refer merely, as claimed by
counsel for the plaintiff, to the completion of mercantile operations
unfinished at the time of the dissolution of the partnership, such
as consignments of goods and the like. As respects the claims of
the Chuidian minors, the suggestion of counsel is that the clause
in question means that their accounts are to be adjusted before
those of the partners but not paid first. Such a provision would
have been of no practical utility, and the language used that the
funds should be "taken out" (se dedujeran) does not admit of
such a construction.
Such being the basis upon which by agreement of the partners the
assets of the partnership are to be applied to the discharge of the
various classes of the firm's liabilities, it follows that D. Vicente
Buenaventura, whose rights are those of his father, is in no case
entitled to receive any part of the assets until the creditors who
are nonpartners and the Chuidian minors are paid. Whatever
rights he had either as creditor or partner, he could only transfer
subject to this condition. And it is clear, from the language of the
instrument under which the plaintiff claims, that this conditional
interest was all that D. Vicente Buenaventura ever intended to
transfer. By that instrument he undertakes to assign to Garcia not
a present interest in the assets of the partnership but an interest
in whatever "may be obtained from the liquidation of the
partnership," which Garcia is to receive "in the same form in which
it may be obtained from said partnership," and "on the date when
Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have
effected the operations necessary in order to satisfy" the claims of
D. Vicente Buenaventura.
Upon this interpretation of the assignment, it becomes
unnecessary to inquire whether article 143 of the Code of
Commerce, prohibiting a partner from transferring his interest in
the partnership without the consent of the other partners, applies
to partnerships in liquidation, as contended by the defendant. The
assignment by its terms is not to take effect until all the liabilities
of the partnership have been discharged and nothing remains to
be done except to distribute the assets, if there should be any,
among the partners. Meanwhile the assignor, Buenaventura, is to
continue in the enjoyment of the rights and is to remain subject to
the liabilities of a partner as though no assignment had been
made. In other words, the assignment does not purport to transfer
an interest in the partnership, but only a future contingent right to
25 per cent of such portion of the ultimate residue of the
partnership property as the assignor may become entitled to
receive by virtue of his proportionate interest in the capital.
There is nothing in the case to show either that the nonpartner
creditors of the partnership have been paid or that the claims of
the Chuidian minors have been satisfied. Such rights as the
plaintiff has acquired against the partnership under the
assignment still remain, therefore, subject to the condition which
attached to them in their origin, a condition wholly uncertain of
realization, since it may be that the entire assets of the
partnership will be exhausted in the payment of the creditors
entitled to preference under the partnership agreement, thus
extinguishing the plaintiff's right to receive anything from the
liquidation.
It is contended by the plaintiff that, as the partnership was
without authority to enter upon new mercantile operations after
the liquidation commenced, the increase in D. Mariano
Buenaventura's account-current during that period was the result
of a void transaction, and that therefore the plaintiff is entitled to
withdraw at once the proportion of such increase to which he is
entitled under the assignment. With reference to this contention, it
is sufficient to say that it nowhere appears in the case that the
increase in D. Mariano Buenaventura's account-current during the
period of liquidation was the result of new advances to the firm,
and the figures would appear to indicate that it resulted from the
accumulation of interest.
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Counsel for the plaintiff have discussed at length in their brief the
meaning of the clause in the partnership agreement limiting the
liability of the partners to the amounts respectively brought into
the partnership by them, and the effect of this stipulation upon
their rights as creditors of the firm. These are questions which
relate to the final adjustment of the affairs of the firm, the
distribution of the assets remaining after all liabilities have been
discharged, or, on the other hand, the apportionment of the losses
if the assets should not be sufficient to meet the liabilities. They
are in no way involved in the determination of the present case.
The plaintiff having acquired no rights under the assignment which
are now enforceable against the defendant, this action can not be
maintained. The liquidator of the defendant having been notified
of the assignment, the plaintiff will be entitled to receive from the
assets of the partnership, if any remain, at the termination of the
liquidation, 25 per cent of D. Vicente's resulting interest, both as
partner and creditor. The judgment in this case should not affect
the plaintiff's right to bring another action against the partnership
when the affairs of the same are finally wound up. The proper
judgment will be that the action be dismissed. The judgment of
the court below is reversed and the case is remanded to that court
with directions to enter a judgment of dismissal. So ordered.
10 - 42 Phil. 282-283, G.R. No. L-16318, October 21, 1921
PANG LIM and BENITO GALVEZ, plaintiffs-appellees, vs. LO
SENG, defendant-appellant. (pp. 134, 138, De Leon)
FACTS: Lo Seng and Pang Lim were partners under the firm
name of Lo Seng and Co., in the business of running a distillery.
The land on which said distillery is located as well as the buildings
and improvements originally used in the business were the
property Lo Yao, who leased the same to the firm of Lo Seng and
Co. Upon the expiration of the original contract of lease, a new
contract of lease was executed by the partners Lo Seng and Pang
Lim, on behalf of the partnership as lessee.
Later, Pang Lim sold all his interest in the distillery to his partner
Lo Seng, thus placing the latter in the position of sole owner.
Thereafter, Lo Yao, executed and acknowledged before a notary
public a deed purporting to convey to Pang Lim and one Benito
Galvez, the entire distillery plant including the land used in
connection therewith(in other words, there was a sale).
Later, Pang Lim and Benito Galvez demanded possession from Lo
Seng, but the latter refused to yield; hence an unlawful detainer
was initiated by Pang Lim and Benito Galvez in the court of the
justice of the peace of Paombong to recover possession of the
premises.
ISSUE: Does Pang Lim have the right to terminate the lease? NO
(For the purpose of discussion, what is the nature of a relation in a
partnership? FIDUCIARY)
HELD: Pang Lim has occupied a double role in the transactions
namely, first, as one of the lessees; and secondly, as one of the
purchasers now seeking to terminate the lease. These two
positions are essentially antagonistic and incompatible. Every
competent person is by law bond to maintain in all good faith the
integrity of his own obligations; and no less certainly is he bound
to respect the rights of any person whom he has placed in his own
shoes as regards any contract previously entered into by himself.
While yet a partner in the firm of Lo Seng and Co., Pang Lim
participated in the creation of this lease, and when he sold out his
interest in that firm to Lo Seng this operated as a transfer to Lo
Seng of Pang Lim's interest in the firm assets, including the lease;
and Pang Lim cannot now be permitted, in the guise of a
purchaser of the estate, to destroy an interest derived from
himself, and for which he has received full value.
The bad faith of Pang Lim and Galvez in seeking to deprive Lo
Seng of this lease is strikingly revealed in the circumstance that
prior to the acquisition of this property Pang Lim had been partner
with Lo Seng and Benito Galvez an employee. Both therefore had
been in relations of confidence with Lo Seng and in that position
had acquired knowledge of the possibilities of the property and
possibly an experience which would have enabled them, in case
they had acquired possession, to exploit the distillery with profit.
On account of his status as partner in the firm of Lo Seng and Co.,
Pang Lim knew that the original lease had been extended for
fifteen years; and he knew the extent of valuable improvements
that had been made thereon. Certainly, it would be shocking to
the moral sense if the condition of the law were found to be such
that Pang Lim, after profiting by the sale of his interest in a
business, worthless without the lease, could intervene as
purchaser of the property and confiscate for his own benefit the
property which he had sold for a valuable consideration to Lo
Seng. The sense of justice recoils before the mere possibility of
such eventuality.
Above all other persons in business relations, PARTNERS ARE
REQUIRED TO EXHIBIT TOWARDS EACH OTHER THE HIGHEST
DEGREE OF GOOD FAITH. In fact the relation between partners is
essentially FIDUCIARY, each being considered in law, as he is in
fact, the confidential agent of the other. It is therefore accepted as
fundamental in equity jurisprudence that one partner cannot, to
the detriment of another, apply exclusively to his own benefit the
results of the knowledge and information gained in the character
of partner. Thus, it has been held that if one partner obtains in his
own name and for his own benefit the renewal of a lease on
property used by the firm, to commence at a date subsequent to
the expiration of the firm's lease, the partner obtaining the
renewal is held to be a constructive trustee of the firm as to such
lease. And this rule has even been applied to a renewal taken in
the name of one partner after the dissolution of the firm and
pending its liquidation.
11 - Lim Tanhu v Ramolete
FACTS: Tan Put filed a complaint against several defendants for
accounting of the real and personal properties of the Glory
Commercial Company including those registered in the names of
the defendants and other persons, which properties are located in
the Philippines and in Hong Kong.These defendants included
Antonio Lim Tanhu and Dy Ochay, their son Lim Teck Chuan and
the other spouses-petitioners Alfonso Leonardo Ng Sua and Co
Oyo and their son Eng Chong Leonardo.
Tan Put is the widow of Tee Hoon Lim Po Chuan who is a partner
and manager of Glory Commercial Company along with the
defendants. She alleged in her complaint that defendants, through
fraud and machination, took actual and active management of the
partnership and although Tee Hoon Lim Po Chuan was the
manager of Glory Commercial Company, defendants managed to
use the funds of the partnership to purchase lands and buildings.
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Furthermore , she alleged that after the death of Tee Hoon Lim Po
Chuan, the defendants, without liquidation continued the business
of Glory Commercial Company by purportedly organizing a
corporation known as the Glory Commercial Company,
Incorporated, with paid up capital in the sum of P125,000.00,
which money and other assets of the said Glory Commercial
Company, Incorporated are actually the assets of the defunct
Glory Commercial Company partnership, of which the Tan Put has
a share equivalent to one third (/ 3) thereof. Finally, through
fraud, she was asked to sign a quitclaim.
(The case is mostly on procedural matters, it was too long I only
included the relevant portion as stated in De Leon, p. 139 )
ISSUE: Whether or not Tan Put, as widow of deceased partner in
a partnership, may demand an accounting from the other
partners. NO
HELD: If Po Chuan was in control of the affairs and the running
of the partnership, how could the defendants have defrauded him
of such huge amounts as plaintiff insists . Upon the other hand,
since Po Chuan was in control of the affairs of the partnership, the
more logical inference is that if defendants had obtained any
portion of the funds of the partnership for themselves, it must
have been with the knowledge and consent of Po Chuan, for which
reason no accounting could be demanded from them therefor,
considering that Article 1807 of the Civil Code refers only to what
is taken by a partner without the consent of the other partner or
partners. Incidentally again, this theory about Po Chuan having
been actively managing the partnership up to his death is a
substantial deviation from the allegation in the amended complaint
to the effect that "defendants Antonio Lim Tanhu, Alfonso
Leonardo Ng Sua, Lim Teck Chuan and Eng Chong Leonardo,
through fraud and machination, took actual and active
management of the partnership and although Tee Hoon Lim Po
Chuan was the manager of Glory Commercial Co., defendants
managed to use the funds of the partnership to purchase lands
and buildings etc. and should not have been permitted to be
proven by the hearing officer, who naturally did not know any
better.
Moreover, it is very significant that according to the very tax
declarations and land titles listed in the decision, most if not all of
the properties supposed to have been acquired by the defendants
Lim Tanhu and Ng Sua with funds of the partnership appear to
have been transferred to their names only in 1969 or later, that is,
long after the partnership had been automatically dissolved as a
result of the death of Po Chuan. Accordingly, defendants have no
obligation to account to anyone for such acquisitions in the
absence of clear proof that they had violated the trust of Po Chuan
during the existence of the partnership.
12 - G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE
APPELLATE COURT and LEUNG YIU, respondents.
Facts: YIU filed a complaint with CFI to recover the sum
equivalent to twenty-two percent (22%) of the annual profits
derived from the operation of Sun Wah Panciteria since October,
1955 from petitioner Dan Fue LEUNG.
The Sun Wah Panciteria, a restaurant, was established sometime
in October, 1955. It was registered as a single proprietorship and
its licenses and permits were issued to and in favor of petitioner
Dan Fue Leung as the sole proprietor. Respondent Leung Yiu
adduced evidence during the trial of the case to show that Sun
Wah Panciteria was actually a partnership and that he was one of
the partners having contributed P4,000.00 to its initial
establishment.
LEUNG argues: "The complaint avers that private respondent
extended 'financial assistance' to herein petitioner at the time of
the establishment of the Sun Wah Panciteria, in return of which
private respondent allegedly will receive a share in the profits of
the restaurant. The same complaint did not claim that private
respondent is a partner of the business. It was, therefore, a
serious error for the lower court and the Hon. Intermediate
Appellate Court to grant a relief not called for by the complaint. It
was also error for the Hon. Intermediate Appellate Court to
interpret or construe 'financial assistance' to mean the contribution
of capital by a partner to a partnership;"
ISSUE: WON YIU is a partner of the LEUNG in the establishment
of Sun Wah Panciteria? YES
HELD: The lower courts did not err in construing the complaint as
one wherein the private respondent asserted his rights as partner
of the petitioner in the establishment of the Sun Wah Panciteria,
notwithstanding the use of the term financial assistance therein.
We agree with the appellate court's observation to the effect that
"... given its ordinary meaning, financial assistance is the giving
out of money to another without the expectation of any returns
therefrom'. It connotes an ex gratia dole out in favor of someone
driven into a state of destitution. But this circumstance under
which the P4,000.00 was given to the petitioner does not obtain in
this case.' (p. 99, Rollo) The complaint explicitly stated that "as a
return for such financial assistance, plaintiff (private respondent)
would be entitled to twenty-two percentum (22%) of the annual
profit derived from the operation of the said panciteria.' (p. 107,
Rollo) The well-settled doctrine is that the '"... nature of the action
filed in court is determined by the facts alleged in the complaint as
constituting the cause of action."
13 G.R. No. 126334, November 23, 2001
EMILIO EMNACE, petitioner,
vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO,
SHERWIN TABANAO, VICENTE WILLIAM TABANAO,
JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO
VARELA, ROSELA TABANAO and VINCENT TABANAO,
respondents.
YNARES-SANTIAGO, J.:
FACTS:
- Petitioner Emnace, Tabanao and Divinagracia were partners in a
fishing business.
- In 1986, they decided to dissolve their partnership and executed
an agreement of partition and distribution of the partnership
properties (fishing boats, vehicles, parcels of land and cash
deposits) among them, consequent to Divinagracia's withdrawal
from the partnership.
- Throughout the existence of the partnership, and even after
Tabanao's untimely demise in 1994, Emnace failed to submit to
Tabanao's heirs, the respondents herein, any statement of assets
and liabilities of the partnership, to render an accounting of the
partnership's finances and to turn over to said heirs the deceased's
1/3 share in the total assets of the partnership, amounting to
P30M, or the sum of P10M, despite formal demand for payment
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thereof.
- Consequently, Tabanao' s heirs, filed against Emnace an action
for accounting, payment of shares, division of assets and
damages.
- Emnace filed a motion to dismiss the complaint with prescription
as one of his grounds. He argued that the heirs action has
prescribed four 4 years after it accrued in 1986.
- RTC denied said motion. CA affirmed.
ISSUE:
WON the respondent heirs action for accounting has already
prescribed. NO.
HELD:
The three 3 final stages of a partnership are: 1) dissolution;
2) winding-up; and 3) termination. The partnership, although
dissolved, continues to exist and its legal personality is retained, at
which time it completes the winding up of its affairs, including the
partitioning and distribution of the net partnership assets to the
partners. For as long as the partnership exists, any of the partners
may demand an accounting of the partnership's business.
Prescription of the said right starts to run only upon the dissolution
of the partnership when the final accounting is done.
Contrary to Emnaces protestations that the heirs' right to
inquire into the business affairs of the partnership accrued in
1986, prescribing four (4) years thereafter, prescription had not
even begun to run in the absence of a final accounting. Article
1842 of the Civil Code provides: The right to an account of his
interest shall accrue to any partner, or his legal representative as
against the winding up partners or the surviving partners or the
person or partnership continuing the business, at the date of
dissolution, in the absence of any agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal
with the duty to account, the above-cited provision states that the
right to demand an accounting accrues at the date of dissolution in
the absence of any agreement to the contrary. When a final
accounting is made, it is only then that prescription begins to run.
In the case at bar, no final accounting has been made, and that is
precisely what respondents are seeking in their action before the
trial court, since petitioner has failed or refused to render an
accounting of the partnership's business and assets. Hence, the
said action is not barred by prescription.
NATURE OF ACTION FOR ACCOUNTING - IN PERSONAM
Emnace, insists that venue was improperly laid since the
action is a real action involving a parcel of land that is located
outside the territorial jurisdiction of the court a quo.

This contention is not well-taken. The records indubitably
show that the heirs are asking that the assets of the partnership
be accounted for, sold and distributed according to the agreement
of the partners. The fact that two of the assets of the partnership
are parcels of land does not materially change the nature of the
action. It is an action IN PERSONAM because it is an action against
a person, namely, petitioner Emnace, on the basis of his personal
liability. It is not an action in rem where the action is against the
thing itself instead of against the person. Furthermore, there is no
showing that the parcels of land involved in this case are being
disputed. In fact, it is only incidental that part of the assets of the
partnership under liquidation happen to be parcels of land.

14 - G.R. No. L-6304 Sison v. McQuaid, 94 Phil. 201
Facts:
- The plaintiff was made a partner in the defendants lumber
business with the plaintiff to contribute the sum due him from
defendant (defendant previously owed the plaintiff) in addition to
his personal services. A partnership was made in which they were
to share alike in the income or profits of the business, each to get
one-half thereof.
-The the partnership sold to the United States Army board feet of
lumber for P13,800 but the defendant has persistently refused to
deliver one-half of it to the plaintiff after repeated demands.
Plaintiff now prays for judgment declaring the existence of the
alleged partnership and requiring the defendant to pay him the
said sum of P6,900, in addition to damages and costs.
-Defendant filed a motion to dismiss on the grounds that plaintiff's
action had already prescribed, that plaintiff's claim was not
provable under the Statute of Frauds, and that the complaint
stated no cause of action.
Issue: W/N of the proceeds of the sale could be recovered
without a liquidation of the business.
Ruling:
-His complaint does not show why he should be entitled to the
sum he claims. It does not allege that there has been a liquidation
of the partnership business and the said sum has been found to be
due him as his share of the profits. The proceeds from the sale of
a certain amount of lumber cannot be considered profits until
costs and expenses have been deducted. The profits of the
business cannot be determined by taking into account the result of
one particular transaction instead of all the transactions had.
Hence, the need for a general liquidation before a member of a
partnership may claim a specific sum as his share of the profits.
-Moreover, it is not clear from the allegations of the complaint just
when plaintiff's cause of action accrued. Consequently, it cannot
be determined with certainty whether that action has already
prescribed or not. The defense of prescription then cannot be
sustained on a mere motion to dismiss based on what appears on
the face of the complaint.
-The order of dismissal should be upheld since complaint states no
cause of action.
15 - JOSE ORNUM and EMERENCIANA ORNUM vs.
MARIANO, LASALA, et al.
GR No. L-47823 July 26, 1943
FACTS:
Plaintiffs and defendants are natives of Taal, Batangas but the
defendants resided in Romblon.
In 1908, Pedro Lasala and Emerenciano Ornum formed a
partnership. Lasala, as capitalist, delivered P1,000 to Ornum, the
industrial partner. Ornum would conduct a business in Romblon.
In 1912, Ornum asked for the dissolution of the partnership and
suggested present petitioners, to become the new partners in his
place.
Pedro Lasala died and his children succeeded to the rights and
interest in the partnership. The partners never knew each other
personally and no formal partnership agreement was ever
executed.
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Petitioners, as managing partners, received of the net gains,
while the other was divided between them and the Lasala
group in proportion to the capital put in by each group.
After 20 years, the business grew to the value of P44,618.67.
Subsequently, respondents announced their desire to dissolve
the partnership.
Respondents filed a CMP, praying for an accounting and final
liquidation of the assets of the partnership.
According to petitioners, they already remitted and paid to
respondents the total amount corresponding to them under the
last statement of accounts, which however, was not signed by
respondents.
According to petitioners, respondents tacitly approved and
accepted the final statement of accounts, thereby losing their right
to a further accounting, from the moment they accepted their
shares without objection.
CFI ruled in favor of petitioners. CA reversed on the ground that
the final statement of accounts was unsigned and stand
disapproved.
ISSUE:
WON respondents may request for further accounting and
liquidation in dissolving the partnership? NO.
HELD:
NO. respondents were already given the final statement of
accounts, which they tacitly approved.
We hold that the last and final statement of accounts, had been
approved by the respondents. This approval resulted, by virtue of
the letter of Father Mariano Lasala of July 19, 1932, quoted in part
in the appealed decision from the failure of the respondents to
object to the statement and from their promise to sign the same
as soon as they received their shares as shown in said statement.
After such shares had been paid by the petitioners and accepted
by the respondents without any reservation, the approval of the
statement of accounts was virtually confirmed and its signing
thereby became a mere formality to be complied with by the
respondents exclusively.
Their refusal to sign, after receiving their shares, amounted to a
waiver to that formality in favor of the petitioners who has already
performed their obligation.
This approval precludes any right on the part of the respondents
to a further liquidation, unless the latter can show that there was
fraud, deceit, error or mistake in said approval.
In our opinion, the pronouncement that the evidence tends to
prove that there were mistakes in the petitioners' statements of
accounts, without specifying the mistakes, merely intimates as
suspicion and is not such a positive and unmistakable finding of
fact as to justify a revision, especially because the CA has relied on
the bare allegations of the parties.
SC reversed the CA decision decision on the legal ground that
the petitioners' final statement of accounts had been approved by
the respondents and no justifiable reason (fraud, deceit, error or
mistake) has been positively and unmistakably found by the CA so
as to warrant the liquidations sought by the respondents.