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2.
They invested the same not merely in one transaction, but in a
series of transactions. The number of lots acquired and transactions
undertake is strongly indicative of a pattern or common design that was
not limited to the conservation and preservation of the aforementioned
common fund or even of the property acquired. In other words, one
cannot but perceive a character of habitually peculiar to business
transactions engaged in the purpose of gain;
3.
Said properties were not devoted to residential purposes, or to
other personal uses, of petitioners but were leased separately to several
persons;
4.
They were under the management of one person where the affairs
relative to said properties have been handled as if the same belonged to a
corporation or business and enterprise operated for profit;
5.
Existed for more than ten years, or, to be exact, over fifteen years,
since the first property was acquired, and over twelve years, since Simeon
Evangelista became the manager;
6.
Petitioners have not testified or introduced any evidence, either on
their purpose in creating the set up already adverted to, or on the causes
for its continued existence.
The collective effect of these circumstances is such as to leave no room
for doubt on the existence of said intent in petitioners herein.
Also, petitioners argument that their being mere co-owners did
not create a separate legal entity was rejected because, according to the
Court, the tax in question is one imposed upon "corporations", which,
strictly speaking, are distinct and different from "partnerships". When the
NIRC includes "partnerships" among the entities subject to the tax on
"corporations", said Code must allude, therefore, to organizations which
are not necessarily "partnerships", in the technical sense of the term. The
qualifying expression found in Section 24 and 84(b) clearly indicates that
a joint venture need not be undertaken in any of the standard forms, or in
conformity with the usual requirements of the law on partnerships, in
order that one could be deemed constituted for purposes of the tax on
corporations. Accordingly, the lawmaker could not have regarded that
personality as a condition essential to the existence of the partnerships
therein referred to. For purposes of the tax on corporations, NIRC includes
1
2 Woodhouse vs Halili
Commenced at stipulated time not when consent was given
FACTS: On November 29, 1947, plaintiff Woodhouse entered into a written
agreement with defendant Halili stating among others that: 1) that they
shall organize a partnership for the bottling and distribution of Missionsoft
drinks, plaintiff to act as industrial partner or manager, and the defendant
as a capitalist, furnishing the capital necessary therefore; 2) that plaintiff
was to secure the Mission Soft Drinks franchise for and in behalf of the
proposed partnership and 3) that the plaintiff was to receive 30 per cent
of the net profits of the business.
Prior to entering into this agreement, plaintiff had informed the Mission
Dry Corporation of Los Angeles, California, that he had interested a
prominent financier (defendant herein) in the business, who was willing to
invest half a milliondollars in the bottling and distribution of the said
beverages, and requested, in order that he may close the deal with him,
that the right to bottle and distribute be granted him for a limited time
under the condition that it will finally be transferred to the corporation.
Pursuant to this request, plaintiff was given a thirty days option on
exclusive bottling and distribution rights for the Philippines. The contract
was finally signed by plaintiff on December 3, 1947.
When the bottling plant was already in operation, plaintiff demanded of
defendant that the partnership papers be executed. Defendant Halili gave
excuses and would not execute said agreement, thus the complaint by the
plaintiff.
Plaintiff prays for the : 1.execution of the contract of partnership; 2)
accounting of profits and 3)share thereof of 30 percent with 4) damages
in the amount of P200,000. The Defendant on the other hand claims that:
1) the defendants consent to the agreement, was secured by the
representation of plaintiff that he was the owner, or was about to become
owner of an exclusive bottling franchise, which representation was false,
and that plaintiff did not secure the franchise but was given to defendant
himself 2) that defendant did not fail to carry out his undertakings, but
that it was plaintiff who failed and 3)that plaintiff agreed to contribute to
the exclusive franchise to the partnership, but plaintiff failed to do so with
a 4) counterclaim for P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the
profits and that the 2) execution of contract cannot be enforced upon
parties. Lastly, the 3) fraud wasnt proved
ISSUES: 1. WON plaintiff falsely represented that he had an exclusive
franchise to bottle Mission beverages
2. WON false representation, if it existed, annuls the agreement to form
the partnership
HELD: 1. Yes. Plaintiff did make false representations and this can be seen
through his letters to Mission Dry Corporation asking for the latter to grant
him temporary franchise so that he could settle the agreement with
defendant. The trial court reasoned, and the plaintiff on this appeal
argues, that plaintiff only undertook in the agreement to secure the
Mission Dry franchise for and in behalf of the proposed partnership. The
existence of this provision in the final agreement does not militate against
plaintiff having represented that he had the exclusive franchise; it rather
strengthens belief that he did actually make the representation. The
defendant believed, or was made to believe, that plaintiff was the grantee
of an exclusive franchise. Thus it is that it was also agreed upon that the
2
a later date. , The defendant may not be compelled against his will to
carry out the agreement nor execute the partnership papers. The law
recognizes the individuals freedom or liberty to do an act he has
promised to do, or not to do it, as he pleases. Dispostive Postion: With
modification above indicated, the judgment appealed from is hereby
affirmed.
3 Torres vs CA
(-) invty valid JV
In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint
venture agreement with Manuel Torres. Under the agreement, the sisters
agreed to execute a deed of sale in favor Manuel over a parcel of land, the
sisters received no cash payment from Manuel but the promise of profits
(60% for the sisters and 40% for Manuel) said parcel of land is to be
developed as a subdivision.
Manuel then had the title of the land transferred in his name and he
subsequently mortgaged the property. He used the proceeds from the
mortgage to start building roads, curbs and gutters. Manuel also
contracted an engineering firm for the building of housing units. But due
to adverse claims in the land, prospective buyers were scared off and the
subdivision project eventually failed.
The sisters then filed a civil case against Manuel for damages equivalent
to 60% of the value of the property, which according to the sisters, is
whats due them as per the contract.
The lower court ruled in favor of Manuel and the Court of Appeals affirmed
the lower court
The sisters then appealed before the Supreme Court where they argued
that there is no partnership between them and Manuel because the joint
venture agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered into with
Manuel is a partnership agreement whereby they agreed to contribute
property (their land) which was to be developed as a subdivision. While on
the other hand, though Manuel did not contribute capital, he is an
3
industrial partner for his contribution for general expenses and other
costs. Furthermore, the income from the said project would be divided
according to the stipulated percentage (60-40). Clearly, the contract
manifested the intention of the parties to form a partnership. Further still,
the sisters cannot invoke their right to the 60% value of the property and
at the same time deny the same contract which entitles them to it.
At any rate, the failure of the partnership cannot be blamed on the sisters,
nor can it be blamed to Manuel (the sisters on their appeal did not show
evidence as to Manuels fault in the failure of the partnership). The sisters
must then bear their loss (which is 60%). Manuel does not bear the loss of
the other 40% because as an industrial partner he is exempt from losses.
4 Gatchalian vs CIR
Facts: Plaintiffs purchased, in the ordinary course of business, from one of
the duly authorized agents of the National Charity Sweepstakes Office one
ticket for the sum of two pesos (P2), said ticket was registered in the
name of Jose Gatchalian and Company. The ticket won one of the thirdprizes in the amount of P50,000.
Jose Gatchalian was required to file the corresponding income tax return
covering the prize won. Defendant-Collector made an assessment against
Jose Gatchalian and Co. requesting the payment of the sum of P1,499.94
to the deputy provincial treasurer of Pulilan, Bulacan. Plaintiffs, however
through counsel made a request for exemption. It was denied.
Plaintiffs failed to pay the amount due, hence a warrant of distraint and
levy was issued. Plaintiffs paid under protest a part of the tax and
penalties to avoid the effects of the warrant. A request that the balance be
paid by plaintiffs in installments was made. This was granted on the
condition that a bond be filed.
Plaintiffs failed in their installment payments. Hence a request for
execution of the warrant of distraint and levy was made. Plaintiffs paid
under protest to avoid the execution.
A claim for refund was made by the plaintiffs, which was dismissed, hence
the appeal.
Issue: Whether the plaintiffs formed a partnership hence liable for income
tax.
said contract does not exist in the eyes of the law, the purpose from which
the contribution was made has not come into existence, and the
administrator of the partnership holding said contribution retains what
belongs to others, without any consideration; for which reason he is not
bound to return it and he who has paid in his share is entitled to recover it.
(2) Our Code does not state whether, upon the dissolution of the unlawful
partnership, the amounts contributed are to be returned by the partners,
because it only deals with the disposition of the profits; but the fact that
said contributions are not included in the disposal prescribed profits,
shows that in consequences of said exclusion, the general law must be
followed, and hence the partners should reimburse the amount of their
respective contributions. (3) Any other solution is immoral, and the law
will not consent to the latter remaining in the possession of the manager
or administrator who has refused to return them, by denying to the
partners the action to demand them. With regard to Profits of an Illegal
Partnership: the court holds that (1) The article cited above permits no
action for the purpose of obtaining the earnings made by the unlawful
partnership, during its existence as result of the business in which it was
engaged, because for the purpose, the partner will have to base his action
upon the partnership contract, which is to annul and without legal
existence by reason of its unlawful object; and it is self evident that what
does not exist cannot be a cause of action. (2) Profits earned in the course
of the partnership, because they do not constitute or represent the
partner's contribution but are the result of the industry, business or
speculation which is the object of the partnership, and therefor, in order to
demand the proportional part of the said profits, the partner would have
to base his action on the contract which is null and void, since this
Under the joint venture, Belo acted as capitalist, Tocao as president and
general manager, and Anay as head of the marketing department and
later, vice-president for sales
The parties agreed that Belo's name should not appear in any documents
relating to their transactions with West Bend Company. Anay having
secured the distributorship of cookware products from the West Bend
Company and organized the administrative staff and the sales force, the
cookware business took off successfully. They operated under the name of
Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's
name.
The parties agreed further that Anay would be entitled to:
(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly
production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement was
not reduced to writing on the strength of Belo's assurances that he was
sincere, dependable and honest when it came to financial commitments.
On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter
addressed to the Cubao sales office to the effect that she was no longer
the vice-president of Geminesse Enterprise.
Anay attempted to contact Belo. She wrote him twice to demand her
overriding commission for the period of January 8, 1988 to February 5,
1988 and the audit of the company to determine her share in the net
profits.
Anay still received her five percent (5%) overriding commission up to
December 1987. The following year, 1988, she did not receive the same
commission although the company netted a gross sales of P
13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint
for sum of money with damages against Marjorie D. Tocao and William
Belo before the Regional Trial Court of Makati, Branch 140
The trial court held that there was indeed an "oral partnership agreement
between the plaintiff and the defendants. The Court of Appeals affirmed
the lower courts decision.
ISSUE:
HELD:
In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a
partnership agreement with Jimmy Yu and Norberto Uy. The three
contributed P50,000.00 each and used the funds to purchase a truck to
start their trucking business. A year later however, Jose Lim died. The
eldest son of Jose Lim, Elfledo Lim, took over the trucking business and
under his management, the trucking business prospered. Elfledo was able
to but real properties in his name. From one truck, he increased it to 9
trucks, all trucks were in his name however. He also acquired other motor
vehicles in his name.
Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet
to do an accounting of all income, profits, and properties from the estate
of Elfledo Lim as they claimed that they are co-owners thereof. Juliet
refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his properties from
the partnership that Jose Lim formed with Norberto and Jimmy. In court,
Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. The
heirs testified that Elfledo was merely the driver of Jose Lim.
ISSUE: Who is the partner between Jose Lim and Elfledo Lim?
But at any rate, the Supreme Court noted that based on the functions
performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was himself the
partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the
partnership, on a date that coincided with the payment of the initial
capital in the partnership;
2.) Elfledo ran the affairs of the partnership, wielding absolute control,
power and authority, without any intervention or opposition whatsoever
from any of petitioners herein;
3.) all of the properties, particularly the nine trucks of the partnership,
were registered in the name of Elfledo;
4.) Jimmy testified that Elfledo did not receive wages or salaries from the
partnership, indicating that what he actually received were shares of the
profits of the business; and
5.) none of the heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime. As repeatedly stressed in the
case of Heirs of Tan Eng Kee, a demand for periodic accounting is
evidence of a partnership.
Elfledo was not just a hired help but one of the partners in the trucking
business, active and visible in the running of its affairs from day one until
this ceased operations upon his demise. The extent of his control,
administration and management of the partnership and its business, the
fact that its properties were placed in his name, and that he was not paid
salary or other compensation by the partners, are indicative of the fact
that Elfledo was a partner and a controlling one at that. It is apparent that
the other partners only contributed in the initial capital but had no say
thereafter on how the business was ran. Evidently it was through Elfredos
efforts and hard work that the partnership was able to acquire more trucks
and otherwise prosper. Even the appellant participated in the affairs of the
partnership by acting as the bookkeeper sans salary.
8 Agad vs Mabato
Facts: Petitioner Mauricio Agad claims that he and defendant Severino
Mabato are partners in afishpond business to which they contributed
P1000 each. As managing partner, Mabato yearly renderedthe accounts of
the operations of the partnership. However, for the years 1957-1963,
defendant failedto render the accounts despite repeated demands.
Petitioner filed a complaint against Mabato to whicha copy of the public
instrument evidencing their partnership is attached. Aside from the share
of profits
(P14,000) and attorneys fees
dissolution of the partnership and
(P1000),
petitioner
prayed
for
the
o
After 3 years, the Angeles spouses asked for an accounting from
Mercado, and they claim that only after this demand for an accounting did
thy discover that Mercado had put the contract of antichresis over the
subject land under Mercado and his spouses names
o
Angeles spouses acknowledged their joint business venture in the
barangay conciliation proceedings although they assailed the manner the
business was conducted
o
Although the legal formalities for the formation were not adhered
to, the partnership relationship was evident.
o
There is no estafa where money is delivered by a partner to his copartner on the latters representation that the amount shall be applied to
the business of their partnership. In case of the money received, the copartners liability is civil in nature
ISSUES/HELD:
1.
W/N the Sec. of Justice committed grave abuse of discretion in
dismissing the appeal - No
2.
W/N a partnership existed between Mercado and the Angeles
spouses - Yes
3.
W/N there was misappropriation by Mercado No
RATIO/RULING:
1. Angeles spouses fail to convince that the Secretary of Justice
committed grave abuse of discretion when he dismissed their appeal.
Moreover, they committed a procedural error when they failed to file a
motion for reconsideration of the Sec. of Justices resolution, which is
already enough reason to dismiss the case.
Failure to register does not affect the liability of the partnership and
of the partners to third persons, nor does it affect the partnerships
juridical personality
Even the RTC of Sta. Cruz, Laguna, which handled the civil case filed
by the Angeles spouses against Mercado and Leo Cerayban stated that it
was the practice to have the contracts secured in Mercados name as the
Angeles spouses fear being kidnapped by the NPA or being questioned by
the BIR as Oscar Angeles was working with the government.
10 A. Litonjua vs Litonjua
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo
entered into a contract of partnership with him. Aurelio showed as
evidence a letter sent to him by Eduardo that the latter is allowing Aurelio
to manage their family business (if Eduardos away) and in exchange
thereof he will be giving Aurelio P1 million or 10% equity, whichever is
higher. A memorandum was subsequently made for the said partnership
agreement. The memorandum this time stated that in exchange of
Aurelio, who just got married, retaining his share in the family business
(movie theatres, shipping and land development) and some other
immovable properties, he will be given P1 Million or 10% equity in all
Ruben died, and Felicidad failed to make payment. She refused to turn
over the property and so the firm filed an ejectment case against her
(wherein she lost). She also failed to redeem the property within the
period stipulated. She then filed a civil case against Alfredo Aguila,
manager of the firm, seeking for the declaration of nullity of the deed of
sale. The RTC retained the validity of the deed of sale. The Court of
Appeals reversed the RTC. The CA ruled that the sale is void for it is a
pactum commissorium sale which is prohibited under Art. 2088 of the
Civil Code (note the disparity of the purchase price, which is the loan
amount, with the actual value of the property which is after all located in a
subdivision).
ISSUE: Whether or not the case filed by Felicidad shall prosper.
HELD: No. Unfortunately, the civil case was filed not against the real party
in interest. As pointed out by Aguila, he is not the real party in interest but
rather it was the partnership A.C. Aguila & Sons, Co. The Rules of Court
provide that every action must be prosecuted and defended in the name
of the real party in interest. A real party in interest is one who would be
benefited or injured by the judgment, or who is entitled to the avails of the
suit. Any decision rendered against a person who is not a real party in
interest in the case cannot be executed. Hence, a complaint filed against
such a person should be dismissed for failure to state a cause of action, as
in the case at bar.
Under Art. 1768 of the Civil Code, a partnership has a juridical personality
separate and distinct from that of each of the partners. The partners
cannot be held liable for the obligations of the partnership unless it is
shown that the legal fiction of a different juridical personality is being used
for fraudulent, unfair, or illegal purposes. In this case, Felicidad has not
shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being
used for fraudulent, unfair, or illegal purposes. Moreover, the title to the
subject property is in the name of A.C. Aguila & Sons, Co. It is the
partnership, not its officers or agents, which should be impleaded in any
litigation involving property registered in its name. A violation of this rule
will result in the dismissal of the complaint.
13 Mendiola v. CA
DOCTRINE: In a partnership, the members become co-owners of what is
contributed to the firm capital and of all property that may be acquired
thereby and through the efforts of the members. The property or stock of
the partnership forms a community of goods, a common fund, in which
each party has a proprietary interest. In fact, the New Civil Code regards a
partner as a co-owner of specific partnership property. Each partner
possesses a joint interest in the whole of partnership property. If the
relation does not have this feature, it is not one of partnership. This
essential element, the community of interest, or co-ownership of, or joint
interest in partnership property is absent in the relations between
petitioner and private respondent Pacfor. xxx the parties in this case,
merely shared profits. This alone does not make a partnership. Besides, a
corporation cannot become a member of a partnership in the absence of
express authorization by statute or charter. This doctrine is based on the
following considerations: (1) that the mutual agency between the
partners, whereby the corporation would be bound by the acts of persons
who are not its duly appointed and authorized agents and officers, would
be inconsistent with the policy of the law that the corporation shall
manage its own affairs separately and exclusively; and, (2) that such an
arrangement would improperly allow corporate property to become
subject to risks not contemplated by the stockholders when they originally
invested in the corporation.
FACTS: Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a
corporation organized and existing under the laws of California, USA. It is a
subsidiary of Cellulose Marketing International (organized in Sweden)
Private respondent Pacfor entered into a "Side Agreement on
Representative Office known as Pacific Forest Resources (Phils.), Inc." with
petitioner Arsenio T. Mendiola (ATM). The Side Agreement outlines the
business relationship of the parties with regard to the Philippine
operations of Pacfor. Private respondent will establish a Pacfor
representative office in the Philippines, to be known as Pacfor Phils, and
petitioner ATM will be its President. Petitioner's base salary and the
overhead expenditures of the company shall be borne by the
representative office and funded by Pacfor/ATM, since Pacfor Phils. is
equally owned on a 50-50 equity by ATM and Pacfor-usa.
In its application (to the SEC), private respondent Pacfor proposed to
establish its representative office in the Philippines. It also designated
petitioner as its resident agent in the Philippines, authorized to accept
summons and processes in all legal proceedings, and all notices affecting
the corporation. The Side Agreement was amended through a "Revised
11
(1) that the mutual agency between the partners, whereby the
corporation would be bound by the acts of persons who are not its duly
appointed and authorized agents and officers, would be inconsistent with
the policy of the law that the corporation shall manage its own affairs
separately and exclusively; and, (2) that such an arrangement would
improperly allow corporate property to become subject to risks not
contemplated by the stockholders when they originally invested in the
corporation. No such authorization has been proved in the case at bar.
(This part goes into the employer-employee relationship bit, I dont think
its important but I included it na din if ever magtanong re: paano nagging
employee) Be that as it may, we hold that on the basis of the evidence, an
employer-employee relationship is present in the case at bar. The
elements to determine the existence of an employment relationship are:
(a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control
the employee's conduct. The most important element is the employer's
control of the employee's conduct, not only as to the result of the work to
be done, but also as to the means and methods to accomplish it.43 In the
instant case, all the foregoing elements are present. First, it was private
respondent Pacfor which selected and engaged the services of petitioner
as its resident agent in the Philippines. Second, as stipulated in their Side
Agreement, private respondent Pacfor pays petitioner his salary
amounting to $65,000 per annum which was later increased to $78,000.
Third, private respondent Pacfor holds the power of dismissal, as may be
gleaned through the various memoranda it issued against petitioner,
placing the latter on preventive suspension while charging him with
various offenses, including willful disobedience, serious misconduct, and
gross neglect of duty, and ordering him to show cause why no disciplinary
action should be taken against him.
Lastly and most important, private respondent Pacfor has the power of
control over the means and method of petitioner in accomplishing his
work.
The power of control refers merely to the existence of the power, and not
to the actual exercise thereof. The principal consideration is whether the
employer has the right to control the manner of doing the work, and it is
not the actual exercise of the right by interfering with the work, but the
right to control, which constitutes the test of the existence of an employeremployee relationship.44 In the case at bar, private respondent Pacfor, as
13
organized in, or existing under the laws of the Philippines, no matter how
created or organized, but not including duly registered general copartnership (compaias colectivas), general professional partnerships,
private educational institutions, and building and loan associations xxx.
Ineludibly, the Philippine legislature included in the concept of
corporations those entities that resembled them such as unregistered
partnerships and associations. Interestingly, the NIRCs inclusion of such
entities in the tax on corporations was made even clearer by the Tax
Reform Act of 1997 Sec. 27 read together with Sec. 22 reads:
SEC. 27. Rates of Income Tax on Domestic Corporations. -(A) In General. -- Except as otherwise provided in this Code, an income
tax of thirty-five percent (35%) is hereby imposed upon the taxable
income derived during each taxable year from all sources within and
without the Philippines by every corporation, as defined in Section 22 (B)
of this Code, and taxable under this Title as a corporation xxx.
SEC. 22. -- Definition. -- When used in this Title:
xxx xxx
xxx
Lim Po Chuan has not been satisfactorily established and that, on the
contrary, the evidence on record convincingly shows that her relation with
said deceased was that of a common-law wife.
PARTNERS OBLIGATIONS
Moreover, the Supreme Court said that the lower courts committed an
error by awarding 1/3 of the partnership properties to Tan because there
has been no liquidation proceedings yet. And if there has not yet been any
liquidation of the partnership, the only right plaintiff could have would be
to what might result after much liquidation to belong to the deceased
partner (her alleged husband) and before this is finished, it is impossible
to determine, what rights or interest, if any the deceased had.
Misappropriation
Sometime before 1910, Pedro Larin formed a partnership with Pedro
Tarug, Eusebio Clarin and Carlos de Guzman. Larin, being the capitalist,
agreed to contribute P172.00 to the partnership and the three others shall
use said fund to trade mangoes. The three industrial partners bought
mangoes and sell them and they earned P203.00 but they failed to give
Larins share of the profits. Larin charged them with the crime of estafa,
but the provincial fiscal filed an information only against Eusebio Clarin in
which he accused him of appropriating to himself not only the P172 but
also the share of the profits that belonged to Larin, amounting to P15.50.
Clarin was eventually convicted.
ISSUE: Whether or not the conviction is correct.
HELD: No. The P172.00 having been received by the partnership, the
business commenced and profits accrued, the action that lies with the
partner who furnished the capital for the recovery of his money is not a
criminal action for estafa, but a civil one arising from the partnership
contract for a liquidation of the partnership and a levy on its assets if
there should be any.
The then Penal Code provides that those who are guilty of estafa are those
who, to the prejudice of another, shall appropriate or misapply any
money, goods, or any kind of personal property which they may have
received as a deposit on commission for administration or in any other
producing the obligation to deliver or return the same, (as, for example,
in commodatum, precarium, and other unilateral contracts which require
the return of the same thing received) does not include money received
for a partnership; otherwise the result would be that, if the partnership,
instead of obtaining profits, suffered losses, as it could not be held liable
civilly for the share of the capitalist partner who reserved the ownership of
the money brought in by him, it would have to answer to the charge of
estafa, for which it would be sufficient to argue that the partnership had
received the money under obligation to return it.
24 Pang Lim v. Lo Seng
The partner who collects is authorized to manage and actually
Lo Seng and Pang Lim were partners in the business of running a distillery,
known as "El Progreso. The land on which said distillery is located was to
the firm of Lo Seng and Co. for the term of three years. Upon the
expiration of this lease a new written contract, in the making of which Lo
Yao was represented by one Lo Shui as attorney in fact, became effective
whereby the lease was extended for fifteen years. Pang Lim sold all his
interest in the distillery to his partner Lo Seng, thus placing the latter in
the position of sole owner.
Lo Shui, again acting as attorney in fact of Lo Yao, executed and
acknowledged before a notary public a deed purporting to convey to Pang
Lim and another Chinaman named Benito Galvez, the entire distillery
plant. But this document was never recorded in the registry of property.
Thereafter, Pang Lim and Benito Galvez demanded possession from Lo
Seng, but the latter refused to yield; and the present action of unlawful
detainer was thereupon initiated by Pang Lim and Benito Galvez in the
court of the justice of the peace of Paombong to recover possession of the
premises.
Plaintiff Pang Lim has occupied a double role in the transactions which
gave rise to this litigation, 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.
Issue: WON Pang Lim, having been a participant in the contract of lease
now in question, is in a position to terminate it: and this is a fatal obstacle
to the maintenance of the action of unlawful detainer by him.
Held: NO. 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.
Ratio: The bad faith of the plaintiffs in seeking to deprive the defendant 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
21
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.
26 Pioneer Insurance v. CA
When De Facto Partnership Does Not Exist
Facts: Jacob Lim was the owner of Southern Air Lines, a single
proprietorship. In 1965, Lim convinced Constancio Maglana, Modesto
Cervantes, Francisco Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute funds and to buy two
aircrafts which would form part a corporation which will be the expansion
of Southern Air Lines. Maglana et al then contributed and delivered money
to Lim.
But instead of using the money given to him to pay in full the aircrafts,
Lim, without the knowledge of Maglana et al, made an agreement with
Pioneer Insurance for the latter to insure the two aircrafts which were
brought in installment from Japan Domestic Airlines (JDA) using said
aircrafts as security. So when Lim defaulted from paying JDA, the two
aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim
and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general
partners.
HELD: No. There was no de facto partnership. Ordinarily, when coinvestors agreed to do business through a corporation but failed to
incorporate, a de facto partnership would have been formed, and as such,
all must share in the losses and/or gains of the venture in proportion to
their contribution. But in this case, it was shown that Lim did not have the
intent to form a corporation with Maglana et al. This can be inferred from
acts of unilaterally taking out a surety from Pioneer Insurance and not
using the funds he got from Maglana et al. The record shows that Lim was
22
acting on his own and not in behalf of his other would-be incorporators in
transacting the sale of the airplanes and spare parts.
27 Evangelista v. Abad Santos
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 were
amended so as to include herein respondent, Estrella Abad Santos, as
industrial partner, with herein petitioners Domingo C. Evangelista, Jr.,
Leonarda Atienza Abad Santos and Conchita P. Navarro, the original
capitalist partners, remaining in that capacity, with a contribution of
P17,500 each
On December 17, 1963 herein respondent filed suit against the
three other partners, 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 to let her examine the partnership books or to give
her information regarding the partnership affairs or to pay her any share
in the dividends declared by the partnership
The defendants, in their answer, 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 by way of affirmative defense 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.
ISSUE: Whether Abad Santos is entitled to see the partnership books
because she is an industrial partner in the partnership
HELD: Yes, Abad Santos is entitled to see the partnership books. The
Supreme Court ruled that according to ART. 1299. Any partner shall have
the right to a formal account as to partnership affairs:
(1)If he is wrongfully excluded from the partnership business or
possession of its property by his co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
Where two partners receive from another a sum of money for the
establishment of a business, and agree to share with the latter the profits
or losses that may result therefrom, the said two persons, as the apparent
administrators of the partnership, acted as agents for the capitalist
partner, and by virtue thereof are bound to fulfill the contract which
implies the management of the business.
Article 1796 is not applicable because no other money than that
contributed as capital was involved. The liability of the partners is joint.
Ong Pong Co shall only pay P750 to Martinez.
30 Agustin v. Inocencio
Facts: The parties, who had been conducting a partnership as industrial
partners without capital, contributed from its profits the sum of P807.28 as
a fund toward the construction of a casco for use in their business, to
which they added P3,500, borrowed from Maria del Rosario, the wife of
Inocencio, he being the managing partner. It is admitted that this total (a
little overP4,300), was the estimated cost of the casco but in the progress
of the work Inocencio found that it called for additional funds, which he
advanced to the amount of P2,024.49. This amount is necessary in order
to complete the work undertaken. Although it would seem that he failed to
notify his partners of the various items from time to time going to make
up this sum, it is shown that the books were at all times open to their
inspection, and that, being asked to examine them, they omitted to do so,
and that the Agustin, representing all the partners, was also present at the
construction of the casco, in charge of the practical work and cognizant of
its needs and its progress.
ISSUE/HELD: WON Inocencio, in borrowing money and advancing funds,
was acting within the scope of his authority as a managing partner.
YES. The work done in the casco having been within the scope of the
association and necessary to carry out its express object, the borrowing of
the money required to carry it on, with the acquiescence if not with the
affirmative consent of his associates, was not outside the powers of the
managing partner and constitutes a debt for which all the associates are
liable.
The note passed into the hands of Inocencio by reason of the successive
deaths of his wife and of their only child, each without debts, and for the
24
Held:
While the transaction was entered into by Ceron, it bound the partnership.
Robert Hill had the same power to buy and sell; that in said partnership
Hill as well as Ceron made the transaction as partners in equal parts; that
on the date of the transaction, February 14, 1934, the partnership
between Hill and Ceron was in existence. After this date, or on February
19th, Hill& Ceron sold shares of the Big Wedge; and when the transaction
was entered into with Litton, it was neither published in the newspapers
nor stated in the commercial registry that the partnership Hill & Ceron had
been dissolved. The SC dissented from the view of the CA that for one of
the partners to bind the partnership the consent of the other is necessary.
Third persons, like the plaintiff, are not bound in entering into a contract
with any of the two partners, to ascertainwhether or not this partner with
whom the transaction is madehas the consent of the other partner.The
public need not makeinquires as to the agreements had between the
partners. Itsknowledge, is enough that it is contracting with the
partnership which is represented by one of the managing partners. The
second paragraph of the articles of partnership of Hill &Ceron reads in
part:
Second: That the purpose or object for which this co-partnership is
organized is to engage in the business of brokerage in general, such as
stock and bond brokers, real brokers, investment security brokers,
shipping brokers, and other activities pertaining to the business of brokers
in general. The kind of business in which the partnership Hill & Ceron is to
engage being thus determined, none of the two partners, under article
130 of the Code of Commerce, may legally engage in the business of
brokerage in general as stock brokers, security brokers and other activities
pertaining to the business of the partnership. Ceron, therefore, could not
have entered into the contract of sale of shares with Litton as a private
individual, but as a managing partner of Hill & Ceron. The stipulation in
the articles of partnership that any of the two managing partners may
contract and sign in the name of the partnership with the consent of the
other, undoubtedly creates an obligation between the two partners, which
consists in asking the other's consent before contracting for the
partnership. This obligation of course is not imposed upon a third person
who contracts with the partnership. Neither is it necessary for the third
person to ascertain if the managing partner with whom he contracts has
previously obtained the consent of the other. Athird person may and has a
25
right to presume that the partner with whom he contracts has, in the
ordinary and natural course of business, the consent of his copartner; for
otherwise he would not enter into the contract. The third person would
naturally not presume that the partner with whom he enters into the
transaction is violating the articles of partnership but, on the contrary, is
acting in accordance therewith. And this finds support in the legal
presumption that the ordinary course of business has been followed. If we
are to interpret the articles of partnership in question by holding that it is
the obligation of the third person to inquire whether the managing
copartner of the one with whom he contracts has given his consent to said
contract, which is practically casting upon him the obligation to get such
consent, this interpretation would, in similar cases, operate to hinder
effectively the transactions, a thing not desirable and contrary tothe
nature of business which requires promptness and dispatch one the basis
of good faith and honesty which are always presumed.
Resolution:
Hill asked for a reconsideration, using the same arguments, saying that he
did not consent to the deal of Ceron. The SC reiterated what they said,
and mentioned that had Ceron in anyway stated to the appellant at the
time of the execution of the contract, or if it could be inferred by his
conduct, that he had the consent of Hill, and should it turn out later that
he did not have such consent, this alone would not annul the contract
judging from the provisions of article 130 of the Code of Commerce
reading as follows:No new obligation shall be contracted against the will of
one of the managing partners, should he have expresslystated it; but if,
however, it should be contracted it shallnot be annulled for this reason,
and shall have its effectswithout prejudice to the liability of the partner
orpartners who contracted it to reimburse the firm for anyloss occasioned
by reason thereof.
32 Goquiolay v. Sycip
FACTS: Tan Sin An and Goquiolay entered into a general commercial
partnership under the partnership name Tan Sin An and Antonio
Goquiolay for the purpose of dealing in real estate. The agreement
lodged upon Tan Sin An the sole management of the partnership affairs.
The lifetime of the partnership was fixed at ten years and the Articles of
Co-partnership stipulated that in the event of death of any of the partners
before the expiration of the term, the partnership will not be dissolved but
will be continued by the heirs or assigns of the deceased partner. But the
partnership could be dissolved upon mutual agreement in writing of the
partners. Goquiolay executed a GPA in favor of Tan Sin An. The plaintiff
partnership purchased 3 parcels of land which was mortgaged to La
Urbana as payment of P25,000. Another 46 parcels of land were
purchased by Tan Sin An in his individual capacity which he assumed
payment of a mortgage debt for P35K. A downpayment and the
amortization were advanced by Yutivo and Co. The two obligations were
consolidated in an instrument executed by the partnership and Tan Sin An,
whereby the entire 49 lots were mortgaged in favor of Banco
HipotecarioTan Sin An died leaving his widow, Kong Chai Pin and four
minor children. The widow subsequently became the administratrix of the
estate. Repeated demands were made by Banco Hipotecario on the
partnership and on Tan Sin An. Defendant Sing Yee, upon request of
defendant Yutivo Sons , paid the remaining balance of the mortgage debt,
the mortgage was cancelled Yutivo Sons and Sing Yee filed their claim in
the intestate proceedings of Tan Sin An for advances, interest and taxes
paid in amortizing and discharging their obligations to La Urbana and
Banco Hipotecario. Kong Chai Pin filed a petition with the probate court
for authority to sell all the 49 parcels of land. She then sold it to Sycip and
Lee in consideration of P37K and of the vendees assuming payment of the
claims filed by Yutivo Sons and Sing Yee. Later, Sycip and Lee executed in
favor of Insular Development a deed of transfer covering the 49 parcels of
land.When Goquiolay learned about the sale to Sycip and Lee, he filed a
petition in the intestate proceedings to set aside the order of the probate
court approving the sale in so far as his interest over the parcels of land
sold was concerned. Probate court annulled the sale executed by the
administratrix w/ respect to the 60% interest of Goquiolay over the
properties Administratrix appealed.The decision of probate court was set
aside for failure to include the indispensable parties. New pleadings were
filed. The second amended complaint prays for the annulment of the sale
in favor of Sycip and Lee and their subsequent conveyance to Insular
Development. The complaint was dismissed by the lower court hence this
appeal.
holding that the widow succeeded her husband Tan Sin An in the sole
management of the partnership upon Tans death Whether or not the
consent of the other partners was necessary to perfect the sale of the
partnership properties to Sycip and Lee?
HELD: Kong Chai Pin became a mere general partner. By seeking authority
to manage partnership property, Tan Sin Ans widow showed that she
desired to be considered a general partner. By authorizing the widow to
manage partnership property (which a limited partner could not be
authorized to do), Goqulay recognized her as such partner, and is now in
estoppel to deny her position as a general partner, with authority to
administer and alienate partnership property. The articles did not provide
that the heirs of the deceased would be merely limited partners; on the
contrary, they expressly stipulated that in case of death of either partner,
the co partnership will have to be continued with the heirs or assignees.
It certainly could not be continued if it were to be converted from a
general partnership into a limited partnership since the difference
between the two kinds of associations is fundamental, and specially
because the conversion into a limited association would leave the heirs of
the deceased partner without a share in the management. Hence, the
contractual stipulation actually contemplated that the heirs would become
general partners rather than limited ones.
NO. The partnership of YULO and PALACIOS was engaged in the operation
of a sugar estate in Negros. It was, therefore a civilpartnership, as
distinguished from a mercantile partnership. Being a civil partnership, by
the express provisions of articles 1698 and 1137 of the Civil Code, the
partners are not liable each for the whole debt of the partnership.
Theliability is pro rata and in this case YULO is responsible toCO-PITCO for
only one-half of the debt. The fact that theother partner, PALACIOS, had
left the country can not increase the liability of YULO.
The judgment of the court below is reversed and judgment isordered in
favor of CO-PITCO and against YULO for the sumof P819.20 pesos with
interest thereon at the rate of 6 percent per annum from the 12th day of
January, 1905, and the costs of the Court of First Instance.
34 Bachrach v. La Protectora
Facts: Nicolas Segundo, Antonio Adiarte, Ignacio Flores and Modesto
Serrano (defendants) formed a civil partnership called La Protectora for
the purpose of engaging in the business of transporting passengers and
freight at Laoag, Ilocos Norte. Marcelo Barba, acting as manager,
negotiated for the purchase of 2 automobile trucks from E. M. Bachrach
for P16,500. Barba paid P3,000 in cash and for the balance executed
promissory notes.
33 Co-Pitco v. Yulo
CO-PITCO then finds that the balance due from the firm was1,638.40
pesos and orders judgment against YULO for theentire amount, with
interest.
ISSUE/HELD: WON YULO is liable for the entire amount.
The other 2 notes were signed in the same way but the word by was
omitted. It was obvious that in signing the notes, Barba intended to bind
both the partnership and himself.
The defendants executed a document in which they declared that they
were members of La Protectora and that they had granted to its president
full authority to contract for the purchase of the 2 automobiles. The
document was delivered by Barba to Bachrach at the time the vehicles
were purchased.
Barba incurred a debt amounting to P2,617.57 and Bachrach foreclosed a
chattel mortgage on the trucks but there was still balance. To recover the
balance, action was instituted against the defendants. Judgment was
rendered against the defendants.
27
Issue: a.Whether or not the defendants are liable for the firm debts.
b.Whether or not Barba had authority to incur expenses for the
partnership (relevant issue)
Held: a.Yes. Promissory notes constitute the obligation exclusively of La
Protectora and Barba. They do not constitute an obligation directly binding
the defendants. Their liability is based on the principles of partnership
liability. A member is not liable in solidum with his fellows for the entire
indebtedness but is liable with them or his aliquot part.
SC obiter: the document was intended merely as an authority to enable
Barba to bind the partnership and that the parties to the instrument did
not intend to confer upon Barba an authority to bind them personally.
b. Yes. Under Art 1804, every partner may associate another person with
him in his share. All partners are considered agents of the partnership.
Barba must be held to have authority to incur these expenses. He is
shown to have been in fact the president/manager, and there can be no
doubt that he had actual authority to incur obligation.
35 Island Sales, Inc. v. United Pioneers General Construction
Company
Liability of Partners Pro-rata Condonation
ISSUE: What is the extent of the liability of the partners considering that
one partner was removed as a co-defendant on motion of Island Sales?
HELD: Their liability is pro-rata pursuant to Article 1816 of the Civil Code.
But is should be noted that since there were 5 partners when the purchase
was made in behalf of the partnership, the liability of each partner should
be 1/5th (of the companys obligation) each. The fact that the complaint
against Lumauig was dismissed, upon motion of the Island Sales, does not
unmake Lumauig as a general partner in the company. In so moving to
dismiss the complaint, Island Sales merely condoned Lumauigs individual
liability to them.
36 Lim Tong Lim v. Philippine Fishing Gear
Corporation by Estoppel
Facts: It was established that Lim Tong Lim requested Peter Yao to engage
in commercial fishing with him and one Antonio Chua. The three agreed to
purchase two fishing boats but since they do not have the money they
borrowed from one Jesus Lim (brother of Lim Tong Lim). They again
borrowed money and they agreed to purchase fishing nets and other
fishing equipments. Now, Yao and Chua represented themselves as acting
in behalf of Ocean Quest Fishing Corporation (OQFC) they contracted
with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing
nets amounting to more than P500k.
They were however unable to pay PFGI and so they were sued in their own
names because 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 hes not liable because he was not
aware that Chua and Yao represented themselves as a corporation; that
the two acted without his knowledge and consent.
ISSUE: Whether or not Lim Tong Lim is liable.
HELD: Yes. From the factual findings of both lower courts, it is clear that
Chua, Yao and Lim had decided to engage in a fishing business, which
they started by buying boats worth P3.35 million, financed by a loan
secured from Jesus Lim. In their Compromise Agreement, they
subsequently revealed their intention to pay the loan with the proceeds of
28
the sale of the boats, and to divide equally among them the excess or
loss. These boats, the purchase and the repair of which were financed with
borrowed money, fell under the term common fund under Article 1767.
The contribution to such fund need not be cash or fixed assets; it could be
an intangible like credit or industry. That the parties agreed that any loss
or profit from the sale and operation of the boats would be divided equally
among them also shows that they had indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by estoppels
can only be imputed to Yao and Chua. Unquestionably, Lim Tong Lim
benefited from the use of the nets found in his boats, the boat which has
earlier been proven to be an asset of the partnership. Lim, Chua and Yao
decided to form a corporation. Although it was never legally formed for
unknown reasons, this fact alone does not preclude the liabilities of the
three as contracting parties in representation of it. Clearly, under the law
on estoppel, those acting on behalf of a corporation and those benefited
by it, knowing it to be without valid existence, are held liable as general
partners.
37 Munasque v. CA
FACTS: Elmo Muasque filed a complaint for payment of sum of money
and damages against respondents Celestino Galan, Tropical Commercial,
Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered
into a contract with respondent Tropical through its Cebu Branch Manager
Pons for remodeling a portion of its building without exchanging or
expecting any consideration from Galan although the latter was casually
named as partner in the contract; that by virtue of his having introduced
the petitioner to the employing company (Tropical), Galan would receive
some kind of compensation in the form of some percentages or
commission.
On January 26, 1967, when the second check for P6,000.00 was due,
petitioner refused to indorse said check presented to him by Galan but
through later manipulations, respondent Pons succeeded in changing the
payee's name to Galan and Associates, thus enabling Galan to cash the
same at the Cebu Branch of the Philippine Commercial and Industrial Bank
(PCIB) placing the petitioner in great financial difficulty in his construction
business and subjecting him to demands of creditors to pay for
construction materials, the payment of which should have been made
from the P13,000.00 received by Galan.
Due to the unauthorized disbursement by respondents Tropical and Pons
of the sum of P13,000.00 to Galan, petitioner demanded that said amount
be paid to him by respondents under the terms of the written contract
between the petitioner and respondent company.
ISSUE: Whether there was a breach of trust when Tropical disbursed the
money to Galan instead of Muasque
HELD:
No, there was no breach of trust when Tropical disbursed the
money to Galan instead of Muasque.
The Supreme Court held that there is nothing in the records to indicate
that the partnership organized by the two men was not a genuine one. A
falling out or misunderstanding between the partners does not convert the
partnership into a sham organization.
In the case at bar the respondent Tropical had every reason to believe that
a partnership existed between the petitioner and Galan and no fault or
error can be imputed against it for making payments to "Galan and
Associates" and delivering the same to Galan because as far as it was
concerned, Galan was a true partner with real authority to transact on
behalf of the partnership with which it was dealing.
Tropical agreed to give petitioner the amount of P7,000.00 soon after the
construction began and thereafter the amount of P6,000.00 every fifteen
(15) days during the construction to make a total sum of P25,000.00.
Quick Summary:
29
Costa,Gorcey and MacDonald to pay the Bank jointly and severally any
deficiency thatremains unpaid should the proceeds of theauction sale be
insufficient
CA: modified the CFI decision byruling that MacDonald is not jointly
andseverally liable with Gorcey and Da Costa topay any deficiency
As was held in Behn Meyer & Co. vs.Rosatzin, where a partnership not
dulyorganized has been recognized as such in itsdealings with certain
persons, it shall beconsidered as partnership by estoppel andthe
persons dealing with it are estopped fromdenying its partnership
existence.
must refund their shares to the retiring partners. Since not all the
members of the partnership have been impleaded, no judgment for refund
can be rendered.
RIGHTS OF A PARTNER
40 Dan Fue Leung v IAC
FACTS: The petitioner asks for the reversal of the decision of the then
Intermediate Appellate Court in AC-G.R. No. CV-00881 which affirmed the
decision of the then Court of First Instance of Manila, Branch II in Civil
Case No. 116725 declaring private respondent Leung Yiu a partner of
petitioner Dan Fue Leung in the business of Sun Wah Panciteria and
ordering the petitioner to pay to the private respondent his share in the
annual profits of the said restaurant.
This case originated from a complaint filed by respondent Leung Yiu with
the then Court of First Instance of Manila, Branch II 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, located at
Florentino Torres Street, Sta. Cruz, Manila, 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 P4,000.00to its initial
establishment. The private respondents evidence is summarized as
follows: About the time the Sun Wah Panciteria started to become
operational, the private respondent gave P4,000.00 as his contribution to
the partnership. This is evidenced by a receipt wherein the petitioner
acknowledged his acceptance of theP4,000.00 by affixing his signature
thereto. Furthermore, the private respondent received from the petitioner
the amount of P12,000.00 covered by the latter's Equitable Banking
Corporation Check from the profits of the operation of the restaurant for
the year 1974The petitioner denied having received from the private
respondent the amount of P4,000.00. He contested and impugned the
genuineness of the receipt.
His evidence is summarized as follows:
32
The petitioner did not receive any contribution at the time he started the
Sun Wah Panciteria. He used his savings from his salaries as an employee
at Camp Stotsenberg in Clark Field and later as waiter at the Toho
Restaurant amounting to a little more than P2,000.00 as capital in
establishing Sun Wah Panciteria. Petitioner presented various government
licenses and permits showing the Sun Wah Panciteria was and still is a
single proprietorship solely owned and operated by himself alone. Fue
Leung also flatly denied having issued to the private respondent the
receipt (Exhibit G) and the Equitable Banking Corporation's Check No.
13389470 B in the amount of P12,000.00 (Exhibit B).
ISSUE: WON Private respondent is a partner of the petitioner in Sun Wah
Panciteria?
HELD: The private respondent is a partner of the petitioner in Sun Wah
Panciteria. The requisites of a partnership which are
1) two or more persons bind themselves to contribute money, property,
or industry to a common fund; and
2) intention on the part of the partners to divide the profits among
themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106
Phil.110)-have been established. As stated by the respondent, a partner
shares not only in profits but also in the losses of the firm. If excellent
relations exist among the partners at the start of business and all the
partners are more interested in seeing the firm grow rather than get
immediate returns, a deferment of sharing in the profits is perfectly
plausible. It would be incorrect to state that if a partner does not assert
his rights anytime within ten years from the start of operations, such
rights are irretrievably lost. The private respondent's cause of action is
premised upon the failure of the petitioner to give him the agreed profits
in the operation of Sun Wah Panciteria. In effect the private respondent
was asking for an accounting of his interests in the partnership.
41 Emnace v. CA
FACTS: Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia
were partners in a business concern known as Ma. Nelma Fishing Industry.
Sometime in January of 1986, they decided to dissolve their partnership
and executed an agreement of partition and distribution of the partnership
properties among them, consequent to Jacinto Divinagracia's withdrawal
business, to which they added P3,500, borrowed from Maria del Rosario,
the wife of the defendant, Bartolome Inocencio, he being the managing
partner. It is admitted that this total, a little over P4,300, was the
estimated cost of the casco, but in the progress of the work the defendant
found that it called for additional funds, which he advanced to the amount
of P2,024.49. It is satisfactorily appears from the evidence that this
amount is necessary in order to complete the work undertaken. Although
it would seem that he failed to notify his partners of the various items
from time to time going to make up this sum, it is shown that the books
were at all times open to their inspection, and that, being asked to
examine them, they omitted to do so, and that the plaintiff Juan Agustin,
representing all the partners, was also present at the construction of the
casco, in charge of the practical work and cognizant of its needs and its
progress.
The work done in the casco having been within the scope of the
association and necessary to carry out its express object, the borrowing of
the money required to carry it on, with the acquiescence if not with the
affirmative consent of his associates, was not outside the powers of the
managing partner and constitutes a debt for which all the associates are
liable.
The note passed into the hands of the defendant by reason of the
successive deaths of his wife and of their only child, each without debts,
and for the amount thereof he became a creditor, subject, however, to the
deduction therefrom of his proportionate part of the indebtedness.
The trial court treated his claim on this note, as well as the sum of
P2,024.49 furnished by him, as an addition to his capital in the firm, rather
than as a loan, and this constitutes one of the grounds of error stated by
the Appellant. We do not deem it necessary to pass upon this objection,
for the reason that, considered as a loan, this sum would place the
defendant as a creditor in a stronger position as against his associates
than if regarded as a mere contribution to capital. The error, if it be an
error, is not, therefore, prejudicial to the plaintiff, but is rather beneficial to
him. The respondent did not except to it.
Various small sums have been paid out of the profits to some of the
partners and these were properly allowed him in the judgment.
34
On the theory on which the action was disposed of, the trial court
committed no error in the computation of the various shares.
Of the four parties plaintiff, but one, Victor del Rosario, is interested in this
appeal, which has been dismissed as to the others, and as to him the
judgment of the trial court must be affirmed, with costs of this instance.
So ordered.
44 Martinez v. Ong Pong Co
Supra 29
Dissolution, winding-up, termination
45 Idos v. CA
Facts: In 1985, Eddie Alarilla and Irma Idos formed a partnership which
they decided to terminate after a year. To pay Alarillas share of the asset,
Idos issued 4 post dated checks. Alarilla was able to encash the first,
second and fourth checks but the third was dishonored for insufficiency of
funds. He demanded payment but Idos failed to pay. She claimed that the
checks were issued as assurance of Alarillas share in the assets of the
partnership and that it was supposed to be deposited until the stocks were
sold. He filed an information for violation of BP blg. 22 against Idos in
which she was found guilty by the trial court.
Issue: Did the court confused and merged into one the legal concepts of
dissolution, liquidation and termination of a partnership?
Ruling: The partners agreement to terminate the partnership did not
automatically dissolve the partnership. They were in the process of
winding-up when the check in question was issued. The best evidence of
the existence of the partnership, which was not yet terminated were the
unsold goods and uncollected receivables which were presented to the
trial court. Article 1829 of the Civil Code provides that on dissolution the
partnership is not terminated but continues until the winding-up of
partnership affairs is completed. Since the partnership has not been
terminated, Idos and Alarilla remained co-partners. The check was issued
by petitioner to respondent as would a partner to another and not as a
payment by debtor to creditor. Thus, absent the first element of the
complained offense, the act is not punishable by the statute.
HELD: Yes. In the first place, even though the Lazatins did specifically pray
for possession the same (placing of improvements under their possession)
is incidental in the relief they prayed for. They are therefore entitled
possession over the parcel of land plus the improvements made thereon
made by Primelink.
In this jurisdiction, joint ventures are governed by the laws of partnership.
Under the laws of partnership, when a partnership is dissolved, as in this
case when the trial court rescinded the joint venture agreement, the
innocent party has the right to wind up the partnership affairs.
With the rescission of the JVA on account of petitioners fraudulent acts, all
authority of any partner to act for the partnership is terminated except so
far as may be necessary to wind up the partnership affairs or to complete
transactions begun but not yet finished. On dissolution, the partnership is
not terminated but continues until the winding up of partnership affairs is
completed. Winding up means the administration of the assets of the
partnership for the purpose of terminating the business and discharging
the obligations of the partnership.
It must be stressed, too, that although the Lazatins acquired possession of
the lands and the improvements thereon, the said lands and
improvements remained partnership property, subject to the rights and
obligations of the parties, inter se, of the creditors and of third parties and
subject to the outcome of the settlement of the accounts between the
parties, absent any agreement of the parties in their JVA to the contrary
(here no agreement in the JVA as to winding up). Until the partnership
accounts are determined, it cannot be ascertained how much any of the
parties is entitled to, if at all.
CAUSES OF DISSOLUTION
49 Rojas v. Maglana
Facts: Maglana and Rojas executed their Articles of Co-Partnership called
Eastcoast Development Enterprises (EDE). It was a partnership with an
indefinite term of existence. Maglana shall manage the business affairs
while Rojas shall be the logging superintendant and shall manage the
logging operation. They shall share in all profits and loss equally. Due to
difficulties encountered they decided to avail of the sources of
Pahamatong as industrial partners. They again executed their Articles of
36
Ruling: It was not the intention of the partners to dissolve the first
partnership, upon the constitution of the second one, which they
unmistakably called additional agreement. Otherwise stated even
during the existence of the second partnership, all business transactions
were carried out under the duly registered articles. No rights and
obligations accrued in the name of the second partnership except in favor
of Pahamatong which was fully paid by the duly registered partnership.
50 Bearneza v. Dequilla
Facts: In the year 1903, Balbino Dequilla, the herein defendant, and
Perpetua Bearneza formed a partnership for the purpose of exploiting a
fish pond with Perpetua obligating herself to contribute to the payment of
the expenses of the business, which obligation she made good, and both
agreeing to divide the profits between themselves, which they had been
doing until the death of the said Perpetua in the year 1912
The deceased left a will in one of the clauses of which she appointed
Domingo Bearnez, the herein plaintiff, as her heir to succeed to all her
rights and interests in the fish pond in question
Domingo Bearnez then instituted an action to recover a part of the fish
pond belonging to the decedent, including of the profits received by the
defendant from the years 1913-1919
Although, as the trial court says in its decision, the defendant, in his
letters to Perpetua or her husband, makes reference to the fish pond,
calling it "our," or "your fish pond," this reference cannot be held to
include the land on which the said fish pond was built
It has not been proven that Bearneza participated in the ownership of the
said land
Therefore, the land on which the fish pond was constructed did not
constitute part of the subject-matter of the partnership
This partnership was dissolved by the death of Perpetua Bearneza
Neither can it be maintained that the partnership continued to exist after
the death of Perpetua, inasmuch as it does not appear that any stipulation
to that effect has ever been made by her and the defendant
The partnership having been dissolved by the death of Perpetua Bearneza,
its subsequent legal status was that of a partnership in liquidation, and
the only rights inherited by her testamentary heir, the herein plaintiff,
were those resulting from the said liquidation in favor of the deceased
partner, and nothing more
37
Before this liquidation is made, which up to the present has not been
effected, it is impossible to determine what rights or interests, if any, the
deceased had, the partnership bond having been dissolved
There is no sufficient ground for holding that a community of property
existed between the plaintiff and the defendant, it not being known
whether the deceased still had any interest in the partnership property
which could have been transmitted by will to the plaintiff
Furthermore, it cannot be said that the partnership continued between the
plaintiff and the defendant. It is true that the latter's act in requiring the
heirs of Perpetua to contribute to the payment of the expenses of
exploitation of the aforesaid fishing industry was an attempt to continue
the partnership, but it is also true that neither the said heirs collectively,
nor the plaintiff individually, took any action in response to that
requirement, nor made any promise to that effect, and therefore no new
contract of partnership existed. The decision is hereby REVERSED
51 Lichauco v. Lichauco
Dissolution
FACTS:
(1) Petitioner (along with his co-plaintiffs in the antecedent cases, namely,
Rodolfo Gayatin, Jose Villacin and Jocelyn Montinola) and private
respondent Rosito Uy were former tenants of the 30-door Barretto
Apartments formerly owned by Serapia Realty, Inc..
and residential units, the tenants formally expressed to Mrs. Ochoa their
intent to purchase.
(5) One and a half years later, on March 12, 1987, petitioner and his coplaintiffs were notified that private respondent was the new owner of the
apartment units occupied by them.
Applicable Laws:
(1) Article 1924. The agency is revoked if the principal directly manages
the business entrusted to the agent, dealing directly with third persons.
(n)
(2) Article 1447. The enumeration of the following cases of implied trust
does not exclude others established by the general law of trust, but the
limitation laid down in article 1442 shall be applicable.
(3) Article 1442. The principles of the general law of trusts, insofar as they
are not in conflict with this Code, the Code of Commerce, the Rules of
Court and special laws are hereby adopted.
ISSUE: Whether or not a constructive trust existed between the plaintiffs
and the defendant.
RTC: The trial court found that private respondent had been designated
and entrusted by plaintiffs to negotiate with the Barretto family for the
sale of the units. It also found that a constructive trust was created
between the private respondent as "the cestui que trust [should be
trustee] and plaintiffs as beneficiaries [or cestuis que trust] vis-a-vis the
subject units."
CA: Reversed the RTC decision and denied the subsequent motion for
reconsideration.
HELD: There was a constructive trust.
RATIO: (1) Implied trust was created by the agreement between petitioner
(and the other tenants) and private respondent. Implied trusts are those
which, without being expressed, are deducible from the nature of the
transaction by operation of law as matters of equity, independently of the
particular intention of the parties. Constructive trusts are created in order
i.
Government assured landowners that
they could repurchase their lands once Lahug Airport was closed or its
operations transferred to Mactan Airport
ii.
iii.
Civil Aeronautics Administration as the
successor agency of the National Airport Corporation filed a complaint
with the Court of First Instance of Cebu, for the expropriation of land.
iv.
payment of just compensation.
v.
vi.
damages.
ii.
Averred that they have been convinced
not to oppose since they could repurchase.
iii.
Facts:
under the name of Donata and her descendants was already assigned as
administrators. The heirs of Maximino claimed that they were defrauded
by Donate when she successfully transferred the properties under her
name and allege that Donata was just a trustee under Art 1451 of NCC.
the entire estate of Maximino, including the real properties, and not
merely a co-owner with the other heirs of her deceased husband. There
being no basis for the Complaint of the heirs of Maximino in Civil Case No.
CEB-5794, the same should have been dismissed.
42