PARTNERSHIP

INTRODUCTION.

Tuason v. Bolanos, 95 Phil. 106

Facts:

 This is an action for recovery of possession of registered land situated in barrio Tatalon, Quezon
City, owned by J.M. Tuason & Co., Inc. but represent by its Managing Partner , Gregrio Araneta,
Inc.
 The defendant argued that the plaintiff is not a real party in interest to the case but the latter
rebutted such argument that as a Managing Partner of J.M. Tuason & Co., Inc., it has a legal
standing to represent it.
 The lower court rendered judgment in favor of plaintiff declaring defendant to be without any
right to the land in question and ordering him to restore possession thereof to plaintiff.
 The defendant appealed to the Supreme Court.

Issue: WON the plaintiff has a legal standing on the case.

Ruling: YES. It is true that the complaint also states that the plaintiff is "represented herein by its Managing
Partner Gregorio Araneta, Inc.", another corporation, but there is nothing against one corporation being
represented by another person, natural or juridical, in a suit in court. The contention that Gregorio
Araneta, Inc. cannot act as managing partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership is without merit, for the true rule is that "though a corporation
has no power to enter into a partnership, it may nevertheless enter into a joint venture with another
where the nature of that venture is in line with the business authorized by its charter." (Wyoming-Indiana
Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2. Fletcher Cyc. of Corp., 1082.) There is nothing in the
record to indicate that the venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its
managing partner" is not in line with the corporate business of either of them.

Aurbach v. Sanitary Wares, 180 SCRA 130

Facts:

 Saniwares was a domestic corporation which entered into an agreement with the ASI (American
Standard Inc.) foreign group in order to expand their business internationally. In the election of
their board members, they agreed that 3 of the 9 directors shall be designated by ASI while the
other 6 shall be designated by the Filipino stockholders.
 Dispute started when ASI invoked their right to cumulative voting and nominated another
candidate. In order to determine who the directors are, the court discussed whether the business
was a joint venture or a corporation.
 There are two petitions filed before SEC, preliminary injunction by Saniwares and for quo
warranto and application for receivership by Wolfgang Aurbach.
 The two petitions were consolidated and tried jointly, SEC ruled in favor of Saniwares. The ASI
appealed to SEC en banc but denied, hence they appealed to Intermediate Appellate Court which
 ordered the remand of the case to the Securities and Exchange Commission with the directive
that a new stockholders' meeting of Saniwares be ordered convoked as soon as possible, under
the supervision of the Commission.
 Saniwares appealed to CA and rendered the questioned amended decision of the Intermediate
Appellate Court. Thus, ASI elevate the case to Supreme Court.

Issue: Won the business agreement between Saniwares and ASI is a joint venture.

Ruling: YES. The rule is that whether the parties to a particular contract have thereby established
among themselves a joint venture or some other relation depends upon their actual intention which
is determined in accordance with the rules governing the interpretation and construction of contracts.
(Terminal Shares, Inc. v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678; Universal Sales Corp. v.
California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)

The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of the
parties should be viewed strictly on the "Agreement" dated August 15, 1962 wherein it is clearly
stated that the parties' intention was to form a corporation and not a joint venture. In the instant
cases, our examination of important provisions of the Agreement as well as the testimonial evidence
presented by the Lagdameo and Young Group shows that the parties agreed to establish a joint
venture and not a corporation. The history of the organization of Saniwares and the unusual
arrangements which govern its policy making body are all consistent with a joint venture and not with
an ordinary corporation.

Torres v. CA, G.R. No. 134559, 320 SCRA 428

Facts:

 Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a “joint venture
agreement” with Respondent Manuel Torres for the development of a parcel of land into a
subdivision and they executed a Deed of Sale covering the said parcel of land in favor of
respondent, who then had it registered in his name. Respondent mortgaged the property and
obtained a loan form the bank which, under the Joint Venture Agreement, was to be used for the
development of the subdivision.
 The project did not push through and the property was foreclosed. Now, the petitioners assert
that the project failed because of the “respondent’s lack of funds or means and skills” and also
the latter used the loan not for the development of the subdivision, but in furtherance of his own
company, Universal Umbrella Company. But the respondent argued that he used the loan to
implement the Agreement.
 Petitioners filed a criminal case for estafa against respondent and his wife, but the case was
dismissed. Thereafter they filed before trial court which also dismissed the case, but on appeal
the case was remanded for further proceedings. RTC rendered decision and affirmed by CA to wit;
“WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and
against the plaintiffs, orders the dismissal of the plaintiff’s complaint. The counterclaims of the
defendant are likewise ordered dismissed. No pronouncement as to costs.”

Issue: Won the agreement between the parties was that of a joint venture/partnership.
 Ruling: YES. A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides:

“ART. 1767. By the 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.”

Under the above-quoted Agreement, petitioners would contribute property to the partnership in the
form of land which was to be developed into a subdivision; while respondent would give, in addition
to his industry, the amount needed for general expenses and other costs. Furthermore, the income
from the said project would be divided according to the stipulated percentage. Clearly, the contract
manifested the intention of the parties to form a partnership.

Heirs of Jose Lim v. Lim, G.R. No. 172690

Facts:

 Petitioners Petitioners are the heirs of the late Jose Lim (Jose), represented by Elenito Lim
(Elenito) while respondent is Juliet Villa Lim, widow of the late Elfledo Lim (Elfledo), who was the
eldest son of Jose and Cresencia. They filed a Complaint for Partition, Accounting and Damages
against respondent.
 Jose together with Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a partnership to
engage in the trucking business and each of them contributed an amount which they used to
purchased a truck. Thereafter, Jose died and the latte’s heirs including Elfledo and the partners
agreed to continue the business under the management of Elfledo. The shares in the partnership
profits and income that formed part of the estate of Jose were held in trust by Elfledo, with
petitioners’ authority for Elfledo to use, purchase or acquire properties using said funds.
 When the partnership ceased, it had nine trucks and other real properties all under the name of
Elfledo, but the latter died and living the respondent his sole surviving heir subsequently
petitioners claimed that respondent took over the administration of the aforementioned
properties, which belonged to the estate of Jose, without their consent and approval and claiming
that they are co-owners of the properties, petitioners required respondent to submit an
accounting of all income, profits and rentals received from the estate of Elfledo, and to surrender
the administration thereof.
 Respondent refused and alleged that that Elfledo was himself a partner of Norberto and Jimmy.
RTC rendered decision in favor of petitioners but the CA reversed.

Issue: WON Elfledo is a partner to the partnership.

Ruling: YES. A partnership exists when two or more persons agree to place their money, effects, labor,
and skill in lawful commerce or business, with the understanding that there shall be a proportionate
sharing of the profits and losses among them. A contract of partnership is defined by the Civil Code as
one where 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.

Applying the legal provision to the facts of this case, 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 petitioners, as heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo
during his lifetime. As repeatedly stressed in Heirs of Tan Eng Kee, a demand for periodic accounting
is evidence of a partnership.

Ortega v. CA, G.R. No. 109248

Facts:

 The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile
Registry and reconstituted with the Securities and Exchange Commission on 4 August 1948. There
were series of amendments on the records of the SEC with regard to the name of the law firm.
 On February 17, 1988, petitioner-appellant, Atty. Misa sent a letter to the respondents-appellees
stating that his withdrawing and retiring from the firm and demanded a liquidation of his
participation on the firm. On 30 June 1988, petitioner filed with the SEC petition for dissolution
and liquidation of partnership.
 SEC rendered decision that the petitioner’s withdrawal from the law firm Bito, Misa & Lozada did
not dissolve the said law partnership but this was reversed by the decision of SEC en banc ruling
that the withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of “Bito, Misa &
Lozada.”. The CA affirmed in toto the assailed decision.

Issue: WON the withdrawal of the petitioner from the firm dissolved the partnership.

Ruling: YES. 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 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. Among partners, 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. Upon its dissolution, the partnership continues and its legal personality is retained until the
complete winding up of its business culminating in its termination.

Arbes v. Polistico, 53 Phil. 489

Facts:

 This is an action to bring about a liquidation of the funds and property of the association called
"Turnuhan Polistico & Co." for the reason that the said institution is considered an unlawful
partnership. The plaintiffs were members or shareholders, and the defendants were designated
as president-treasurer, directors and secretary of said association.
 The court appointed a commissioner to examine all the books, documents and accounts of
"Turnuhan Polistico & Co.," and to receive whatever evidence the parties might desire to present.
The commissioner rendered his report to the court, the defendants objected but the trial court,
having examined the reasons for the objection, found the same sufficiently explained in the report
and the evidence, and accepting it, rendered judgment, holding that the association "Turnuhan
Polistico & Co." is unlawful.
 The defendants assigned one of the errors as ground of ther appeal, that not all persons having
an interest in this association are included as plaintiffs or defendants.

Issue: WON the charitable institution to whom the partnership funds may be ordered to be turned
over, should be included as a party defendant.

Ruling: NO. There is no question that "Turnuhan Polistico & Co." is an unlawful partnership (U. S. vs.
Baguio, 39 Phil., 962), but the appellants allege that because it is so, some charitable institution to
whom the partnership funds may be ordered to be turned over, should be included as a party
defendant. The appellants refer to article 1666 of the Civil Code, which provides:

"A partnership must have a lawful object, and must be established for the common benefit of the
partners.

"When the dissolution of an unlawful partnership is decreed, the profits shall be given to the
charitable institutions of the domicile of the partnership, or, in default of such, to those of the
province."

Appellants' contention on this point is untenable. According to said article, no charitable institution is
a necessary party in the present case f or the determination of the rights of the parties. The action
which may arise from said article, in the case of an unlawful partnership, is that for the recovery of
the amounts paid in by the members from those in charge of the administration of said partnership,
and it is not necessary for the said partners to base their action on the existence of the partnership,
but on the fact of having contributed some money to the partnership capital. And hence, the
charitable institutions of the domicile of the partnership, and in default thereof, those of the province
are not necessary parties in this case. The article cited above permits no action for the purpose of
obtaining the earnings made by the unlawful partnership, during its existence as a result of the
business in which it was engaged, because, for that purpose, as Manresa remarks, the partner will
have to base his action upon the partnership contract, which is null 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.
Hence, paragraph 2 of the same article provides that when the dissolution of an unlawful partnership
is decreed, the profits cannot inure to the benefit of the partners, but must be given to some
charitable institution.

Agad v. Mabato, 23 SCRA 1223

Facts:

 Mauricio Agad and Severino Mabato entered into a partnership concerning to fishpond business,
where the latter contributed an amount of P1,000 with the right to receive 50% from the profits
while Mabato handled the partnership funds and render an accounts of the operations of the
partnership, but the latter had failed and refused to render accounts for the years 1957 to 1963
and this prompted Agad the petitioner, to file a complaint against Mabato and Mabato & Agad
Company.
 Agad prayed for his share in the profits of the partnership and the dissolution of such partnership,
but Mabato denied the existence of said partnership, upon the ground that the contract therefor
had not been perfected because Agad had allegedly failed to give his P1,000 contribution to the
partnership capital and prayed for the dismissal of the complaint.
 The court issued an order granting the motion to dismiss the complaint for failure to state a cause
of action which was predicated upon the theory that the contract of partnership is null and void,
pursuant to Art. 1773 of our Civil Code, because an inventory of the fishpond referred in said
instrument had not been attached thereto.

Issue: WON “immovable property or real rights” have been contributed to the partnership under
consideration.

Ruling: NO. It should be noted, however, that, as stated in Annex “A” the partnership was established
“to operate a fishpond”, not to “engage in a fishpond business”. Moreover, none of the partners
contributed either a fishpond or a real right to any fishpond. Their contributions were limited to the
sum of P1,000 each. The operation of the fishpond mentioned in Annex “A” was the purpose of the
partnership. Neither said fishpond nor a real right thereto was contributed to the partnership or
became part of the capital thereof, even if a fishpond or a real right thereto could become part of its
assets.

Fernandez v. dela Rosa, 1 Phil. 671

Facts:

 The plaintiff and the respondent of this case through verbal agreement, formed a partnership for
the purchase of cascoes where the latter will be the one to buy the cascoes and each partner
(including the plaintiff) will furnish money for that purpose and the profits to be divided
proportionately.
 Parties undertook to draw up articles of partnership for the purpose of embodying the same in
an authentic document but they were unable to come to any understanding and no written
 agreement was executed and the plaintiff thereafter, made a demand for an accounting upon
him, which the defendant refused to render, denying the existence of the partnership.
 The defendant admits that the project of forming a partnership in the casco business but he
denies that any agreement was ever consummated. Judgment was rendered for the defendant in
the court below and the plaintiff appealed.

Issue: WON a partnership exist between the parties.

Ruling: YES. Partnership is a contract by which 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. The essential points upon which the minds of the parties must meet in a contract of
partnership are, therefore, (1) mutual contribution to a common stock, and (2) a joint interest in the
profits. If the contract contains these two elements the partnership relation results, and the law itself
fixes the incidents of this relation if the parties fail to do so. We have found as a fact that money was
furnished by the plaintiff and received by the defendant with the understanding that it was to be used
for the purchase of the cascoes in question. This establishes the first element of the contract, namely,
mutual contribution to a common stock. The second element, namely, the intention to share profits,
appears to be an unavoidable deduction from the fact of the purchase of the cascoes in common, in
the absence of any other explanation of the object of the parties in making the purchase in that form,
and, it may be added, in view of the admitted fact that prior to the purchase of the first casco the
formation of a partnership had been a subject of negotiation between them. We must assume that
the object of the purchase was active use and profit and not mere passive ownership in common.

It is thus apparent that a complete and perfect contract of partnership was entered into by the parties.
This contract, it is true, might have been subject to a suspensive condition, postponing its operation
until an agreement was reached as to the respective participation of the partners in the profits, the
character of the partnership as collective or en comandita, and other details, but although it is
asserted by counsel for the defendant that such was the case, there is little or nothing in the record
to support this claim, and the fact that the defendant did actually go on and purchase the boats, as it
would seem, before any attempt had been made to formulate partnership articles, strongly
discountenances the theory.

Aguila v. CA, 310 SCRA 246

Facts:

 The petitioner here is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending
activities while private respondent and her late husband, Ruben M. Abrogar, were the registered
owners of a house and lot, covered by Transfer Certificate of Title No. 195101, in Marikina, Metro
Manila and on April 18, 1991, the respondent entered into a Memorandum of Agreement with
the A.C. Aguila & Sons, Co., the latter shall buy the house and lot of the respondent with an
amount of P200,000 upon failure to repurchase of the respondent.
 Private respondent failed to redeem the property within the 90-day period as provided in the
Memorandum of Agreement and pursuant to the special power of attorney, petitioner caused the
cancellation of TCT No. 195101 and the issuance of a new certificate of title in the name of A.C.
 Aguila and Sons, Co.; petitioner demand from the respondent to vacate the property but the latter
refused and this prompted the former to file an ejectment case against the respondent.
 MTC and RTC ruled in favor of the petitioners but upon by the respondents to the CA, it reversed
the decision of the lower court ruling that the transaction between plaintiff-appellant and
defendant-appellee is indubitably an equitable mortgage therefore, the deed of sale should be
declared void as we hereby so declare to be invalid, for being violative of law.
 Petitioner now contends that he is not the real party in interest but A.C. Aguila & Co., against
which this case should have been brought.

Issue: WON the petitioner is the real party interest to the case.

Ruling: NO. 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, private respondent 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. and the
Memorandum of Agreement was executed between private respondent, with the consent of her late
husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence, 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. We cannot understand why
both the Regional Trial Court and the Court of Appeals sidestepped this issue when it was squarely
raised before them by petitioner.

Tan v. del Rosario, 237 SCRA 324

Facts:

 Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme
(“SNIT”) was passed, amending certain provisions of the National Internal Revenue Code and
petitioners claimed to be taxpayers adversely affected by the continued implementation of the
amendatory legislation.
 Petitioners argued that under Section 6 of Revenue Regulations No. 2-93, public respondents
have exceeded their rule-making authority in applying SNIT to general professional partnerships.

Issue: WON general professional partnerships are subject to the payment of income tax.

Ruling: NO. The Court, first of all, should like to correct the apparent misconception that general
professional partnerships are subject to the payment of income tax or that there is a difference in the
tax treatment between individuals engaged in business or in the practice of their respective
professions and partners in general professional partnerships. The fact of the matter is that a general
professional partnership, unlike an ordinary business partnership (which is treated as a corporation
for income tax purposes and so subject to the corporate income tax), is not itself an income taxpayer.
The income tax is imposed not on the professional partnership, which is tax exempt, but on the
partners themselves in their individual capacity computed on their distributive shares of partnership
profits.
Mendiola v. CA, 497 SCRA 346

Facts:

 Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and
existing under the laws of California, USA; it entered into a “Side Agreement on Representative
Office known as Pacific Forest Resources (Phils.), Inc.” with petitioner Arsenio T. Mendiola (ATM),
in this agreement, 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 but when the petitioner sent a later to Kevin Daley, Vice President
for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils., the latter refused and
replied that he is not a part-owner of Pacfor Phils. because the he is merely Pacfor-USA’s
representative office and not an entity separate and distinct from Pacfor-USA. “It’s simply a
‘theoretical company’ with the purpose of dividing the income 50-50.”
 Petitioner claimed that he was all along made to believe that he was in a joint venture with them
and on October 2000, petitioner wrote Pacfor-USA demanding payment of unpaid commissions
and office furniture and equipment rentals and as a result, Pacfor, through counsel, ordered
petitioner to turn over to it all papers, documents, files, records, and other materials in his or ATM
Marketing Corporation’s possession that belong to Pacfor ; Petitioner construed these directives
as a severance of the “unregistered partnership” between him and Pacfor, and the termination
of his employment as resident manager of Pacfor Phils.
 Petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of
attorney’s fees with the NLRC and the Labor Arbiter ruled in favor of petitioner, finding there was
constructive dismissal but this was reversed by the NLRC and held that there was no employer-
employee relationship between the parties but a full co-owner (50/50 equity).

Issue: WON an employer-employee relationship exists between petitioner and private respondent
Pacfor.

Ruling: YES. We hold that petitioner is an employee of private respondent Pacfor and that no
partnership or co-ownership exists between the parties.

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. Petitioner is not a part-owner of Pacfor
Phils. William Gleason, private respondent Pacfor’s President established this fact when he said that
Pacfor Phils. is simply a “theoretical company” for the purpose of dividing the income 50-50. He
 stressed that petitioner knew of this arrangement from the very start, having been the one to propose
to private respondent Pacfor the setting up of a representative office, and “not a branch office” in the
Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not
make a partnership.

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.

Angeles v. Secretary of Justice, 465 SCRA 106

Facts:

 Angeles spouses filed a criminal complaint for estafa under Article 315 of the Revised Penal Code
against Mercado before the Provincial Prosecution Office, the petitioners alleged that Mercado
convinced them to enter into a contract of antichresis, colloquially known as sanglaang-perde,
covering eight parcels of land (“subject land”) planted with fruit-bearing lanzones trees located in
Nagcarlan, Laguna.
 After three years, the Angeles spouses asked for an accounting from Mercado and discovered that
the latter had put the contract of sanglaang-perde over the subject land under Mercado and his
spouse’s names but the respondent claimed that there exists an industrial partnership,
colloquially known as sosyo industrial, between him and his spouse as industrial partners and the
Angeles spouses as the financiers.
 Provincial Prosecution Office dismissed the complaint and this was affirmed by the Secretary of
Justice.

Issue: WON a partnership existed between the Angeles spouses and Mercado even without any
documentary proof to sustain its existence.

Ruling: YES. The Angeles spouses’ position that there is no partnership because of the lack of a public
instrument indicating the same and a lack of registration with the Securities and Exchange Commission
(“SEC”) holds no water. First, the Angeles spouses contributed money to the partnership and not
immovable property. Second, mere failure to register the contract of partnership with the SEC does not
invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the
contract of partnership is to give notice to third parties. Failure to register the contract of partnership
does not affect the liability of the partnership and of the partners to third persons. Neither does such
failure to register affect the partnership’s juridical personality. A partnership may exist even if the partners
do not use the words “partner” or “partnership.”

Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract showing
a sosyo industrial or industrial partnership, contribution of money and industry to a common fund, and
division of profits between the Angeles spouses and Mercado.
SEC Opinion dated 29 Feb. 1980

Facts:

 This case is with regard to the letter dated October 29, 1970 requesting information whether or
not two or more medium- size corporations (contractors) may enter into a partnership or joint
venture/ consortium and the commission hereby reiterates that corporation cannot ordinarily
enter into a contract of partnership with another corporation or individual.
 According to the prevailing view, a corporation has no implied power to become a partner with
an individual or another corporation, for, in entering into partnership the identity of the
corporation is lost or merged with that of another; a corporation can act only through its duly
authorized agents and is not bound by the acts of anyone else, while partnership each member
binds the firm when acting within the scope of the partnership.
 Nevertheless, there are exceptions to the rule, namely; (a) the articles of incorporation of the
corporations involved must expressly authorize the corporation to enter into contract of
partnership with others in the pursuit of its business, (b) the agreement or articles of partnership
must provide that all partners will manage the partnership and (c) the articles of partnership must
stipulate that all partners are and shall be jointly and severally liable for all the obligations of the
partnership.

Gatchalian v. CIR, 67 Phil. 666

Facts:

 Plaintiffs in order to purchase one sweepstakes ticket valued at two pesos (P2), each one of them
contributed an amount for the sole purpose of dividing equally the prize which they may win, as
they did in fact in the amount of P50,000 and the corresponding check covering the above-
mentioned prize was drawn by the National Charity Sweepstakes Office in favor of Jose Gatchalian
& Company against the Philippine National Bank.
 Jose Gatchalian (petitioner) was required by income tax examiner Alfredo David to file the
corresponding income tax return covering the prize won by Jose Gatchalian & Company to which
the petitioner protested and argued that what was formed by the petitioners was merely a
community of property. Hence they are exempt from payment of tax.

Issue: WON the plaintiffs formed merely a community of property without a personality of its own.

Ruling: NO. There is no doubt that if the plaintiffs merely formed a community of property the latter
are exempt from the payment of income tax under the law. But according to the stipulated facts the
plaintiffs organized a partnership of a civil nature because each of them put up money to buy a
sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did
in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only formed, but
upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared in
the office of the Philippine Charity Sweepstakes, in his capacity as co-partner, as such collected the
prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said
partner, in the same capacity, collected the said check. All these circumstances repel the idea that the
plaintiffs organized and formed a community of property only.

Pascual v. CIR, 166 SCRA 560

Facts:

 The petitioners bought five (5) parcels of land in total, subsequently petitioners were able to sold
these parcels of land and corresponding capital gains taxes were paid by petitioners in 1973 and
1974 by availing of the tax amnesties granted in the said years.
 Petitioners were assessed by the BIR Commissioner and required to pay a total amount of P107,
101.70 as alleged deficiency corporate income taxes, but the petitioners protested the said
assessment and alleged that they had availed of tax amnesties way back in 1974 and as a reply,
respondent Commissioner informed petitioners that in the years 1968 and 1970, petitioners as
co-owners in the real estate transactions formed an unregistered partnership or joint venture
taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed
under Section 24, both of the National Internal Revenue Code.
 Court of Tax Appeals affirmed the decision of the Commissioner and ruled that an unregistered
partnership was in fact formed by petitioners which like a corporation was subject to corporate
income tax distinct from that imposed on the partners.

Issue: WON the petitioners formed an unregistered partnership which is taxable.

Ruling: NO. In order to constitute a partnership inter sese there must be: (a) An intent to form the
same; (b) generally participating in both profits and losses; (c) and such a community of interest, as
far as third persons are concerned as enables each party to make contract, manage the business, and
dispose of the whole property.’(Municipal Paving Co. vs. Herring, 150 P. 1067, 50 III 470.)

The common ownership of property does not itself create a partnership between the owners, though
they may use it for the purpose of making gains; and they may, without becoming partners, agree
among themselves as to the management, and use of such property and the application of the
proceeds therefrom.(Spurlock vs. Wilson, 142 S.W. 363, 160 No. App. 14.)”6

The sharing of returns does not in itself establish a partnership whether or not the persons sharing
therein have a joint or common right or interest in the property. There must be a clear intent to form
a partnership, the existence of a juridical personality different from the individual partners, and the
freedom of each party to transfer or assign the whole property.

In the present case, there is clear evidence of co-ownership between the petitioners. There is no
adequate basis to support the proposition that they thereby formed an unregistered partnership. The
two isolated transactions whereby they purchased properties and sold the same a few years
thereafter did not thereby make them partners. They shared in the gross profits as co-owners and
paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. Under the
circumstances, they cannot be considered to have formed an unregistered partnership which is
thereby liable for corporate income tax, as the respondent commissioner proposes.
 Obillos v. CIR, 139 SCRA 436

Facts:

 Jose Obillos, Sr., bought two lots located in San Juan Rizal and the next day he transferred his
rights to his four children, the petitioners, to enable them to build their residences but the latter
after more than one year, resold them and They derived from the sale a total profit of P134,341.
88 or P33, 584 for each of them. They treated the profit as a capital gain and paid an income tax
on one-half thereof or on P16, 792.
 Commissioner of Internal Revenue required the four petitioners to pay corporate income tax on
the total profit of P134, 336 in addition to individual income tax on their shares thereof. Thus, the
petitioners are being held liable for deficiency income taxes and penalties totalling P127,781.76
on their profit of P134,336, in addition to the tax on capital gains already paid by them.
 The Commissioner acted on the theory that the four petitioners had formed an unregistered
partnership or joint venture within the meaning of sections 24(a) and 84(b) of the Tax Code.
 Two Judges of the Tax Court sustained the decision of the Commissioner.

Issue: WON the petitioners formed an unregistered partnership or joint venture.

Ruling: NO. Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of
itself establish a partnership, whether or not the persons sharing them have a joint or common right
or interest in any property from which the returns are derived". There must be an unmistakable
intention to form a partnership or joint venture. As testified by Jose Obillos, Jr., they had no such
intention. They were co-owners pure and simple. To consider them as partners would obliterate the
distinction between a coownership and a partnership. The petitioners were not engaged in any joint
venture by reason of that isolated transaction.

Rivera v. People’s Bank, 73 Phil. 546

Facts:

 Ana Rivera was employed by Edgar Stephenson as housekeeper until his death. The latter opened
an account with the defendant People’s Bank by depositing therein the sum of P1,000 and
subsequently executed a survivorship agreement and the said account was transferred to the
name of "Edgar Stephenson and/or Ana Rivera."
 Upon the death of Stephen, Ana Rivera claimed the balance with the People’s Bank which the
latter refused for the reason that the survivorship agreement was of doubtful validity and this
prompted the petitioner to file an action against the bank.
 The trial court held that the agreement in question, was a mere power of attorney authorizing
Ana Rivera to withdraw the deposit, which power terminated upon the death of the principal.

Issue: WON the survivorship agreement is valid.

Ruling: YES. Art. 1790. By an aleatory contract one of the parties binds himself, or both reciprocally
bind themselves, to give or to do something as an equivalent for that which the other party is to give
or do in case of the occurrence of an event which is uncertain or will happen at an indeterminate time.
 Furthermore, "it is well established that a bank account may be so created that two persons shall be
joint owners thereof during their mutual lives, and the survivor take the whole on the death of the
other. The right to make such joint deposits has generally been held not to be done away with by
statutes abolishing joint tenancy and survivorship generally as they existed at common law.”

Heirs of Tan Eng Kee v. CA, 341 SCRA 740.

Facts:

 After the World War II, Tan Eng Kee and Tan Eng Lay formed a partnership engaged in the business
of selling lumber and hardware and construction supplies, but Tan Eng Kee died and Tan Eng Lay
and his children caused the conversion of the partnership “Benguet Lumber” into a corporation
called “Benguet Lumber Company”.
 Now, the heirs of Tan Eng Kee, filed suit against the decedent’s brother Tan Eng Lay for
accounting, liquidation and winding up of the alleged partnership.
 Regional Trial Court of Baguio City rendered decision in favor of the petitioners ruling that Benguet
Lumber is a joint venture which is akin to a particular partnership but this was reversed by the
Court of Appeals.

Issue: WON Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.

Ruling: NO. A review of the record persuades us that the Court of Appeals correctly reversed the
decision of the trial court. The evidence presented by petitioners falls short of the quantum of proof
required to establish a partnership.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only an employee,
not a partner. Even if the payrolls as evidence were discarded, petitioners would still be back to square
one, so to speak, since they did not present and offer evidence that would show that Tan Eng Kee
received amounts of money allegedly representing his share in the profits of the enterprise.
Petitioners failed to show how much their father, Tan Eng Kee, received, if any, as his share in the
profits of Benguet Lumber Company for any particular period. Hence, they failed to prove that Tan
Eng Kee and Tan Eng Lay intended to divide the profits of the business between themselves, which is
one of the essential features of a partnership.

Litonjua v. Litonjua, 477 SCRA 576

Facts:

 Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo K. Litonjua, Sr.
(Eduardo) brothers, entered into a joint venture/partnership for the continuation of their family
business and common family funds and this joint venture/partnership agreement was contained
in a memorandum addressed by Eduardo to his siblings, parents and other relatives.
 The relations between Aurelio and Eduardo became sour so that the former requested for an
accounting and liquidation of his share in the joint venture/partnership but these demands for
complete accounting and liquidation were not heeded.
 Eduardo and the corporate respondents, as defendants a quo, filed a joint ANSWER With
Compulsory Counterclaim denying under oath the material allegations of the complaint, more
particularly that portion thereof depicting petitioner and Eduardo as having entered into a
contract of partnership. As affirmative defenses, Eduardo, apart from raising a jurisdictional
matter, alleged that the complaint states no cause of action, since no cause of action may be
derived from the actionable document.
 The petitioner has a reasonable cause to believe that Eduardo and/or the corporate defendants
as well as Bobby [Yang], are transferring various real properties of the corporations belonging to
the joint venture/partnership to other parties in fraud of petitioner. The trial court ruled in favor
of Eduardo and this was affirmed by the CA.

Issue: WON there was no partnership created by the actionable document because this was not a
public instrument and immovable properties were contributed to the partnership.

Ruling: YES. Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be necessary.
Lest it be overlooked, the contract-validating inventory requirement under Article 1773 of the Civil
Code applies as long real property or real rights are initially brought into the partnership. In short, it
is really of no moment which of the partners, or, in this case, who between petitioner and his brother
Eduardo, contributed immovables. In context, the more important consideration is that real property
was contributed, in which case an inventory of the contributed property duly signed by the parties
should be attached to the public instrument, else there is legally no partnership to speak of.

Bourns v. Carman, 7 Phil. 117

Facts:

 The plaintiff in this action seeks to recover the sum of $437.50) United States currency, balance
due on a contract for the sawing of lumber for the lumber yard of Lo-Chim-Lim together with his
codefendants jointly, alleging that, at the time the contract was made, they were the joint
proprietors and operators of the said lumber yard engaged in the purchase and sale of lumber
under the name and style of Lo-Chim-Lim.
 The court below dismissed the action as to the other defendants and found that "Lo-Chim-Lim,
Vicente Palanca, and Go-Tauco had a lumber yard in Calle Lemery that the appellants were,
according to the court below, co-participants with the said Lo-Chim-Lim in the business in
question.

Issue: WON the transaction is one of a partnership of cuentas en participación.

Ruling: NO. The contracts made with the plaintiff were made by Lo-Chim-Lim individually in his own
name, and there is no evidence that the partnership ever contracted in any other form. Under such
circumstances we find nothing upon which to consider this partnership other than as a partnership of
cuentas en participación. It may be that, as a matter of fact, it is something different, but the uncertain
and scant evidence introduced by the parties does not permit of any other designation of this
partnership. We see nothing, according to the evidence, but a simple business conducted by Lo-Chim-
Lim exclusively, in his own name, and under his own personal management, he having effected every
transaction connected therewith also in his own name, the names of the other persons interested in
the profits and losses of the business nowhere appearing. A partnership constituted in such a manner,
the existence of which was only known to those who had an interest in the same, there being no
mutual agreements between the partners, and without a corporate name indicating to the public in
some way that there were other people besides the one who ostensibly managed and conducted the
business, is exactly the accidental partnership of cuentas en participación defined in article 239 of the
Code of Commerce.

Those who contract with the person under whose name the business of such partnership of cuentas
en participación is conducted, shall have only a right of action against such person and not against the
other persons interested, and the latter, on the other hand, shall have no right of action against the
third person who contracted with the manager unless such manager formally transfers his right to
them. (Art. 242 of the Code of Commerce.) It follows, therefore, that the plaintiff has no right to
demand from the appellants the payment of the amount claimed in the complaint, as Lo-Chim-Lim
was the only one who contracted with him. The action of the plaintiff lacks, therefore, a legal
foundation and should be accordingly dismissed.

Sevilla v. CA, 160 SCRA 171

Facts:

 One of the branch of Tourist World Service, Inc., was run by Lina O. Sevilla the petitioner, but due
to competition the said branch was closed by Tourist World and subsequently the petitioner filed
a case against the appellees.
 The petitioner claimed that a joint business venture was entered into by and between her and
appellee TWS with offices at the Ermita branch office and that she was not an employee of the
TWS to the end that her relationship with TWS was one of a joint business venture.
 The lower court dismissed the case and it was affirmed by the CA, ruling that the petitioner was
a mere employee of the TWS. Thus, the petitioner went to the Supreme Court.

Issue: WON the relationship between the petitioner and TWS was one of a joint venture/partnership.

Ruling: NO. In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla’s own, that is, that the parties had embarked on a joint venture
or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly “concedes your [Tourist World Service,
Inc.'s] right to stop the operation of your branch office," in effect, accepting Tourist World Service,
Inc.'s control over the manner in which the business was run. A joint venture, including a partnership,
presupposes generally a parity of standing between the joint co-venturers or partners, in which each
party has an equal proprietary interest in the capital or property contributed and where each party
exercises equal rights in the conduct of the business. Furthermore, the parties did not hold themselves
out as partners, and the building itself was embellished with the electric sign “Tourist World Service,
Inc.," in lieu of a distinct partnership name. It is the Court’s considered opinion, that when the
petitioner, Lina Sevilla, agreed to woman the private respondent, Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a contract of agency. It is the essence of this contract that
the agent renders services “in representation or on behalf of another." In the case at bar, Sevilla
solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla
herself, based on her letter of November 28, 1961, presumed her principal’s authority as owner of
the business undertaking. We are convinced, considering the circumstances and from the respondent
Court’s recital of facts, that the parties had contemplated a principal-agent relationship, rather than
a joint management or a partnership.

Philex Mining Corp. v. CIR, 551 SCRA 428

Facts:

 Petitioner Philex Mining Corporation (Philex Mining), entered into an agreement with Baguio Gold
Mining Company (”Baguio Gold”) for the former to manage and operate the latter’s mining claim,
known as the Sto. Nino mine, located in Atok and Tublay, Benguet Province.
 In the course of managing and operating the project, Philex Mining made advances of cash and
property in accordance with paragraph 5 of the agreement, however, the mine suffered
continuing losses over the years which resulted to petitioner’s withdrawal as manager of the mine
and in the eventual cessation of mine operations.
 The parties executed an agreement where Baguio Gold is indebted to petitioner and amount
P259, 137,245.00 and subsequently, in its 1982 annual income tax return, petitioner deducted
from its gross income the amount of P112, 136,000.00 as “loss on settlement of receivables from
Baguio Gold against reserves and allowances.” however, the Bureau of Internal Revenue (BIR)
disallowed the amount as deduction for bad debt and assessed petitioner a deficiency income tax
of P62, 811,161.39.
 Petitioner protested and argued that the debt arose out of a valid management contract it
entered into with Baguio Gold, but the BIR denied petitioner’s protest for lack of legal and factual
basis, this was affirmed by CTA (Court of Tax Appeal) and subsequently by the Court of Appeals.

Issue: WON The Court of Appeals erred in construing that the advances made by Philex in the
management of the Sto. Nino Mine pursuant to the Power of Attorney partook of the nature of an
investment rather than a loan.

Ruling: NO. In this case, the totality of the circumstances and the stipulations in the parties’ agreement
indubitably lead to the conclusion that a partnership was formed between petitioner and Baguio Gold.

The tax court correctly concluded that the agreement provided for a distribution of assets of the Sto.
Niño mine upon termination, a provision that is more consistent with a partnership than a creditor-
debtor relationship. It should be pointed out that in a contract of loan, a person who receives a loan
or money or any fungible thing acquires ownership thereof and is bound to pay the creditor an equal
amount of the same kind and quality In this case, however, there was no stipulation for Baguio Gold
to actually repay petitioner the cash and property that it had advanced, but only the return of an
amount pegged at a ratio which the manager’s account had to the owner’s account.

The strongest indication that petitioner was a partner in the Sto. Niño mine is the fact that it would
receive 50% of the net profits as “compensation” under paragraph 12 of the agreement. The entirety
of the parties’ contractual stipulations simply leads to no other conclusion than that petitioner’s
“compensation” is actually its share in the income of the joint venture.

Article 1769 (4) of the Civil Code explicitly provides that the “receipt by a person of a share in the
profits of a business is prima facie evidence that he is a partner in the business”.

Tocao v. CA, 342 SCRA 20

Facts:

 Nenita Anay met Belo, then the latter introduced her to petitioner Marjorie Tocao, and the three
agreed to enter into a joint venture for the importation and local distribution of kitchen
cookwares where 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 Anay would be entitled to commissions but this was not reduced into
writing. They operated under the name of Geminesse Enterprise, a sole proprietorship registered
in Marjorie Tocao’s name and the business was a success but one day she received a note from
Lina T. Cruz, marketing manager, that Marjorie Tocao had barred her from holding office and
conducting demonstrations in both Makati and Cubao offices.
 Anay filed a complaint for sum of money with damages8 against Marjorie D. Tocao and William
Belo before the Regional Trial Court of Makati, and prayed that defendants be ordered to pay her,
jointly and severally but in their answer, Marjorie Tocao and Belo asserted that the alleged
agreement with Anay that was neither reduced in writing, nor ratified, was either unenforceable
or void or inexistent and there could not have been a partnership because, as Anay herself
admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao
 The lower court rendered decision in favor of Anay and affirmed by CA ruling that there was
indeed an “oral partnership agreement between the plaintiff and the defendants.

Issue: WON the plaintiff was a partner of Tocao and Belo.

Ruling: YES. In this case, both the trial court and the Court of Appeals are one in ruling that petitioners
and private respondent established a business partnership. This Court finds no reason to rule
otherwise.

To be considered a juridical personality, a partnership must fulfill these requisites: (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. It may be constituted in
any form; a public instrument is necessary only where immovable property or real rights are
contributed thereto. This implies that since a contract of partnership is consensual, an oral contract
of partnership is as good as a written one. Where no immovable property or real rights are involved,
what matters is that the parties have complied with the requisites of a partnership. The fact that there
appears to be no record in the Securities and Exchange Commission of a public instrument embodying
the partnership agreement pursuant to Article 1772 of the Civil Code did not cause the nullification of
the partnership.
 IV. PARTNER’S OBLIGATIONS TO THE PARTNERSHIP

US v. Clarin, G.R. No. 5840, 17 Phil. 84

Facts:

 Pedro Larin delivered to Pedro Tarug P172 in order that the latter, together with Eusebio Clarin
and Carlos de Guzman might buy and sell mangoes with an agreement that the profits were to be
divided equally among them.
 The three succeeded in trading the mangoes and obtained a profit which amounted to P203 but
Larin was not given his share and the former did not render an account of the transaction.
 Larin filed a complaint of a crime of estafa, but the fiscal filed an information only against Eusebio
Clarin to which the latter was convicted before trial court of First Instance of Pampanga.

Issue: WON the complaint of a crime of estafa which was filed was proper.

Ruling: NO. The P172 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.

No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "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
character 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.

Sancho v. Lizarraga, G.R. No. 33580, 55 Phil. 601

Facts:

 The plaintiff brought an action for the rescission of a partnership contract between him and the
defendant and also, for the reimbursement of his 50,000 peso investment therein.
 The defendant denied all the allegations and instead asked for the dissolution of the partnership,
and the payment to him as its manager and administrator.
 The Court of First Instance of Manila, found that defendant had not contributed all the capital he
had bound himself to invest and ordered that the partnership be liquidated.
 The plaintiff appealed and assigned one of the errors of the decision of the lower court.

Issue: WON the plaintiff has a right to demand rescission of the partnership.
Ruling: NO. Owing to the defendant's failure to pay to the partnership the whole amount which he bound
himself to pay, he became indebted to it for the remainder, with interest and any damages occasioned
thereby, but the plaintiff did not thereby acquire the right to demand rescission of the partnership
contract according to article 1124 of the Code. This article cannot be applied to the case in question,
because it refers to the resolution of obligations in general, whereas article 1681 and 1682 specifically
refer to the contract of partnership in particular. And it is a well-known principle that special provisions
prevail over general provisions.

Po Yeng Cheo v. Lim Ka Yam, G.R. No. L-18707, 44 Phil. 172

Facts:

 In this case, petitioner Po Yeng Cheo, alleged sole owner of a business named Kwong Cheong,
(which he inherited from Po Gui Yao his father) filed a complaint for recovery of his properties
and asset as a managing partner in said business. The original defendant Lim Ka Yam died during
the pendency of this case, so he is represented by Lim Yock Tock, as administrator, to present a
liquidation of said business.
 The lower court rendered decision in favor of the plaintiff to recover of the defendant Lim Yock
Tock, as administrator of Lim Ka Yam, the sum of sixty thousand pesos and from this judgment,
the defendant appealed.

Issue: WON the petitioner can recover from the deceased managing partner which is represented by
his administrator.

Ruling: NO. In the first place, it is well settled that when a member of a mercantile partnership dies,
the duty of liquidating its affair devolves upon the surviving member, or members, of the firm, not
upon the legal representative of the deceased partner. (Wahl vs. Donaldson Sim & Co., 5 Phil., 11;
Sugo and Shibata vs. Green, 6 Phil., 744). It is elementary that one partner, suing alone, cannot recover
of the managing partner the value of such partner's individual interest; and a liquidation of the
business is an essential prerequisite.

The managing partner of a mercantile enterprise is not a debtor to the shareholders for the capital
embarked by them in the business; and he can only be made liable for the capital when, upon
liquidation of the business, there are found to be assets in his hands applicable to capital account.

Liwanag v. CA, G.R. No. 114398, 281 SCRA 225

Facts:

 Petitioner Carmen Liwanag (Liwanag) and Thelma Tabligan went to the house of complainant
Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes
and under their agreement, Rosales would give the money needed to buy the cigarettes while
Liwanag and Tabligan would act as her agents, with a corresponding 40% commission to her if the
goods are sold; otherwise the money would be returned to Rosales.
 Rosales gave several cash advances to Liwanag and Tabligan and during the first two months, they
made periodic visits to Rosales to report on the progress of the transactions but they suddenly
stopped and this prompted Rosales to file a case of estafa against Liwanag.
 Liwanag was convicted by the lower court and CA. In his appeal he argued that there was a
partnership relations between him and Rosales.

Issue: WON there was a partnership between the parties.

Ruling: NO. The language of the receipt could not be any clearer. It indicates that the money delivered
to Liwanag was for a specific purpose, that is, for the purchase of cigarettes, and in the event the
cigarettes cannot be sold, the money must be returned to Rosales.

Thus, even assuming that a contract of partnership was indeed entered into by and between the
parties, we have ruled that when money or property have been received by a partner for a specific
purpose (such as that obtaining in the instant case) and he later misappropriated it, such partner is
guilty of estafa.

In the instant petition, however, it is evident that Liwanag could not dispose of the money as she
pleased because it was only delivered to her for a single purpose, namely, for the purchase of
cigarettes, and if this was not possible then to return the money to Rosales. Since in this case there
was no transfer of ownership of the money delivered, Liwanag is liable for conversion under Art. 315,
par. l(b) of the Revised Penal Code.

Pang Lim v. Lo Seng, G.R. No. L-16318, 42 Phil. 282

Facts:

 Lo Seng and Pang Lim were partners in the business of running a distillery, known as "El Progreso,"
and the land on which said distillery is located as well as the buildings and improvements originally
used in the business were property of Lo Yao who resides in Hongkong and the latter leased the
said properties to the partners.
 The leased, through Lo Shui attorney in fact of Lo Yao was extended for fifteen years for the reason
that the Bureau of Internal Revenue had required sundry expensive improvements to be made in
the distillery, and it was agreed that these improvements should be effected at the expense of
the lessees.
 Subsequently, Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus placing the
latter in the position of sole owner and then Lo Shui and acting as attorney in fact of Lo Yao, Lo
Shui 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 including the land used in
connection therewith.
 Pang Lim and Benito Galvez demanded possession from Lo Seng, but the latter refused so they
filed an unlawful detainer case which was granted by lower court and affirmed by the CFI.

Issue: WON the Pang Lim acted in bad faith in filing an ejectment case against Lo Seng.

Ruling: YES. 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. (20 R. C. L., 878-882.) 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. (16 R. C. L., 906; Knapp vs. Reed, 88 Neb., 754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed
61 N. Y., 123; 19 Am. Rep., 252.)

Hanlon v. Hausserman, G.R. No. L-14617, 40 Phil. 796

Facts:

 This action was originally instituted by R. Y. Hanlon to compel the defendants, John W.
Haussermann and A. W. Beam, to account for a share of the profits gained by them in
rehabilitating the plant of the Benguet Consolidated Mining Company.
 It was initially agreed by Hanlon, Haussermann, Beam and Sellner that P75, 000.00 was needed
to rehabilitate the mine; P50, 000.00 would come from Hanlon by securing and obtaining
subscriptions for the company’s stocks, P25, 000.00 would come from Haussermann and Beam.
 They were to receive compensation in the form of shares of stock for the services rendered in the
flotation of this proposition and it was stipulated that the funds were needed on a certain date.
 But Hanlon was unable to raise the P75, 000.00, so that Haussermann and Beam made
arrangements to finance the rehabilitation of the mine and because of this new arrangement, the
company became profitable that it was able to pay dividends.

Issue: WON Hanlon acted in good faith.

Ruling: YES. In the present case so far as we can see, the defendants acted in good faith for the
accomplishment of the common purpose and to the full extent of their obligation during the
continuance of their contract; and if Sellner had not defaulted, or if Hanlon had been able to produce
the necessary capital from some other source, during the time set for raising the money, the original
project would undoubtedly have proceeded to its consummation. Certainly, no act of the defendants
can be pointed to which prevented or retarded its realization; and we are of the opinion that, under
the circumstances, nothing more could be required of the defendants than a full and honest
compliance with their contract. As this had been discharge through the fault of another they cannot
be held liable upon it.

Lim Tanhu v. Ramolete, 66 SCRA 425

Facts:

 Tan alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a partner in the commercial
partnership, Glory Commercial Company with Antonio Lim Tanhu and Alfonso Ng Sua.
  She alleged in her complaint 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 and sometime
in the month of November, 1967, defendants, particularly Antonio Lim Tanhu, by means of fraud
deceit, and misrepresentations did then and there, induce and convince her to execute a quitclaim
of all her rights and interests, in the assets of the partnership of Glory Commercial Company.
 The defendants who had earlier promised to liquidate the aforesaid properties and assets in favor
of the plaintiff refused and stated that they would not give the share of the plaintiff.

Issue: WON Whether Tan has a right over the liquidated properties of the partnership.

Ruling: No, Tan has no right over the liquidated properties of the partnership

The Supreme Court held that there is no alternative but to hold that plaintiff Tan Put's allegation that
she is the widow of Tee Hoon 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.

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.

In other words, no specific amounts or properties may be adjudicated to the heir or legal
representative of the deceased partner without the liquidation being first terminated.

Catalan v. Gatchalian, 105 Phil. 1270

Facts:

 Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the
improvements thereon to secure a credit from the latter.
 The partnership failed to pay the obligation. The properties were sold to Dr. Marave at a public
auction. Catalan redeemed the property and he contends that title should be cancelled and a
new one must be issued in his name.

Issue: WON Catalan’s redemption of the properties make him the absolute owner of the lands?

Ruling: No. Under Article 1807 every partner becomes a trustee for his copartner with regard to any
benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the
properties in question, he became a trustee and held the same in trust for his copartner Gatchalian,
subject to his right to demand from the latter his contribution to the amount of redemption.

V. PARTNER’S OBLIGATION TO PARTNERS.

Martinez v. Ong Pang Co., G.R. No. L-5236, 14 Phil. 726

Facts:

 The plaintiff delivered an amount of P1, 500 to the defendants who acknowledged that they had
received the same with the agreement, as stated by them, "that we are to invest the amount in a
store, the profits or losses of which we are to divide with the former, in equal shares."
 Subsequently, plaintiff filed a complaint in order to compel the defendants to render him an
accounting of the partnership as agreed to, or else to refund him the P1, 500 that he had given
them for the said purpose.
 Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to
the plaintiff one-half of the said capital of P1, 500.

Issue: WON Ong Pong Co is liable to the plaintiff.

Ruling: YES. 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. (Arts. 1108 and 1100, Civil Code.) We do not
consider that article 1688 is 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.

Agustin v. Inocencio, G.R. No. L-3745

Facts:

 The parties entered into a partnership as industrial partners without capital and because of this,
they borrowed an amount of P3, 500 from Maria del Rosario, the wife of the defendant,
Bartolome Inocencio, he being the managing partner to construct a casco for use in their business
 In the course of the construction, the defendant found that it called for additional funds, which
he advanced and this was done without the knowledge of the other partner.
 Maria Del Rosario, the wife of Inocencio died and the note was passed into the hands of the
defendant making him the creditor thereof.
 The trial court treated his claim on this note, as well as the sum he had advanced as an addition
to his capital in the firm, rather than as a loan.

Issue: WON the lower erred in treating the note as additional capital of the defendant to the firm.

Ruling: NO. 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.

VI. PARTNER’S OBLIGATION INTER SE

Moran v. CA, 133 SCRA 88

Facts:

 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.
 Private respondent Pecson filed with the Court of First Instance of Manila an action for the
recovery of a sum of money and one of the cause was 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.
 The CFI rendered decision ordering defendant Isabelo C. Moran, Jr. to return to plaintiff Mariano
E. Pecson the sum of P17, 000 but this was modified by the CA into P47, 500.

Issue: WON the amount awarded to Pecson was highly speculative.

Ruling: YES. 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). 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.

It does not follow however that the private respondent is not entitled to recover any amount from the
petitioner.

Duterte v. Rallos, 2 Phil. 509

Facts:

 The plaintiff-appellant in this case claimed that they were partners of the defendant in the
management of a cockpit to which the latter denied.
 In this case, plaintiff rendered services in the management of the cockpit, and that the defendant
paid him money on account of the cockpit.
 The lower court found that no such partnership existed and ordered judgment for the defendant.

Issue: WON there was partnership between the parties.

 Ruling: YES. We see no way of explaining the accounts submitted by the defendant to plaintiff on any
theory other than that there was a partnership between them up to September 1, 1901, at least. The
letter of the defendant, in which he says that he admitted the plaintiff into the partnership, can be
explained on no other theory.

That there was an agreement to share the profits is clearly proved by the accounts submitted. The
plaintiff testified that the profits and losses were to be shared equally. But even omitting this
testimony, the case is covered by article 1689 of the Civil Code, which provides that, in the absence
of agreement as to the losses, they shall be shared as the gains are.

Ona v. CIR, 45 SCRA 74

Facts:

 Lorenzo T. Oña the surviving spouse was appointed administrator of the estate of Julia Buñales
and the former submitted the project of partition, which was approved by the Court; they have
minor five children and because of this, their father and administrator of the estate, filed a
petition for appointment as guardian of said minors which was also approved by the court.
 The project of partition shows that that the heirs have undivided one-half (1/2) interest in ten
parcels of land, six houses and an undetermined amount to be collected from the War Damage
Commission.
 Although the project of partition was approved by the Court no attempt was made to divide the
properties instead, the properties remained under the management of Lorenzo T. Oña who used
said properties in business by leasing or selling them and investing the income derived therefrom
and the proceeds from the sales thereof in real properties and securities and as a result,
petitioners' properties and investments gradually increased.
 Hence, respondent (Commissioner of Internal Revenue) decided that petitioners formed an
unregistered partnership and therefore, subject to the corporate income tax, pursuant to Section
24, in relation to Section 84(b), of the Tax Code.
 The petitioners appealed the decision to the Court of Tax Appeal but the latter affirmed the
decision of the Commissioner.

Issue: WON the petitioners have formed an unregistered partnership.

Ruling: YES. In these circumstances, it is our considered view that from the moment petitioners
allowed not only the incomes from their respective shares of the inheritance but even the inherited
properties themselves to be used by Lorenzo T. Oña as a common fund in undertaking several
transactions or in business, with the intention of deriving profit to be shared by them proportionally,
such act was tantamount to actually contributing such incomes to a common fund and, in effect, they
thereby formed an unregistered partnership within the purview of the above-mentioned provisions
of the Tax Code.
 Pioneer Insurance v. CA, 175 SCRA 668

Facts:

 Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract for the sale and
purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total to
be paid in installments.
 Pioneer Insurance and Surety Corporation as surety executed and issued its Surety Bond in favor
of JDA, in behalf of its principal, Lim and it appears that Border Machinery and Heavy Equipment
Company, Inc respondents contributed some funds used in the purchase of the above aircrafts
and spare parts.
 Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel
mortgage as security for the latter's surety ship in favor of the former and it was stipulated therein
that Lim transfer and convey to the surety the two aircrafts.
 Lim defaulted on his subsequent installment payments prompting JDA to request payments from
the surety Pioneer to which the latter paid; hence Pioneer filed a petition for the extrajudicial
foreclosure of the said chattel mortgage but the respondents Border Machinery and Heavy
Equipment Company, Inc filed a third party claim alleging that they are co-owners of the aircrafts.
 The lower court rendered decision holding Lim liable to pay Pioneer but dismissed Pioneer's
complaint against all other defendants.

Issue: WON Border Machinery and Heavy Equipment Company, Inc., are co-owners of the aircrafts.

Ruling: NO. Applying therefore the principles of law earlier cited to the facts of the case, necessarily,
no de facto partnership was created among the parties which would entitle the petitioner to a
reimbursement of the supposed losses of the proposed corporation. The record shows that the
petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting
the sale of the airplanes and spare parts.

It is therefore clear that the petitioner never had the intention to form a corporation with the
respondents despite his representations to them. This gives credence to the cross-claims of the
respondents to the effect that they were induced and lured by the petitioner to make contributions
to a proposed corporation which was never formed because the petitioner reneged on their
agreement.

Evangelista v. Abad Santos, 51 SCRA 416

Facts:

 A co-partnership was formed under the name of "Evangelista & Co." to which 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.
 The petitioner filed a 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 defendants had refused and continued to refuse and let her
examine the partnership books or to give her information regarding the partnership affairs.
  Petitioner 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.
 The defendants in their answer such allegations and set up a defense that plaintiff was not an
industrial partner and that she did not in fact contribute industry to the partnership.
 The CFI rendered decision that the petitioner is an industrial partner and this was affirmed by the
CA.

Issue: WON the plaintiff is an industrial partner and WON the latter can demand an accounting of
partnership.

Ruling: YES. It is not the function of the Supreme Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that might have been committed by the
lower court. It should be observed, in this regard, that the Court of Appeals did not hold that the
Articles of Co-partnership, identified in the record as Exhibit "A", was conclusive evidence that the
respondent was an industrial partner of the said company, but considered it together with other
factors, consisting of both testimonial and documentary evidences, in arriving at the factual
conclusion expressed in the decision.

Art. 1899. 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;

(4) Whenever other circumstance render it just and reasonable.

Soncuya v. De Luna, 67 Phil. 646

Facts:

 Plaintiff Josue Soncuya filed with the Court of First Instance of Manila and under the amended
complaint it is prayed that defendant Carmen de Luna be sentenced to pay plaintiff damages in
the sum of P700, 432 as a result of the administration, said to be fraudulent, of her partnership,
"Centro Escolar de Señoritas", of which plaintiff, defendant and the deceased Librada Avelino
were members.
 The defendant filed a demurrer based on the following grounds: (1) That the complaint does not
contain facts sufficient to constitute a cause of action; and (2) that the complaint is ambiguous,
unintelligible and vague.
 The trial court ordered the plaintiff to amend his complaint but the latter refused; hence it was
dismissed by the court.

Issue: WON the plaintiff as member of the partnership can collect damages from defendant as
managing partner thereof, without a previous liquidation.
 Ruling: NO. In view of the foregoing considerations, we are of the opinion and so hold that for a
partner to be able to claim from another partner who manages the general co-partnership, damages
allegedly suffered by him by reason of the fraudulent administration of the latter, a previous
liquidation of said partnership is necessary.

VII. PARTNER’S OBLIGATIONS TO PERSONAL AND PARTNERSHIP CREDITORS; THIRD PARTIES

In re Sycip, 92 SCRA 1

Facts:

 Two petitions regarding the two law firms praying that they may retain the names of their former
partners “Sycip” and “Ozaeta” who both passed away.
 They argued that under the law, a partnership is not prohibited from continuing its business under
a firm name which includes the name of a deceased partner.
 They invoked Article 1840 of the Civil Code which states that the use by the person or partnership
continuing the business of the partnership name, or the name of a deceased partner as part
thereof, shall not of itself make the individual property of the deceased partner liable for any
debts contracted by such person or partnership.

Issue: WON the two law firms may retain the names of their deceased partners.

Ruling: The Court ruled that they should remove the names of the deceased partners.

Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name
of one or more of the partners.

Those who, not being members of the partnership, include their names in the firm name, shall be
subject to the liability, of a partner.

This implies that the partner must be living for his/her name to be included. Heirs of the deceased
cannot also be held liable or get a percentage (esp. if non-lawyers) because the “partner” being dead
doesn’t give service anymore.

Litton v. Hill, 67 Phil. 509

Facts:

 The plaintiff sold and delivered to Carlos Ceron, who is one of the managing partners of Hill &
Ceron, a certain number of mining claims to which the latter paid only P1, 150 leaving an unpaid
balance of P720.
 The plaintiff was unable to collect the balance either from Hill & Ceron or from its surety Visayan
Surety & Insurance Corporation, Litton the plaintiff, filed a complaint in the Court of First Instance
of Manila against the said defendants for the recovery of the said balance.
  The lower court rendered decision Carlos Ceron personally to pay the amount claimed and
absolved the partnership Hill & Ceron, Robert Hill and the Visayan Surety & Insurance
Corporation.
 The decision of lower court was affirmed by the CA.

Issue: WON the partnership is liable to the transaction made by one of its partner.

Ruling: YES. There is a general presumption that each individual partner is an authorized agent for the firm
and that he has authority to bind the firm in carrying on the partnership transactions. (Mills vs. Riggle, 112
Pac., 617.)

The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into
by one of members of the firm acting apparently in its behalf and within the scope of his authority. (Le
Roy vs. Johnson, 7 U. S. [Law. ed.], 391.)

Goquiolay v. Sycip, 9 SCRA 663

Facts:

 Kong Chai Pin, widow of the deceased partner Tan Sin An sold a parcel of lands owned by the
partnership Goquiolay & Tan Sin An (Executed in her dual capacity as Administratrix of the
husband's estate and as partner in lieu of the husband), in favor of the buyers Washington Sycip
and Betty Lee.
 The appellant, Goquiolay insist that Kong Chai Pin, widow of the deceased partner Tan Sin An,
never became more than a limited partner, incapacitated by law to manage the affairs of
partnership.

Issue: WON Kong Chai Pin was only a limited partner, hence cannot alienate the property of
partnership.

Ruling: NO. It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to
manage the property, and that it did not include the power to alienate, citing Article 1713 of the Civil
Code of 1889. What this argument overlooks is that the widow was not a mere agent, because she
had become a partner upon her husband's death, as expressly provided by the articles of co-
partnership. Even more, granting that by succession to her husband, Tan Sin An, the widow only
became a limited partner, Goquiolay's authorization to manage the partnership property was proof
that he considered and recognized her as general partner, at least since 1945. The reason is plain:
Under the law (Article 148, last paragraph, Code of Commerce), appellant could not empower the
widow, if she were only a limited partner, to administer the properties of the firm, even as a mere
agent.

By seeking authority to manage partnership property, Tan Sin An's 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), Goquiolay 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.
Goquiolay v. Sycip, 108 Phil. 947

Facts:

 Tan Sin An and Antonio C. Goquiolay", entered into a general commercial partnership under the
partnership name "Tan Sin An and Antonio C. Goquiolay", for the purpose in dealing in real state
where the sole management of the partnership was lodged to Tan Sin An.
 The partnership purchased the three (3) parcels of land and another 46 parcels were purchased
by Tan Sin An in his individual capacity and these two separate obligations were consolidated in
an instrument executed by the partnership and Tan Sin An, whereby the entire 49 lots were
mortgaged in favor of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana").
 Tan Sin An died and his wife Kong Chai Pin was appointed administratrix of the intestate estate of
her deceased husband and in the meantime, repeated demands for payment were made by the
Banco Hipotecario on the partnership and on Tan Sin An, hence, Yutivo Sans Hardware Co., paid
the remaining balance of the mortgage debt, and the mortgage was cancelled.
 Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in the
intestate proceedings of Tan Sin An and the partnership which prompted Kong Chai Pin filed a
petition with the probate court for authority to sell all the 49 parcels of land to Washington Z,
Sycip and Betty Y. Lee, for the purpose preliminary of settling the aforesaid debts of Tan Sin An
and the partnership.
 The court granted such request, and upon learning about the sale to Sycip and Lee, the surviving
partner Antonio Goquiolay filed, a petition in the intestate proceedings seeking 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 which was dismissed by the lower court.

Issue: WON the consent of the other partners was necessary to perfect the sale of the partnership
properties to Washington Sycip and Betty Lee.

Ruling: NO. Strangers dealing with a partnership have the right to assume, in the absence of restrictive
clauses in the co-partnership agreement, that every general partner has power to bind the
partnership, specially those partners acting with ostensible authority.

"There is a general presumption that each individual partner is an agent for the firm and that he has
authority to bind the firm in carrying on the partnership transactions." [Mills vs. Riggle, 112 Pac., 617]

"The presumption is sufficient to permit third persons to hold the firm liable on transactions entered
into by one of the members of the firm acting apparently in its behalf and within the scope of his
authority." [Le Roy vs. Johnson, 7 U.S. Law, Ed., 391] (George Litton vs. Hill & Ceron, et al., 67 Phil.,
513-514).
Co-Pitco v. Yulo, 8 Phil. 544

Facts:

 Florencio Yulo and Jaime Palacios were partners in the operation of a sugar estate in Victorias,
Island of Negros.
 In February, 1903, the defendant, Pedro Yulo, father of the said Florencio, took charge of the
latter's interest in the above-mentioned partnership, and he became a general partner with the
said Jaime Palacios in the same business, and he continued as such partner until about the end of
1904, dealing with Dy-Sianco in the same manner as the old partnership had dealt with the latter.
 It was found out that the balance due from the firm Pedro Yulo and Jaime Palacios was 1,638.40
pesos and orders judgment against the defendant, Pedro Yulo, for the entire amount, with
interest.

Issue: WON Pedro Yulo is liable to the whole amount.

Ruling: NO. The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in
Negros. It was, therefore a civil partnership, 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. The liability is pro rata and in this case Pedro
Yulo is responsible to plaintiff for only one-half of the debt. The fact that the other partner, Jaime
Palacios, had left the country cannot increase the liability of Pedro Yulo.

Compania Maritima v. Munoz, 9 Phil. 326

Facts:

 The defendants Francisco Muñoz, Emilio Muñoz, and Rafael Naval formed on ordinary general
mercantile partnership under the name of Francisco Muñoz & Sons for the purpose of carrying on
the mercantile business in the Province of Albay.
 Francisco Muñoz was a capitalist partner and Emilio Muñoz and Rafael Naval were industrial
partners.
 Judgment was rendered in the court below acquitting Emilio Muñoz de Bustillo and Rafael Naval
of the complaint, and in favor of the plaintiff and against the defendant partnership, Francisco
Muñoz & Sons, and Francisco Muñoz de Bustillo form the sum of P26, 828.30 with interest at the
rate of 8 per cent per annum.

Issue: WON an industrial partner in an ordinary, general mercantile partnership liable to third persons
for the debts and obligations contracted by the partnership.

Ruling: YES. In limited partnership the Code of Commerce recognizes a difference between general
and special partners, but in a general partnership there is no such distinction-- all the members are
general partners. The fact that some may be industrial and some capitalist partners does not make
the members of either of these classes alone such general partners. There is nothing in the code which
says that the industrial partners shall be the only general partners, nor is there anything which says
that the capitalist partners shall be the only general partners.
Pacific Commercial v. Aboitiz, 48 Phil. 841

Facts:

 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a regular, collective,
merchantile partnershi with a capital of P40, 000 of which each of the partners Aboitiz and De
Silva furnished one-third while Jose Martinez was an industrial partner and furnished no capital.
 The partnership, through its duly authorized representative, Guillermo Aboitiz, executed a
promissory note in favor of the plaintiff the Pacific Commercial Company for the sum of P23,
168.71 and as security for the payment of the note, the partnership executed a chattel mortgage
in favor of the plaintiff on certain personal property.
 For failure to pay, the chattel mortgage was foreclosed and sold and the proceeds was paid to the
plaintiff of this case and no further payment was made by the partnership and as a result, the
plaintiff filed an action for the recovery of the unpaid balance with interest.
 The lower court rendered decision in favor of the plaintiff and against the partnership and the
judgment further provided that execution should first issue against the property of the
partnership should first issue against the insolvency of the partnership, it might issue against the
property of the partners De Silva and Aboitiz and in the event of their insolvency, then against the
property of the industrial partner Jose Martinez.
 From this decision the former appealed.

Issue: WON industrial partner can be held liable for the debts of the partnership.

Ruling: YES. All the members of the general co-partnership, be they or be they not managing partners of
the same are liable personally and in solidum with all their property for the results of the transaction made
in the name and for the account of the partnership, under the signature of the later, and by a person
authorized to make use thereof. The language of this article is clear and specific that all the members of
a general co-partnership are liable with all their property for the results of the duly authorized transactions
made in the name and for the account of the partnership.

Island Sales v. United Pioneers, 65 SCRA 554

Facts:

 Defendant company, a general partnership duly registered under the laws of the Philippines,
purchased from the plaintiff a motor vehicle on the installment basis and for this purpose
executed a promissory note for P9, 440.00, payable in twelve (12) equal monthly installments of
P786.63 with the condition that failure to pay any of said installments as they fall due would
render the whole unpaid balance immediately due and demandable.
 The partnership failed to pay, then the plaintiff sued the partnership for the unpaid balance where
Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were
included as co-defendants in their capacity as general partners of the defendant company.
 One of the partners Daniel A. Guizona was rendered in default for failure to answer and the case
was dismissed as the defendant Romulo B. Lumauig is concerned while the other defendants and
their counsels failed to appear notwithstanding the notices sent to them, hence, the trial court
authorized the plaintiff to present its evidence ex-parte , after which the trial court rendered the
decision appealed from.
 The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that
since there are five (5) general partners, the joint and subsidiary liability of each partner should
not exceed one-fifth (1/5) of the obligations of the defendant company but the trial court denied
the said motion notwithstanding the conformity of the plaintiff to limit the liability of the
defendants Daco and Sim to only one-fifth (1/5) of the obligations of the defendant company.

Issue: WON the dismissal of the complaint to favor one of the general partners of a partnership
increases the joint and subsidiary liability of each of the remaining partners for the obligations of the
partnership.

Ruling: NO. In the instant case, there were five (5) general partners when the promissory note in
question was executed for and in behalf of the partnership. Since the liability of the partners is pro
rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth (1/5 ) of the
obligations of the defendant company. The fact that the complaint against the defendant Romulo B.
Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general
partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely
condoned Lumauig's individual liability to the plaintiff.

Magdusa v. Albaran, 5 SCRA 511

Facts:

 Appellant and appellees, together with various other persons, had verbally formed a partnership
de facto, for the sale of general merchandise in Surigao, to which appellant contributed P2, 000
as capital, and the others contributed their labor, under the condition that out of the net profits
of the business 25% would be added to the original capital, and the remaining 75% would be
divided among the members in proportion to the length of service of each.
 Sometime in 1953 and 1954, the appellees expressed their desire to withdraw from the
partnership, and appellant thereupon made a computation to determine the value of the
partners' shares to that date and the former thereafter made demands upon appellant for
payment, but appellant having refused, they filed the initial complaint in the court
 The CFI of Bohol dismissed the complaint on the ground that the other were indispensable parties
but were not impleaded but this was reversed by the CA ruling that The action of the plaintiffs is
one for the recovery of a sum of money with Gregorio Magdusa as the principal defendant,
therefor is personal to Gregorio Magdusa, and the judgment should be against his sole interest,
not against the partnership.
Issue: WON the CA erred in ruling that Gregorio Madusa is solely liable to the plaintiffs.

Ruling: YES. A partner's share cannot be returned without first dissolving and liquidating the
partnership (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 177), for the return is dependent on the discharge
of the creditors, whose claims enjoy preference over those of the partners; and it is self-evident that
all members of the partnership are interested in his assets and business, and are entitled to be heard
in the matter of the firm's liquidation and the distribution of its property.

In addition, unless a proper accounting and liquidation of the partnership affairs is first had, the capital
shares of the appellees, as retiring partners, cannot be repaid, for the firm's outside creditors have
preference over the assets of the enterprise (Civ. Code, Art. 1839), and the firm's property cannot be
diminished to their prejudice. Finally, the appellant cannot be held liable in his personal capacity for
the payment of partners' shares for he does not hold them except as manager of, or trustee for, the
partnership. It is the latter that 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, and the
action should have been dismissed.

Muñasque v. CA, G.R. No. L-39780, 139 SCRA 533

Facts:

 Petitioner Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor

entered into a written contract with respondent Tropical for remodeling the respondent's Cebu
branch building.
 The first payment made by respondent Tropical was in the form of a check for P7, 000 in the name
of the petitioner however, he indorsed the check in favor of respondent Galan to enable the latter
to deposit it in the bank and pay for the materials and labor used in the project.
 When the second check in the amount of P6, 000 came and Galan asked the petitioner to indorse
it again, the petitioner refused hence, the former informed the Cebu branch of Tropical that there
was a “misunderstanding" between him and petitioner, respondent Tropical changed the name
of the payee in the second check from Muñasque to "Galan and Associates" and this enabled
Galan to encash the second check.
 Petitioner filed a complaint for payment of sum of money and damages against the respondents,
seeking to recover the following: the amounts covered by the first and second checks which fell
into the hands of respondent Galan, the additional expenses that the petitioner incurred in the
construction and in this case, and the business firms Cebu Southern Hardware Company and Blue
Diamond Glass Palace were allowed to intervene, both having legal interest in the matter in
litigation.
 The lower court and CA rendered decision that petitioner together with respondent Galan, liable
to the intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace for the
credit which the intervenors extended to the partnership of petitioner and Galan.

Issue: WON the liability of the partners to the partnership is solidary.

Ruling: YES. The obligation is solidary, because the law protects him, who in good faith relied upon
the authority of a partner, whether such authority is real or apparent. That is why under Article 1824
of the Civil Code all partners, whether innocent or guilty, as well as the legal entity which is the
partnership, are solidarily liable.

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. This is even more true in the cases of Cebu Southern Hardware and Blue Diamond Glass
Palace who supplied materials on credit to the partnership. Thus, it is but fair that the consequences
of any wrongful act committed by any of the partners therein should be answered solidarily by all the
partners and the partnership as a whole.

Lim Tong Lim v. Philippine Fishing Gear, 317 SCRA 728

Facts:

 On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a
Contract dated February 7, 1990, for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein respondent) and they claimed that they were
engaged in a business venture with Petitioner Lim Tong Lim, who however was not a signatory to
the agreement.
 The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents
filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim and this suit was brought
against the three in their capacities as general partners, on the allegation that "Ocean Quest
Fishing Corporation" was a nonexistent corporation as shown by a Certification from the
Securities and Exchange Commission.
 The lower court issued a Writ of Preliminary Attachment but instead of answering the complaint,
Chua filed a Manifestation admitting his liability and requesting a reasonable time within which
to pay and he also turned over to respondent some of the nets which were in his possession.
 Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Cross-claim and moved
for the lifting of the Writ of Attachment but on November 18, 1992, the trial court rendered its
decision, ruling that Philippine Fishing Gear Industries was entitled to the Writ of Attachment and
that Chua, Yao and Lim, as general partners, were jointly liable to pay respondent.
 Lim Tong Lim appealed to the CA but it affirmed the decision of the lower court and in affirming
the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing business and
may thus be held liable as a such for the fishing nets and floats purchased by and for the use of
the partnership.

Issue: WON Lim is liable in this case by virtue of corporation by estoppel.

Ruling: YES. Petitioner argues that under the doctrine of corporation by estoppel, liability can be
imputed only to Chua and Yao, and not to him. Again, we disagree.

Sec. 21. Corporation by estoppel. — All persons who assume to act as a corporation knowing it to be
without authority to do so shall be liable as general partners for all debts, liabilities and damages
incurred or arising as a result thereof: Provided however, That when any such ostensible corporation
is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it
shall not be allowed to use as a defense its lack of corporate personality.

One who assumes an obligation to an ostensible corporation as such, cannot resist performance
thereof on the ground that there was in fact no corporation. Thus, even if the ostensible corporate
entity is proven to be legally nonexistent, a party may be estopped from denying its corporate
existence.

Bachrach v. La Protectora, 37 Phil. 441

Facts:

 Defendants in this action 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, purchase of two automobile trucks from the plaintiff, E. M.
Bachrach, he paid the sum of 3,000 in cash, and for the balance executed promissory notes
representing the deferred payments.
 As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte,
Ignacio Flores, and Modesto Serrano, executed in due form a document in which they declared
that they were members of the firm "La Protectora" and that they had granted to its president
full authority "in the name and representation of said partnership to contract for the purchase of
two automobiles.
 In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained on the trucks in
order to secure the purchase price and the amount realized from this sale was P1,000; To recover
this balance, together with the sum due for additional purchases, the present action was
instituted in the Court of First Instance of the city of Manila, upon May 29, 1914, against "La
Protectora" and the five individuals Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio
Flores, and Modesto Serrano.
 Judgment was rendered against all of the defendants and the four individuals who signed the
document to which reference has been made, authorizing Barba to purchase the two trucks have,
however, appealed and assigned errors.

Issue: WON these individuals are liable for the firm debts and if so to what extent.

Ruling: YES. 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 upon June 12, 1913.
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. And so it has been held
by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)
VIII. RIGHTS OF PARTNERS

Dan Fue Leung v. IAC, 169 SCRA 746

Facts:

 The Sun Wah Panciteria, a restaurant and registered as a single proprietorship under the name of
petitioner Dan Fue Leung as the sole proprietor while Respondent Leung Yiu alleged that he is a
partner of the said restaurant having contributed P4,000 to its initial establishment and his claim
was supported by an evidence receipt Exhibit "A" wherein the petitioner acknowledged his
acceptance of the P4,000.00 by affixing his signature thereto; furthermore, the private
respondent received from the petitioner the amount of P12, 000 covered by the latter's Equitable
Banking Corporation Check No. 13389470-B from the profits of the operation of the restaurant
for the year 1974.
 The petitioner denied having received from the private respondent the amount of P4, 000 and to
prove, he 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; he also denied
the 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 (Exhibit B).
 Both the trial court and the appellate court found that the private respondent is a partner of the
petitioner in the setting up and operations of the panciteria.
 The petitioner asserted that the court erred in interpreting or construing the term “financial
assistance” to mean the contribution of capital by a partner to a partnership.

Issue: WON respondent Leung Yiu is a partner in the Sun Wah Panciteria.

Ruling: YES. In essence, the private respondent alleged that when Sun Wah Panciteria was established,
he gave P4, 000. to the petitioner with the understanding that he would be entitled to twenty-two
percent (22%) of the annual profit derived from the operation of the said panciteria. These allegations,
which were proved, make the private respondent and the petitioner partners in the establishment of
Sun Wah Panciteria because Article 1767 of the Civil Code provides that "By the 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".

Therefore, 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." (De
 Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v. Court of Appeals,
135 SCRA 37).

The appellate court did not err in declaring that the main issue in the instant case was whether or not
the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria.

Emnace v. CA, 370 SCRA 431

Facts:

 Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business
known as Ma. Nelma Fishing Industry and 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 from the partnership.
 During the existence of the partnership and despite the death of one of its partners Vicente
Tabanao, petitioner failed to submit to Tabanao's heirs any statement of assets and liabilities of
the partnership, and to render an accounting of the partnership's finances.
 Also, the petitioner reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3
share in the total assets of the partnership, amounting to P30, 000,000.00, or the sum of P10,
000,000.00, despite formal demand for payment thereof; hence, the heirs of Tabanao filed against
petitioner an action for accounting, payment of shares, division of assets and damages.
 The petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of
jurisdiction over the nature of the action or suit, and lack of capacity of the estate of Tabanao to
sue but these grounds were dismissed by the lower courts.
 In his appeal, the petitioner raised the issue of prescription of the plaintiff heirs' cause of action.

Issue: WON Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion
in not dismissing the case on the ground of prescription.

Ruling: NO. 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 petitioner's protestations that respondents' 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.

IX. ASSIGNEES

Realubit v. Jaso, G.R. No. 178782

Facts:

 Petitioner Josefina Realubit (Josefina) as the industrial partner and Francis Eric Amaury Biondo
(Biondo) a French national, as the capitalist partner entered into a Joint Venture Agreement, for
the operation of an ice manufacturing business where they agreed that they would each receive
40% of the net profit with the remaining 20% to be used for the payment of the ice making
machine which was purchased for the business.
 Biondo executed a Deed of Assignment dated 27 June 1997, transferring all his rights and interests
in the business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso
and after Biondo left the country, the spouses Jaso demanded through letter sent to Josefina
apprising her of their acquisition of said Frenchman’s share in the business and formally
demanding an accounting and inventory thereof as well as the remittance of their portion of its
profits.
 Subsequently, due to failure of Josefina to render their requests, the spouses filed a complaint for
specific performance, accounting, examination, audit and inventory of assets and properties,
dissolution of the joint venture, appointment of a receiver and damages.
 Spouses Realubit in their answer, argued that Biondo had left the country in May 1997 and could
not have executed the Deed of Assignment which bears a signature markedly different from that
which he affixed on their Joint Venture Agreement; that they refused the Spouses Jaso’s demand
in view of the dubious circumstances surrounding their acquisition of Biondo’s share in the
business.
 RTC ruled mandating the defendants to submit to plaintiffs a complete accounting and inventory
of the assets and liabilities of the joint venture from its inception to the present, to allow plaintiffs
access to the books and accounting records of the joint venture, to deliver to plaintiffs their share
in the profits, if any, but this was set aside by the Court of Appeals ordering the dissolution of the
joint venture between defendant-appellant Josefina Realubit and Francis Eric Amaury Biondo and
the subsequent conduct of accounting, liquidation of assets and division of shares of the joint
venture business.

Issue: WON the court may order Josefina as a partner, in the joint venture to render an accounting to
one who is not a partner in said joint venture.

Ruling: YES. The rule is settled that joint ventures are governed by the law on partnerships which are,
in turn, based on mutual agency or delectus personae. Insofar as a partner’s conveyance of the
entirety of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as
follows:

Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself dissolve
the partnership, or, as against the other partners in the absence of agreement, entitle the assignee,
during the continuance of the partnership, to interfere in the management or administration of the
partnership business or affairs, or to require any information or account of partnership transactions,
or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with
his contracts the profits to which the assigning partners would otherwise be entitled. However, in
case of fraud in the management of the partnership, the assignee may avail himself of the usual
remedies.

In the case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest
and may require an account from the date only of the last account agreed to by all the partners.

From the foregoing provision, it is evident that "(t)he transfer by a partner of his partnership interest
does not make the assignee of such interest a partner of the firm, nor entitle the assignee to interfere
in the management of the partnership business or to receive anything except the assignee’s profits.
The assignment does not purport to transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the assignor may become entitled to receive
by virtue of his proportionate interest in the capital." Since a partner’s interest in the partnership
includes his share in the profits, we find that the CA committed no reversible error in ruling that the
Spouses Jaso are entitled to Biondo’s share in the profits, despite Juanita’s lack of consent to the
assignment of said Frenchman’s interest in the joint venture. Although Eden did not, moreover,
become a partner as a consequence of the assignment and/or acquire the right to require an
accounting of the partnership business, the CA correctly granted her prayer for dissolution of the joint
venture conformably with the right granted to the purchaser of a partner’s interest under Article 1831
of the Civil Code.

Machua v. Chuidian, G.R. No. 1011, 2 Phil. 210

Facts:

 The defendants are a regular general partnership, organized in Manila, December 29, 1882, as a
continuation of a prior partnership of the same name and the original partners were D. Telesforo
Chuidian, Doña Raymunda Chuidian, Doña Candelaria Chuidian, and D. Mariano Buenaventura.
 It was agreed that the liability of the partners should be "limited to the amounts brought in by
them to form the partnership stock”, subsequently, D. Mariano Buenaventura died, his estate
passing by will to his children, among whom was D. Vicente Buenaventura and the latter executed
a public instrument in which for a valuable consideration he "assigns to D. Jose Gervasio Garcia a
25 percent share in all that may be obtained by whatever right in whatever form from the
liquidation of the partnership in the part pertaining to him in said partnership.
 The liquidator of the partnership was notified but the latter declined to record in the books of the
partnership the plaintiff's claim under the assignment as a credit due and as a result, the
petitioner brought an action to compel such record to be made, and further asks that he be
adjudicated to be a creditor of the partnership in an amount equal to 25 percent of D. Vicente
Buenaventura's share in his father's account-current.
 Under 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 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."
 The lower court 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 percent 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.

Issue: WON the assignee can get his share without first settling the obligations of outside parties.

Ruling: NO. Our construction of this clause is that it establishes as a basis for the final adjustment of
the affairs of the partnership; that that basis is that the liabilities to non-copartners 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.

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.