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HAVING ARRIVED AT THE CONCLUSION THAT THE ART. 1299. ANY PARTNER SHALL HAVE THE RIGHT TO A
CONTRACT CANNOT BE DECLARED NULL AND VOID, FORMAL ACCOUNT AS TO PARTNERSHIP AFFAIRS:
MAY THE AGREEMENT BE CARRIED OUT OR
EXECUTED? THE SC FINDS NO MERIT IN THE CLAIM OF (1)IF HE IS WRONGFULLY EXCLUDED FROM THE
PLAINTIFF THAT THE PARTNERSHIP WAS ALREADY A PARTNERSHIP BUSINESS OR POSSESSION OF ITS
PROPERTY BY HIS CO-PARTNERS;
FAIT ACCOMPLI FROM THE TIME OF THE OPERATION
OF THE PLANT, AS IT IS EVIDENT FROM THE VERY (2)IF THE RIGHT EXISTS UNDER THE TERMS OF ANY
LANGUAGE OF THE AGREEMENT THAT THE PARTIES AGREEMENT;
INTENDED THAT THE EXECUTION OF THE AGREEMENT
TO FORM A PARTNERSHIP WAS TO BE CARRIED OUT AT (3)AS PROVIDED BY ARTICLE 1807;
A LATER DATE. , THE DEFENDANT MAY NOT BE
(4)WHENEVER OTHER CIRCUMSTANCES RENDER IT
COMPELLED AGAINST HIS WILL TO CARRY OUT THE
JUST AND REASONABLE."
AGREEMENT NOR EXECUTE THE PARTNERSHIP PAPERS.
THE LAW RECOGNIZES THE INDIVIDUAL’S FREEDOM IN THE CASE AT HAND, THE COMPANY IS ESTOPPED
OR LIBERTY TO DO AN ACT HE HAS PROMISED TO DO, FROM DENYING ABAD SANTOS AS AN INDUSTRIAL
OR NOT TO DO IT, AS HE PLEASES. PARTNER BECAUSE IT HAS BEEN 8 YEARS AND THE
COMPANY NEVER CORRECTED THEIR AGREEMENT IN
3. EVANGELISTA & CO. v. ABAD SANTOS G.R. No.
ORDER TO SHOW THEIR TRUE INTENTIONS. THE
L-31684; June 28, 1973
COMPANY NEVER BOTHERED TO CORRECT THOSE UP
FACTS: UNTIL ABAD SANTOS FILED A COMPLAINT.
It is plaintiff’s contention that Vargas & Co. being a As far back as the year 1925, the Modern Box Factory
partnership, it is necessary, in bringing an action was established at 603 Magdalena Street, Manila. It
against it, to serve the summons on all of the was at first owned by Ngo Hay, who three years later
partners, delivering to each one of them personally was joined by Ngo Tian Tek as a junior partner. The
a copy thereof; and that the summons in this case modern Box Factory dealt in pare and similar
having been served on the managing agent of the merchandise and purchased goods from the
company only, the service was of no effect as plaintiff and its assignors in the names of the Modern
against the company and the members thereof and Box Factory, Ngo Hay and Co., Go Hay Box Factory,
the judgment entered by virtue of such a service was or Go Hay.
void.
When that concern, through Vicente Tan, sought
Issue: credit with the plaintiff and its assignors, Ngo Hay, in
conversations and interviews with their officers and
Whether or not it is indispensable in bringing an
employees, represented that he was the principal
action to a partnership to serve summons to all
owner of such factory, that the Lee Guan Box
parties thereof.
Factory and the Modern Box Factory belonged to
Held: the same owner, and that the Lee Guan Box Factory
was a subsidiary of the Modern Box Factory.
No, it is dispensable.
There is evidence that many goods purchased in the
REASONS name of the Lee Guan Box Factory were delivered
to the Modern Box Factory by the employees of the
It has been the universal practice in the Philippine
plaintiff and its assignors upon the express direction
Islands since American occupation, and was the
of Vicente Tan. There is also evidence that the
practice prior to that time, to treat companies of the
collectors of the sellers were requested by Vicente
class to which the plaintiff belongs as legal or
Tan to collect — and did collect — from the Modern
juridical entities and to permit them to sue and be
Box Factory the bills against the Lee Guan Box
sued in the name of the company, the summons
Factory. In the fact the record shows many checks
being served solely on the managing agent or other
signed by Ngo Hay or Ngo Tian Tek in payment of
official of the company specified by the section of
accounts of the Lee Guan Box Factory.
the Code of Civil Procedure referred to. The plaintiff
brings this action in the company name and not in Furthermore, — and this seems to be conclusive-Ngo
the name of the members of the firm. Actions Hay, testifying for the defense, admitted that 'he'
against companies of the class to which plaintiff was the owner of the Lee Guan Box Factory in and
belongs are brought, according to the uninterrupted before the year 1934, but that in January, 1935, 'he'
practice, against such companies in their company sold it, by the contract of sale to Vicente Tan, who
names and not against the individual partners had been his manager of the business. Tan declared
constituting the firm. In case the individual members also that before January, 1935, the Lee Guan Box
of the firm must be separately served with process, Factory pertained to Ngo Hay and Ngo Tian Tek.
the rule also prevails that they must be parties to the
action, either plaintiffs or defendant, and that the The Philippine Education Co., Inc., instituted in the
action cannot be brought in the name of or against Court of First Instance of Manila an action against
the company itself. the defendants, Vicente Tan alias Chan Sy and the
partnership of Ngo Tian Tek and Ngo Hay, for the
recovery of some P16,070.14, unpaid cost of five years. When the amended articles were
merchandise purchased by Lee Guan Box Factory presented for registration in the Office of the
from the plaintiff and five other corporate entities Securities & Exchange Commission on April 16, 1958,
which, though not parties to the action, had registration was refused upon the ground that the
previously assigned their credits to the plaintiff, extension was in violation of the aforesaid Act.
together with attorney's fees, interest and costs.
Issue:
By agreement of the parties, the case was heard
before a referee, Attorney Francisco Dalupan, who
in due time submitted his report holding the RULING:
defendants jointly and severally liable to the plaintiff
for the sum of P16,070.14 plus attorney's fees and To organize a corporation or a partnership that could
interest at the rates specified in the report. On March claim a juridical personality of its own and transact
6, 1939, the Court of First Instance of Manila rendered business as such, is not a matter of absolute right but
judgment was affirmed by the Court of Appeals in its a privilege which may be enjoyed only under such
decision of January 31, 1941, now the subject of the terms as the State may deem necessary to impose.
Supreme Court’s review at the instance of the That the State, through Congress, and in the manner
partnership Ngo Tian Tek and Ngo Hay, petitioner provided by law, had the right to enact Republic Act
herein. No. 1180 and to provide therein that only Filipinos
and concerns wholly owned by Filipinos may
During the pendency of the case, Ngo Hay died. engage in the retail business can not be seriously
disputed. That this provision was clearly intended to
ISSUE:
apply to partnership already existing at the time of
Whether or not the case filed against the partnership the enactment of the law is clearly showing by its
will be dismissed because of the death of the provision giving them the right to continue engaging
partner, Ngo Hay. in their retail business until the expiration of their term
or life.
RULING:
To argue that because the original articles of
NO. It is sufficient to state that the petitioner Ngo
partnership provided that the partners could extend
Tian Tek and Ngo Hay is sued as a partnership
the term of the partnership, the provisions of
possessing a personality distinct from any of the
Republic Act 1180 cannot be adversely affect
partners.
appellants herein, is to erroneously assume that the
19. G.R. No. L-17295 July 30, 1962 aforesaid provision constitute a property right of
which the partners cannot be deprived without due
ANG PUE & COMPANY, ET AL., plaintiffs-appellants, process or without their consent. The agreement
vs. contain therein must be deemed subject to the law
SECRETARY OF COMMERCE AND existing at the time when the partners came to
INDUSTRY, defendant-appellee. agree regarding the extension. In the present case,
as already stated, when the partners amended the
FACTS:
articles of partnership, the provisions of Republic Act
On May 1, 1953, Ang Pue and Tan Siong, both 1180 were already in force, and there can be not the
Chinese citizens, organized the partnership Ang Pue slightest doubt that the right claimed by appellants
& Company for a term of five years from May 1, 1953, to extend the original term of their partnership to
extendible by their mutual consent. The purpose of another five years would be in violation of the clear
the partnership was "to maintain the business of intent and purpose of the law aforesaid.
general merchandising, buying and selling at
20. G.R. No. 78133 October 18, 1988
wholesale and retail, particularly of lumber,
hardware and other construction materials for MARIANO P. PASCUAL and RENATO P.
commerce, either native or foreign." The DRAGON, petitioners,
corresponding articles of partnership (Exhibit B) were vs.
registered in the Office of the Securities & Exchange THE COMMISSIONER OF INTERNAL REVENUE and
Commission on June 16, 1953. COURT OF TAX APPEALS, respondents.
On June 19, 1954 Republic Act No. 1180 was The distinction between co-ownership and an
enacted to regulate the retail business. It provided, unregistered partnership or joint venture for income
among other things, that, after its enactment, a tax purposes is the issue in this petition.
partnership not wholly formed by Filipinos could
continue to engage in the retail business until the FACTS:
expiration of its term.
On June 22, 1965, petitioners bought two (2) parcels
On April 15, 1958 — prior to the expiration of the five- of land from Santiago Bernardino, et al. and on May
year term of the partnership Ang Pue & Company, 28, 1966, they bought another three (3) parcels of
but after the enactment of the Republic Act 1180, land from Juan Roque. The first two parcels of land
the partners already mentioned amended the were sold by petitioners in 1968 to Marenir
original articles of part ownership (Exhibit B) so as to Development Corporation, while the three parcels
extend the term of life of the partnership to another of land were sold by petitioners to Erlinda Reyes and
Maria Samson on March 19,1970. Petitioners realized When petitioners bought two (2) parcels of land in
a net profit in the sale made in 1968 in the amount of 1965, they did not sell the same nor make any
P165,224.70, while they realized a net profit of improvements thereon. In 1966, they bought another
P60,000.00 in the sale made in 1970. The three (3) parcels of land from one seller. It was only
corresponding capital gains taxes were paid by 1968 when they sold the two (2) parcels of land after
petitioners in 1973 and 1974 by availing of the tax which they did not make any additional or new
amnesties granted in the said years. purchase. The remaining three (3) parcels were sold
by them in 1970. The transactions were isolated. The
However, in a letter dated March 31, 1979 of then
character of habituality peculiar to business
Acting BIR Commissioner Efren I. Plana, petitioners
transactions for the purpose of gain was not present.
were assessed and required to pay a total amount
of P107,101.70 as alleged deficiency corporate The sharing of returns does not in itself establish a
income taxes for the years 1968 and 1970. partnership whether or not the persons sharing
therein have a joint or common right or interest in the
Petitioners protested the said assessment in a letter
property. There must be a clear intent to form a
of June 26, 1979 asserting that they had availed of
partnership, the existence of a juridical personality
tax amnesties way back in 1974.
different from the individual partners, and the
In a reply of August 22, 1979, respondent freedom of each party to transfer or assign the whole
Commissioner informed petitioners that in the years property.
1968 and 1970, petitioners as co-owners in the real
In the present case, there is clear evidence of co-
estate transactions formed an unregistered
ownership between the petitioners. There is no
partnership or joint venture taxable as a corporation
adequate basis to support the proposition that they
under Section 20(b) and its income was subject to
thereby formed an unregistered partnership. The two
the taxes prescribed under Section 24, both of the
isolated transactions whereby they purchased
National Internal Revenue Code 1 that the
properties and sold the same a few years thereafter
unregistered partnership was subject to corporate
did not thereby make them partners. They shared in
income tax as distinguished from profits derived from
the gross profits as co- owners and paid their capital
the partnership by them which is subject to individual
gains taxes on their net profits and availed of the tax
income tax; and that the availment of tax amnesty
amnesty thereby. Under the circumstances, they
under P.D. No. 23, as amended, by petitioners
cannot be considered to have formed an
relieved petitioners of their individual income tax
unregistered partnership which is thereby liable for
liabilities but did not relieve them from the tax liability
corporate income tax, as the respondent
of the unregistered partnership. Hence, the
commissioner proposes.
petitioners were required to pay the deficiency
income tax assessed. And even assuming for the sake of argument that
such unregistered partnership appears to have been
Petitioners filed a petition for review with the
formed, since there is no such existing unregistered
respondent Court of Tax Appeals docketed as CTA
partnership with a distinct personality nor with assets
Case No. 3045. In due course, the respondent court
that can be held liable for said deficiency corporate
by a majority decision of March 30, 1987, 2 affirmed
income tax, then petitioners can be held individually
the decision and action taken by respondent
liable as partners for this unpaid obligation of the
commissioner with costs against petitioners.
partnership p. 7 However, as petitioners have availed
It ruled that on the basis of the principle enunciated of the benefits of tax amnesty as individual taxpayers
in Evangelista 3 an unregistered partnership was in in these transactions, they are thereby relieved of
fact formed by petitioners which like a corporation any further tax liability arising therefrom.
was subject to corporate income tax distinct from
21. G.R. No. L-19342 May 25, 1972
that imposed on the partners.
LORENZO T. OÑA and HEIRS OF JULIA BUÑALES,
Issue:
namely: RODOLFO B. OÑA, MARIANO B. OÑA, LUZ B.
Ruling: WON PETITIONERS FORMED AN UNREGISTERED OÑA, VIRGINIA B. OÑA and LORENZO B. OÑA,
PARTNERSHIP SUBJECT TO CORPORATE INCOME TAX, JR., petitioners, vs. THE COMMISSIONER OF INTERNAL
AND THAT THE BURDEN OF OFFERING EVIDENCE IN REVENUE, respondent.
OPPOSITION THERETO RESTS UPON THE PETITIONERS.
FACTS:
Ruling:
Julia Buñales died on March 23, 1944, leaving as heirs
There is no evidence that petitioners entered into an her surviving spouse, Lorenzo T. Oña and her five
agreement to contribute money, property or industry children. In 1948, Civil Case No. 4519 was instituted in
to a common fund, and that they intended to divide the Court of First Instance of Manila for the
the profits among themselves. Respondent settlement of her estate. Later, Lorenzo T. Oña the
commissioner and/ or his representative just surviving spouse was appointed administrator of the
assumed these conditions to be present on the basis estate of said deceased.
of the fact that petitioners purchased certain
On April 14, 1949, the administrator submitted the
parcels of land and became co-owners thereof.
project of partition, which was approved by the
Court on May 16, 1949. Because three of the heirs,
namely Luz, Virginia and Lorenzo, Jr., all surnamed Issue: WON Petitioners formed an unregistered
Oña, were still minors when the project of partition partnership?
was approved, Lorenzo T. Oña, their father and
Ruling:
administrator of the estate, filed a petition in Civil
Case No. 9637 of the Court of First Instance of Manila Pondering on these questions, the first thing that has
for appointment as guardian of said minors. On struck the Court is that whereas petitioners'
November 14, 1949, the Court appointed him predecessor in interest died way back on March 23,
guardian of the persons and property of the 1944 and the project of partition of her estate was
aforenamed minors. judicially approved as early as May 16, 1949, and
presumably petitioners have been holding their
The project of partition shows that the heirs have
respective shares in their inheritance since those
undivided one-half (1/2) interest in ten parcels of
dates admittedly under the administration or
land with a total assessed value of P87,860.00, six
management of the head of the family, the widower
houses with a total assessed value of P17,590.00 and
and father Lorenzo T. Oña, the assessment in
an undetermined amount to be collected from the
question refers to the later years 1955 and 1956.
War Damage Commission. Later, they received from
said Commission the amount of P50,000.00, more or We believe this point to be important because,
less. This amount was not divided among them but apparently, at the start, or in the years 1944 to 1954,
was used in the rehabilitation of properties owned by the respondent Commissioner of Internal Revenue
them in common. Of the ten parcels of land did treat petitioners as co-owners, not liable to
aforementioned, two were acquired after the death corporate tax, and it was only from 1955 that he
of the decedent with money borrowed from the considered them as having formed an unregistered
Philippine Trust Company in the amount of partnership. At least, there is nothing in the record
P72,173.00. indicating that an earlier assessment had already
been made. Such being the case, and We see no
The project of partition also shows that the estate
reason how it could be otherwise, it is easily
shares equally with Lorenzo T. Oña, the administrator
understandable why petitioners' position that they
thereof, in the obligation of P94,973.00, consisting of
are co-owners and not unregistered co-partners, for
loans contracted by the latter with the approval of
the purposes of the impugned assessment, cannot
the Court.
be upheld. Truth to tell, petitioners should find
Although the project of partition was approved by comfort in the fact that they were not similarly
the Court on May 16, 1949, no attempt was made to assessed earlier by the Bureau of Internal Revenue.
divide the properties therein listed. Instead, the
The Tax Court found that instead of actually
properties remained under the management of
distributing the estate of the deceased among
Lorenzo T. Oña who used said properties in business
themselves pursuant to the project of partition
by leasing or selling them and investing the income
approved in 1949, "the properties remained under
derived therefrom and the proceeds from the sales
the management of Lorenzo T. Oña who used said
thereof in real properties and securities. As a result,
properties in business by leasing or selling them and
petitioners' properties and investments gradually
investing the income derived therefrom and the
increased from P105,450.00 in 1949 to P480,005.20 in
proceed from the sales thereof in real properties and
1956.
securities," as a result of which said properties and
From said investments and properties petitioners investments steadily increased yearly from
derived such incomes as profits from installment sales P87,860.00 in "land account" and P17,590.00 in
of subdivided lots, profits from sales of stocks, "building account" in 1949 to P175,028.68 in
dividends, rentals and interests. "investment account," P135.714.68 in "land account"
and P169,262.52 in "building account" in 1956. And all
Every year, petitioners returned for income tax
these became possible because, admittedly,
purposes their shares in the net income derived from
petitioners never actually received any share of the
said properties and securities and/or from
income or profits from Lorenzo T. Oña and instead,
transactions involving them . However, petitioners
they allowed him to continue using said shares as
did not actually receive their shares in the yearly
part of the common fund for their ventures, even as
income. The income was always left in the hands of
they paid the corresponding income taxes on the
Lorenzo T. Oña who, as heretofore pointed out,
basis of their respective shares of the profits of their
invested them in real properties and securities.
common business as reported by the said Lorenzo T.
On the basis of the foregoing facts, respondent Oña.
(Commissioner of Internal Revenue) decided that
It is thus incontrovertible that petitioners did not,
petitioners formed an unregistered partnership and
contrary to their contention, merely limit themselves
therefore, subject to the corporate income tax,
to holding the properties inherited by them. Indeed,
pursuant to Section 24, in relation to Section 84(b), of
it is admitted that during the material years herein
the Tax Code. Accordingly, he assessed against the
involved, some of the said properties were sold at
petitioners the amounts of P8,092.00 and P13,899.00
considerable profit, and that with said profit,
as corporate income taxes for 1955 and 1956,
petitioners engaged, thru Lorenzo T. Oña, in the
respectively.
purchase and sale of corporate securities. It is
likewise admitted that all the profits from these
ventures were divided among petitioners 2. Gregoria Cristobal
proportionately in accordance with their respective ........................................................... .18
....................................
shares in the inheritance. In these circumstances, it is
Our considered view that from the moment
3. Saturnina Silva
petitioners allowed not only the incomes from their ........................................................... .08
respective shares of the inheritance but even the .........................................
1. Plaintiff are all residents of the municipality of 4. As a result of the drawing of the sweepstakes on
Pulilan, Bulacan, and that defendant is the Collector December 15, 1934, the ticket won one of the third
of Internal Revenue of the Philippines; prizes in the amount of P50,000 and that the
corresponding check covering the above-
2. That prior to December 15, 1934 plaintiffs, in order mentioned prize of P50,000 was drawn by the
to enable them to purchase one sweepstakes ticket National Charity Sweepstakes Office in favor of Jose
valued at two pesos (P2), subscribed and paid Gatchalian & Company against the Philippine
therefor the amounts as follows: National Bank, which check was cashed during the
latter part of December, 1934 by Jose Gatchalian &
1. Jose Gatchalian
........................................................... P0.18
Company;
.........................................
5. That on December 29, 1934, Jose Gatchalian was FACTS:
required by income tax examiner Alfredo David to
Petitioner brought an action in the City Court of
file the corresponding income tax return covering
Dipolog for collection of a sum of P5,217.25 based on
the prize won;
promissory notes executed by the herein private
6. That on January 8, 1935, an assessment against respondent Nobio Sardane in favor of the herein
Jose Gatchalian & Company requesting the petitioner. Petitioner bases his right to collect on
payment of the sum of P1,499.94 Exhibits B, C, D, E, F, and G executed on different
dates and signed by private respondent Nobio
7. Plaintiffs requested exemption from payment of
Sardane. Exhibit B is a printed promissory note
the income tax which was however denied;
involving Pl,117.25 and dated May 13, 1972. Exhibit C
9. That in view of the failure of the plaintiffs to pay the is likewise a printed promissory note and denotes on
amount, defendant on May 13, 1935 issued a its face that the sum loaned was Pl,400.00. Exhibit D
warrant of distraint and levy against the property of is also a printed promissory note dated May 31, 1977
the plaintiffs; involving an amount of P100.00. Exhibit E is what is
commonly known to the layman as 'vale' which
10. That to avoid embarrassment, plaintiff paid under reads: 'Good for: two hundred pesos (Sgd) Nobio
protest the sum of P601.51 as part of the tax and Sardane'. Exhibit F is stated in the following tenor:
penalties; 'Received from Mr. Romeo Acojedo the sum Pesos:
Two Thousand Two Hundred (P2,200.00) ONLY, to be
Issue: Whether the plaintiffs formed a partnership, or
paid on or before December 25, 1975. (Sgd) Nobio
merely a community of property without a
Sardane.' Exhibit G and H are both vales' involving
personality of its own; in the first case it is admitted
the same amount of one hundred pesos, and dated
that the partnership thus formed is liable for the
August 25, 1972 and September 12, 1972
payment of income tax, whereas if there was merely
respectively.
a community of property, they are exempt from such
payment; and (2) whether they should pay the tax It has been established in the trial court that on many
collectively or whether the latter should be prorated occasions, the petitioner demanded the payment
among them and paid individually. of the total amount of P5,217.25. The failure of the
private respondent to pay the said amount
Ruling:
prompted the petitioner to seek the services of
There is no doubt that if the plaintiffs merely formed lawyer who made a letter formally demanding the
a community of property the latter is exempt from return of the sum loaned. Because of the failure of
the payment of income tax under the law. But the private respondent to heed the demands
according to the stipulation facts the plaintiffs extrajudicially made by the petitioner, the latter was
organized a partnership of a civil nature because constrained to bring an action for collection of sum
each of them put up money to buy a sweepstakes of money.
ticket for the sole purpose of dividing equally the
During the scheduled day for trial, private
prize which they may win, as they did in fact in the
respondent failed to appear and to file an answer.
amount of P50,000 (article 1665, Civil Code). The
On motion by the petitioner, respondent was
partnership was not only formed, but upon the
declared in default. Based on petitioner's evidence,
organization thereof and the winning of the prize,
the City Court of Dipolog rendered judgment by
Jose Gatchalian personally appeared in the office
default in favor of the petitioner.
of the Philippines Charity Sweepstakes, in his
capacity as co-partner, as such collection the prize, The Order of default was however lifted.
the office issued the check for P50,000 in favor of
Jose Gatchalian and company, and the said After the trial on the merits, the City Court of Dipolog
partner, in the same capacity, collected the said rendered its decision in favor of the plaintiff and
check. All these circumstances repel the idea that against the defendant.
the plaintiffs organized and formed a community of
Therein defendant Sardane appealed to the Court
property only.
of First Instance of Zamboanga del Norte which
Having organized and constituted a partnership of a reversed the decision of the lower court by dismissing
civil nature, the said entity is the one bound to pay the complaint. Plaintiff-appellee then sought the
the income tax which the defendant collected review of said decision by petition to the respondent
under the aforesaid section 10 (a) of Act No. 2833, Court.
as amended by section 2 of Act No. 3761. There is no
The then Court of First Instance held that "the
merit in plaintiff's contention that the tax should be
pleadings of the parties herein put in issue the
prorated among them and paid individually,
imperfection or ambiguity of the documents in
resulting in their exemption from the tax.
question", hence "the appellant can avail of the
23. G.R. No. L-47045 November 22, 1988 parol evidence rule to prove his side of the case, that
is, the said amount taken by him from appellee is or
NOBIO SARDANE, petitioner, was not his personal debt to appellee, but expenses
vs. of the partnership between him and appellee."
THE COURT OF APPEALS and ROMEO J.
ACOJEDO, respondents.
Consequently, said trial court concluded that the FACTS:
promissory notes involved were merely receipts for
In 1940 Nicanor Casteel filed a fishpond application
the contributions to said partnership and, therefore,
for a big tract of swampy land in the then Sitio of
upheld the claim that there was ambiguity in the
Malalag (now the Municipality of Malalag),
promissory notes, hence parol evidence was
Municipality of Padada, Davao. No action was
allowable to vary or contradict the terms of the
taken thereon by the authorities concerned. During
represented loan contract.
the Japanese occupation, he filed another fishpond
Issue: application for the same area, but because of the
conditions then prevailing, it was not acted upon
RULING:
either. On December 12, 1945 he filed a third
The parol evidence rule in Rule 130 provides: fishpond application for the same area, which, after
a survey, was found to contain 178.76 hectares.
Sec. 7. Evidence of written agreements.—When the Upon investigation conducted by a representative
terms of an agreement have been reduced to of the Bureau of Forestry, it was discovered that the
writing, it is to be considered as containing all such area applied for was still needed for firewood
terms, and, therefore, there can be, between the production. Hence on May 13, 1946 this third
parties and their successors in interest, no evidence application was disapproved.
of the terms of the agreement other than the
contents of the writing except in the following cases: Meanwhile, several applications were submitted by
other persons for portions of the area covered by
(a) Where a mistake or imperfection of the writing or Casteel's application.
its failure to express the the true intent and
agreement of the parties, or the validity of the On May 20, 1946 Leoncio Aradillos filed his fishpond
agreement is put in issue by the pleadings; application 1202 covering 10 hectares of land found
inside the area applied for by Casteel; he was later
(b) When there is an intrinsic ambiguity in the writing. granted fishpond permit F-289-C covering 9.3
hectares certified as available for fishpond purposes
As correctly pointed out by the respondent Court the
by the Bureau of Forestry.
exceptions to the rule do not apply in this case as
there is no ambiguity in the writings in question. Victor D. Carpio filed on August 8, 1946 his fishpond
application 762 over a portion of the land applied
The Court of Appeals held, and We agree, that even
for by Casteel. Alejandro Cacam's fishpond
if evidence aliunde other than the promissory notes
application 1276, filed on December 26, 1946, was
may be admitted to alter the meaning conveyed
given due course on December 9, 1947 with the
thereby, still the evidence is insufficient to prove that
issuance to him of fishpond permit F-539-C. On
a partnership existed between the private parties
November 17, 1948 Felipe Deluao filed his own
hereto.
fishpond application for the area covered by
As manager of the basnig Sarcado naturally some Casteel's application.
degree of control over the operations and
Because of the threat poised upon his position by the
maintenance thereof had to be exercised by herein
above applicants who entered upon and spread
petitioner. The fact that he had received 50% of the
themselves within the area, Casteel realized the
net profits does not conclusively establish that he
urgent necessity of expanding his occupation
was a partner of the private respondent herein.
thereof by constructing dikes and cultivating
Article 1769(4) of the Civil Code is explicit that while
marketable fishes, in order to prevent old and new
the receipt by a person of a share of the profits of a
squatters from usurping the land. But lacking
business is prima facie evidence that he is a partner
financial resources at that time, he sought financial
in the business, no such inference shall be drawn if
aid from his uncle Felipe Deluao who then extended
such profits were received in payment as wages of
loans totalling more or less P27,000 with which to
an employee. Furthermore, herein petitioner had no
finance the needed improvements on the fishpond.
voice in the management of the affairs of
Hence, a wide productive fishpond was built.
the basnig.
On November 25, 1949 Inocencia Deluao (wife of
The foregoing factual findings, which belie the
Felipe Deluao) as party of the first part, and Nicanor
further claim that the aforesaid promissory notes do
Casteel as party of the second part, executed a
not express the true intent and agreement of the
contract — denominated a "contract of service".
parties, are binding on Us since there is no showing
that they fall within the exceptions to the rule limiting On the same date the above contract was entered
the scope of appellate review herein to questions of into, Inocencia Deluao executed a special power of
law. attorney in favor of Jesus Donesa, extending to the
latter the authority "To represent me in the
24. G.R. No. L-21906 December 24, 1968
administration of the fishpond at Malalag,
INOCENCIA DELUAO and FELIPE DELUAO plaintiffs- Municipality of Padada, Province of Davao,
appellees, Philippines, which has been applied for fishpond
vs. permit by Nicanor Casteel, but rejected by the
NICANOR CASTEEL and JUAN DEPRA, defendants, Bureau of Fisheries, and to supervise, demand,
NICANOR CASTEEL, defendant-appellant.
receive, and collect the value of the fish that is being It is well to note that when the appellee Inocencia
periodically realized from it...." Deluao and the appellant entered into the so-called
"contract of service" on November 25, 1949, there
Sometime in January 1951 Nicanor Casteel forbade
were two pending applications over the fishpond.
Inocencia Deluao from further administering the
One was Casteel's which was appealed by him to
fishpond, and ejected the latter's representative
the Secretary of Agriculture and Natural Resources
(encargado), Jesus Donesa, from the premises.
after it was disallowed by the Director of Fisheries on
Alleging violation of the contract of service (exhibit October 25, 1949. The other was Felipe Deluao's
A) entered into between Inocencia Deluao and application over the same area which was likewise
Nicanor Casteel, Felipe Deluao and Inocencia rejected by the Director of Fisheries on November 29,
Deluao on April 3, 1951 filed an action in the Court of 1949, refiled by Deluao and later on withdrawn by
First Instance of Davao for specific performance and him by letter dated March 15, 1950 to the Secretary
damages against Nicanor Casteel and Juan Depra of Agriculture and Natural Resources. Clearly,
(who, they alleged, instigated Casteel to violate his although the fishpond was then in the possession of
contract) Casteel, neither he nor, Felipe Deluao was the holder
of a fishpond permit over the area. But be that as it
On April 18, 1951 the plaintiffs filed an ex parte may, they were not however precluded from
motion for the issuance of a preliminary injunction, exploiting the fishpond pending resolution of
praying among other things, that during the Casteel's appeal or the approval of Deluao's
pendency of the case and upon their filling the application over the same area — whichever event
requisite bond as may be fixed by the court, a happened first. No law, rule or regulation prohibited
preliminary injunction be issued to restrain Casteel them from doing so. Thus, rather than let the fishpond
from doing the acts complained of, and that after remain idle they cultivated it.
trial the said injunction be made permanent. The
lower court on April 26, 1951 granted the motion, The evidence preponderates in favor of the view
and, two days later, it issued a preliminary that the initial intention of the parties was not to form
mandatory injunction addressed to Casteel. a co-ownership but to establish a partnership —
Inocencia Deluao as capitalist partner and Casteel
On the basis of the plaintiffs' evidence, a decision as industrial partner — the ultimate undertaking of
was rendered on May 4, 1956 the dispositive portion which was to divide into two equal parts such portion
of which reads as follows: of the fishpond as might have been developed by
the amount extended by the plaintiffs-appellees,
EN SU VIRTUD, el Juzgado dicta de decision a favor
with the further provision that Casteel should
de los demandantes y en contra del demandado
reimburse the expenses incurred by the appellees
Nicanor Casteel. xxx
over one-half of the fishpond that would pertain to
Issue: WON the agreement made by the parties him. This can be gleaned, among others, from the
created a contract of co-ownership or partnership? letter of Casteel to Felipe Deluao on November 15,
1949, which states, inter alia:
Too well-settled to require any citation of authority is
the rule that everyone is conclusively presumed to ... [W]ith respect to your allowing me to use your
know the law. It must be assumed, conformably to money, same will redound to your benefit
such rule, that the parties entered into the so-called because you are the ones interested in half of the
"contract of service" cognizant of the mandatory work we have done so far, besides I did not insist on
and prohibitory laws governing the filing of our being partners in my fishpond permit, but it was
applications for fishpond permits. And since they you "Tatay" Eping the one who wanted that we be
were aware of the said laws, it must likewise be partners and it so happened that we became
assumed — in fairness to the parties — that they did partners because I am poor, but in the midst of my
not intend to violate them. This view must perforce poverty it never occurred to me to be unfair to you.
negate the appellees' allegation that exhibit A Therefore so that each of us may be secured, let us
created a contract of co-ownership between the have a document prepared to the effect that we
parties over the disputed fishpond. Were we to are partners in the fishpond that we caused to be
admit the establishment of a co-ownership violative made here in Balasinon, but it does not mean that
of the prohibitory laws which will hereafter be you will treat me as one of your "Bantay" (caretaker)
discussed, we shall be compelled to declare on wage basis but not earning wages at all, while the
altogether the nullity of the contract. This would truth is that we are partners. In the event that you are
certainly not serve the cause of equity and justice, not amenable to my proposition and consider me as
considering that rights and obligations have already "Bantay" (caretaker) instead, do not blame me if I
arisen between the parties. We shall therefore withdraw all my cases and be left without even a
construe the contract as one of partnership, divided little and you likewise.
into two parts — namely, a contract of partnership (emphasis supplied) 9
Ruling: Ruling:
Proceeding by process of elimination, it is self- gave effect to his understanding of the case last
evident that Teck Seing & Co., Ltd., is not a cited and which here must be given serious
corporation. Neither is it contended by any one that attention.
Teck Seing & Co., Ltd., is accidental partnership
The decision in Hung-Man-Yoc vs. Kieng-Chiong-
denominated cuenta en participacion (joint
Seng, supra, discloses that the firm Kieng-Chiong-
account association).
Seng was not organized by means of any public
The document providing for the partnership contract document; that the partnership had not been
purported to form "una sociedad mercantil recorded in the mercantile registry; and that Kieng-
limitada," and counsel for the petitioner's first Chiong-Seng was not proven to be the firm name,
contention was that Teck Seing & Co., Ltd., was but rather the designation of the partnership. The
not "una sociedad regular colectiva, ni siquiera conclusion then was, that the partnership in question
comanditaria, sino una sociedad mercantil was merely de facto and that, therefore, giving
limitada." Let us see if the partnership contract effect to the provisions of article 120 of the Code of
created a "sociedad en comandita," or, as it is Commerce, the right of action was against the
known in English, and will hereafter be spoken of, "a persons in charge of the management of the
limited partnership." association.
To establish a limited partnership there must be, at Laying the facts of the case of Hung-Man-Yoc vs.
least, one general partner and the name of the least Kieng-Chiong-Seng, supra, side by side with the facts
one of the general partners must appear in the firm before us, a marked difference is at once disclosed.
name. (Code of Commerce, arts. 122 [2], 146, 148.) In the cited case, the organization of the partnership
But neither of these requirements have been fulfilled. was not evidenced by any public document; here,
The general rule is, that those who seek to avail it is by a public document. In the cited case, the
themselves of the protection of laws permitting the partnership naturally could not present a public
creation of limited partnerships must show a instrument for record in the mercantile registry; here,
substantially full compliance with such laws. A limited the contract of partnership has been duly registered.
partnership that has not complied with the law of its But the two cases are similar in that the firm name
creation is not considered a limited partnership at all, failed to include the name of any of the partners.
but a general partnership in which all the members
We come then to the ultimate question, which is,
are liable. (Mechem, Elements of Partnership, p. 412;
whether we should follow the decision in Hung-Man-
Gilmore, Partnership, pp. 499, 595; 20 R C. L. 1064.)
Yoc vs. Kieng-Chiong-Seng, supra, or whether we
The contention of the creditors and appellants is that should differentiate the two cases, holding Teck
the partnership contract established a general Seing & Co., Ltd., a general copartnership,
partnership. notwithstanding the failure of the firm name to
include the name of one of the partners. Let us now
Article 125 of the Code of Commerce provides that
notice this decisive point in the case.
the articles of general copartnership must estate the
names, surnames, and domiciles of the partners; the Article 119 of the Code of Commerce requires every
firm name; the names, and surnames of the partners commercial association before beginning its
to whom the management of the firm and the use business to state its article, agreements, and
of its signature is instrusted; the capital which each conditions in a public instrument, which shall be
partner contributes in cash, credits, or property, presented for record in the mercantile registry.
stating the value given the latter or the basis on Article 120, next following, provides that the persons
which their appraisement is to be made; the in charge of the management of the association
duration of the copartnership; and the amounts who violate the provisions of the foregoing article
which, in a proper case, are to be given to each shall be responsible in solidum to the persons not
managing partner annually for his private expenses, members of the association with whom they may
while the succeeding article of the Code provides have transacted business in the name of the
that the general copartnership must transact association. Applied to the facts before us, it would
business under the name of all its members, of seem that Teck Seing & Co., Ltd. has fulfilled the
several of them, or of one only. Turning to the provisions of article 119. Moreover, to permit the
document before us, it will be noted that all of the creditors only to look to the person in charge of the
requirements of the Code have been met, with the management of the association, the partner Lim
sole exception of that relating to the composition of Yogsing, would not prove very helpful to them.
the firm name. We leave consideration of this phase
What is said in article 126 of the Code of Commerce
of the case for later discussion.
relating to the general copartnership transacting
The remaining possibility is the revised contention of business under the name of all its members or of
counsel for the petitioners to the effect that Teck several of them or of one only, is wisely included in
Seing & Co., Ltd., is "una sociedad mercantil "de our commercial law. It would appear, however, that
facto" solamente" (only a de facto commercial this provision was inserted more for the protection of
association), and that the decision of the Supreme the creditors than of the partners themselves. A
court in the case of Hung-Man-Yoc vs. Kieng- distinction could well be drawn between the right of
Chiong-Seng [1906], 6 Phil., 498), is controlling. It was the alleged partnership to institute action when
this argument which convinced the trial judge, who failing to live up to the provisions of the law, or even
the rights of the partners as among themselves, and order to put the blame on third persons, and much
the right of a third person to hold responsible a less, on the firm creditors in order to avoid their
general copartnership which merely lacks a legal personal possibility.
firm name in order to make it a partnership de jure.
The legal intention deducible from the acts of the
The civil law and the common law alike seem to parties controls in determining the existence of a
point to a difference between the rights of the partnership. If they intend to do a thing which in law
partners who have failed to comply with the law and constitutes a partnership, they are partners, although
the rights of third persons who have dealt with the their purpose was to avoid the creation of such
partnership. relation. Here, the intention of the persons making up
Teck Seing & co., Ltd. was to establish a partnership
The supreme court of Spain has repeatedly held that
which they erroneously denominated a limited
notwithstanding the obligation of the members to
partnership. If this was their purpose, all subterfuges
register the articles of association in the commercial
resorted to in order to evade liability for possible
registry, agreements containing all the essential
losses, while assuming their enjoyment of the
requisites are valid as between the contracting
advantages to be derived from the relation, must be
parties, whatever the form adopted, and that, while
disregarded. The partners who have disguised their
the failure to register in the commercial registry
identity under a designation distinct from that of any
necessarily precludes the members from enforcing
of the members of the firm should be penalized, and
rights acquired by them against third persons, such
not the creditors who presumably have dealt with
failure cannot prejudice the rights of third persons.
the partnership in good faith.
(See decisions of December 6, 1887, January 25,
1888, November 10, 1890, and January 26, 1900.) The We reach the conclusion that the contract of
same reasoning would be applicable to the less partnership found in the document hereinbefore
formal requisite pertaining to the firm name. quoted established a general partnership or, to be
more exact, a partnership as this word is used in the
The common law is to the same effect. The State of
Insolvency Law.
Michigan had a statute prohibiting the transaction
of business under an assumed name or any other 27. G.R. No. L-24193 June 28, 1968
than the real name of the individual conducting the
MAURICIO AGAD, plaintiff-appellant,
same, unless such person shall file with the county
vs.
clerk a certificate setting forth the name under
SEVERINO MABATO and MABATO and AGAD
which the business is to be conducted and the real
COMPANY, defendants-appellees.
name of each of the partners, with their residences
and post-office addresses, and making a violation FACTS:
thereof a misdemeanor.
Alleging that he and defendant Severino Mabato
On the question of whether the fact that the firm are — pursuant to a public instrument dated August
name "Teck Seing & Co., Ltd." does not contain the 29, 1952, copy of which is attached to the complaint
name of all or any of the partners as prescribed by as Annex "A" — partners in a fishpond business, to the
the Code of Commerce prevents the creation of a capital of which Agad contributed P1,000, with the
general partnership, Professor Jose A. Espiritu, right to receive 50% of the profits; that from 1952 up
as amicus curiæ, states: to and including 1956, Mabato who handled the
partnership funds, had yearly rendered accounts of
My opinion is that such a fact alone cannot and will
the operations of the partnership; and that, despite
not be a sufficient cause of preventing the formation
repeated demands, Mabato had failed and refused
of a general partnership, especially if the other
to render accounts for the years 1957 to 1963, Agad
requisites are present and the requisite regarding
prayed in his complaint against Mabato and
registration of the articles of association in the
Mabato & Agad Company, filed on June 9, 1964,
Commercial Registry has been complied with, as in
that judgment be rendered sentencing Mabato to
the present case. I do not believe that the adoption
pay him (Agad) the sum of P14,000, as his share in
of a wrong name is a material fact to be taken into
the profits of the partnership for the period from 1957
consideration in this case; first, because the mere
to 1963, in addition to P1,000 as attorney's fees, and
fact that a person uses a name not his own does not
ordering the dissolution of the partnership, as well as
prevent him from being bound in a contract or an
the winding up of its affairs by a receiver to be
obligation he voluntarily entered into; second,
appointed therefor.
because such a requirement of the law is merely a
formal and not necessarily an essential one to the In his answer, Mabato admitted the formal
existence of the partnership, and as long as the allegations of the complaint and denied the
name adopted sufficiently identity the firm or existence of said partnership, upon the ground that
partnership intended to use it, the acts and the contract therefor had not been perfected,
contracts done and entered into under such a despite the execution of Annex "A", because Agad
name bind the firm to third persons; and third, had allegedly failed to give his P1,000 contribution to
because the failure of the partners herein to adopt the partnership capital. Mabato prayed, therefore,
the correct name prescribed by law cannot shield that the complaint be dismissed; that Annex "A" be
them from their personal liabilities, as neither law nor declared void ab initio; and that Agad be
equity will permit them to utilize their own mistake in
sentenced to pay actual, moral and exemplary 28. ) G.R. No. L-4935 May 28, 1954
damages, as well as attorney's fees.
J. M. TUASON & CO., INC., represented by it
Subsequently, Mabato filed a motion to dismiss, Managing PARTNER, GREGORIA ARANETA,
upon the ground that the complaint states no cause INC., plaintiff-appellee, vs. QUIRINO
of action and that the lower court had no jurisdiction BOLAÑOS, defendant-appellant.
over the subject matter of the case, because it
involves principally the determination of rights over FACTS:
public lands. After due hearing, the court issued the
order appealed from, granting the motion to dismiss This case involves an action to recover
the complaint for failure to state a cause of action. possesion of registered land situated in barrio
This conclusion was predicated upon the theory that Tatalon, Quezon City. Plaintiff's complaint was
the contract of partnership, Annex "A", is null and amended three times with respect to the extent and
void, pursuant to Art. 1773 of our Civil Code, description of the land sought to be recovered. The
because an inventory of the fishpond referred in said original complaint described the land as a portion of
instrument had not been attached thereto. A a lot registered in plaintiff's name under Transfer
Certificate of Title No. 37686 of the land record of
reconsideration of this order having been denied,
Rizal Province and as containing an area of 13
Agad brought the matter to us for review by record
hectares more or less. But the complaint was
on appeal.
amended by reducing the area of 6 hectares, more
Issue: Whether or not immovable property or real or less. In the course of trial, the plaintiff again
rights have been contributed to the partnership? amended its complaint to make its allegations
conform to the evidence. Defendant sets up
Ruling: prescription and title in himself thru "open,
continuous, exclusive and public and notorious
Articles 1771 and 1773 of said Code provide: possession (of land in dispute) under claim of
ownership, adverse to the entire world by defendant
Art. 1771. A partnership may be constituted in any
and his predecessor in interest" from "time in-
form, except where immovable property or real memorial".
rights are contributed thereto, in which case a public
instrument shall be necessary. The lower court rendered judgment for
plaintiff, declaring defendant to be without any right
Art. 1773. A contract of partnership is void, whenever
to the land in question and ordering him to restore
immovable property is contributed thereto, if
possession thereof to plaintiff.
inventory of said property is not made, signed by the
parties; and attached to the public instrument.
The defendant appealed directly to this
The issue before us hinges on whether or not court. He contended that the trial court erred in not
"immovable property or real rights" have dismissing the case on the ground that the case was
been contributed to the partnership under not brought by the real party in interest and that
Gregorio Araneta, Inc. cannot act as managing
consideration. Mabato alleged and the lower court
partner for plaintiff on the theory that it is illegal for
held that the answer should be in the affirmative,
two corporations to enter into a partnership.
because "it is really inconceivable how a partnership
engaged in the fishpond business could exist without
ISSUE: WON Gregorio Araneta, Inc. may represent
said fishpond property (being) contributed to the J.M. Tuason & Co., Inc. as the latter’s managing
partnership." It should be noted, however, that, as partner in a suit in court. YES
stated in Annex "A" the partnership was established
"to operate a fishpond", not to "engage in a fishpond RULING: There is nothing to the contention that the
business". Moreover, none of the partners present action is not brought by the real party in
contributed either a fishpond or a real right to any interest, that is, by J. M. Tuason and Co., Inc. What
fishpond. Their contributions were limited to the sum the Rules of Court require is that an action be
of P1,000 each. Indeed, Paragraph 4 of Annex "A" brought in the name of, but not necessarily by, the
provides: real party in interest. (Section 2, Rule 2.)
That the capital of the said partnership is Two In fact the practice is for an attorney-at-law
Thousand (P2,000.00) Pesos Philippine Currency, of to bring the action, that is to file the complaint, in the
which One Thousand (P1,000.00) pesos has been name of the plaintiff. That practice appears to have
contributed by Severino Mabato and One Thousand been followed in this case, since the complaint is
(P1,000.00) Pesos has been contributed by Mauricio signed by the law firm of Araneta and Araneta,
Agad. "counsel for plaintiff" and commences with the
statement "comes now plaintiff, through its
xxx xxx xxx undersigned counsel."
The operation of the fishpond mentioned in Annex
It is true that the complaint also states that the
"A" was the purpose of the partnership. Neither said
plaintiff is "represented herein by its Managing
fishpond nor a real right thereto was contributed to Partner Gregorio Araneta, Inc.", another corporation,
the partnership or became part of the capital but there is nothing against one corporation being
thereof, even if a fishpond or a real right thereto represented by another person, natural or juridical,
could become part of its assets. in a suit in court. The contention that Gregorio
Araneta, Inc. cannot act as managing partner for the business operations in the Philippines shall be
plaintiff on the theory that it is illegal for two carried on by an incorporated enterprise and that
corporations to enter into a partnership is without the name of the corporation shall initially be "Sanitary
merit, for the true rule is that "though a corporation Wares Manufacturing Corporation."
has no power to enter into a partnership, it may
nevertheless enter into a joint venture with another The Agreement contained provisions relevant to the
where the nature of that venture is in line with the nomination and election of the directors of the corp.
business authorized by its charter." (Wyoming- including:
Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043,
citing 2 Fletcher Cyc. of Corp., 1082.) There is nothing o Sec. 3. (a) - Articles of Incorporation: (a)
in the record to indicate that the venture in which The Articles of Incorporation of the
plaintiff is represented by Gregorio Araneta, Inc. as Corporation shall be substantially in the
"its managing partner" is not in line with the form annexed hereto as Exhibit A and,
corporate business of either of them. insofar as permitted under Philippine law,
shall specifically provide for: (1)
29. ) G.R. No. 75875 December 15, 1989 Cumulative voting for directors
WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P. o Sec. 5. (a) - Management: (a) The
WHITTINGHAM and CHARLES CHAMSAY, petitioners, management of the Corporation shall be
vs. SANITARY WARES MANUFACTURING vested in a Board of Directors, which shall
CORPORATOIN, ERNESTO V. LAGDAMEO, ERNESTO R. consist of 9 individuals. As long as
LAGDAMEO, JR., ENRIQUE R. LAGDAMEO, GEORGE F. American-Standard shall own at least
LEE, RAUL A. BONCAN, BALDWIN YOUNG and 30% of the outstanding stock of the
AVELINO V. CRUZ, respondents. Corporation, 3 of the 9 directors shall be
designated by American-Standard, and
G.R. No. 75951 December 15, 1989 the other 6 shall be designated by the
SANITARY WARES MANUFACTURING CORPORATION, other stockholders of the Corporation.
ERNESTO R. LAGDAMEO, ENRIQUE B. LAGDAMEO,
GEORGE FL .EE RAUL A. BONCAN, BALDWIN YOUNG The dispute arose between American Standard Inc.
and AVELINO V. CRUX, petitioners, vs. THE COURT OF (ASI) and the group Lagdameo, one of the
APPEALS, WOLFGANG AURBACH, JOHN GRIFFIN, incorporators, during the election of the board of
DAVID P. WHITTINGHAM, CHARLES CHAMSAY and directors with respect to the issue of who were the
LUCIANO SALAZAR, respondents. duly elected board of directors of Saniwares. In
resolving such issue it was necessary to also
G.R. Nos. 75975-76 December 15, 1989 determine the nature of the business established by
LUCIANO E. SALAZAR, petitioner, vs. SANITARY the parties.
WARES MANUFACTURING CORPORATION, ERNESTO
V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR., ENRIQUE
The ASI Group and petitioner Salazar (G.R. Nos.
R. LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN,
75975-76) contended that the actual intention of the
BALDWIN YOUNG, AVELINO V. CRUZ and the COURT
parties should be viewed strictly on the "Agreement"
OF APPEALS, respondents.
wherein it is clearly stated that the parties' intention
was to form a corporation and not a joint venture
DOCTRINE: The rule is that whether the parties to a while the group of Lagdameo claimed that the
particular contract have thereby established intention of the parties was to form a joint venture
among themselves a joint venture or some other and not a corporation.
relation depends upon their actual intention which is
determined in accordance with the rules governing
ISSUE: Whether the nature of the business established
the interpretation and construction of contracts. A
by the parties was a joint venture or a corporation?
joint venture is a form of partnership and should thus
be governed by the law of partnerships. SC has
RULING: Joint Venture
however recognized a distinction between these
two business forms, and has held that although a
corporation cannot enter into a partnership The rule is that whether the parties to a particular
contract, it may however engage in a joint venture contract have thereby established among
with others. themselves a joint venture or some other relation
depends upon their actual intention which is
determined in accordance with the rules governing
FACTS: Sanitary Wares Mftg. Corp. (Saniware) is a
the interpretation and construction of contracts.
domestic corp. incorporated for the primary purpose
of manufacturing and marketing sanitary wares.
Baldwin Young, one of the incorporators, went In the instant cases, our examination of important
abroad to look for foreign partners for its expansion. provisions of the Agreement as well as the
testimonial evidence presented by the Lagdameo
and Young Group shows that the parties agreed to
Aug. 15, 1962: American Standard Inc. (ASI), a
establish a joint venture and not a corporation. The
foreign corp., entered into an Agreement with
history of the organization of Saniwares and the
Saniwares & some Filipino investors whereby ASI and
unusual arrangements which govern its policy
the Filipino investors agreed to participate in the
making body are all consistent with a joint venture
ownership of an enterprise which would engage
and not with an ordinary corporation.
primarily in the business of manufacturing in the
Philippines and selling here and abroad vitreous
china and sanitary wares. The parties agreed that Section 5 (a) of the agreement uses the word
"designated" and not "nominated" or "elected" in the
selection of the nine directors on a six to three ratio. of his own company, Universal Umbrella Company.
Each group is assured of a fixed number of directors Respondent alleged that he used the loan to
in the board. implement the Agreement. With the said amount, he
was able to effect the survey and the subdivision of
Moreover, ASI in its communications referred to the the lots. He secured the Lapu Lapu City Council's
enterprise as joint venture. Baldwin Young also approval of the subdivision project which he
testified that Section 16(c) of the Agreement that advertised in a local newspaper. He also caused the
"Nothing herein contained shall be construed to construction of roads, curbs and gutters. Likewise, he
constitute any of the parties hereto partners or joint entered into a contract with an engineering firm for
venturers in respect of any transaction hereunder" the building of sixty low-cost housing units and
was merely to obviate the possibility of the enterprise actually even set up a model house on one of the
being treated as partnership for tax purposes and subdivision lots.
liabilities to third parties.
Petitioners filed a criminal case for estafa against
The legal concept of a joint venture is of common respondent and his wife, who were however
law origin. It has no precise legal definition but it has acquitted. Thereafter, they filed the present civil
been generally understood to mean an organization case which was dismissed by the trial court. On
formed for some temporary purpose. It is in fact appeal, the CA affirmed the trial court’s ruling.
hardly distinguishable from the partnership, since
their elements are similar community of interest in the Hence, this Petition. Petitioners contended that the
business, sharing of profits and losses, and a mutual transaction between them and respondent was not
right of control. that of a partnership, that the joint venture
agreement was void because of the absence of
The main distinction cited by most opinions in inventory of immovable properties and for lack of
common law jurisdictions is that the partnership consideration.
contemplates a general business with some degree
of continuity, while the joint venture is formed for the ISSUE: 1.) WON the transaction between the
execution of a single transaction, and is thus of a petitioners and respondent was a joint
temporary nature. venture/partnership. YES
2.) WON the alleged joint venture agreement
This observation is not entirely accurate in this is void. NO
jurisdiction, since under the Civil Code, a partnership 3.) WON the agreement is void due to lack of
may be particular or universal, and a particular consideration. NO
partnership may have for its object a specific
undertaking. (Art. 1783, Civil Code). It would seem RULING: 1.) Article 1767 of the Civil Code, which
therefore that under Philippine law, a joint venture is provides:
a form of partnership and should thus be governed
by the law of partnerships. The Supreme Court has Art. 1767. By the contract of partnership two or more
however recognized a distinction between these persons bind themselves to contribute money,
two business forms, and has held that although a property, or industry to a common fund, with the
corporation cannot enter into a partnership intention of dividing the profits among themselves.
contract, it may however engage in a joint venture Under the joint venture agreement, petitioners
with others. would contribute property to the partnership in the
form of land which was to be developed into a
30.) G.R. No. 134559 December 9, 1999 subdivision; while respondent would give, in addition
to his industry, the amount needed for general
expenses and other costs. Furthermore, the income
ANTONIA TORRES assisted by her husband, ANGELO
from the said project would be divided according to
TORRES; and EMETERIA BARING, petitioners, vs.
the stipulated percentage. Clearly, the contract
COURT OF APPEALS and MANUEL
manifested the intention of the parties to form a
TORRES, respondents.
partnership.
FACTS: Petitioners entered into a "joint venture
It should be stressed that the parties
agreement" with Respondent Manuel Torres for the
implemented the contract. Thus, petitioners
development of a parcel of land into a subdivision.
transferred the title to the land to facilitate its use in
Pursuant to the contract, they executed a Deed of
the name of the respondent. On the other hand,
Sale covering the said parcel of land in favor of
respondent caused the subject land to be
respondent, who then had it registered in his name.
mortgaged, the proceeds of which were used for
By mortgaging the property, respondent obtained
the survey and the subdivision of the land. As noted
from Equitable Bank a loan of P40,000 which, under
earlier, he developed the roads, the curbs and the
the Joint Venture Agreement, was to be used for the
gutters of the subdivision and entered into a
development of the subdivision. All three of them
contract to construct low-cost housing units on the
also agreed to share the proceeds from the sale of
property. Respondent's actions clearly belie
the subdivided lots. However, the project did not
petitioners' contention that he made no contribution
push through, and the land was subsequently
to the partnership. Under Article 1767 of the Civil
foreclosed by the bank.
Code, a partner may contribute not only money or
property, but also industry.
According to petitioners, the project failed because
the respondent used the loan not for the
development of the subdivision, but in furtherance
2.) Petitioners argue that the Joint Venture Chua, representative of Thai Tong Chuache &
Agreement is void under Article 1773 of the Civil Co. insured the latter's interest with Travellers Multi-
Code, which provides: Indemnity Corporation.
Art. 1773. A contract of partnership is void, whenever Pedro Palomo secured a Fire Insurance Policy with
immovable property is contributed thereto, if an Zenith Insurance Corporation, Philippine British
inventory of said property is not made, signed by the Assurance Co. and S.S.S. Group of Accredited
parties, and attached to the public instrument. Insurers. The building and the contents were totally
razed by fire. Spouses Palomo claimed the proceeds
They contend that since the parties did not make, of the insurance policies from the four insurers.
sign or attach to the public instrument an inventory However, Travellers Multi-Indemnity refused to pay
of the real property contributed, the partnership is the amount of P30,894.31. Hence, a complaint was
void. filed against Travellers Multi-Indemnity.
Subsequently, petitioner filed a complaint in
We clarify. First, Article 1773 was intended primarily to intervention claiming the proceeds of the insurance
protect third persons. Thus, the eminent Arturo M. policy issued by respondent.
Tolentino states that under the aforecited provision
which is a complement of Article 1771, "The Respondent insurance commission dismissed the
execution of a public instrument would be useless if complaint of spouses Palomos on the ground that
there is no inventory of the property contributed, the insurance policy subject of the complaint was
because without its designation and description, taken out by Tai Tong Chuache & Company,
they cannot be subject to inscription in the Registry petitioner herein, for its own interest only as
of Property, and their contribution cannot prejudice mortgagee of the insured property and thus
third persons. This will result in fraud to those who complainant as mortgagors of the insured property
contract with the partnership in the belief [in] the have no right of action against herein respondent.
efficacy of the guaranty in which the immovables Also, respondent insurance commission absolved
may consist. Thus, the contract is declared void by Travellers Mulit-Indemnity from liability on the basis
the law when no such inventory is made." The case that at the time of the occurrence of the peril,
at bar does not involve third parties who may be petitioner as mortgagee had no more insurable
prejudiced. interest over the insured property since the credit
secured by the mortgaged property was already
Second, petitioners themselves invoke the allegedly paid by the Palomos before the said property was
void contract as basis for their claim that respondent gutted down by fire and it is Antonio Lopez Chua
should pay them 60 percent of the value of the and not Tai Tong Chuache & Company who is
property. They cannot in one breath deny the entitled to the insurance proceeds since he was
contract and in another recognize it, depending on named as the complainant in the certification issued
what momentarily suits their purpose. Parties cannot by the Court of First Instance of Davao. Petitioner’s
adopt inconsistent positions in regard to a contract motion was denied, hence this appeal.
and courts will not tolerate, much less approve, such
practice. It is the contention of the petitioner that respondent
erred in ruling that a certain Arsenio Lopez Chua is
In short, the alleged nullity of the partnership will not the one entitled to the insurance proceeds and not
prevent courts from considering the Joint Venture Tai Tong Chuache & Company.Public respondent
Agreement an ordinary contract from which the argued that the civil case should have been brought
parties' rights and obligations to each other may be by Tai Tong Chuache or by its representative in its
inferred and enforced. own behalf and since it was filed by Arsenio Chua,
he was deemed as the personal creditor of Spouses
Palomo.
3.) The Joint Venture Agreement clearly
states that the consideration for the sale was the
expectation of profits from the subdivision project. ISSUE: WON the civil case was filed by Arsenio Chua
Consideration, more properly denominated in his capacity as personal creditor of spouses or as
as cause, can take different forms, such as the a representative of petitioner. – As representative of
prestation or promise of a thing or service by petitioner
another. In this case, the cause of the contract of
sale consisted not in the stated peso value of the RULING: It should be borne in mind that petitioner
land, but in the expectation of profits from the being a partnership may sue and be sued in its name
subdivision project, for which the land was intended or by its duly authorized representative. The fact that
to be used. Arsenio Lopez Chua is the representative of
petitioner is not questioned. Petitioner's declaration
31.) G.R. No. L-55397 February 29, 1988 that Arsenio Lopez Chua acts as the managing
TAI TONG CHUACHE & CO., petitioner, vs. THE partner of the partnership was corroborated by
INSURANCE COMMISSION and TRAVELLERS MULTI- respondent insurance company. Thus, Chua as the
INDEMNITY CORPORATION, respondents. managing partner of the partnership may execute
all acts of administration including the right to sue
debtors of the partnership in case of their failure to
FACTS: Azucena Palomo obtained a loan from Tai
pay their obligations when it became due and
Tong Chuache Inc. in the amount of P100,000.00. To
demandable. Or at the very least, Chua being a
secure the payment of the loan, a mortgage was
partner of petitioner Tai Tong Chuache & Company
executed over the land and the building in favor of
is an agent of the partnership. Being an agent, it is
Tai Tong Chuache & Co.). Arsenio
understood that he acted for and in behalf of the COMMISSIONER OF INTERNAL REVENUE, petitioner,
firm. vs. WILLIAM J. SUTER and THE COURT OF TAX
APPEALS, respondents
The record of the case shows that the petitioner to
support its claim for the insurance proceeds offered FACTS: A limited partnership, named "William J. Suter
as evidence the contract of mortgage which has 'Morcoin' Co., Ltd.," was formed on 1947 by
not been cancelled nor released. It has been held in respondent William J. Suter as the general partner,
a long line of cases that when the creditor is in and Julia Spirig and Gustav Carlson, as the limited
possession of the document of credit, he need not partners. The partners contributed, respectively,
prove non-payment for it is presumed. The P20,000.00, P18,000.00 and P2,000.00 to the
respondent insurance company having issued a partnership. The firm engaged, among other
policy in favor of herein petitioner which policy was activities, in the importation, marketing, distribution
of legal force and effect at the time of the fire, it is and operation of automatic phonographs, radios,
bound by its terms and conditions. Upon its failure to television sets and amusement machines, their parts
prove the allegation of lack of insurable interest on and accessories.
the part of the petitioner, respondent insurance
company is and must be held liable. In 1948, general partner Suter and limited partner
Spirig got married and, thereafter, limited partner
Carlson sold his share in the partnership to Suter and
32. ) G.R. No. L-414 November 9, 1903
his wife.
HUNG-MAN-YOC, in the name of KWONG-WO- It has not been proven that Kieng-Chiong-
SING, plaintiff-appellee, vs.KIENG-CHIONG-SENG, ET Seng was the firm name, but rather the designation
AL., defendants-appellants. of the partnership.
FACTS: Private respondents came into an It cannot be the firm name of a general
agreement to engage in the importation of goods partnership because this should contain the names
for sale at a profit under the firm name of Kieng- of all the partners, or some of them, or at least one
Chiong-Seng. The private respondents were as of them to be, followed in the two latter cases by the
follows: words “and company”, whereas in this case none of
the four names of those who it is alleged were
a. Chua-Che-Co members of the firm appear in the firm name of the
b. Yu-Tec-Pin - Manager partnership.
c. Ang-Chu-Keng
d. Kiong-Tiao-Eng - Manager
Neither can it be considered as the firm The Court of First Instance annulled the sale of the
name of a limited partnership for the reason that this vehicles to Gonzales; ordered Da Costa and Gorcey
should contain the same requisites as the firm name to pay the Bank jointly and severally; ordered
of a general partnership, and in addition thereto the Gonzales to deliver the vehicles to the Bank for sale
word “limited”. The firm name in question has at public auction if Da Costa and Gorcey fails to
absolutely none of these requisites. pay; ordered Da Costa, Gorcey and MacDonald to
pay the Bank jointly and severally any deficiency
2. Not all respondents cannot be held liable. that remains unpaid should the proceeds of the
The defendant, Chua-Che-Co, was not in charge of auction sale be insufficient.
the management of the association, nor did he
make any contract at all with the plaintiff, as clearly MacDonald and Gonzales appealed to the CA. CA
appears from the testimony of the various witnesses, modified the CFI decision by ruling that MacDonald
the agent of the partnership, Yu-Yec-Pin, being the is not jointly and severally liable with Gorcey and Da
person who made all the contracts for the Costa to pay any deficiency
partnership; also Kieng-Tiao-Eng according to two of
the witnesses. It is evident, therefore, that Chua- Issue: WON the partnership, Stasikinocey, is
Che-Co has incurred no liability and that he cannot estopped from asserting that it does not have
be held individually responsible for the payment of juridical personality considering that it is an
the plaintiff’s claims, as the court below found. unregistered commercial partnership.
PAUL MACDONALD, ET AL., PETITIONERS, VS. THE While an unregistered commercial partnership has
NATIONAL CITY BANK OF NEW YORK, RESPONDENT. no juridical personality, nevertheless, where two or
more persons attempt to create a partnership failing
FACTS: Stasikinocey is a partnership formed by Alan to comply with all the legal formalities, the law
Gorcey, Louis Da Costa Jr., William Kusik and Emma considers them as partners and the association is a
Badong Gavino. It was denied registration in the SEC partnership in so far as it is a favorable to third
due to the confusion between this partnership and persons, by reason of the equitable principle of
the business Cardinal Rattan, which is treated as a estoppel.
co-partnership where Gorcey and Da Costa are the
general partners. It appears that Cardinal Rattan is Da Costa and Gorcey cannot deny that they are
merely the business name or style used by the partners of the partnership Stasikinocey, because in
partnership, Stasikinocey. all their transactions with the National City Bank they
represented themselves as such. McDonald cannot
Stasikinocey had an overdraft account with the disclaim knowledge of the partnership Stasikinocey
National City Bank of New York. The said overdraft because he dealt with said entity in purchasing two
account has a P6,134.92 balance. Due to the failure of the vehicles in question through Gorcey and Da
of Stasikinocey to make the required payment, said Costa. The sale of the vehicles to MacDonald being
balance was converted into an ordinary loan for void, the sale to Gonzales is also void since a buyer
which a promissory joint note, non-negotiable was cannot have a better right than the seller.
executed on the same day by Da Costa for and in
the name of Cardinal Rattan, himself and Gorcey. As was held in Behn Meyer & Co. vs. Rosatzin, where
The promissory note was secured by a chattel a partnership not duly organized has been
mortgage executed by Da Costa, general partner recognized as such in its dealings with certain
for and in the name of Stasikinocey. Said mortgage persons, it shall be considered as “partnership by
was constituted over the following: Fargo truck, estoppel” and the persons dealing with it are
Plymouth Sedan and Fargo Pick-Up FKI-16. estopped from denying its partnership existence.
Gorcey and Da Costa executed an agreement If the law recognizes a defectively organized
purporting to convey and transfer all their rights, title partnership as de facto as far as third persons are
and participation in Stasikinocey to Shaeffer, concerned, for purposes of its de facto existence it
allegedly in consideration of the cancellation of an should have such attribute of a partnership as
indebtedness of P25,000 owed by them and domicile. In Hung-Man Yoc vs. Kieng-Chiong-Seng, 6
Stasikinocey to the latter. Phil.., 498, it was held that although "it has no legal
standing, it is a partnership de facto and the general
During the subsistence of the loan and chattel provisions of the Code applicable to all partnerships
mortgage, Stasikinocey, through Gorcey and Da apply to it." The registration of the chattel mortgage
Costa transferred to MacDonald the Fargo truck and in question with the Office of the Register of Deeds
Plymouth sedan. Thereafter, Shaeffer sold the Fargo of Rizal, the residence or place of business of the
pick-up to MacDonald. Paul MacDonald sold the partnership Stasikinocey being San Juan, Rizal, was
Fargo truck and Plymouth sedan to Benjamin therefore in accordance with section 4 of the
Gonzales. Chattel Mortgage Law. Thus, for purposes of
registration of chattel mortgage, its domicile is its
When the National City Bank learned of these place of business of partnership.
transactions, it filed an action against Stasikinocey,
Da Costa, Gorcey, MacDonald and Gonzales to 36.) G.R. No. 84197 July 28, 1989
recover its credit and to foreclose the chattel
mortgage.
PIONEER INSURANCE & SURETY
CORPORATION, petitioner, vs.THE HON. COURT OF In 1905, Francisco Muñoz, Emilio Muñoz, and Rafael
APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, Naval formed an ordinary general mercantile
INC., (BORMAHECO), CONSTANCIO M. MAGLANA partnership in accordance with the Code of
and JACOB S. LIM, respondents. Commerce. They named the partnership “Francisco
Muñoz & Sons”. Francisco was the capitalist partner
G.R. No. 84157 July 28, 1989 while the other two were industrial partners. In the
articles of partnership, it was agreed upon by the
JACOB S. LIM, petitioner, vs. COURT OF APPEALS, three that for profits, Francisco shall have a 3/4th
PIONEER INSURANCE AND SURETY CORPORATION, share while the other two would have 1/8th each.
BORDER MACHINERY and HEAVY EQUIPMENT CO., For losses, only Francisco shall bear it. Later, the
INC,, FRANCISCO and MODESTO CERVANTES and partnership was sued by La Compañia Martitama for
CONSTANCIO MAGLANA, respondents. collection of sum of money amounting to P26,828.30.
The partnership lost the case and was ordered to
make said payment; that in case the partnership
FACTS: Jacob Lim was the owner of Southern Air
can’t pay the debt, all the partners should be liable
Lines, a single proprietorship. In 1965, Lim convinced
for it.
Constancio Maglana, Modesto Cervantes,
Francisco Cervantes, and Border Machinery and
The ruling is in accordance with Article 127 of the
Heavy Equipment Company (BORMAHECO) to
Code of Commerce which states: All the members
contribute funds and to buy two aircrafts which
of the general copartnership, be they or be they not
would form part a corporation which will be the
managing partners of the same, are liable personally
expansion of Southern Air Lines. Maglana et al then
and in solidum with all their property for the results of
contributed and delivered money to Lim.
the transactions made in the name and for the
account of the partnership, under the signature of
But instead of using the money given to him to pay
the latter, and by a person authorized to make use
in full the aircrafts, Lim, without the knowledge of
thereof.
Maglana et al,
Francisco now argues that the industrial partners
Lim made an agreement with Pioneer Insurance and should NOT be liable pursuant to Article 141 of the
Surety Corp. wherein as surety, Pioneer executed a Code of Commerce which states:
surety bond in favor of Japan Domestic Aircraft
(JDA) to insure the two aircrafts which were bought Losses shall be charged in the same proportion
in installment from (JDA) and using said aircrafts as among the partners who have contributed capital,
security in favor of Pioneer. So when Lim defaulted without including those who have not, unless by
from paying JDA, Pioneer paid JDA and special agreement the latter have been constituted
subsequently foreclosed the chattel mortgage. as participants therein.
Maglana, Bormaheco and the Cervantes’s filed
cross-claims against Lim alleging that they were not ISSUE: Whether or not the industrial partners are liable
privies to the contracts signed by Lim and for to third parties like La Compañia Martitama.
recovery of the sum of money they advanced to Lim
for the purchase of the aircrafts. The decision was HELD: Yes. The controlling law is Article 127. There is
rendered holding Lim liable to pay. no injustice in imposing this liability upon the industrial
partners. They have a voice in the management of
It was established that no corporation was formally the business, if no manager has been named in the
formed between Lim and Maglana et al. articles; they share in the profits and as to third
persons it is no more than right that they should share
ISSUE: Whether failure to incorporate automatically in the obligations. It is admitted that if in this case
resulted to de facto partnership. NO there had been a capitalist partner who had
contributed only P100 he would be liable for this
HELD: There was no de facto partnership. Ordinarily, entire debt of P26,000.
when co-investors agreed to do business through a
corporation but failed to incorporate, a de facto Article 141 relates exclusively to the settlement of the
partnership would have been formed, and as such, partnership affairs among the partners themselves
all must share in the losses and/or gains of the and has nothing to do with the liability of the partners
venture in proportion to their contribution. to third persons; that each one of the industrial
partners is liable to third persons for the debts of the
But in this case, it was shown that Lim did not have firm; that if he has paid such debts out of his private
the intent to form a corporation with Maglana et al. property during the life of the partnership, when its
This can be inferred from acts of unilaterally taking affairs are settled he is entitled to credit for the
out a surety from Pioneer Insurance and not using amount so paid, and if it results that there is not
the funds he got from Maglana et al. The record enough property in the partnership to pay him, then
shows that Lim was acting on his own and not in the capitalist partners must pay him.
behalf of his other would-be incorporators in
transacting the sale of the airplanes and spare parts. In relation to this, the Supreme Court noted that
partnerships under the Civil Code provides for a
scenario where all partners are industrial partners
(like when it is a partnership for the exercise of a
37. CO. MARITIMA vs. MUÑOZ
profession). In such case, if it is permitted that
industrial partners are not liable to third persons then
FACTS:
such third persons would get practically nothing from Dummy law refers to aliens only (Commonwealth
such partnerships if the latter is indebted. Act 108 as amended).
The petitioner did not receive any contribution at the xxx xxx xxx
time he started the Sun Wah Panciteria. He used his (3) A partner has been guilty of such conduct as
savings from his salaries as an employee at Camp tends to affect prejudicially the carrying on of the
Stotsenberg in Clark Field and later as waiter at the business;
Toho Restaurant amounting to a little more than
P2,000.00 as capital in establishing Sun Wah (4) A partner willfully or persistently commits a breach
Panciteria. Petitioner presented various government of the partnership agreement, or otherwise so
licenses and permits showing the Sun Wah Panciteria conducts himself in matters relating to the
was and still is a single proprietorship solely owned partnership business that it is not reasonably
and operated by himself alone. Fue Leung also flatly practicable to carry on the business in partnership
denied having issued to the private respondent the with him;
receipt (Exhibit G) and the Equitable Banking
Corporation's Check No. 13389470 B in the amount xxx xxx xxx
of P12,000.00 (Exhibit B). (6) Other circumstances render a dissolution
ISSUE: equitable.
WON Private respondent is a partner of the petitioner There shall be a liquidation and winding up of
in Sun Wah Panciteria? partnership affairs, return of capital, and other
incidents of dissolution because the continuation of
HELD: the partnership has become inequitable.
16. G.R. No. L-47823 July 26, 1943 The Court of First Instance of Manila held that the last
JOSE ORNUM and EMERENCIANA and final statement of accounts prepared by the
ORNUM, petitioners, petitioners was tacitly approved and accepted by
vs. the respondents who, by virtue of the above-quoted
MARIANO, LASALA, et al., respondent. letter of Father Mariano Lasala, lost their right to a
further accounting from the moment they received
and accepted their shares as itemized in said
FACTS: statement
In 1908, Pedro Lasala, father of the respondents, This judgment was reversed by the Court of Appeals
andEmerenciano Ornum formed a partnership. principally on the ground that as the final statement
Lasala as capitalist while Ornum will be the industrial of accounts remains unsigned by the respondents,
partner. Lasala delivered the sum of P1,000 to Ornum the same stands disapproved.
who will conducta business at his place of residence
in Romblon. The decision appealed by the petitioners
The parties then agreed to suspend the liquidation In view of the foregoing, we are of the opinion that
ordered by the court, and the defendant was the case must be, as is hereby, decided by the
authorized to continue in the possession of the reversing the judgment appealed from, and
property in litigation after giving a bond in the sentencing the defendant to pay the plaintiff the
amount of P25,000, and cancelling the former bond sum of P30,299.14 with legal interest at the rate of 6
of P10,000.
per cent per annum from July 1, 1918, until fully paid, to institute the action for damages which he claims
with costs. So ordered. from the managing partner Carmen de Luna.
Plaintiff having manifested that he would prefer not "That besides the powers and duties granted the said
to amend his amended complaint, the attorney for Tan Sin An by the articles of co-partnership of said
the defendant, Carmen de Luna, filed a motion co-partnership "Tan Sin An and Antonio Goquiolay",
praying that the amended complaint be dismissed the said Tan Sin An should act as my Manager for
with costs against the plaintiff. Said motion was said co-partnership for the full period of the term for
granted by the CFI which ordered the dismissal of which said co-partnership was organized or until the
the aforesaid amended complaint, with costs whole period that the said capital of P30,000.00 of
against the plaintiff. the co-partnership should last..”
From this order of dismissal, the appellant took an The plaintiff partnership "Tan Sin An and Goquiolay"
appeal. The demurrer interposed by defendant to purchased the 3 parcels of land, known as Lots Nos.
the amended complaint filed by plaintiff having 526, 441 and 521 of the Cadastral Survey of Davao,
been sustained on the grounds that the facts subject-matter of the instant litigation, assuming the
alleged in said complaint are not sufficient to payment of a mortgage obligation of. P25.000.00,
constitute a cause of action. payable to "La Urbana Sociedad Mutua de
Construction y Prestamos". Another 46 parcels were
In the amended complaint it is prayed that purchased by Tan Sin An in his individual capacity,
defendant Carmen de Luna be sentenced to pay and he assumed payment of a mortgage debt
plaintiff damages in the sum of P700,432 as a result thereon for P35,000.00, with interest.
of the administration, said to be fraudulent, of the
partnership, "Centro Escolar de Señoritas", of which The two separate obligations were consolidated in
plaintiff, defendant and the deceased Librada an instrument executed by the partnership and Tan
Avelino were members. Sin An, whereby the entire 49 lots were mortgaged in
favor of the "Banco Hipotecario de Filipinas" (as
ISSUE: Whether or not the plaintiff is entitled to successor to "La Urbana").
damages.
Tan Sin An died, leaving as surviving heirs his widow,
RULING: No. For the purpose of adjudicating to Kong Chai Pin, and four minor children. Defendant
plaintiff damages which he alleges to have suffered Kong Chai Pin was appointed administratrix of the
as a partner by reason of the supposed fraudulent intestate estate of her deceased husband.
management of the partnership referred to, it is first
necessary that a liquidation of the business thereof In the meantime, repeated demands for payment
be made to the end that the profits and losses may were made by the Banco Hipotecario on the
be known and the causes of the latter and the partnership and on Tan Sin An. In March, 1944, the
responsibility of the defendant as well as the defendant Sing Yee and Cuan, Co., Inc., upon
damages which each partner may have suffered, request of defendant Yutivo Sons Hardware Co.,
may be determined. paid the remaining balance of the mortgage debt,
and the mortgage was cancelled.
It is not alleged in the complaint that such liquidation
has been effected nor is it prayed that it be made. Then in 1946, Yutivo Sons Hardware Co. and Sing Yee
Consequently, there is no reason or cause for plaintiff and Cuan Co., Inc. filed their claims in the intestate
proceedings of Tan Sin An for P62,415.91 and
P54,310.13, respectively, as alleged obligations of validity of like clauses in partnership agreements is
the partnership "Tan Sin An and Antonio C. expressly sanctioned under Article 222 of the Code
Goquiolay" and Tan Sin An, for advances, interests of Commerce.
and taxes paid in amortizing and discharging their
obligations to "La Urbana" and the "Banco Appellants argue, however, that since the "new"
Hipotecario". members' liability in the partnership was limited
merely to the value of the share or estate left by the
On March 29, 1949, Kong Chai Pin filed a petition deceased Tan Sin An, they became no more than
with the probate court for authority to sell all the 49 limited partners and, as such, were disqualified from
parcels of land to Washington Z, Sycip and Betty Y. the management of the business under Article 148 of
Lee, for the purpose primarily of settling the aforesaid the Code of Commerce.
debts of Tan Sin An and the partnership.
Kong Chai Pin, who, by her affirmative actions,
Learning about the sale to Sycip and Lee, the manifested her intent to be bound by the
surviving partner Antonio Goquiolay filed a petition partnership agreement not only as a limited but as a
in the intestate proceedings seeking to set aside the general partner. Thus, she managed and retained
order of the probate court approving the sale in so possession of the partnership properties and was
far as his interest over the parcels of land sold was admittedly deriving income therefrom up to and
concerned. until the same were sold to Washington Sycip and
Betty Lee. In fact, by executing the deed of sale of
The second amended complaint in the case at bar the parcels of land in dispute in the name of the
prays, among other things, for the annulment of the partnership, she was acting no less than as a
sale in favor of Washington Sycip and Betty Lee, and managing partner. Having thus preferred to act as
their subsequent conveyance in favor of the Insular such, she could be held liable for the partnership
Development Co., Inc., in so far as the three (3) lots debts and liabilities as a general partner, beyond
owned by the plaintiff partnership are concerned. what she might have derived only from the estate of
The answer averred the validity of the sale by Kong her deceased husband. By allowing her to retain
Chai Pin as successor partner, in lieu of the late Tan control of the firm's property from 1942 to 1949,
Sin An. After hearing, the complaint was dismissed by plaintiff estopped himself to deny her legal
the lower court in its decision dated October 30, representation of the partnership, with the power to
1956; hence, this appeal. bind it by proper contracts.
The trial court denied the motion to dismiss. On Hardly a year after such organization, the plaintiff
appeal, the Court of Appeals rendered the assailed commenced the present case to ask for the
decision dismissing the petition for certiorari, upon a dissolution of the partnership and to compel
finding that no grave abuse of discretion amounting defendant to submit an accounting of his
to lack or excess of jurisdiction was committed by the administration and to deliver to him his share as such
trial court in issuing the questioned orders denying partner.
petitioner's motions to dismiss.
In his answer defendant expressed his conformity to
ISSUE: Whether or not the trial court should have the dissolution of the partnership and the liquidation
dismissed the complaint on the ground of of its affairs; but by way of counterclaim he asked
prescription. that, having covered a deficit incurred by the
partnership amounting to P4,000 with his own
HELD: No. The three (3) final stages of a partnership money, plaintiff reimburse him of one-half of said
are: (1) dissolution; (2) winding-up; and (3) sum.
termination. The partnership, although dissolved,
continues to exist and its legal personality is retained, Juan D. Mencarini was assigned as receiver and
at which time it completes the winding up of its liquidator. Upon acting on his duty, the court
affairs, including the partitioning and distribution of ordered him to deliver certain machines which were
the net partnership assets to the partners. For as long at Nos. 705-707 Ylaya Street. But before he could
as the partnership exists, any of the partners may take actual possession of the said machines, the
demand an accounting of the partnership's court suspended the effects of its order.
business. Prescription of the said right starts to run
only upon the dissolution of the partnership when the In the meantime the judgments rendered in cases
final accounting is done. Nos. 42794 and 43070 ordering Clemente to pay a
sum of money. He mortgaged the machines to his
Contrary to petitioner's protestations that nephew, the intervenor. The intervenor then
respondents' right to inquire into the business affairs commenced a case to collect his mortgaged credit.
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. ISSUE: Whether or not the intervenor (now plaintiff)
Article 1842 of the Civil Code provides: can obtain the possession of the machines.
The right to an account of his interest shall accrue to
any partner, or his legal representative as against the HELD: No. From the foregoing facts, it is clear that
winding up partners or the surviving partners or the plaintiff could not obtain possession of the machines
person or partnership continuing the business, at the in question. The constructive possession deducible
date of dissolution, in the absence of any from the fact that he had the keys to the place
agreement to the contrary. where the machines were found (Ylaya Street Nos.
705-707), as they had been delivered to him by the
Applied in relation to Articles 1807 and 1809, which receiver, does not help him any because the lower
also deal with the duty to account, the above-cited court suspended the effects of the order whereby
provision states that the right to demand an the keys were delivered to him a few days after its
accounting accrues at the date of dissolution in the issuance; and thereafter revoked it entirely in the
absence of any agreement to the contrary. When a appealed decision. Furthermore, when he
final accounting is made, it is only then that attempted to take actual possession of the
prescription begins to run. In the case at bar, no final machines, the defendant did not allow him to do so.
accounting has been made, and that is precisely
what respondents are seeking in their action before Consequently, if he did not have actual possession
the trial court, since petitioner has failed or refused of the machines, he could not in any manner
to render an accounting of the partnership's business mortgage them, for while it is true that the oft-
and assets. Hence, the said action is not barred by mentioned deed of mortgage was annotated in the
prescription. registry of property, it is no less true that the machines
to which it refers are not the same as those in
question because the latter are on Ylaya Street Nos.
Arts. 1810 – 1814 705-707 and the former are on Singalong Street No.
Property Rights of a Partner 1163.
1. G.R. No. L-45662, April 26, 1939 The evidence of record shows that the machines in
ENRIQUE CLEMENTE, plaintiff-appellee, vs. DIONISIO contention originally belonged to the defendant
GALVAN, defendant-appellee. and from him were transferred to the partnership
JOSE ECHEVARRIA, intervenor-appellant. Galvan y Compania. This being the case, said
machines belong to the partnership and not to him,
and shall belong to it until partition is effected Why was it necessary to hear them on the merits of
according to the result thereof after the liquidation. Lastrilla's motion?
ISSUE: Whether or not Lastrilla has any proper claim "Indispensable parties are those without whom the
to the proceeds of the sale? action cannot be finally determined. In a case for
recovery of real property, the defendant alleged in
HELD: No. If he was a creditor of the FELCO, perhaps his answer that he was occupying the property as a
or maybe. But he was not. The partner of a tenant of a third person. This third person is an
partnership is not a creditor of such partnership for indispensable party, for, without him, any judgment
the amount of his shares. which the plaintiff might obtain against the tenant
would have no effectiveness, for it would not be
Granting, arguendo that the auction sale did not binding upon, and cannot be executed against, the
include the interest or portion of the FELCO defendant's landlord, against whom the plaintiff has
properties corresponding to the shares of Lastrilla in to file another action if he desires to recover the
the same partnership (17%), the resulting situation property effectively. In an action for partition of
would be at most that the purchasers Dorfe and property, each co-owner is an indispensable party,
Asturias will have to recognize dominion of Lastrilla for without him no valid judgment for partition may
over 17 per cent of the properties awarded to them. be rendered."
So Lastrilla acquired no right to demand any part of
the money paid by Dorfe and Asturias to the sheriff Wherefore, the orders of the court recognizing
for the benefit of FELCO and Tomassi, the plaintiffs in Lastrilla's right and ordering payment to him of a part
that case, for the reason that, as he says, his shares of the proceeds were patently erroneous, because
(acquired from Brown) could not have been and promulgated in excess or outside of its jurisdiction.
were not auctioned off to Dorfe and Asturias. For this reason the respondents' argument resting on
plaintiffs' failure to appeal from the orders on time,
Supposing however that Lastrilla's shares have been although ordinarily decisive, carries no persuasive
actually (but unlawfully) sold by the sheriff (at the force in this instance.
instance of plaintiffs) to Dorfe and Asturias, what is his
remedy? Section 15, Rule 39 furnishes the answer.
3. G.R. No. L-59956, October 31, 1984 he should have complied with his obligation (Art.
ISABELO MORAN, JR., petitioner, vs. THE HON. COURT 1788, Civil Code).
OF APPEALS and MARIANO E. PECSON, respondents.
Article 1797 of the Civil Code provides:
FACTS: On February 22, 1971 Pecson and Moran The losses and profits shall be distributed in
entered into an agreement whereby both would conformity with the agreement. If only the share of
contribute P15,000 each for the purpose of printing each partner in the profits has been agreed upon,
95,000 posters (featuring the delegates to the 1971 the share of each in the losses shall be in the same
Constitutional Convention), with Moran actually proportion.
supervising the work; that Pecson would receive a
commission of P 1,000 a month starting on April 15, Being a contract of partnership, each partner must
1971 up to December 15, 1971; that on December share in the profits and losses of the venture. That is
15, 1971, a liquidation of the accounts in the the essence of a partnership. And even with an
distribution and printing of the 95,000 posters would assurance made by one of the partners that they
be made, that Pecson gave Moran P10,000 for would earn a huge amount of profits, in the absence
which the latter issued a receipt; that only a few of fraud, the other partner cannot claim a right to
posters were printed; that on or about May 28, 1971, recover the highly speculative profits. It is a rare
Moran executed in favor of Pecson a promissory business venture guaranteed to give 100% profits.
note in the amount of P20,000 payable in two equal
installments, the whole sum becoming due upon
default in the payment of the first installment on the 4. G.R. No. L-31684 June 28, 1973
date due, complete with the costs of collection. EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR.,
CONCHITA B. NAVARRO and LEONARDA ATIENZA
Private respondent Pecson filed with the CFI an ABAD SABTOS, petitioners, vs. ESTRELLA ABAD
action for the recovery of a sum of money and SANTOS, respondent.
alleged in his complaint: (1) on the alleged
partnership agreement, the return of his contribution Doctrine: The prohibition against an industrial partner
of P10,000.00, payment of his share in the profits that engaging in business for himself seeks to prevent any
the partnership would have earned, and, payment conflict in interest between the industrial partner and
of unpaid commission; (2) on the alleged promissory the partnership, and to insure faithful compliance by
note, payment of the sum of P20,000.00. said partner with his prestation.
Court of First Instance ruled that by virtue of the FACTS: On October 9, 1954 a co-partnership was
partnership agreement entered into by the parties- formed under the name of "Evangelista & Co."
plaintiff and defendant the plaintiff did contribute
10k, and another sum of 7kfor the Voice of the On June 7, 1955 the Articles of Co-partnership was
Veteran or Delegate Magazine. Of the expected amended as to include herein respondent, Estrell
95,000 copies of the posters, the defendant was able aAbad Santos, as industrial partner, with herein
to print 2,000 copies only authorized of which, petitioners Domingo C. Evangelista, Jr., Leonardo
however, were sold at P5.00 each. Atienza Abad Santos and Conchita P. Navarro, the
original capitalist partners, remaining in that
Nothing more was done after this and it can be said capacity, with a contribution of P17,500 each. The
that the venture did not really get off the ground. On amended Articles provided, inter alia, that "the
the other hand, the plaintiff failed to give his full contribution of Estrella Abad Santos consists of her
contribution of P15,000.00. Thus, each party is industry being an industrial partner", and that the
entitled to rescind the contract. CFI ordered profits and losses "shall be divided and distributed
defendant Moran to return to plaintiff Mariano E. among the partners ... in the proportion of 70% for
Pecson the sum of 17k. the first three partners, Domingo C. Evangelista, Jr.,
Conchita P. Navarro and Leonardo Atienza Abad
Both parties appealed to CA. CA ordered Moran to Santos to be divided among them equally; and 30%
pay Pecson: a) P47,500 (the amount that could have for the fourth partner Estrella Abad Santos."
accrued to Pecson under their agreement);(b)
P8,000, (the commission for eight months);(c) P7,000 On December 17, 1963 herein respondent filed suit
(as a return of Pecson's investment for the Veteran's against the three other partners in the Court of First
Project). Instance of Manila, alleging that the partnership,
which was also made a party-defendant, had been
ISSUE: Whether or not Moran is liable to Pecson in the paying dividends to the partners except to her; and
sum of P47,500.00 as the supposed expected profits that notwithstanding her demands the defendants
due to him. had refused and continued to refuse and let her
examine the partnership books or to give her
HELD: No. There is no dispute over the nature of the information regarding the partnership affairs to pay
agreement between the petitioner and the private her any share in the dividends declared by the
respondent which is a contract of partnership. partnership. She therefore prayed that the
defendants be ordered to render accounting to her
The rule is, when a partner who has undertaken to of the partnership business and to pay her
contribute a sum of money fails to do so, he corresponding share in the partnership profits after
becomes a debtor of the partnership for whatever such accounting, plus attorney's fees and costs.
he may have promised to contribute (Art. 1786, Civil
Code) and for interests and damages from the time
ISSUE: Whether or not Abad Santos is an industrial The appellants Severo Eugenio Lo and Ng Khey Ling,
partner and is entitled to the shares of the together with J. A. Say Lian Ping, Ko Tiao Hun, On
partnership Yem Ke Lam and Co Sieng Peng formed a
commercial partnership under the name of "Tai Sing
HELD: YES. It is clear that even as she was and still is a and Co.," with a capital of P40,000 contributed by
Judge of the City Court of Manila, she has rendered said partners.
services for appellants without which they would not
have had the wherewithal to operate the business In the articles of copartnership, J. A. Say Lian Ping
for which appellant company was organized. was appointed general manager of the partnership.
However, general manager A. Say Lian Ping
Article 1767 of the New Civil Code which provides executed a power of attorney in favor of A. Y. Kelam,
that "By contract of partnership two or more persons authorizing him to act in his stead as manager and
bind themselves, to contribute money, property, or administrator of "Tai Sing & Co.," and obtained a
industry to a common fund, with the intention of loans in current account from PNB. As security for
dividing the profits among themselves, 'does not said loan, he mortgaged certain personal property
specify the kind of industry that a partner may thus of "Tai Sing & Co. Defendants had been using this
contribute, hence the said services may legitimately commercial credit in a current account with the
be considered as appellee's contribution to the plaintiff bank, from the year 1918, to May 22, 1921.
common fund. Later, PNB sued for non payment of the loans.
RULING: No.
What has gone before persuades us to hold with the
lower Court that appellee is an industrial partner of The anomalous adoption of the firm name above
appellant company, with the right to demand for a noted does not affect the liability of the general
formal accounting and to receive her share in the partners to third parties under Article 127 of the Code
net profit that may result from such an accounting. of Commerce. In the case of Jo Chung Cang vs.
Our said holding is based on the following article of Pacific Commercial Co., the SC ruled that the object
the New Civil Code: of the Code of Commerce in requiring a general
ART. 1899. Any partner shall have the right to a formal partnership to transact business under the name of
account as to partnership affairs: all its members, of several of them, or of one only, is
(1) If he is wrongfully excluded from the partnership to protect the public from imposition and fraud; it is
business or possession of its property by his co- for the protection of the creditors rather than of the
partners; partners themselves. It is unenforceable as between
(2) If the right exists under the terms of any the partners and at the instance of the violating
agreement; party, but not in the sense of depriving innocent
(3) As provided by article 1807; parties of their rights who may have dealt with the
(4) Whenever other circumstance render it just and offenders in ignorance of the latter having violated
reasonable. the law; and that contracts entered into by a
partnership firm defectively organized are valid
ARTICLES 1815 to 1827 when voluntarily executed by the parties, and the
only question is whether or not they complied with
OBLIGATIONS OF THE PARTNERS TO THIRD PARTIES the agreement.
1. PHILIPPINE NATIONAL BANK vs. SEVERO Therefore, Lo cannot invoke in his defense the
EUGENIO LO, ET AL., SEVERIO EUGENIO LO, anomaly in the firm name which they themselves
NG KHEY LING and YEP SENG adopted. Lo was not able to prove his second
FACTS: argument. But even assuming arguendo, his second
contention does not deserve merit because (a) Lam, would render the whole unpaid balance
in acting as a GM, is also a partner and his actions immediately due and demandable.
were never objected to by the partners, and (b) it
also appeared from the evidence that Lo, Lam and Having failed to receive the installment due on July
the other partners authorized some of the loans. 22, 1961, the plaintiff sued the defendant company
for the unpaid balance amounting to P7,119.07.
2. NICOLAS CO-PITCO vs. PEDRO YULO Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim,
Romulo B. Lumauig, and Augusto Palisoc were
FACTS: included as co-defendants in their capacity as
Before Feb. 1903, FLORENCIO Yulo and Jaime general partners of the defendant company.
PALACIOS were partners in the operation of a sugar
estate in Victorias, Island of Negros, and had
commercial dealings with a Chinaman named Dy- Daniel A. Guizona failed to file an answer and was
Sianco, who furnished them with money and goods, consequently declared in default. Subsequently, on
and used to buy their crop of sugar. Pedro YULO, motion of the plaintiff, the complaint was dismissed
father of the said Florencio, took charge of the insofar as the defendant Romulo B. Lumauig is
latter's interest in the above-mentioned partnership, concerned.
and he became a general partner with PALACIOS in
the same business, and he continued as such When the case was called for hearing, the
partner until about the end of 1904,dealing with Dy- defendants and their counsels failed to appear
Sianco in the same manner as the old partnership notwithstanding the notices sent to them.
had dealt with the latter. Consequently, the trial court authorized the plaintiff
to present its evidence ex-parte, after which the trial
CO-PITCO then finds that the balance due from the court rendered the decision appealed from.
firm was 1,638.40 pesos and orders judgment
against YULO for the entire amount, with interest. The defendants Benjamin C. Daco and Noel C. Sim
moved to reconsider the decision claiming that
ISSUE: WON YULO is liable for the entire amount. since there are five (5) general partners, the joint and
subsidiary liability of each partner should not exceed
RULING: NO one-fifth (1/5) of the obligations of the defendant
The partnership of YULO and PALACIOS was company. But the trial court denied the said motion
engaged in the operation of a sugar estate in notwithstanding the conformity of the plaintiff to limit
Negros. It was, therefore a civil partnership, as the liability of the defendants Daco and Sim to only
distinguished from a mercantile partnership. Being a one-fifth (1/5 ) of the obligations of the defendant
civil partnership, by the express provisions of articles company. Hence, this appeal.
1698 and 1137 of the Civil Code, the partners are ISSUE: Whether the condonation of a partner’s
not liable each for the whole debt of the share in the debts of the company increases the
partnership. The liability is pro rata and in this case remaining partners’ liability?
YULO is responsible to CO-PITCO for only one-half of
the debt. The fact that the other partner, PALACIOS, RULING:
had left the country cannot increase the liability of
YULO. No. In the instant case, there were five (5) general
partners when the promissory note in question was
The judgment of the court below is reversed and executed for and in behalf of the partnership. Since
judgment is ordered in favor of CO-PITCO and the liability of the partners is pro rata, the liability of
against YULO for the sum of P819.20 pesos with the appellant Benjamin C. Daco shall be limited to
interest thereon at the rate of 6 percent per annum only one-fifth ( 1/ 5 ) of the obligations of the
from the 12th day of January, 1905, and the costs of defendant company. The fact that the complaint
the Court of First Instance 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
3. Island Sales v. United 65 SCRA 554 defendant company. In so moving to dismiss the
complaint, the plaintiff merely condoned Lumauig's
DOCTRINE: Condonation by creditor of share in individual liability to the plaintiff.
partnership debt of one partner does not increase
pro rata liability of other partners. RATIO: Article 1816 of the Civil Code provides:
HELD: RATIO:
In determining the liability of Freeman, the Court first
Yes, Muñoz is liable to third persons even if he is an identified the nature of the business.
industrial partner.
Art 17 and 119 of the Code of Commerce then
The Supreme Court held that in limited partnership,
applicable, provide the requirements for the
the Code of Commerce recognizes a difference
constitution of a commercial partnership (i.e.
between general and special partners, but in a
recording of the business agreements in the
general partnership there is no such distinction — all
commercial registry.) The requirements were not
the members are general partners. The fact that
complied with. The Court therefore held that no
some may be industrial and some capitalist partners
formal partnership was entered into between
does not make the members of either of these
Freeman and Whitcomb. As such, the Civil Code
classes alone such general partners.
and not the Code of Commerce must govern in
Our construction of the article is that it relates determining the liability of the partners.
exclusively to the settlement of the partnership affairs
among the partners themselves and has nothing to Insisting that he is not liable, Whitcomb posits that the
do with the liability of the partners to third persons; association was one of cuentas en participation. A
that each one of the industrial partners is liable to partnership of cuentas en participacion is
third persons for the debts of the firm; that if he has constituted in such a manner that its existence was
paid such debts out of his private property during the only known to those who had an interest in the same,
life of the partnership, when its affairs are settled he there being no mutual agreement between the
is entitled to credit for the amount so paid, and if it partners, and without a corporate name indicating
results that there is not enough property in the to the public in some way that there were other
partnership to pay him, then the capitalist partners people besides the one who ostensibly managed
must pay him. and conducted the business. under the provisions of
article 242 of the Code of Commerce, those who
Our conclusion is upon this branch of the case that contract with the person in whose name the business
neither on principle nor on authority can the of such a partnership was conducted shall have only
industrial partner be relieved from liability to third the right of action against such person and not
persons for the debts of the partnership. against other persons interested
5. DIETRICH V. FREEMAN AND WHITCOMB
However, a partnership of cuentas en participacion
does not have a corporate name. Here, the business
Quick Facts: Plaintiff sued to collect from the
is known as Manila Steam Laundry and Dietrich was
partners of Manila Steam Laundry. The trial court
employed by Manila steam Laundry and not
held the defendants jointly and severally liable. The
Freeman alone.
Court reversed holding that the business was a
partnership of cuentas en participacion and the
Since the partners were doing business under this
liability of the partners is pro-rata based on their
name, and since it is not a commercial partnership,
interest in the business.
Articles 1698 and 1137 of the Civil Code should
govern and the partners are not liable individually for
the entire amount due the plaintiff. The liability is pro Yes, the mortgage executed by the Lims is
rata and in this case the appellant is responsible to attributable to their partnership.
the plaintiff for only one-half of the debt.
The Supreme Court held that the legal fiction of a
DISPOSITIVE: separate juridical personality and existence will not
Judgment modified. Whitcomb liable only to half shield it from the conclusion of having such
the balance due plaintiff. knowledge which naturally and irresistibly flows from
the undenied facts. It would violate all precepts of
reason, ordinary experience and common sense to
6. SANTIAGO SYJUCO, INC v. CASTRO
propose that a partnership, as such, cannot be held
G.R. No. 70403; July 7, 1989
accountable with knowledge of matters commonly
known to all the partners or of acts in which all of the
FACTS:
latter, without exception, have taken part, where
Back in November 1964, the Lims, borrowed from such matters or acts affect property claimed as its
petitioner Santiago Syjuco, Inc., the sum of own by said partnership.
P800,000.00. The loan was given on the security of a
The silence and failure of the partnership to impugn
first mortgage on property registered in the names of
said mortgage within a reasonable time, let alone a
said borrowers as owners in common under Transfer
space of more than seventeen years, brought into
Certificates of Title Numbered 75413 and 75415 of
play the doctrine of estoppel to preclude.
the Registry of Deeds of Manila. Thereafter
additional loans on the same security were obtained There is no reason to distinguish between the Lims, as
by the Lims from Syjuco, so that as of May 8, 1967, individuals, and the partnership itself, since the
the aggregate of the loans stood at P2,460,000.00, former constituted the entire membership of the
exclusive of interest, and the security had been latter. In other words, despite the concealment of
augmented by bringing into the mortgage other the existence of the partnership, for all intents and
property, also registered as owned pro indiviso by purposes and consistently with the Lims' own theory,
the Lims under two titles: TCT Nos. 75416 and 75418 of it was that partnership which was the real party in
the Manila Registry. interest in all the actions; it was actually represented
in said actions by all the individual members thereof,
On November 8, 1967, the Lims failed to pay it
and consequently, those members' acts,
despite demands therefore; that Syjuco
declarations and omissions cannot be deemed to
consequently caused extra-judicial proceedings for
be simply the individual acts of said members, but in
the foreclosure of the mortgage to be commenced
fact and in law, those of the partnership.
by the Sheriff of Manila; and that the latter
scheduled the auction sale of the mortgaged
7. BENITO LIWANAG and MARIA LIWANAG
property on December 27, 1968.
REYES vs. WORKMEN'S COMPENSATION
The attempt to foreclose triggered off a legal battle COMMISSION, ET AL.
that has dragged on for more than twenty years
now, fought through five (5) cases in the trial FACTS:
courts, two (2) in the Court of Appeals, and three
(3) more in the Supreme Court. Appellants Benito Liwanag and Maria Liwanag
Reyes are co-owners of Liwanag Auto Supply, a
One of the complaints filed by the Lims was filed not commercial guard who while in line of duty, was
in their individual names, but in the name of a skilled (killed siguro?) by criminal hands. His widow
partnership of which they themselves were the only Ciriaca Vda. de Balderama and minor children
partners: "Heirs of Hugo Lim." The complaint Genara, Carlos and Leogardo, all surnamed
advocated the theory that the mortgage which Balderama, in due time filed a claim for
they, together with their mother, had individually compensation with the Workmen's Compensation
Commission, which was granted.
constituted (and thereafter amended during the
period from 1964 to 1967) over lands standing in their
In appeal, the appellants claim that, under the
names in the Property Registry as owners pro indiviso,
Workmen's Compensation Act, the compensation is
in fact no longer belonged to them at that time,
divisible, hence the commission erred in ordering
having been earlier deeded over by them to the appellants to pay jointly and severally the amount
partnership, "Heirs of Hugo Lim," more precisely, on awarded. They argue that there is nothing in the
March 30, 1959, hence, said mortgage was void compensation Act which provides that the
because executed by them without authority from obligation of an employer arising from compensable
the partnership. injury or death of an employee should be solidary
obligation, the same should have been specifically
provided, and that, in absence of such clear
ISSUE: Whether the mortgage executed by the Lims provision, the responsibility of appellants should not
be solidary but merely joint.
be attributable to their partnership
FACTS: FACTS:
Stasikinocey is a partnership doing business in San Jacob Lim was the owner of Southern Air Lines, a
Juan, Rizal, and formed by Alan W. Gorcey, Louis F. single proprietorship. In 1965, Lim convinced
da Costa, Jr., William Kusik and Emma Badong Constancio Maglana, Modesto Cervantes,
Gavino. The partnership was denied registration in Francisco Cervantes, and Border Machinery and
Heavy Equipment Company (BORMAHECO) to On July 23, 1926, the court rendered a decision,
contribute funds and to buy two aircrafts which reaffirming its order of April 14, and ordered the
would form part a corporation which will be the insolvent to deliver to the assignee the sum of
expansion of Southern Air Lines. Maglana et al then P56,000, more or less alleged to have been in her
contributed and delivered money to Lim. possession on April 19, 1925.
But instead of using the money given to him to pay
On August 4, 1926, attorney for the insolvent filed a
in full the aircrafts, Lim, without the knowledge of
Maglana et al, made an agreement with Pioneer motion asking the court to dismiss the proceedings
Insurance for the latter to insure the two aircrafts against her on the ground that they should have
which were brought in installment from Japan been brought against the partnership "Lao Liong
Domestic Airlines (JDA) using said aircrafts as Naw & Co.," of which she was only a member. The
security. So when Lim defaulted from paying JDA, alleged partnership was evidenced by an
the two aircrafts were foreclosed by Pioneer agreement dated July 22, 1922, and from which it
Insurance. appeared that on that date Lao Liong Naw
It was established that no corporation was formally (Leoncia), Chan Chiaco Wa, Cua Yuk, Chan Bun
formed between Lim and Maglana et al. Suy, Cahn Bun Le, and Juan Maquitan Chan had
formed a partnership with a capital of P21,000, of
ISSUE: Whether or not Maglana et al must share in
which only P4,000 was contributed by Leoncia.
the loss as general partners.
HELD: In view of the aforesaid motion Judge Del Rosario on
August 7, 1926, suspended for the time being the
No. There was no de facto partnership. Ordinarily, effects of the decision of July 23, 1926, and set the
when co-investors agreed to do business through a
motion down for hearing on the 14th of August, 1926.
corporation but failed to incorporate, a de facto
His Honor again appointed Summers as referee.
partnership would have been formed, and as such,
all must share in the losses and/or gains of the After several hearings in which various witnesses
venture in proportion to their contribution. But in this were examined and documents presented on
case, it was shown that Lim did not have the intent
behalf of both sides, the referee, on February 28,
to form a corporation with Maglana et al. This can
1927, rendered a second report, in which he found
be inferred from acts of unilaterally taking out a
as facts that the alleged partnership between the
surety from Pioneer Insurance and not using the
funds he got from Maglana et al. The record shows insolvent and some of her relatives and employees
that Lim was acting on his own and not in behalf of was only a fictitious organization created for the
his other would-be incorporators in transacting the purpose of deceiving the Bureau of Customs and
sale of the airplanes and spare parts. enable some of the aforesaid relatives, who were
mere coolies, to come to the Philippines under the
10. Vuida de Chan vs Pen, 53 Phil 906
status of merchants. He, therefore, recommended
G.R. No. L-29182 October 24, 1928 that the motion of the insolvent to dismiss the
proceedings against her be denied
LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG
NAW) appellee, vs. JOSE S. Y. PENG, assignee, on June 6, 1927, Judge Francisco Zandueta, who
appellant. had been temporarily assigned to take the place of
Judge Del Rosario, rendered a decision
FACTS: disapproving the report of the referee and affirmed
On June 13, 1925, the San Miguel Brewery, Porta the suspension of the decision of Judge Del Rosario,
Pueco & Co., and Ruiz & Rementaria S. en C. and and on June 6, 1927, dismissed the insolvency
instituted insolvency proceedings against Leoncia proceedings, and ordered the assignee to return to
Vda. de Chan Diaco (alias Lao Liong Naw), alleged the sheriff all the property of the insolvent which he,
to be the owner of a grocery store on Calle Nueva, the sheriff, might have in his possession.
Binondo, known as the store of "La Viuda de G. G. ISSUE: Is creditor entitled to collect individually from
Chan Diaco." the partners the amount of the debt of the insolvent
In their petition for the declaration of the insolvency, partnership?
the above-mentioned firms alleged, among other RULING: YES
things, that Leoncia was indebted to them in the sum
of P26,234.47, which debt was incurred within thirty For the sake of the argument that the debts in
days prior to the filing of said petition. It further question were incurred by the alleged partnership, it
appears that other creditors have filed claims clearly appears from the record that said
against the estate to the amount of P50,000. partnership, as such, has no visible assets that,
therefore, the partners individually must, jointly and
The petition for the declaration of insolvency severally, respond for its debts (Code of Commerce,
Leoncia did not appear at the hearing, art. 127).
notwithstanding the fact that she was duly notified,
and the court declared her insolvent and ordered As the appellee is one of the partners and admits
the sheriff to take possession of her property, that she is insolvent, we can see no reason for the
afterwards sold at public auction for P3,300. Judge dismissal of the proceedings against her.
Simplicio del Rosario, appointed Ricardo Summers,
as the referee.
It is further to be noted that both the partnership and 1953: DEEN CASE: a law firm in Cebu continued its
the separate partners thereof may be joined in the practice of including in its firm name that of a
same action, though the private property of the latter deceased partner, C.D. Johnston. The matter was
cannot be taken in payment of the partnership debts resolved with this Court advising the firm to desist
until the common property of the concern is from including in their firm designation the name of
exhausted (Comapnia Maritima vs. Munoz, 9 Phil., C. D. Johnston, who has long been dead."
326) and, under this rule, it seems clear that the
1958: Register of Deeds of Manila vs. China Banking
alleged partnership here in question may, if
Corporation, "Perkins & Ponce Enrile" CASE; the Court
necessary, be included in the case by amendments
found no reason to depart from the policy it
to the insolvency petition.
adopted in June 1953 when it required Attorneys
We also call attention to the fact that the evidence Alfred P. Deen and Eddy A. Deen of Cebu City to
clearly shows that the business, alleged to have desist from including in their firm designation, the
been that of the partnership, was carried on under name of C. D. Johnston, deceased. The Court
the name "Leoncia Vda. de Chan Diaco" or "La Vda. believes that, in view of the personal and
de G. G. Chan Diaco," both of which are names of confidential nature of the relations between attorney
the appellee, and we think it can be safely held that and client, and the high standards demanded in the
a partnership may be adjudged bankrupt in the canons of professional ethics, no practice should be
name of an ostensible partner, when such name is allowed which even in a remote degree could give
the name under which the partnership did business. rise to the possibility of deception. Said attorneys are
accordingly advised to drop the name "PERKINS"
11. IN RE: Ozaeta and Sycip 92 SCRA 1
from their firm name.
PETITION FOR AUTHORITY TO CONTINUE USE OF THE
ISSUE:
FIRM NAME "SYCIP, SALAZAR, FELICIANO,
HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, Whether or not the two law firms may retain the
FLORENTINO P. FELICIANO, BENILDO G. HERNANDEZ. names of their deceased partners.
GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN
RULING:
C. REYES. JR., ANDRES G. GATMAITAN, JUSTINO H.
CACANINDIN, NOEL A. LAMAN, ETHELWOLDO E. The Court ruled that they should remove the
FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. names of the deceased partners for the following
CENIZA, TRISTAN A. CATINDIG, ANCHETA K. TAN, and reasons:
ALICE V. PESIGAN, petitioners.
Inasmuch as "Sycip, Salazar, Feliciano, Hernandez
IN THE MATTER OF THE PETITION FOR AUTHORITY TO and Castillo" and "Ozaeta, Romulo, De Leon,
CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO, Mabanta and Reyes" are partnerships, the use in
DE LEON, MABANTA & REYES." RICARDO J. ROMULO, their partnership names of the names of deceased
BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE partners will run counter to Article 1815 of the Civil
MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS Code which provides:
ANGELES, and JOSE F. BUENAVENTURA, petitioners.
Art. 1815. Every partnership shall operate under
FACTS: a firm name, which may or may not include the
name of one or more of the partners.
Two separate Petitions were filed before this Court 1)
by the surviving partners of Atty. Alexander Sycip, Those who, not being members of the partnership,
who died on May 5, 1975, and 2) by the surviving include their names in the firm name, shall be subject
partners of Atty. Herminio Ozaeta, who died on to the liability, of a partner.
February 14, 1976, praying that they be allowed to
continue using, in the names of their firms, the names It is clearly tacit in the above provision that names in
of partners who had passed away. In the Court's a firm name of a partnership must either be those of
Resolution of September 2, 1976, both Petitions were living partners and in the case of non-partners,
ordered consolidated. should be living persons who can be subjected to
liability.
Petitioners base their petitions on the following
arguments: In fact, Article 1825 of the Civil Code prohibits a third
person from including his name in the firm name
Under the law, a partnership is not prohibited from under pain of assuming the liability of a partner. The
continuing its business under a firm name which heirs of a deceased partner in a law firm cannot be
includes the name of a deceased partner; in fact, held liable as the old members to the creditors of a
Article 1840 of the Civil Code explicitly sanctions the firm particularly where they are non-lawyers. Thus,
practice when it provides in the last paragraph that: Canon 34 of the Canons of Professional Ethics
"prohibits an agreement for the payment to the
The use by the person or partnership continuing the
widow and heirs of a deceased lawyer of a
business of the partnership name, or the name of a
percentage, either gross or net, of the fees received
deceased partner as part thereof, shall not of itself
from the future business of the deceased lawyer's
make the individual property of the deceased
clients, both because the recipients of such division
partner liable for any debts contracted by such
are not lawyers and because such payments will not
person or partnership.
represent service or responsibility on the part of the
recipient.” Accordingly, neither the widow nor the said products (shall) be returned to said Mrs. Isidora P. Rosales
the said amount of P526,650.00 or the said items on or before
heirs can be held liable for transactions entered into August 30, 1988.
after the death of their lawyer-predecessor. There (SGD & Thumbedmarked) (sic)
being no benefits accruing, there can be no CARMEN LIWANAG
26 H. Kaliraya St. Quezon City
corresponding liability. Signed in the presence of: (Sgd) Illegible (Sgd) Doming Z.
Baligad
Prescinding the law, there could be practical
objections to allowing the use by law firms of the The language of the receipt could not be any
names of deceased partners. The public relations clearer. It indicates that the money delivered to
value of the use of an old firm name can tend to Liwanag was for a specific purpose, that is, for the
create undue advantages and disadvantages in the purchase of cigarettes, and in the event the
practice of the profession. An able lawyer without cigarettes cannot be sold, the money must be
connections will have to make a name for himself returned to Rosales.
starting from scratch. Another able lawyer, who can
join an old firm, can initially ride on that old firm's 1. No. Even assuming that a contract of partnership
reputation established by deceased partners. was indeed entered into by and between the
parties, when money or property have been
12. Liwanag vs CA, 281 SCRA 225 received by a partner for a specific purpose and he
G.R. No. 114398. October 24, 1997 later misappropriated it, such partner is guilty of
estafa.
CARMEN LIWANAG, petitioner, vs. THE HON. COURT
OF APPEALS and THE PEOPLE OF THE PHILIPPINES, 2. No. In a contract of loan once the money is
represented by the Solicitor General, respondents. received by the debtor, ownership over the same is
transferred. Being the owner, the borrower can
FACTS: dispose of it for whatever purpose he may deem
proper.
Liwanag and Tabligan went to the house of Rosales
and asked her to join them in the business of buying
and selling cigarettes. Convinced of the feasibility of
the venture, Rosales readily agreed. 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.
Consequently, Rosales gave several cash advances
to Liwanag and Tabligan amounting to P633,650.00.
During the first two months, Liwanag and Tabligan 13. Guy vs Gacott, 780 SCRA 579
made periodic visits to Rosales to report on the January 13, 2016 G.R. No. 206147
progress of the transactions. The visits, however,
suddenly stopped, and all efforts by Rosales to MICHAEL C. GUY, Petitioner, vs. ATTY. GLENN C.
obtain information regarding their business proved GACOTT, Respondent.
futile. Alarmed by this development and believing
DOCTRINE:
that the amounts she advanced were being
misappropriated, Rosales filed a case of estafa 1. Notice to any partner operates as notice to or
against Liwanag. knowledge to the partnership only. Evidently, it does
not provide for the reverse situation, or that notice to
Liwanag advances the theory that the intention of
the partnership is notice to the partners.
the parties was to enter into a contract of
partnership, wherein Rosales would contribute the 2. With regard to partnerships, ordinarily, the liability
funds while she would buy and sell the cigarettes, of the partners is not solidary.
and later divide the profits between them. She also
argues that the transaction can also be interpreted XPNs: Only in exceptional circumstances shall the
as a simple loan, with Rosales lending to her the partners’ liability be solidary in nature. Articles 1822,
amount stated on an installment basis. 1823 and 1824 of the Civil Code provide for these
exceptional conditions. It is the act of a partner
Issue: 1. WON the parties entered into a partnership which caused loss or injury to a third person that
agreement; NO makes all other partners solidarily liable with the
partnership
2. if in the negative, WON the transaction is a simple
loan - NO FACTS:
RULING: Atty. Gacott purchased two (2) brand new
May 19, 1988 Quezon City
transreceivers from Quantech Systems Corp (QSC)
Received from Mrs. Isidora P. Rosales the sum of FIVE HUNDRED through its employee Rey Medestomas. Due to
TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY PESOS major defects, Gacott returned the items to QSC
(P526,650.00) Philippine Currency, to purchase cigarrets (sic)
(Philip & Marlboro) to be sold to customers. In the event the and requested for replacement. However, despite
said cigarrets (sic) are not sold, the proceeds of the sale or the several demands, Gacott was never given a
replacement or a refund. Thus, Gacott filed a into a separate obligation to perform a partnership
complaint for damages. Summons was served upon contract.
QSC and Medestomas, afterwhich they filed their
This provision clearly states that, first, the partners’
Answer.
obligation with respect to the partnership liabilities is
RTC’s decision ordered the defendants to jointly and subsidiary in nature. To say that one’s liability is
severally pay plaintiff. The decision became final as subsidiary means that it merely becomes secondary
QSC and Medestomas did not interpose an appeal. and only arises if the one primarily liable fails to
Gacott then secured a Writ of Execution. sufficiently satisfy the obligation.
During the execution stage, Gacott learned that In this case, Guy’s liability would only arise after the
QSC was not a corporation, but was in fact a properties of QSC would have been exhausted. The
general partnership. In the articles of partnership, records, however, miserably failed to show that the
Guy was appointed as General Manager of QSC. partnership’s properties were exhausted. Clearly, no
The sheriff attached Guy’s vehicle. genuine efforts were made to locate the properties
of QSC that could have been attached to satisfy the
Guy filed his Motion to Lift Attachment Upon
judgment − contrary to the clear mandate of Article
Personalty, arguing that he was not a judgment
1816.
debtor and, therefore, his vehicle could not be
attached. Second, Article 1816 provides that the partners’
obligation to third persons with respect to the
On June 28, 2009, the RTC issued an order denying
partnership liability is pro rata or joint. Liability
Guy’s motion and his subsequent motion for
is joint when a debtor is liable only for the payment
reconsideration.
of only a proportionate part of the debt. In contrast,
RTC’s ratio: All partners are liable solidarily with the a solidary liability makes a debtor liable for the
partnership for everything chargeable to the payment of the entire debt. In the same vein, Article
partnership under Article 1822 and 1823. 1207 does not presume solidary liability unless: 1)
the obligation expressly so states; or 2) the law or
Guy to seek relief before the CA. The CA dismissed nature requires solidarity. With regard to
Guy’s appeal for the same reasons given by the trial partnerships, ordinarily, the liability of the partners is
court. Guy filed a motion for reconsideration but it not solidary. The joint liability of the partners is a
was denied by the CA. defense that can be raised by a partner impleaded
in a complaint against the partnership.
Guy arguments:
In other words, only in exceptional circumstances
1. That jurisdiction over the person of the
shall the partners’ liability be solidary in nature.
partnership (QSC) was not acquired because the
Articles 1822, 1823 and 1824 of the Civil Code
summons was never served upon it or through any of
provide for these exceptional conditions, to wit:
its authorized officer;
Article 1822. Where, by any wrongful act or omission
2. Article 1816 of the Civil Code which states
of any partner acting in the ordinary course of the
that the liability of the partners to the partnership is
business of the partnership or with the authority of his
merely joint and subsidiary in nature. And he is not
co-partners, loss or injury is caused to any person, not
solidarily liable with the partnership because the
being a partner in the partnership, or any penalty is
solidary liability of the partners under Articles 1822,
incurred, the partnership is liable therefor to the
1823 and 1824 of the Civil Code only applies when it
same extent as the partner so acting or omitting to
stemmed from the act of a partner. In this case, the
act.
alleged lapses were not attributable to any of the
partners. Article 1823. The partnership is bound to make good
the loss:
ISSUE 1: WON a partners’ liability is subsidiary and
generally joint and WON immediate levy upon the (1) Where one partner acting within the scope of his
property of a partner can be made. apparent authority receives money or property of a
third person and misapplies it; and
HELD.
(2) Where the partnership in the course of its business
NO partner’s liability is not subsidiary and generally
receives money or property of a third person and the
joint and the partner’s property cannot be
money or property so received is misapplied by any
immediately levied.
partner while it is in the custody of the partnership.
SC RATIO:
Article 1824. All partners are liable solidarily with the
Article 1816. All partners, including industrial ones, partnership for everything chargeable to the
shall be liable pro rata with all their property and partnership under Articles 1822 and 1823.
after all the partnership assets have been exhausted,
In essence, these provisions articulate that it is
for the contracts which may be entered into in the
the act of a partner which caused loss or injury to a
name and for the account of the partnership, under
third person that makes all other partners solidarily
its signature and by a person authorized to act for
liable with the partnership because of the
the partnership. However, any partner may enter
words "any wrongful act or omission of any
partner acting in the ordinary course of the business," Jurisprudence is replete with pronouncements that
"one partner acting within the scope of his apparent such provision provides an exclusive enumeration of
authority" and "misapplied by any partner while it is the persons authorized to receive summons for
in the custody of the partnership." The obligation is juridical entities.
solidary because the law protects the third person,
In this case, QSC was not served with the summons
who in good faith relied upon the authority of a
through any of the enumerated authorized persons
partner, whether such authority is real or apparent.40
to receive such, namely: president, managing
In the case at bench, it was not shown that Guy or partner, general manager, corporate secretary,
the other partners did a wrongful act or misapplied treasurer or in-house counsel. Service of summons
the money or property he or the partnership upon persons other than those officers enumerated
received from Gacott. A third person who in Section 11 is invalid. Even substantial compliance
transacted with said partnership can hold the is not sufficient service of summons. Nevertheless,
partner’s solidarily liable for the whole obligation if while proper service of summons is necessary to vest
the case of the third person falls under Articles 1822 the court jurisdiction over the defendant, the same is
or 1823. Gacott’s claim stemmed from the alleged merely procedural in nature and the lack of or
defective transreceivers he bought from QSC, defect in the service of summons may be cured by
through the latter's employee, Medestomas. It was the defendant’s subsequent voluntary submission to
for a breach of warranty in a contractual obligation the court’s jurisdiction through his filing a responsive
entered into in the name and for the account of pleading such as an answer. In this case, it is not
QSC, not due to the acts of any of the partners. For disputed that QSC filed its Answer despite the
said reason, it is the general rule under Article 1816 defective summons. Thus, jurisdiction over its person
that governs the joint liability of such breach, and not was acquired through voluntary appearance.
the exceptions under Articles 1822 to 1824. Thus, it
ISSUE 4: WON whether the trial court’s jurisdiction
was improper to hold Guy solidarily liable for the
over QSC extended to the person of Guy insofar as
obligation of the partnership.
holding him solidarily liable with the partnership.
ISSUE 2: WON it is necessary to implead a partner in
HELD: NO.
order to be bound by the partnership liability.
SC RATIO:
HELD: YES. It is necessary to implead a partner.
Although a partnership is based on delectus
SC RATIO:
personae or mutual agency, whereby any partner
Under Article 1821, notice to any partner of any can generally represent the partnership in its business
matter relating to partnership affairs, and the affairs, it is non sequitur that a suit against the
knowledge of the partner acting in the particular partnership is necessarily a suit impleading each and
matter, acquired while a partner or then present to every partner. It must be remembered that a
his mind, and the knowledge of any other partner partnership is a juridical entity that has a distinct and
who reasonably could and should have separate personality from the persons composing it.
communicated it to the acting partner, operate as
A decision rendered on a complaint in a civil action
notice to or knowledge of the partnership, except in
or proceeding does not bind or prejudice a person
the case of fraud on the partnership, committed by
not impleaded therein, for no person shall be
or with the consent of that partner.
adversely affected by the outcome of a civil action
A careful reading of the provision shows that notice or proceeding in which he is not a party.
to any partner operates as notice to or knowledge to
Here, Guy was never made a party to the case. He
the partnership only. Evidently, it does not provide for
did not have any participation in the entire
the reverse situation, or that notice to the partnership
proceeding until his vehicle was levied upon and he
is notice to the partners.
suddenly became QSC’s “co-defendant debtor”
OTHER ISSUES: during the judgment execution stage. It is a basic
principle of law that money judgments are
ISSUE 3: WON the service of summons to QSC was
enforceable only against the property
flawed.
incontrovertibly belonging to the judgment debtor
HELD: YES, however, voluntary appearance cured
14. Buenviaje vs. Salonga, 805 SCRA 369
the defect.
GR No. 216023, Oct 05, 2016
SC RATIO:
DR. RESTITUTO C. BUENVIAJE v. SPOUSES JOVITO R. &
Under Section 11, Rule 14 of the 1997 Revised Rules
LYDIA B. SALONGA
of Civil Procedure, when the defendant is a
corporation, partnership or association organized FACTS:
under the laws of the Philippines with a juridical
On May 29, 1997, Jebson, an entity engaged in the
personality, the service of summons may be made
real estate business, through its Executive Vice
on the president, managing partner, general
President, Bañez, entered into a Joint Venture
manager, corporate secretary, treasurer, or in-house
Agreement (JVA) with Sps. Salonga. Under the JVA,
counsel.
Sps. Salonga, who owned three parcels of land
(2,935 square meters) situated in Tagaytay City, conformity, in violation of the JVA. They maintained
agreed to construct thereon ten high-end single that they were ready to cause the subdivision and
detached residential units, to be known as individual titling of the subject property. They also
Brentwoods Tagaytay Villas (Brentwoods). They filed a cross-claim against Jebson for the latter's
likewise assumed to subdivide the property into failure to complete and deliver to them the three (3)
individual titles upon which Jebson shall assume the units corresponding to their share in Brentwoods, and
liability to pay their mortgage loan with the for representing to the buyers that it owned the land
Metropolitan Bank. where Brentwoods was located.
On the other hand, Jebson undertook to construct The HLURB-RIV Ruling- rescinded the respective
the units at its own expense, secure the building and contracts to sell entered into by Jebson with the
development permits, and the license to sell from complainants and found respondents, Sps. Salonga
the HLURB, as well as the other permits required. Out solidarily liable for he return of the payments made
of the ten (10) units, seven (7) units, i.e., Units 3, 4, 5, by the complainants, with interest of 12% per annum
6, 8, 9, and 10, will belong to Jebson while the and the payment of moral and exemplary
remaining three (3) units, i.e., Units 1, 2, and 7, will damages, attorney's fees, and litigation expenses.
correspond to Sps. Salonga's share. Jebson was also
The HLURB-BOC Ruling - reversed and set aside the
allowed to sell its allocated units under such terms as
HLURB-RIV's ruling, it upheld the validity of the
it may deem fit, subject to the condition that the
respective contracts to sell of Jebson with Buenviaje
price agreed upon was with the conformity of Sps.
and Beliz Realty and ordered the complainants to
Salonga.
pay respondents Sps. Salonga moral damages and
On June 9, 1997, Jebson entered into a Contract to attorney's fees.
Sell with Buenviaje over Unit 5 for a total
The OP's Ruling - OP affirmed the ruling of the HLURB-
consideration of P10,500,000.00, without the
BOC, finding:
conformity of Sps. Salonga.
(a) no factual basis to hold Sps. Salonga solidarily
However, despite full payment of the contract price,
liable with Jebson, pointing out that under the JVA,
Jebson was unable to complete Unit 5 in violation of
Jebson, as the developer, holds Sps. Salonga free
its contractual stipulation to finish the same within
from liability to third parties for non- compliance with
twelve (12) months from the date of issuance of the
HLURB rules and regulations;
building permit. Thus, in April 1999, Buenviaje formally
demanded the immediate completion and delivery (b) the contracts to sell between Jebson and the
of Unit 5, to which Jebson cited the 1997 financial complainants to be unenforceable against Sps.
crisis as the reason for the delay. Accordingly, Salonga whose conformity thereto was not secured
Jebson asked to be given until the early part of the in violation of the JVA;
year 2000 to complete the same but still failed to do
so. The CA Ruling
On May 27, 2002, Buenviaje filed before the HLURB The CA affirmed the OP ruling. It found that Jebson
Regional Field Office IV (HLURB-RIV) a Complaint for violated the terms of the JVA when it failed to secure
Specific Performance with Damages and Attorney's the pertinent government permits for the
Fees, against Jebson, Bañez, and Sps. Salonga development of Brentwoods, and sold its allocated
(respondents), praying for the (a) completion of Unit units without the conformity of Sps. Salonga.
5, (b) partition and subdivision of the property, (c)
ISSUE:
delivery of the title to Unit 5, and (d) payment of
damages and attorney's fees. In the alternative, he WON Sps. Salonga ARE NOT SOLIDARILY LIABLE with
prayed for the rescission of the subject CTS, and the Jebson and Banez to Buenviaje for the completion
return of all payments made thereunder, with of the construction and delivery of the unit
interest at 24% per annum (p.a.), as well as the house
RULING: YES
and lot, and golf share pursuant to the "swapping
arrangement." With the propriety of specific performance having
In their defense, Jebson and Bañez claimed that been decreed, Buenviaje's claim to be restituted the
they were ready to comply with all their contractual alleged purchase price of P10,625,000.00 - for which
obligations but were not able to secure the Sps. Salonga were claimed to be solidarily liable -
thus, holds no basis.
necessary government permits because Sps.
Salonga stubbornly refused to cause the As above-intimated, mutual restitution is the proper
consolidation of the parcels of land covered by TCT consequence of the remedy of resolution. It cannot
No. T-9000, and their partition into ten (10) arise - as it is, in fact, theoretically incompatible - with
individuallots. the remedy of specific performance, which is the
For their part, Sps. Salonga averred that they were relief prayed for and consequently, granted to the
injured party herein.
not liable to the complainants since there was no
privity of contract between them, adding that the In this relation, it is fitting to clarify that the obligations
contracts to sell were unenforceable against them to be fulfilled, i.e., the completion of Unit 5, the
as they were entered into by Jebson without their subdivision of Sps. Salonga's property into individual
lots per unit, and the tum-over of Unit 5, as well as the they had some sort of control over Jebson, it was not
subdivided lot portion allocated to such unit, are shown that they acted in bad faith and had a hand
obligations of Jebson to Buenviaje under the subject in inducing Jebson's acts from which Buenviaje's
CTS dated June 1997. cause of action arose. As such, the foregoing
provision cannot be invoked to hold Sps. Salonga
In this case, it is undisputed that Sps. Salonga were
solidarily liable with Jebson.
not parties to the above-mentioned contract. Under
Article 1311 of the Civil Code, it is a basic principle in Similarly, there is no perceptible legal basis to hold
civil law on relativity of contracts, that contracts can them solidarily liable under Articles 1822 and 1824 of
only bind the parties who had entered into it and it the Civil Code. These provisions, which are found
cannot favor or prejudice third persons. Contracts under Section 3, Chapter 2, Title IX, Book IV of the
take effect only between the parties, their Civil Code on Partnership, respectively state:
successors in interest, heirs and assigns. Thus, absent
Article 1822. Where, by any wrongful act or omission
any privity of contract as to them, there is no basis to
of any partner acting in the ordinary course of the
hold Sps. Salonga liable for any of the obligations
business of the partnership or with the authority of his
stated under the said contract to sell.
co-partners, loss or injury is caused to any person, not
At this juncture, it should be further made clear that being a partner in the partnership, or any penalty is
the imputation of joint or solidary liability against a incurred, the partnership is liable therefor to the
particular person- such as that insistently claimed same extent as the partner so acting or omitting to
against Sps. Salonga by Buenviaje first presupposes act.
the existence of that person's obligation. On the
xxxx
active side, the joint or solidary nature of an
obligation is an aspect of demandability; it pertains Article 1824. All partners are liable solidarily with the
to the extent of a creditor's entitlement to demand partnership for everything chargeable to the
fulfillment against any or all of his debtors under one partnership under Articles 1822 and 1823.
particular obligation. Based on case law, a solidary
obligation is one in which each of the debtors is Evidently, the foregoing legal provisions pertain to
liable for the entire obligation, and each of the the obligations of a co-partner in the event that the
creditors is entitled to demand the satisfaction of the partnership to which he belongs is held liable. In this
whole obligation from any or all of the debtors. On case, Buenviaje never dealt with any partnership
the other hand, a joint obligation is one in which constituted by and between Jebson and Sps.
each debtors is liable only for a proportionate part Salonga. As previously mentioned, the subject CTS,
of the debt, and the creditor is entitled to demand which was the source of the obligations relative to
only a proportionate part of the credit from each the completion and delivery of Unit 5, solely
debtor. devolved upon the person of Jebson. As there was
no partnership privy to any obligation to which
As already mentioned, no source of obligation under Buenviaje is a creditor, Articles 1822 and 1824 of the
the subject CTS can be traced to Sps. Salonga as Civil Code do not apply.
they were clearly non-parties thereto. Therefore,
without such extant obligation, the possibility of While Jebson, as developer, and Sps. Salonga, as
holding them liable in solidum with Jebson under the land owner, entered into a joint venture, which -
said contract is out of the question. based on case law may be considered as a form of
partnership, the fact remains that their joint venture
Neither has Buenviaje persuasively argued that Sps. was never privy to any obligation with Buenviaje;
Salonga may be held solidarily liable pursuant to law, hence, liability cannot be imputed against the joint
which is a distinct source of obligation. More venture based on the same principle of relativity as
particularly, Buenviaje attempts to establish that above¬ mentioned. Besides, it should be pointed out
Section 40 of PD 957 as well as Articles 1822 and 1824 that the JVA between Jebson and Sps. Salonga was
of the Civil Code, are legal provisions which render limited to the construction of the residential units
Sps. Salonga solidarity liable together with Jebson: under the Brentwoods Project and that Jebson had
the sole hand in marketing the units allocated to it to
Section 40 of PD 957 reads:
third persons, such as Buenviaje. In fact, under the
Section 40. Liability of controlling persons. Every express terms of the JVA, Jebson, as the developer,
person who directly or indirectly controls any person had even stipulated to hold Sps. Salonga free from
liable under any provision of this Decree or of any any liability to third parties for non-compliance with
rule or regulation issued thereunder shall be liable HLURB rules and regulations. As things stand, only
jointly and severally with and to the same extent as Jebson should be held liable for its obligations to
such controlled person unless the controlling person Buenviaje under the subject CTS.
acted in good faith and did not directly or indirectly
DISSOLUTION AND WINDING UP
induce the act or acts constituting the violation or
cause of action. ARTICLES 1828 to 1842
In this case, records are bereft of any showing that 1. Yu vs. NLRC, 224 SCRA 75
Sps. Salonga had direct or indirect control over
Jebson throughout the course of the entire YU VS. NATIONAL LABOR RELATIONS COMMISSION
Brentwoods Project. In fact, even if it is assumed that 224 SCRA 75. June 30, 1993.
FACTS: partnership had not retained petitioner Yu in his
original position as Assistant General Manager, and
Benjamin Yu was formerly the Assistant
that there was no law requiring the new partnership
General Manager of the marble quarrying and
to absorb the employees of the old partnership.
export business operated by a registered partnership
with the firm name of "Jade Mountain Products Benjamin Yu, therefore, had not been illegally
Company Limited". The partnership was originally dismissed by the new partnership which had simply
organized by Lea Bendal and Rhodora Bendal as declined to retain him in his former managerial
general partners and Chin Shian Jeng, Chen Ho-Fu position or any other position.
and Yu Chang, all citizens of the Republic of China,
Finally, the NLRC held that Benjamin Yu’s claim for
as limited partners. The partnership business
unpaid wages should be asserted against the
consisted of exploiting a marble deposit found on
original members of the preceding partnership, but
land owned by the Sps. Ricardo and Guillerma Cruz,
these though impleaded had, apparently, not been
situated in Bulacan Province. The partnership had its
served with summons in the proceedings before the
main office in Makati, Metropolitan Manila.
Labor Arbiter.
Yu was hired with a monthly salary of P4,000.00,
Benjamin Yu’s Contention: the NLRC has overlooked
however, according to him, he actually received
the principle that a partnership has a juridical
only half of his stipulated monthly salary, since he
personality separate and distinct from that of each
had accepted the promise of the partners that the
of its members. Such independent legal personality
balance would be paid when the firm shall have
subsists, petitioner claims, notwithstanding changes
secured additional operating funds from abroad. Yu
in the identities of the partners.
actually managed the operations and finances of
the business; he had overall supervision of the Consequently, the employment contract between
workers at the marble quarry in Bulacan and took Benjamin Yu and the partnership and the partnership
charge of the preparation of papers relating to the Jade Mountain could not have been affected by
exportation of the firm's products. changes in the latter’s membership.
In 1988, without the knowledge of Yu, the general ISSUE:
partners sold and transferred their interests in the
partnership to private respondent Willy Co and to 1. whether the partnership which had hired Yu
one Emmanuel Zapanta. Mr. Yu Chang, a limited had been extinguished and replaced by a
partner, also sold and transferred his interest in the new partnership composed of Willy Co and
partnership to Willy Co. The partnership now Emmanuel Zapanta; YES
constituted solely by Willy Co and Emmanuel
2. If a new partnership came into existence,
Zapanta continued to use the old firm name of Jade
can Yu assert his rights under his employment
Mountain, though they moved the firm's main office
contract with the old partnership - YES
from Makati to Mandaluyong. Yu reported to the
Mandaluyong office for work and was informed by RULING:
Willy Co that the latter had bought the business from
ISSUE 1:
the original partners and that it was for him to decide
whether or not he was responsible for the obligations The applicable law in this connection is found in the
of the old partnership, including petitioner's unpaid Civil Code provisions relating to partnerships. Article
salaries. Petitioner was in fact not allowed to work 1828 of the Civil Code provides as follows:
anymore in the Jade Mountain business enterprise.
His unpaid salaries remained unpaid. Yu filed a “Art. 1828. The dissolution of a partnership is the
complaint for illegal dismissal and recovery of change in the relation of the partners caused by any
unpaid salaries accruing from November 1984 to partner ceasing to be associated in the carrying on
October 1988, moral and exemplary damages and as distinguished from the winding up of the business.”
attorney's fees, against Jade Mountain, Mr. Willy Co
Article 1830 of the same Code must also be noted:
and the other private respondents. The partnership
and Willy Co denied petitioner's charges, “Art. 1830. Dissolution is caused:
contending that Yu was never hired as an employee
by the present or new partnership. (1) without violation of the agreement between the
partners;
LA Ruling: Labor Arbiter Nieves Vivar-De Castro
rendered a decision holding that petitioner had xxx
been illegally dismissed. The Labor Arbiter decreed (b) by the express will of any partner, who must act
his reinstatement and awarded him his claim for in good faith, when no definite term of particular
unpaid salaries, backwages and attorney’s fees. undertaking is specified;
NLRC Ruling: reversed the decision of the LA and (2) in contravention of the agreement between the
dismissed petitioner’s complaint partners, where the circumstances do not permit a
The NLRC held that a new partnership consisting of dissolution under any other provision of this article, by
Mr. Willy Co and Mr. Emmanuel Zapanta had bought the express will of any partner at any time; x x x
the Jade Mountain business, that the new
In the case at bar, just about all of the partners had 2, either alone or with others, and without liquidation
sold their partnership interests (amounting to 82% of of the partnership affairs;
the total partnership interest) to Mr. Willy Co and
(6) When a partner is expelled and the remaining
Emmanuel Zapanta. The acquisition of 82% of the
partners continue the business either alone or with
partnership interest by new partners, coupled with
others without liquidation of the partnership affairs;
the retirement or withdrawal of the partners who had
originally owned such 82% interest, was enough to The liability of a third person becoming a partner in
constitute a new partnership. the partnership continuing the business, under this
article, to the creditors of the dissolved partnership
The occurrence of events which precipitate the legal
shall be satisfied out of the partnership property only,
consequence of dissolution of a partnership do not,
unless there is a stipulation to the contrary. When the
however, automatically result in the termination of
business of a partnership after dissolution is
the legal personality of the old partnership. Article
continued under any conditions set forth in this
1829 of the Civil Code states that:
article the creditors of the retiring or deceased
“On dissolution the partnership is not terminated, but partner or the representative of the deceased
continues until the winding up of partnership affairs is partner, have a prior right to any claim of the retired
completed.” partner or the representative of the deceased
partner against the person or partnership continuing
In the ordinary course of events, the legal personality
the business on account of the retired or deceased
of the expiring partnership persists for the limited
partner’s interest in the dissolved partnership or on
purpose of winding up and closing of the affairs of
account of any consideration promised for such
the partnership.
interest or for his right in partnership property.
In the case at bar, it is important to underscore the
Nothing in this article shall be held to modify any right
fact that the business of the old partnership was
of creditors to set aside any assignment on the
simply continued by the new partners, without the
ground of fraud. x x x (Emphasis supplied)
old partnership undergoing the procedures relating
to dissolution and winding up of its business affairs. In Under Article 1840 above, creditors of the old Jade
other words, the new partnership simply took over Mountain are also creditors of the new Jade
the business enterprise owned by the preceding Mountain which continued the business of the old
partnership, and continued using the old name of one without liquidation of the partnership affairs.
Jade Mountain Products Company Limited, without
Indeed, a creditor of the old Jade Mountain, like
winding up the business affairs of the old partnership,
Benjamin Yu in respect of his claim for unpaid wages,
paying off its debts, liquidating and distributing its net
is entitled to priority vis-a-vis any claim of any retired
assets, and then re-assembling the said assets or
or previous partner insofar as such retired partner’s
most of them and opening a new business
interest in the dissolved partnership is concerned.
enterprise.
Under Article 1840 above, Benjamin Yu is entitled to
ISSUE 2:
enforce his claim for unpaid salaries, as well as other
In Singson, et al. vs. Isabela Saw Mill, et al, the Court claims relating to his employment with the previous
held that under facts very similar to those in the case partnership, against the new Jade Mountain.
at bar, a withdrawing partner remains liable to a third
2. Testate Estate of Mota vs. Serra. 47 Phil 464
party creditor of the old partnership.
G.R. No. L-22825 February 14, 1925
The liability of the new partnership, upon the other
hand, in the set of circumstances obtaining in the TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL.,
case at bar, is established in Article 1840 of the Civil plaintiffs-appellants, vs. SALVADOR SERRA,
Code which reads as follows: defendant-appellee
“Art. 1840. In the following cases credit DOCTRINE:
(3) When any partner retires or dies and the business The dissolution of the firm does not relieve any of its
of the dissolved partnership is continued as set forth members from liability for existing obligations,
in Nos. 1 and 2 of this article, with the consent of the although it does save them from new obligation to
retired partners or the representative of the which they have not expressly or impliedly assented
deceased partner, but without any assignment of his and any of them may be discharge from old
right in partnership property; obligations by novation or other form of release. A
partnership continues, even after dissolution, for the
(4) When all the partners or their representative
purpose of winding up its affairs. at the termination
assign their rights in partnership property to one or
of the object for which it was created the
more third persons who promise to pay the debts
partnership is extinguished pending the winding up
and who continue the business of the dissolved
of some incidents and obligations of the partnership,
partnership;
but in such case, the partnership will be reputed as
(5) When any partner wrongfully causes a dissolution existing until the juridical relations arising out of the
and remaining partners continue the business under contract are dissolved. A partnership cannot be
the provisions of article 1837, second paragraph, No.
considered as extinguished until all the obligations Whitaker & Concepcion having failed to pay to
pertaining to it are fulfilled. Serra a part of the purchase price (P750,000), Serra,
foreclosed the mortgage upon the said hacienda. It
FACTS:
was adjudicated to him at the public sale for
Salvador Serra, Lazaro Mota and Juan J. P500,000. He was put in possession including what
Vidaurrazaga for himself and in behalf of his brother, was planted at the time, together with all the
Felix and Dionisio Vidaurrazaga, entered into a improvements made by Whitaker & Concepcion.
contract of partnership for the construction and
Since Serra failed to pay ½ of the amount expended
exploitation of a railroad line of about 10 kms. from
by Mota et al. upon the construction of the railroad
the "San Isidro" and "Palma" centrals to the place
line (P113,046.46), as well as Whitaker & Concepcion,
known as "Nandong."
Mota et al. instituted the present action. PRAYER:
Original capital stipulated: P150,000 to be paid by
(1) That the deed of Feb. 1, 1919 (Contract of
parties in equal parts with Mota et. al. were entrusted
Partnership) be declared valid and binding;
with the administration of the partnership.
(2) That after the execution of the said document,
Mota et al owns "San Isidro" Central while Serra owns
Serra improved economically so as to be able to pay
“Palma” Central.
Mota et al. the amount owed, but that he refused to
The agreed capital (P150k) however, did not prove pay either in part or in whole the said amount
sufficient, as the expenses up to May 15, 1920, had notwithstanding the several demands made on him
reached P226,092.92 for the purpose; and
Serra entered into a contract of sale with Venancio (3) Serra be sentenced to pay Mota et al.
Concepcion, Phil. C. Whitaker, and Eusebio R. de P113,046.46, with the stipulated interest at 10% p.a.
Luzuriaga, and sold the estate and central known as
Serra set up three special defenses:
"Palma" with its running business, as well as all the
improvements, machineries and buildings, real and (1) The novation of the contract by the substitution
personal properties, rights, choses in action and of the debtor with the conformity of the creditors;
interests, including the sugar plantation of the
(2) the confusion of the rights of the creditor and
harvest year of 1920 to 1921, covering all his
debtor; and
property. They were willing to assume the Serra's
obligation to Mota et al. (3) the extinguishment of the contract (Contract of
partnership)
Before the delivery to the purchasers of
the hacienda thus sold, Luzuriaga renounced all his TRIAL COURT:
rights under the contract of sale in favor of
Concepcion & Whitaker. Absolved Serra from the complaint.
Thus, Concepcion, Whitaker & Serra executed There was a novation of the contract by the
another deed of absolute sale of the said "Palma" substitution of the debtor. Whitaker & Concepcion,
Estate for P1,695,961.90. Serra received at the time of upon purchasing the "Palma" Central, were
executing the deed and the balance was payable subrogated in the place of the Serra in all his rights
by installments in the form and manner stipulated in and obligations under the contract relating to the
the contract. Clause 6 of the deed: Whitaker & railroad line existing between "Palma" and "San
Concepcion state that they are aware of the Isidro" centrals and Mota et al. agreed to this
contract that Serra has with the proprietors of the subrogation
"San Isidro" Central and hereby obligate themselves
As to the prayer that contract of partnership be
to respect the said contract and subrogate
declared valid and binding, there was no way of
themselves into the rights and obligations
reviving the contract which the parties themselves in
thereunder. They also bind themselves to comply
interest had spontaneously and voluntarily
with all the contracts heretofore entered by the
extinguished thru the Contract of Sale bet.
vendor with the customers, coparceners on shares
Concepcion, Whitaker & Mota et al. on ½ of the
and employees.
railroad
Moreover, Concepcion & Whitaker bought from
Mota et al. the ½ of the railroad line pertaining to the ISSUE: Whether Serra cannot be held liable to pay
latter, executing a Contract of Sale. They agreed Mota et. al. a part of the cost of the construction of
that the partnership "Palma" and "San Isidro," formed the railroad line stipulated in the contract of
by the agreement of Feb. 1, 1919 should be dissolved partnership by reason of the dissolution of the
upon the execution of the contract, and that the said partnership? (NO, Serra is liable)
partnership agreement should be totally cancelled
and of no force and effect whatever. TERMINATION OF PARTNERSHIP
Thus, "Hacienda Palma," with the entire railroad, the Serra’s Contention: By virtue of the Contract of Sale
subject-matter of the contract of partnership on ½ of the railroad, the Testate Estate of Lazaro
between Mota et al. and Serra, became the Mota et al. and Phil. C. Whitaker and Venancio
property of Whitaker & Concepcion. Concepcion, by common consent, decided to
dissolve the partnership between "Hacienda Palma" could not prevent the Serra from selling to them his
and "Hacienda San Isidro," thus cancelling the "Hacienda Palma" with the rights that he had over
contract of partnership of February 1, 1919. the railroad in question.
Mota et al. cannot enforce any right arising out of Serra ceased to be a partner in said line and,
that contract of partnership, which has been therefore, Mota et al. had to take the vendees as
annulled, such as the right to claim now a part of the their new partners.
cost of the construction of the railroad line stipulated
in that contract. Mota et al. had to come to an understanding with
the new owners of the "Hacienda Palma" in
RULING: connection with the railroad line "Palma-San Isidro-
Nandong."
Serra's contention signifies that any person, who has
contracted a valid obligation with a partnership, is Mota et al. were not a party to the Contract of Sale
exempt from complying with his obligation by the between Serra, Whittaker, Concepcion & Luzuriaga.
mere fact of the dissolution of the partnership. Serra's No stipulation whereby the obligation of the Serra
contention is untenable. was novated with the consent of the creditor
OTHER ISSUES: These in turn acquired the credit of the Testate Estate
of Lazaro Mota et al. by virtue of the debt (Contract
NOVATION
of Sale on ½ of the railroad); thus the rights of the
Serra’s Contention: By the substitution of the debtor
debtor and creditor were merged in one person.
with the consent of the creditor, the obligation of
SUPREME COURT: No. The rights and titles which Mota
Serra to pay his obligation under the contract of
et al. sold to Whitaker & Concepcion refer only to
partnership was extinguished since there was a
one-half of the railroad line. The credit which they
novation of the contract
had against Serra for ½ of the cost of construction of
the said line was not included in the sale contained
SUPREME COURT: There was no novation. There was
in the Contract of Sale on ½ of the railroad.
none intended; Mota et. al have not expressly
consented to the substitution of Serra.
That Mota et al. sold their rights and titles over ½ of
the line, is evident from the very Contract of Sale. The
It should be noted that in order to give novation its
purchasers, Whitaker and Concepcion, to secure
legal effect, the law requires that the creditor should
the payment of the price, executed a mortgage in
consent to the substitution of a new debtor. This
favor of Mota et al. on the same rights and titles that
consent must be given expressly for the reason that,
they had bought and also upon what they had
since novation extinguishes the personality of the first
purchased from Serra.
debtor who is to be substituted by new one, it implies
on the part of the creditor a waiver of the right that
In other words, Whitaker & Concepcion mortgaged
he had before the novation which waiver must be
unto Mota et al. what they had bought from Mota
express
et al. and also what they had bought from Serra.
The fact that Phil. C. Whitaker and Venancio
The rights and titles transferred by Mota et al. to
Concepcion were willing to assume the Serra's
Whitaker & Concepcion were only those they had
obligation to Mota et al. is of no avail, if the latter
over the other half of the railroad line.
have not expressly consented to the substitution of
the first debtor.
No novation of the contract between Mota et al.
and Serra, as regards the obligation of the latter to
Letter presented as proof of alleged consent of
pay the former ½ of the cost of the construction of
Mota et. al to the substitution of Whitaker &
the said railroad line, and since Mota et al. did not
Concepcion only shows that they asked the two to
include in the sale, evidenced by Contract of Sale,
be their new partners (not substituted). It is natural
the credit that they had against the Serra.
that Mota et al. should have done this. Still, there was
nothing to show the express consent, the manifest
That the obligation of the Serra became
and deliberate intention of Estate of Mota et al. to
extinguished by the merger of the rights of creditor
exempt Serra from his obligation and to transfer it to
and debtor by the purchase of Whitaker and
his successors in interest, Whitaker & Concepcion.
Concepcion is wholly untenable.
Serra transferred his hacienda to C. Whitaker &
3. G.R. No. 17024 March 24, 1922
Concepcion and made it known to Mota et al. that
the new owners would hold themselves liable for the
cost of constructing the said railroad line. Mota et al.
DOMINGO BEARNEZA, plaintiff-appelle, vs. BALBINO was that of a partnership in liquidation, and the only
DEQUILLA, defendant-appellant. rights inherited by her testamentary heir, the herein
plaintiff, were those resulting from the said liquidation
FACTS:
in favor of the deceased partner, and nothing more.
Balbino Dequilla, the herein defendant, and Before this liquidation is made, which up to the
Perpetua Bearneza formed a partnership for the present has not been effected, it is impossible to
purpose of exploiting a fish pond situated in the determine what rights or interests, if any, the
barrio of Talisay, municipality of Barotac Nuevo, deceased had, the partnership bond having been
Province of Iloilo, Perpetua obligating herself to dissolved.
contribute to the payment of the expenses of the
(According to Art. 1830 (5) of the NCC, dissolution of
business, which obligation she made good, and
a partnership is caused by the death of any partner.)
both agreeing to divide the profits between
themselves, which they had been doing until the 4. G.R. No. L-3518 February 29, 1952
death of the said Perpetua in the year 1912.
URBANO LOTA (Substituted by SOLOMON LOTA in his
Perpetua Bearneza left a will in one of the clauses of capacity as Administrator of the Estate of URBANO
which she appointed Domingo Bearnez, the herein LOTA), plaintiff-appellant, vs. BENIGNO TOLENTINO,
plaintiff, as her heir to succeed to all her rights and defendant-appellee
interests in the fish pond in question.
DOCTRINE:
Demand having been made upon Balbino Dequilla
PARTNERSHIPS:
by Domingo Bearneza for the delivery of the part of
the fish pond belonging to his decedent, Perpetua, ACCOUNTING AND LIQUIDATION; ACTION FOR,
and delivery having been refused, Domingo CANNOT BE CONTINUED AGAINSTHEIRS OF
Bearneza brought this action to recover said part of DECEASED PARTNER.·
the fish pond belonging to his decedent, Perpetua,
and delivery having been refused, Domingo Plaintiff's action for accounting and liquidation of the
Bearneza brought this action recover said part of the partnership formed between plaintiff and the
fish pond and one-half of the profits received by the deceased defendant who was the industrial and
defendant from the fish pond from the year 1913 to managing partner cannot be continued against the
1919, as damages (the amended complaint was heirs of the deceased defendant. It is well settled
filed on April 12, 1920), amounting, according to that when a member of mercantile partnership dies,
plaintiff, to the sum of thirteen thousand one the duty of liquidating its affairs devolves upon the
hundred pesos (13,100) surviving member, or members, of the firm, not upon
the legal representatives of the deceased partner.
ISSUE: WON plaintiff as heir is entitled to recover one-
half of the fishpond - NO FACTS:
RULING:
On April 6, 1949, counsel for plaintiff filed a motion
The partnership formed by Perpetua Bearneza and praying that deceased defendant be substituted by
Balbino Dequilla, as to the existence of which the his heirs, Marta Sadiasa and Efigenia, Resurreccion
proof contained in the record is conclusive and and Mercedes, all surnamed Tolentino, as parties
there is no dispute, was of a civil nature. It was a defendant in this case. To said motion counsel for
particular partnership, as defined in article 1678 of defendant interposed an opposition upon the
following ground that the nature of the action for
the Civil Code, it having had for its subject-matter a
accounting and liquidation of the partnership filed
specified thing, to with, the exploitation of the
by plaintiff since March 3, 1937, is purely personal in
aforementioned fish pond.
character and, upon the death of the defendant on
Now, this partnership not having been organized in November 22, 1939, the claim was already
extinguished.
the form of a mercantile partnership, and, therefore,
the provisions of the Code of Commerce not being
ANTECEDENT FACTS:
applicable thereto (article 1670 of the Civil Code), it
was dissolved by the death of Perpetua Bearneza,
On March 3, 1937, plaintiff filed an action against
and falls under the provisions of article 1700,
defendant to order the latter (a) to render an
subsection 3, of the same Code, and not under the
accounting of his management of their partnership,
exception established in the last paragraph of said
and (b) to deliver the plaintiff whatever share he
article 1700 of the Civil Code. may have in the assets of the partnership after the
liquidation has been approved by the Court.
Neither can it be maintained that the partnership
continued to exist after the death of Perpetua,
The partnership above-mentioned was entered into
inasmuch as it does not appear that any stipulation
by and between plaintiff and defendant in the year
to that effect has ever been made by her and the
1918, whereby they agreed to engage in general
defendant, pursuant to the provisions of article 1704
business in the municipality of Alabat, province of
of the Code last cited. Batangas, both to divide the profits and losses share
The partnership having been dissolved by the death alike, and defendant to be manager of the
partnership. Plaintiff alleges that from 1918 until 1928
of Perpetua Bearneza, its subsequent legal status
defendant had rendered an annual accounting, Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil.,
but has refused to do so from 1929 to 1937, hence, 744.)
plaintiff's complaint.
And the same rule must be equally applicable to a
Defendant filed an answer, alleging that hewas the civil partnership clothed with the form of a
industrial partner in said partnership; that he commercial association (art. 1670, Civil Code:
rendered a yearly accounting and liquidation Lichauco vs. Licahuco, 33 Phil., 350).
thereof from 1918 to 1932, and that in the latter year,
1932, the partnership was dissolved and defendant Moreover, If the plaintiff was genuinely interested in
delivered all its properties and assets to the plaintiff. substituting the proper party, assuming that plaintiff's
Hence, defendant prays for the dismissal of plaintiff's action may still be pursued after Tolentino's death,
complaint. he should have taken timely measures to have the
administratrix appointed on August 8, 1941, qualify
The plaintiff died in 1938, and on September 28, 1939, or, in case of her failure or refusal, to procure the
he was substituted by the administrator of his estate,
appointment of another administrator; because the
Solomon Lota.
plaintiff could have availed himself of section 6, Rule
80, of the Rules of Court, providing that "letters of
On December 8, 1939, defendant's counsel made a
administration may be granted to any qualified
suggestion upon the record that defendant died on
November 26, 1939. On January 9, 1940, the Court applicant, though it appears that there are other
gave plaintiff 30 days to amend the complaint by competent persons having better right to the
substituting for the deceased defendant the administration, if such persons fail to appear when
administrator of his estate or his legal representative. notified and claim the issuance of letters to
themselves." Certainly, inaction for almost eight
On January 28, 1941, the Court ordered the dismissal years (after the issuance of letters of administration)
of the case for lack of prosecution. This order was on the part of the appellant, sufficiently implies
reconsidered and set aside upon a showing by indifference to or desistance from its suit.
plaintiff that on March 28, 1941, he had filed a
petition for the issuance of letters of administration to The theory of the appellant is that the heirs may
deceased defendant's surviving spouse, Marta properly be substituted for the deceased Benigno
Sadiasa, for the purpose of substituting her for the Tolentino, because they are in possession of property
deceased defendant, said petition being Special allegedly belonging to the partnership in question,
Proceedings No. 3859 of this Court entitled "Intestate and the appellant seeks the recovery thereof. Apart
Estate of the late Benigno Tolentino, Solomon Lota, from the fact that said allegation seems to refer to
petitioner." This special proceedings was, however, cause of action foreign to the claim for accounting
dismissed for failure of the administratrix to file a and liquidation against Tolentino, and should have
bond and to take her oath.
been made in proper pleading to duly admitted by
the lower court, the filing of appellant's motion for
It will thus be seen that from defendant's death on
substitution more than twelve years after the
November 26, 1939, to the present, or almost ten
institution of the complaint came too late and
years, no administrator or legal representative had
been actually substituted to take the place of said already called for the prosecution. It is immaterial
defendant. It was only on April 6, 1949, that plaintiff that, before the appealed resolution was issued by
made another try to substitute said deceased by the lower court, the appellant attempted to have
filing his motion, referred to in the first paragraph of the deceased defendant had not yet been properly
this resolution, praying that defendant's heirs be substituted.
substituted for him as parties defendant.
5. Goquiolay vs. Sycip
The present appellant is Solomon Lota, in his FACTS:
capacity as administrator of the estate of Urbano
Lota, original plaintiff, who died in l938. Tan Sin An and Goquiolay entered into a general
commercial partnership under the partnership name
ISSUE: WON after the death of the defendant Benigno “Tan Sin An and Antonio Goquiolay” for the purpose
Tolentino on November 22, 1939, plaintiff's action for of dealing in real estate. The agreement lodged
accounting and liquidation of the partnership upon Tan Sin An the sole management of the
formed in l918 between Urbano Lota and Benigno partnership affairs. The lifetime of the partnership was
Tolentino, of which the latter was the industrial and fixed at ten years and the Articles of Co-partnership
managing partner, may be continued against the stipulated that in the event of death of any of the
heirs of Benigno Tolentino. partners before the expiration of the term, the
partnership will not be dissolved but will be
RULING: continued by the heirs or assigns of the deceased
partner. But the partnership could be dissolved upon
Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 172: mutual agreement in writing of the partners.
Goquiolay executed a GPA in favor of Tan Sin An.
It is well settled that when a member of a mercantile The plaintiff partnership purchased 3 parcels of land
partnership dies, the duty of liquidating its affairs which was mortgaged to “La Urbana” as payment
devolves upon the surviving member, or members, of P25,000. Another 46 parcels of land were
of the firm, not upon the legal representatives of the purchased by Tan Sin An in his individual capacity
deceased partner. (Wahl vs. Donaldson Sim and which he assumed payment of a mortgage debt for
P35K. A downpayment and the amortization were would become general partners rather than limited
advanced by Yutivo and Co. The two obligations ones.
were consolidated in an instrument executed by the
partnership and Tan Sin An, whereby the entire 49 ISSUE 2: Whether or not the consent of the other
lots were mortgaged in favor of “Banco Hipotecario” partners was necessary to perfect the sale of the
Tan Sin An died leaving his widow, Kong Chai Pin partnership properties to Sycip and Lee?-NO
and four minor children. The widow subsequently
became the administratrix of the estate. Repeated HELD 2: Strangers dealing with a partnership have the
demands were made by Banco Hipotecario on the right to assume, in the absence of restrictive clauses
partnership and on Tan Sin An.
Defendant Sing Yee, in the co-partnership agreement, that every general
upon request of defendant Yutivo Sons , paid the partner has power to bind the partnership, specially
remaining balance of the mortgage debt, the those partners acting with ostensible authority. And
mortgage was cancelled Yutivo Sons and Sing Yee so, we held in one case:
filed their claim in the intestate proceedings of Tan
Sin An for advances, interest and taxes paid in . . . Third persons, like the plaintiff, are not bound in
amortizing and discharging their obligations to “La entering into a contract with any of the two partners,
Urbana” and “Banco Hipotecario.” Kong Chai Pin to ascertain whether or not this partner with whom
filed a petition with the probate court for authority to the transaction is made has the consent of the other
sell all the 49 parcels of land. She then sold it to Sycip partner. The public need not make inquiries as to the
and Lee in consideration of P37K and of the vendees agreements had between the partners. Its
assuming payment of the claims filed by Yutivo Sons knowledge is enough that it is contracting with the
and Sing Yee. Later, Sycip and Lee executed in favor partnership which is represented by one of the
of Insular Development a deed of transfer covering managing partners.
the 49 parcels of land.
When Goquiolay learned
about the sale to Sycip and Lee, he filed a petition in "There is a general presumption that each individual
the intestate proceedings to set aside the order of partner is an agent for the firm and that he has
the probate court approving the sale in so far as his authority to bind the firm in carrying on the
interest over the parcels of land sold was concerned. partnership transactions."
Probate court annulled the sale executed by the
administratrix w/ respect to the 60% interest of "The presumption is sufficient to permit third persons
Goquiolay over the properties Administratrix to hold the firm liable on transactions entered into by
appealed.
The decision of probate court was set one of the members of the firm acting apparently in
aside for failure to include the indispensable parties. its behalf and within the scope of his authority."
New pleadings were filed. The second amended
complaint prays for the annulment of the sale in
favor of Sycip and Lee and their subsequent 6. Goquiolay vs. Sycip, Resolution of Motion for
conveyance to Insular Development. The complaint Reconsideration
was dismissed by the lower court hence this appeal.
Facts: The matter now pending is the appellant's
ISSUE 1: Whether or not a widow or substitute motion for reconsideration of our main decision,
become also a general partner or only a limited wherein we have upheld the validity of the sale of
partner. Whether or not the lower court err in holding the lands owned by the partnership Goquiolay & Tan
that the widow succeeded her husband Tan Sin An Sin An, made in 1949 by the widow of the managing
in the sole management of the partnership upon partner, Tan Sin An (executed in her dual capacity
Tan’s death of Administratrix of her husband's estate and as
partner, in lieu of the husband), in favor of buyers
HELD 1: Kong Chai Pin became a mere general Washington Sycip and Betty Lee
partner. By seeking authority to manage partnership
property, Tan Sin An’s widow showed that she Issue: Whether Kong Chai Pin, widow of the
desired to be considered a general partner. By deceased partner Tan Sin An was incapacitated by
authorizing the widow to manage partnership law to manage the affairs of the partnership?
property (which a limited partner could not be
authorized to do), Goqulay recognized her as such
Held: It is argued that the authority given by
partner, and is now in estoppel to deny her position
Goquiolay to the widow Kong Chai Pin was only to
as a general partner, with authority to administer
manage the property, and that it did not include the
and alienate partnership property. The articles did
power to alienate, citing Article 1713 of the Civil
not provide that the heirs of the deceased would be
Code of 1889. What this argument overlooks is that
merely limited partners; on the contrary, they
the widow was not a mere agent, because she had
expressly stipulated that in case of death of either
become a partner upon her husband's death, as
partner, “the co partnership will have to be
expressly provided by the articles of co-partnership.
continued” with the heirs or assignees. It certainly
Even more, granting that by succession to her
could not be continued if it were to be converted
husband, Tan Sin An, the widow only a became the
from a general partnership into a limited partnership
limited partner, Goquiolay's authorization to
since the difference between the two kinds of
manage the partnership property was proof that he
associations is fundamental, and specially because
considered and recognized her has general partner,
the conversion into a limited association would leave
at least since 1945. The reason is plain: Under the law
the heirs of the deceased partner without a share in
(Article 148, last paragraph, Code of Commerce),
the management. Hence, the contractual
appellant could not empower the widow, if she were
stipulation actually contemplated that the heirs
only a limited partner, to administer the properties of obligations of the partnership, it was deemed proper
the firm, even as a mere agent: and wise by Ng Diong, who continued to be the
manager of the partnership, to sell all its properties
Limited partners may not perform any act of mortgaged to Hodges in order that the excess may
administration with respect to the interests of the co- be applied to the Payment of said other obligations.
partnership, not even in the capacity agents of the
managing partners.(Emphasis supplied) Issue: Whether the manager can still execute the
sale of its properties to C. N. Hodges as was done by
By seeking authority to manage partnership Ng Diong? -YES
property, Tan Sin An's widow showed that she
desired to be considered a general partner. By Held: Yes, because Ng Diong was still the managing
authorizing the widow to manage partnership partner of the partnership and he had the necessary
property (which a limited partner could not be authority to liquidate its affairs under its articles of co-
authorized to do), Goquiolay recognized her as such partnership. He may sell the partnership properties
partner, and is now in estoppel to deny her position even after the life of the partnership has already
as a general partner, with authority to administer expired since he, as manager, is empowered to wind
and alienate partnership property. up the business affairs of the partnership.
Besides, as we pointed out in our main decision, the 8. Lichauco vs. Lichauco
heir ordinarily (and we did not say "necessarily")
Facts: In 1901, F. Lichauco Hermanos partnership was
becomes a limited partner for his own protection,
formed. It was provided, among others, in the
because he would normally prefer to avoid any
liability in excess of the value of the estate inherited partnership agreement that Faustino Lichauco will
so as not to jeopardize his personal assets. But this be the managing partner; and that the firm cannot
statutory limitation of responsibility being designed to be dissolved except upon the 2/3 vote of all the
protect the heir, the latter may disregard it and partners. In 1904, the firm wasn’t performing well and
instead elect to become a collective or general was unprofitable and so its machineries were
partner, with all the rights and privileges of one, and dismantled. In 1905, Eugenia and one other partner
answering for the debts of the firm not only with the demanded Faustino to make an accounting of the
inheritance bud also with the heir's personal fortune. firm’s assets but Faustino refused to do so. Belatedly
This choice pertains exclusively to the heir, and does in 1912, Eugenia et al filed a civil suit against Faustino
not require the assent of the surviving partner. to compel the latter to perform ac accounting.
Faustino, in his defense, argued that the firm was not
It must be remembered that the articles of co- dissolved pursuant to the partnership agreement
partnership here involved expressly stipulated that:
there being no 2/3 vote from all the members
(Faustino et al are only 1/5 of the firm).
In that event of the death of any of the partners at
any time before the expiration of said term, the co- Issue: Whether or not Eugenia et al can demand an
partnership shall not be dissolved but will have to be accounting?
continued and the deceased partner shall be
represented by his heirs or assigns in said co- Held: Yes. The firm was already dissolved in 1904
partnership" (Art. XII, Articles of Co-Partnership). when its machineries were dismantled – this was a
sign that the firm abandoned and concluded the
The Articles did not provide that the heirs of the purpose for it was formed (rice cleaning business).
deceased would be merely limited partner; on the Upon said dissolution, it was the duty of Faustino to
contrary they expressly stipulated that in case of liquidate the assets and inform his partners. The
death of either partner "the co-partnership ... will provision which requires a 2/3 votes of all the
have to be continued" with the heirs or assigns. It partners to dissolve the firm cannot be given effect
certainly could not be continued if it were to be because the same denied the right of a less number
converted from a general partnership into a limited
of partners to effect the dissolution especially where
partnership, since the difference between the two
the firm has already sustained huge losses. It would
kinds of associations is fundamental; and specially
because the conversion into a limited association be absurd and unreasonable to hold that such an
would leave the heirs of the deceased partner association could never be dissolved and liquidated
without a share in the management. Hence, the without the consent and agreement of two-thirds of
contractual stipulation does actually contemplate its partners, notwithstanding that it had lost all its
that the heirs would become general partners rather capital, or had become bankrupt, or that the
than limited ones. enterprise for which it had been organized had been
concluded or utterly abandoned.
7. Ng Cho Cio vs Ng Diong
9. Soncuya vs. De Luna
Facts: The partnership NG CHIN BENG HERMANOS
obtained several loans subsequently, the partnership Facts: Petitioner filed a complaint against
was declared insolvent upon petition of its creditors, respondent for damages as a result of the fraudulent
among them is C.N. Hodges. The indebtedness of administration of the partnership, “Centro Escolar de
the partnership to C. N. Hodges which was the Senoritas” of which petitioner and the deceased
subject of the foreclosure proceedings in a separate Avelino Librada were members. For the purpose of
case was P103,883.34. In order to pay off the same adjudicating to plaintiff damages which he alleges
and raise necessary funds to pay the other to have suffered as a partner, it is necessary that a
liquidation of the business be made that the end Facts: Plaintiff, Po Yeng Cheo, alleged sole owner of
profits and losses maybe known and the causes of a business formerly conducted in the City of Manila
the latter and the responsibility of the defendant as under the style of Kwong Cheong, as managing
well as the damages in which each partner may partner in said business and to recover from him its
have suffered, maybe determined. properties and assets. The defendant having died
during the pendency of the cause in the court below
Issue: Whether the petitioner can claim damages. and the death suggested of record, his
administrator, one Lim Yock Tock, was required to
Held: According to the Supreme Court the appear and make defense.
complaint is not sufficient to constitute a cause of
action on the part of the plaintiff as member of the In a decision dated July 1, 1921, the Honorable C. A.
partnership to collect damages from defendant as Imperial, presiding in the court below, found that the
managing partner thereof, without previous plaintiff was entitled to an accounting from Lim Ka
liquidation. Thus, for a partner to be able to claim Yam, the original defendant, as manager of the
from another partner who manages the general co- business already reffered to, and he accordingly
partnership, allegedly suffered by him by reason of required Lim Yock Tock, as administrator, to present
the fraudulent administration of the latter, a previous a liquidation of said business within a stated time. This
liquidation of said partnership is necessary. order bore no substantial fruit, for the reason that Lim
Yock Tock personally knew nothing about the
10. Singsong vs. Isabela Sawmill aforesaid business (which had ceased operation
more than ten years previously) and was apparently
Facts: In 1951, defendants entered into a contract of unable to find any books or documents that could
partnership under the firm name “Isabela Sawmill”. shed any real light on its transaction. However, he
In 1956 the plaintiff sold to the partnership a motor did submit to the court a paper written by Lim Ka
truck and two tractors. The partnership was not able Yam in life purporting to give, with vague and
to pay their whole balance even after demand was uncertain details, a history of the formation of the
made. One of the partners withdrew from the Kwong Cheong Tay and some account of its
partnership but instead of terminating the said disruption and cessation from business in 1910. To this
partnership it was continued by the two remaining narrative was appended a statement of assets and
liabilities, purporting to show that after the business
partners under the same firm name. Plaintiffs also
was liquidate, it was actually debtor to Lim Ka Yam
seek the annulment of the assignment of right with
to the extent of several thousand pesos.
chattel mortgage entered into by the withdrawing Appreciating the worthlessness of this so-called
partner and the remaining partners. The appellants statement, and all parties apparently realizing that
contend that the chattel mortgage may no longer nothing more was likely to be discovered by further
be nullified because it had been judicially approved insisting on an accounting, the court proceeded, on
and said chattel mortgage had been judicially December 27, 1921, to render final judgment in favor
foreclosed. of the plaintiff.
Ruling: Issue:
August 3, 1918, defendant assumed complete Whether appellees action can be entertained
responsibility for the business by objecting to the because the distribution of all or part of the
appointment of a receiver as prayed for by plaintiff, partnership’s assets, all the partners have no interest
and giving a bond therefor. Until that date his acts and are indispensable parties without whose
were those of a managing partner, binding against intervention no decree of distribution can be validly
the partnership; but thereafter his acts were those of entered.
a receiver whose authority is contained in section Ruling:
175 of the Code of Civil Procedure. A partner's share can not be returned without first
A receiver has no right to carry on and conduct a dissolving and liquidating the partnership (Po Yeng
business unless he is authorized or directed by the Cheo vs. Lim Ka Yam, 44 Phil. 177), for the return is
court to do some, and such authority is not derived dependent on the discharge of the creditors, whose
from an order of appointment to take and preserve claims enjoy preference over those of the partners;
the property. It does not appear that the defendant and it is self-evident that all members of the
as a receiver was authorized by the court to partnership are interested in his assets and business,
continue the business of the partnership in and are entitled to be heard in the matter of the
liquidation. This being so, he is personally liable for firm's liquidation and the distribution of its property.
the losses that the business amy have sustained. (34 The liquidation Exhibit "C" is not signed by the other
Cyc., 296.) The partnership must not, therefore, be members of the partnership besides appellees and
liable for the acts of the defendant in connection appellant; it does not appear that they have
with the management of the business until August 3, approved, authorized, or ratified the same, and,
1918, the date when he ceased to be a member therefore, it is not binding upon them. At the very
and manager in order to become receiver. least, they are entitled to be heard upon its
As to the first semester of 1918, during which time the correctness.
defendant had seen managing the business of the In addition, unless a proper accounting and
partnership as a member and manager, taking into liquidation of the partnership affairs is first had, the
account that the profits had been on the increase, capital shares of the appellees, as retiring partners,
said profits having reached the amount of can not be repaid, for the firm's outside creditors
P10,174.69 in the year 1917, it would not be an have preference over the assets of the enterprise
exaggeration to estimate that the profits for 1918 (Civ. Code, Art. 1839), and the firm's property can
would have been at least the same as the profits of not be diminished to their prejudice. Finally, the
1917; so that for the first half of 1918, the profit would appellant can not be held liable in his personal
be P5,087.34. 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
15. G.R. No. L-17526 June 30, 1962 their shares to the retiring partners. Since not all the
GREGORIO MAGDUSA, ET AL., petitioners, members of the partnership have been impleaded,
vs. no judgment for refund can be rendered, and the
GERUNDIO ALBARAN, ET AL., respondents. action should have been dismissed.
Facts:
The Court of Appeals found that appellant and 16. G.R. No. L-40098 August 29, 1975
appellees, together with various other persons, had ANTONIO LIM TANHU, DY OCHAY, ALFONSO
verbally formed a partnership de facto, for the sale LEONARDO NG SUA and CO OYO, petitioners,
of general merchandise in Surigao, Surigao, to which vs.
appellant contributed P2,000 as capital, and the HON. JOSE R. RAMOLETE as Presiding Judge, Branch
others contributed their labor, under the condition III, CFI, Cebu and TAN PUT, respondents.
that out of the net profits of the business 25% would
be added to the original capital, and the remaining Facts:
75% would be divided among the members in Tee Hoon Lim Po Chuan, Alfonso Ng Sua and
proportion to the length of service of each. Antonio Lim Tanhu were partners in the commercial
Sometime in 1953 and 1954, the appellees expressed partnership of Glory Commercial Company with Tee
their desire to withdraw from the partnership, and Hoon as the manager. When Tee Hoon died, Tan Put,
appellant thereupon made a computation to claiming to be the widow, filed a complaint against
determine the value of the partners' shares to that spouses Antonio Lim Tanhu and Dy Ochay. Later, the
date. The results of the computation were embodied complaint included Lim Tanhu’s son Lim Teck Chuan,
in the document Exhibit "C", drawn in the
as well as the spouses Alfonso Ng Sua and Co Oyo, In her amended complaint, plaintiff repeatedly
and their son Eng Chong Leonardo. Tan Put claims in alleged that as widow of Po Chuan she is entitled to
her complaint that after Tee Hoon died, there was ¹/3 share of the assets and properties of the
no liquidation of the company assets made and that partnership. In fact, her prayer in said complaint is,
she owns one third of the company shares. However, among others, for the delivery to her of such
Lim Tanhu, Ng Sua, Lim Teck Chuan, and Eng Chong ¹/3 share. His Honor's statement of the case as well as
his findings and judgment are all to that same effect.
Leonardo continued to manage the company and
But what did she actually try to prove at the ex-
used the company funds to acquire lands and
parte hearing?
buildings in several areas. Allegedly, the defendants
According to the decision, plaintiff had shown that
also used the company assets to organize another
she had money of her own when she "married" Po
corporation known as Glory Commercial, Inc.
Chuan and "that prior to and just after the marriage
Subsequently, Tan Put amended her complaint and
of the plaintiff to Po Chuan, she was engaged in the
added other averments. According to Tan Put, she drugstore business; that not long after her marriage,
had asked the defendants to liquidate the business upon the suggestion of Po Chuan, the plaintiff sold
of the defunct partnership including real estate her drugstore for P125,000 which amount she gave
investments in Hong Kong. The defendants did not to her husband in the presence of Tanhu and was
make good in their promise to liquidate the said invested in the partnership Glory Commercial Co.
properties, and instead, induced her to execute a sometime in 1950; that after the investment of the
quitclaim of all her rights and interests in the same. above-stated amount in the partnership, its business
After the quitclaim was executed, Lim Tanhu flourished and it embarked in the import business
allegedly offered to pay her P65,000 and issued a and also engaged in the wholesale and retail trade
receipt to her bearing the said amount. She signed of cement and GI sheets and under (sic) huge
profits." (pp. 25-26, Annex L, petition.)
the receipt but was not given a copy of it and had
not received the said money. When she eventually To begin with, this theory of her having contributed
made a formal demand for the accounting and of P125,000 to the capital of the partnership by
liquidation of the partnership company’s assets, the reason of which the business flourished and amassed
all the millions referred to in the decision has not
defendants refused and stated that they will not give
been alleged in the complaint, and inasmuch as
her share.
what was being rendered was a judgment by
Issue: default, such theory should not have been allowed
to be the subject of any evidence. But inasmuch as
Whether plaintiff is entitled to the share of the it was the clerk of court who received the evidence,
partnership it is understandable that he failed to observe the
rule. Then, on the other hand, if it was her capital that
Ruling: made the partnership flourish, why would she claim
to be entitled to only to ¹/3 of its assets and profits?
We find no alternative but to hold that plaintiff Tan
Under her theory found proven by respondent court,
Put's allegation that she is the widow of Tee Hoon Lim
she was actually the owner of everything,
Po Chuan has not been satisfactorily established
particularly because His Honor also found "that
and that, on the contrary, the evidence on record
defendants Lim Tanhu and Ng Sua were partners in
convincingly shows that her relation with said
the name but they were employees of Po Chuan
deceased was that of a common-law wife and
that defendants Lim Tanhu and Ng Sua had no
furthermore, that all her claims against the company
means of livelihood at the time of their employment
and its surviving partners as well as those against the
with the Glory Commercial Co. under the
estate of the deceased have already been settled
management of the late Po Chuan except their
and paid. 2. If, as We have seen, plaintiff's evidence
salaries therefrom; ..." (p. 27, id.) Why then does she
of her alleged status as legitimate wife of Po Chuan
claim only ¹/3 share? Is this an indication of her
is not only unconvincing but has been actually
generosity towards defendants or of a concocted
overcome by the more competent and weighty
cause of action existing only in her confused
evidence in favor of the defendants, her attempt to
imagination engendered by the death of her
substantiate her main cause of action that
common-law husband with whom she had settled
defendants Lim Tanhu and Ng Sua have defrauded
her common-law claim for recompense of her
the partnership Glory Commercial Co. and
services as common law wife for less than what she
converted its properties to themselves is even more
must have known would go to his legitimate wife and
dismal. From the very evidence summarized by His
children?
Honor in the decision in question, it is clear that not
an iota of reliable proof exists of such alleged Actually, as may be noted from the decision itself,
misdeeds. the trial court was confused as to the participation
of defendants Lim Tanhu and Ng Sua in Glory
Of course, the existence of the partnership has not
Commercial Co. At one point, they were deemed
been denied, it is actually admitted impliedly in
partners, at another point mere employees and then
defendants' affirmative defense that Po Chuan's
elsewhere as partners-employees, a newly found
share had already been duly settled with and paid
concept, to be sure, in the law on partnership. And
to both the plaintiff and his legitimate family. But the
the confusion is worse comfounded in the judgment
evidence as to the actual participation of the
which allows these "partners in name" and "partners-
defendants Lim Tanhu and Ng Sua in the operation
employees" or employees who had no means of
of the business that could have enabled them to
livelihood and who must not have contributed any
make the extractions of funds alleged by plaintiff is
capital in the business, "as Po Chuan was practically
at best confusing and at certain points manifestly
the owner of the partnership having the controlling
inconsistent.
interest", ¹/3 each of the huge assets and profits of and consent of Po Chuan, for which reason no
the partnership. Incidentally, it may be observed at accounting could be demanded from them
this juncture that the decision has made Po Chuan therefor, considering that Article 1807 of the Civil
play the inconsistent role of being "practically the Code refers only to what is taken by a partner
owner" but at the same time getting his capital from without the consent of the other partner or partners.
the P125,000 given to him by plaintiff and from which Incidentally again, this theory about Po Chuan
capital the business allegedly "flourished." having been actively managing the partnership up
Anent the allegation of plaintiff that the properties to his death is a substantial deviation from the
shown by her exhibits to be in the names of allegation in the amended complaint to the effect
defendants Lim Tanhu and Ng Sua were bought by that "defendants Antonio Lim Tanhu, Alfonso
them with partnership funds, His Honor confirmed the Leonardo Ng Sua, Lim Teck Chuan and Eng Chong
same by finding and holding that "it is likewise clear Leonardo, through fraud and machination, took
that real properties together with the improvements actual and active management of the partnership
in the names of defendants Lim Tanhu and Ng Sua and although Tee Hoon Lim Po Chuan was the
were acquired with partnership funds as these manager of Glory Commercial Co., defendants
defendants were only partners-employees of managed to use the funds of the partnership to
deceased Po Chuan in the Glory Commercial Co. purchase lands and buildings etc. (Par. 4, p. 2 of
until the time of his death on March 11, 1966." (p. amended complaint, Annex B of petition) and
30, id.) It Is Our considered view, however, that this should not have been permitted to be proven by the
conclusion of His Honor is based on nothing but pure hearing officer, who naturally did not know any
unwarranted conjecture. Nowhere is it shown in the better.
decision how said defendants could have extracted Moreover, it is very significant that according to the
money from the partnership in the fraudulent and very tax declarations and land titles listed in the
illegal manner pretended by plaintiff. Neither in the decision, most if not all of the properties supposed to
testimony of Nuñez nor in that of plaintiff, as these have been acquired by the defendants Lim Tanhu
are summarized in the decision, can there be found and Ng Sua with funds of the partnership appear to
any single act of extraction of partnership funds have been transferred to their names only in 1969 or
committed by any of said defendants. That the later, that is, long after the partnership had been
partnership might have grown into a multi-million automatically dissolved as a result of the death of Po
enterprise and that the properties described in the Chuan. Accordingly, defendants have no obligation
exhibits enumerated in the decision are not in the to account to anyone for such acquisitions in the
names of Po Chuan, who was Chinese, but of the absence of clear proof that they had violated the
defendants who are Filipinos, do not necessarily trust of Po Chuan during the existence of the
prove that Po Chuan had not gotten his share of the partnership. (See Hanlon vs. Hansserman and. Beam,
profits of the business or that the properties in the 40 Phil. 796.)
names of the defendants were bought with money There are other particulars which should have
of the partnership. In this connection, it is decisively caused His Honor to readily disbelieve plaintiffs'
important to consider that on the basis of the pretensions. Nuñez testified that "for about 18 years
concordant and mutually cumulative testimonies of he was in charge of the GI sheets and sometimes
plaintiff and Nuñez, respondent court found very attended to the imported items of the business of
explicitly that, and We reiterate: Glory Commercial Co." Counting 18 years back from
xxx xxx xxx 1965 or 1966 would take Us to 1947 or 1948. Since
That the late Po Chuan was the one who actively according to Exhibit LL, the baptismal certificate
managed the business of the partnership Glory produced by the same witness as his birth certificate,
Commercial Co. he was the one who made the shows he was born in March, 1942, how could he
final decisions and approved the appointments have started managing Glory Commercial Co. in
of new Personnel who were taken in by the 1949 when he must have been barely six or seven
partnership; that the late Po Chuan and years old? It should not have escaped His Honor's
defendants Lim Tanhu and Ng Sua are brothers, attention that the photographs showing the
the latter to (2) being the elder brothers of the premises of Philippine Metal Industries after its
former; that defendants Lim Tanhu and Ng Sua organization "a year or two after the establishment
are both naturalized Filipino citizens whereas the of Cebu Can Factory in 1957 or 1958" must have
late Po Chuan until the time of his death was a been taken after 1959. How could Nuñez have been
Chinese citizen; that the three (3) brothers were only 13 years old then as claimed by him to have
partners in the Glory Commercial Co. but Po been his age in those photographs when according
Chuan was practically the owner of the to his "birth certificate", he was born in 1942? His
partnership having the controlling interest; that Honor should not have overlooked that according to
defendants Lim Tanhu and Ng Sua were partners the same witness, defendant Ng Sua was living in
in name but they were mere employees of Po Bantayan until he was directed to return to Cebu
Chuan; after the fishing business thereat floundered,
whereas all that the witness knew about defendant
If Po Chuan was in control of the affairs and the
Lim Teck Chuan's arrival from Hongkong and the
running of the partnership, how could the
expenditure of partnership money for him were only
defendants have defrauded him of such huge
told to him allegedly by Po Chuan, which testimonies
amounts as plaintiff had made his Honor believe?
are veritably exculpatory as to Ng Sua and hearsay
Upon the other hand, since Po Chuan was in control
as to Lim Teck Chuan. Neither should His Honor have
of the affairs of the partnership, the more logical
failed to note that according to plaintiff herself, "Lim
inference is that if defendants had obtained any
Tanhu was employed by her husband although he
portion of the funds of the partnership for
themselves, it must have been with the knowledge
did not go there always being a mere employee of be accountable to plaintiff, just because they
Glory Commercial Co." (p. 22, Annex the decision.) happen to be the wives of Lim Tanhu and Ng Sua,
The decision is rather emphatic in that Lim Tanhu and respectively. We further note that while His Honor has
Ng Sua had no known income except their salaries. ordered defendants to deliver or pay jointly and
Actually, it is not stated, however, from what severally to the plaintiff P4,074,394.18 or ¹/3 of the
evidence such conclusion was derived in so far as P12,223,182.55, the supposed cash belonging to the
Ng Sua is concerned. On the other hand, with partnership as of December 31, 1965, in the same
respect to Lim Tanhu, the decision itself states that breath, they have also been sentenced to partition
according to Exhibit NN-Pre trial, in the supposed and give ¹/3share of the properties enumerated in
income tax return of Lim Tanhu for 1964, he had an the dispositive portion of the decision, which
income of P4,800 as salary from Philippine Metal seemingly are the very properties allegedly
Industries alone and had a total assess sable net purchased from the funds of the partnership which
income of P23,920.77 that year for which he paid a would naturally include the P12,223,182.55
tax of P4,656.00. (p. 14. Annex L, id.) And per Exhibit defendants have to account for. Besides, assuming
GG-Pretrial in the year, he had a net income of there has not yet been any liquidation of the
P32,000 for which be paid a tax of P3,512.40. (id.) As partnership, contrary to the allegation of the
early as 1962, "his fishing business in Madridejos Cebu defendants, then Glory Commercial Co. would have
was making money, and he reported "a net gain the status of a partnership in liquidation and the only
from operation (in) the amount of P865.64" (id., per right plaintiff could have would be to what might
Exhibit VV-Pre-trial.) From what then did his Honor result after such liquidation to belong to the
gather the conclusion that all the properties deceased partner, and before this is finished, it is
registered in his name have come from funds impossible to determine, what rights or interests, if
malversed from the partnership? any, the deceased had (Bearneza vs. Dequilla 43
Phil. 237). In other words, no specific amounts or
It is rather unusual that His Honor delved into financial
properties may be adjudicated to the heir or legal
statements and books of Glory Commercial Co.
representative of the deceased partner without the
without the aid of any accountant or without the
liquidation being first terminated.
same being explained by any witness who had
prepared them or who has knowledge of the entries Indeed, only time and the fear that this decision
therein. This must be the reason why there are would be much more extended than it is already
apparent inconsistencies and inaccuracies in the prevent us from further pointing out the inexplicable
conclusions His Honor made out of them. In Exhibit deficiencies and imperfections of the decision in
SS-Pre-trial, the reported total assets of the company question. After all, what have been discussed should
amounted to P2,328,460.27 as of December, 1965, be more than sufficient to support Our conclusion
and yet, Exhibit TT-Pre-trial, according to His Honor, that not only must said decision be set aside but also
showed that the total value of goods available as of that the action of the plaintiff must be totally
the same date was P11,166,327.62. On the other dismissed, and, were it not seemingly futile and
hand, per Exhibit XX-Pre-trial, the supposed balance productive of other legal complications, that plaintiff
sheet of the company for 1966, "the value of is liable on defendants' counterclaims. Resolution of
inventoried merchandise, both local and imported", the other issues raised by the parties albeit important
as found by His Honor, was P584,034.38. Again, as of and perhaps pivotal has likewise become
December 31, 1966, the value of the company's superfluous.
goods available for sale was P5,524,050.87, per
Exhibit YY and YY-Pre-trial. Then, per Exhibit II-3-Pre- 17. G.R. No. L-5837 May 31, 1954
trial, the supposed Book of Account, whatever that
CRISTOBAL BONNEVIE, ET AL., plaintiffs-appellants,
is, of the company showed its "cash analysis" was
vs.
P12,223,182.55. We do not hesitate to make the
JAIME HERNANDEZ, defendant-appellee.
observation that His Honor, unless he is a certified
public accountant, was hardly qualified to read Facts:
such exhibits and draw any definite conclusions Plaintiffs with other associates formed a syndicate or
therefrom, without risk of erring and committing an secret partnership for the purpose of acquiring the
injustice. In any event, there is no comprehensible plants, franchises and other properties of the Manila
explanation in the decision of the conclusion of His Electric Co. — hereinafter called the Meralco — in
Honor that there were P12,223,182.55 cash money the provinces of Camarines Sur, Albay, and
defendants have to account for, particularly when it Sorsogon, with the idea of continuing that
can be very clearly seen in Exhibits 11-4, 11-4- A, 11- company's business in that region. No formal articles
5 and 11-6-Pre-trial, Glory Commercial Co. had were drawn for it was the purpose of the members
accounts payable as of December 31, 1965 in the to incorporate once the deal had been
amount of P4,801,321.17. (p. 15, id.) Under the consummated. But in the meantime they elected
circumstances, We are not prepared to permit Pedro Serranzana and David Serrano general
anyone to predicate any claim or right from manager and secretary-treasurer, respectively, of
respondent court's unaided exercise of accounting the partnership. Negotiation for the purchase was
knowledge.Additionally, We note that the decision commenced, but as it made no headway,
has not made any finding regarding the allegation defendant was taken in as a member of the
in the amended complaint that a corporation partnership so that he could push the deal through,
denominated Glory Commercial Co., Inc. was and to that end he was given the necessary power
organized after the death of Po Chuan with capital of attorney. Using partnership funds, defendant was
from the funds of the partnership. We note also that able to buy the Meralco properties for P122,000,
there is absolutely no finding made as to how the paying P40,000 upon the signing of the deed of sale
defendants Dy Ochay and Co Oyo could in any way and agreeing to pay the balance in two equal
installments. before the incorporation papers could faced the danger of losing its entire assets. As
be perfected, several partners, not satisfied with the testified to by Judge Reyes, one of the withdrawing
way matters were being run and fearful that the partners, it was clearly understood that upon their
venture might prove a failure because the business withdrawal and return to them of their investment
was not going well and there was a possibility of their they would have nothing more to do with the
being assessed more than their original investments association. It must, therefore, have been the
when the time came to meet the two installments of intention or understanding of the parties that the
the unpaid purchase price due the Meralco, withdrawing partners were relinquishing all their
expressed their desire to withdraw from the rights and interest in the partnership upon the return
partnership and get back the money they had to them of their investment. That Judge Reyes did not
invested therein. The partnership was then dissolved. join the plaintiffs in this action is a clear indication
In accordance with the terms of the resolution, the that such was really the understanding. Judge Reyes
withdrawing partners were, on the following day, has testified that when he was invited to join in the
reimbursed their respective contributions to the present claim he refused because he did not want
partnership fund. Following the dissolution of the to be a "sin verguenza." And, indeed, if the
partnership, the members who preferred to remain agreement was that the withdrawing partners were
in the business went ahead with the formation of the still to have participation in the subsequent
corporation, taking in new associates as transactions of the partnership so that they would
stockholders. And defendant, on his part, in have a share not only in the profits but also in the
fulfillment of his trust, made a formal assignment of losses, it is not likely that their investment would have
the Meralco properties to the treasurer of the been returned to them. It is, therefore, our conclusion
corporation, giving them a book value of P365,000, that the acceptance by the withdrawing partners,
in return for which the corporation issued, to the including the plaintiffs, of their investment in the
various subscribers to its capital stock, shares of stock instant case was understood and intended by all the
of the total face value of P225,000 and assumed the parties as a final settlement of whatever rights or
obligation of paying what was still due the Meralco claim the withdrawing partners might have in the
on the purchase price. The new corporation was dissolved partnership. Such being the case they are
named "Bicol Electric Company."Two years from their now precluded from claiming any share in the
withdrawal from the partnership, when the alleged profits, should there be any, at the time of
corporate business was already in a prosperous the dissolution.
condition, plaintiffs brought the present suit against
Jaime Hernandez, claiming a share in the profit the
18. G.R. No. 109248 July 3, 1995
latter is supposed to have made from the
assignment of the Meralco properties to the GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR.,
corporation, estimated by plaintiffs to be P225,000 and BENJAMIN T. BACORRO, petitioners,
and their share of it to be P115,312.50. vs.
HON. COURT OF APPEALS, SECURITIES AND
Issue:
EXCHANGE COMMISSION and JOAQUIN L.
Whether plaintiffs are still entitled to the share in the MISA, respondents.
alleged profits after withdrawal from the partnership
Facts:
Ruling:
The law firm of ROSS, LAWRENCE, SELPH and
As a general rule, when a partner retires from the CARRASCOSO was duly registered in the Mercantile
firm, he is entitled to the payment of what may be Registry on 4 January 1937 and reconstituted with
due him after a liquidation. But certainly no the Securities and Exchange Commission on 4
liquidation is necessary where there is already a August 1948. The SEC records show that there were
settlement or an agreement as to what the retiring several subsequent amendments to the articles of
partner shall receive. In the instant case, it appears partnership on 18 September 1958, to change the
that a settlement was agreed upon on the very day firm [name]. On 19 December 1980, [Joaquin L. Misa]
the partnership was dissolved. For when plaintiffs and appellees Jesus B. Bito and Mariano M. Lozada
Judge Jaime Reyes withdrew from the partnership associated themselves together, as senior partners
on that day they did so as agreed to by all the with respondents-appellees Gregorio F. Ortega,
partners, subject to the only condition that they were Tomas O. del Castillo, Jr., and Benjamin Bacorro, as
to be repaid their contributions or investments within junior partners. Petitioner filed with this Commission's
three days from said date. And this condition was Securities Investigation and Clearing Department
fulfilled when on the following day they were (SICD) a petition for dissolution and liquidation of
reimbursed the respective amounts due them partnership. The hearing officer rendered a decision
pursuant to the agreement. ruling that P]etitioner's withdrawal from the law firm
There is evidence that the partnership was at that Bito, Misa & Lozada did not dissolve the said law
time operating its business at a loss and that the partnership. On appeal, the SEC en banc reversed
partnership did not have necessary funds to meet its the decision of the Hearing Officer and held that the
obligation to Meralco for the balance of the withdrawal of Attorney Joaquin L. Misa had dissolved
purchase price. And in that connection it should be the partnership of "Bito, Misa & Lozada. The parties
recalled that nonpayment of that obligation would sought a reconsideration of the decision. Attorney
result in the partnership losing its entire investment Misa, in addition, asked for an appointment of a
because of the penalty clause in the deed of sale. receiver to take over the assets of the dissolved
Because of these circumstances there is every partnership and to take charge of the winding up of
reason to believe that plaintiffs together with Judge its affairs. On 4 April 1991, respondent SEC issued an
Jaime Reyes, withdrew from the partnership for fear order denying reconsideration, as well as rejecting
that they might lose their entire investment should the petition for receivership, and reiterating the
they choose to remain in the partnership which then remand of the case to the Hearing Officer.
Issue: two percent (2%) for her demonstration services. The
Whether the partnership of Bito, Misa, and Lozada is agreement was not reduced to writing on the
a partnership at will and that the withdrawal of strength of Belos assurances that he was sincere,
private respondent dissolved the partnership dependable and honest when it came to financial
regardless of his good faith or bad faith commitments. On August 31, 1987, she received a
plaque of appreciation from the administrative and
Ruling:
sales people through Marjorie Tocao[4] for her
A partnership that does not fix its term is a partnership excellent job performance. On October 7, 1987, in
at will. That the law firm "Bito, Misa & Lozada," and the presence of Anay, Belo signed a
now "Bito, Lozada, Ortega and Castillo," is indeed memo[5] entitling her to a thirty-seven percent (37%)
such a partnership need not be unduly belabored. commission for her personal sales "up Dec 31/87.
The birth and life of a partnership at will is predicated Belo explained to her that said commission was
on the mutual desire and consent of the partners. apart from her ten percent (10%) share in the
The right to choose with whom a person wishes to profits. On October 9, 1987, Anay learned that
associate himself is the very foundation and essence Marjorie Tocao had signed a letter[6] addressed to
of that partnership. Its continued existence is, in turn, the Cubao sales office to the effect that she was no
dependent on the constancy of that mutual resolve, longer the vice-president of Geminesse Enterprise.
along with each partner's capability to give it, and The following day, October 10, she received a note
the absence of a cause for dissolution provided by from Lina T. Cruz, marketing manager, that Marjorie
the law itself. Verily, any one of the partners may, at Tocao had barred her from holding office and
his sole pleasure, dictate a dissolution of the conducting demonstrations in both Makati and
partnership at will. He must, however, act in good Cubao offices.[7] Anay attempted to contact Belo.
faith, not that the attendance of bad faith can She wrote him twice to demand her overriding
prevent the dissolution of the partnership4 but that it commission for the period of January 8, 1988 to
can result in a liability for damages. In passing, February 5, 1988 and the audit of the company to
neither would the presence of a period for its specific determine her share in the net profits. When her
duration or the statement of a particular purpose for letters were not answered, Anay consulted her
its creation prevent the dissolution of any partnership lawyer, who, in turn, wrote Belo a letter. Still, that
by an act or will of a partner.6 Among letter was not answered. Marjorie Tocao and Belo
partners,7 mutual agency arises and the doctrine asserted that the alleged agreement with Anay that
of delectus personae allows them to have was neither reduced in writing, nor ratified, was
the power, although not necessarily theright, to either unenforceable or void or inexistent. As far as
dissolve the partnership. An unjustified dissolution by Belo was concerned, his only role was to introduce
the partner can subject him to a possible action for Anay to Marjorie Tocao. There could not have been
damages.The dissolution of a partnership is the a partnership because, as Anay herself admitted,
change in the relation of the parties caused by any Geminesse Enterprise was the sole proprietorship of
partner ceasing to be associated in the carrying on, Marjorie Tocao. Because Anay merely acted as
as might be distinguished from the winding up of, the marketing demonstrator of Geminesse Enterprise for
business.8 Upon its dissolution, the partnership an agreed remuneration, and her complaint
continues and its legal personality is retained until the referred to either her compensation or dismissal,
complete winding up of its business culminating in its such complaint should have been lodged with the
termination. Department of Labor and not with the regular court.
Issue:
19. [G.R. No. 127405. October 4, 2000] Whether there exist a partnership and plaintiff Anay
MARJORIE TOCAO and WILLIAM T. BELO, petitioners, was a partner of Marjorie tacao and Belo and for
vs. COURT OF APPEALS and NENITA A. that, the former is entitled to her share after her
ANAY, respondents. exclusion from the partnership
Facts: Ruling:
Private respondent Nenita A. Anay met To be considered a juridical personality, a
petitioner William T. Belo, then the vice-president for partnership must fulfill these requisites: (1) two or
operations of Ultra Clean Water Purifier, through her more persons bind themselves to contribute money,
former employer in Bangkok. Belo introduced Anay property or industry to a common fund; and (2)
to petitioner Marjorie Tocao, who conveyed her intention on the part of the partners to divide the
desire to enter into a joint venture with her for the profits among themselves.[15] It may be constituted in
importation and local distribution of kitchen any form; a public instrument is necessary only where
cookwares. Belo volunteered to finance the joint immovable property or real rights are contributed
venture and assigned to Anay the job of marketing thereto.[16] This implies that since a contract of
the product considering her experience and partnership is consensual, an oral contract of
established relationship with West Bend Company, a partnership is as good as a written one. Where no
manufacturer of kitchen wares in Wisconsin, immovable property or real rights are involved, what
U.S.A. Under the joint venture, Belo acted as matters is that the parties have complied with the
capitalist, Tocao as president and general manager, requisites of a partnership. The fact that there
and Anay as head of the marketing department appears to be no record in the Securities and
and later, vice-president for sales. The parties Exchange Commission of a public instrument
agreed further that Anay would be entitled to: (1) embodying the partnership agreement pursuant to
ten percent (10%) of the annual net profits of the Article 1772 of the Civil Code[17] did not cause the
business; (2) overriding commission of six percent nullification of the partnership. The pertinent
(6%) of the overall weekly production; (3) thirty provision of the Civil Code on the matter states:
percent (30%) of the sales she would make; and (4)
Art. 1768. The partnership has a juridical personality vs.
separate and distinct from that of each of the THE COURT OF APPEALS, INTESTATE ESTATE OF SY
partners, even in case of failure to comply with the YONG HU,
requirements of article 1772, first paragraph. SEC. HEARING OFFICER FELIPE TONGCO, SECURITIES
Petitioners admit that private respondent had the AND EXCHANGE COMMISSION, respondents.
expertise to engage in the business of distributorship Facts:
of cookware. Private respondent contributed such Sy Yong Hu & Sons is a partnership of Sy Yong Hu and
expertise to the partnership and hence, under the his sons, Jose Sy, Jayme Sy, Marciano Sy, Willie Sy,
law, she was the industrial or managing partner. It Vicente Sy, and Jesus Sy, registered with the SEC on
was through her reputation with the West Bend March 29, 1962, with Jose Sy as managing partner.
Company that the partnership was able to open the Partners Sy Yong Hu, Jose Sy, Vicente Sy, and
business of distributorship of that companys Marciano Sy died on May 18, 1978, August 12, 1978,
cookware products; it was through the same efforts December 30, 1979 and August 7, 1987, respectively.
that the business was propelled to financial success. Sometime in September, 1977, during the lifetime of
Petitioner Tocao herself admitted private all the partners, Keng Sian brought an
respondents indispensable role in putting up the action,7 docketed as Civil Case No. 13388 before the
business when, upon being asked if private then Court of First Instance of Negros Occidental,
respondent held the positions of marketing manager against the partnership as well as against the
and vice-president for sales. individual partners for accounting of all the
A mere falling out or misunderstanding between properties allegedly owned in common by Sy Yong
partners does not convert the partnership into a Hu and the plaintiff (Keng Sian), and for the delivery
sham organization.]The partnership exists until or reconveyance of her one-half (1/2) share in said
dissolved under the law. Since the partnership properties and in the fruits thereof. Keng Sian averred
created by petitioners and private respondent has that she was the common law wife of partner Sy
no fixed term and is therefore a partnership at will Yong Hu, that Sy Yong Hu, together with his
predicated on their mutual desire and consent, it children,8 who were partners in the partnership,
may be dissolved by the will of a partner. The right to connived to deprive her of her share in the properties
choose with whom a person wishes to associate acquired during her cohabitation with Sy Yong Hu,
himself is the very foundation and essence of that by diverting such properties to the partnership.
partnership. Its continued existence is, in turn, Marciano Sy filed a petition for declaratory relief
dependent on the constancy of that mutual resolve, against partners Vicente Sy, Jesus Sy and Jayme Sy,
along with each partners capability to give it, and docketed as SEC Case No. 1648, praying that he be
the absence of cause for dissolution provided by the appointed managing partner of the partnership, to
law itself. Verily, any one of the partners may, at his replace Jose Sy who died on August 12, 1978.
sole pleasure, dictate a dissolution of the partnership Answering the petition, Vicente Sy, Jesus Sy and
at will. He must, however, act in good faith, not that Jaime Sy, who claim to represent the majority interest
the attendance of bad faith can prevent the in the partnership, sought the dissolution of the
dissolution of the partnership but that it can result in partnership and the appointment of Vicente Sy as
a liability for damages.An unjustified dissolution by a managing partner. In due time, Hearing Officer
partner can subject him to action for damages Emmanuel Sison came out with a decision11 (Sison
because by the mutual agency that arises in a Decision) dismissing the petition, dissolving the
partnership, the doctrine of delectus partnership and naming Jesus Sy, in lieu of Vicente
personae allows the partners to have Sy who had died earlier, as the managing partner in
the power, although not necessarily the right to charge of winding the affairs of the partnership.The
dissolve the partnership.[42] Sison decision was affirmed in toto by the SEC en
In this case, petitioner Tocaos unilateral banc in a decision. On the basis of the decision of
exclusion of private respondent from the partnership the SEC en banc, Hearing Officer Sison approved a
is shown by her memo to the Cubao office plainly partial partition of certain partnership assets in an
stating that private respondent was, as of October 9, order dated December 2, 1986. Therefrom,
1987, no longer the vice-president for sales of respondents seasonably appealed.
Geminesse Enterprise.[43] By that memo, petitioner Issue:
Tocao effected her own withdrawal from the Whether the dissolution of the partnership did mean
partnership and considered herself as having that the juridical entity was immediately terminated
ceased to be associated with the partnership in the and that the distribution of its assets to its partners
carrying on of the business. Nevertheless, the should be perfunctorily follow.
partnership was not terminated thereby; it continues
Ruling:
until the winding up of the business.[44]
Petitioners fail to recognize the basic distinctions
The winding up of partnership affairs has not yet
underlying the principles of dissolution, winding up
been undertaken by the partnership. This is manifest
and partition or distribution. The dissolution of a
in petitioners claim for stocks that had been
partnership is the change in the relation of the
entrusted to private respondent in the pursuit of the
parties caused by any partner ceasing to be
partnership business.
associated in the carrying on, as might be
distinguished from the winding up, of its business.
20. G.R. No. 94285 August 31, 1999 Upon its dissolution, the partnership continues and its
JESUS SY, JAIME SY, ESTATE OF JOSE SY, ESTATE OF legal personality is retained until the complete
VICENTE SY, winding up of its business culminating in its
HEIR OF MARCIANO SY represented by JUSTINA VDA. termination.46
DE SY and WILLIE SY, petitioners,
The dissolution of the partnership did not mean that be equally divided between them. The partnership
the juridical entity was immediately terminated and allegedly had Jacinto as manager, assisted by
that the distribution of the assets to its partners should Josephine Sy (hereafter Josephine), a sister of the
perfunctorily follow. On the contrary, the dissolution wife respondent, Erlinda Sy. As compensation,
simply effected a change in the relationship among Jacinto would receive a manager's fee or
the partners. The partnership, although dissolved, remuneration of 10% of the gross profit and
continues to exist until its termination, at which time Josephine would receive 10% of the net profits, in
the winding up of its affairs should have been addition to her wages and other remuneration from
completed and the net partnership assets are the business. While Jacinto furnished respondent with
partitioned and distributed to the partners.47 the merchandise inventories, balance sheets and
The error, therefore, ascribed to the Court of Appeals net worth of Shellite from 1977 to 1989, respondent
is devoid of any sustainable basis. The Abello however suspected that the amount indicated in
Decision though, indeed, final and executory, did these documents were understated and
not pose any obstacle to the Hearing Officer to issue undervalued by Jacinto and Josephine for their own
orders not inconsistent therewith. From the time a selfish reasons and for tax avoidance. Upon Jacinto's
dissolution is ordered until the actual termination of death in the later part of 1989, his surviving wife,
the partnership, the SEC retained jurisdiction to petitioner Cecilia and particularly his daughter,
adjudicate all incidents relative thereto. Thus, the petitioner Lilibeth, took over the operations, control,
disputed order placing the partnership under a custody, disposition and management of Shellite
receivership committee cannot be said to have without respondent's consent. Despite respondent's
varied the final order of dissolution. Neither did it repeated demands upon petitioners for accounting,
suspend the dissolution of the partnership. If at all, it inventory, appraisal, winding up and restitution of his
only suspended the partition and distribution of the net shares in the partnership, petitioners failed to
partnership assets pending disposition of Civil Case comply. Petitioner Lilibeth allegedly continued the
No. 903 on the basis of the agreement by the parties operations of Shellite, converting to her own use and
and under the circumstances of the case. It bears advantage its properties. Petitioner Lilibeth allegedly
stressing that, like the appointment of a manager in informed respondent that the P200,000.00
charge of the winding up of the affairs of the represented partial payment of the latter's share in
partnership, said appointment of a receiver during the partnership, with a promise that the former would
the pendency of the dissolution is interlocutory in make the complete inventory and winding up of the
nature, well within the jurisdiction of the SEC. properties of the business establishment. Despite
such commitment, petitioners allegedly failed to
Furthermore, having agreed with the respondents
comply with their duty to account, and continued to
not to dispose of the partnership assets, petitioners
benefit from the assets and income of Shellite to the
effectively consented to the suspension of the
damage and prejudice of respondent.
winding up or, more specifically, the partition and
distribution of subject assets. Petitioners are now Issue:
estopped from questioning the order of the Hearing Whether the death of Jacinto immediately
Officer issued in accordance with the said terminated the partnership
agreement. Ruling:
The action for accounting filed by respondents three
21. G.R. No. 143340 August 15, 2001 (3) years after Jacinto's death was well within the
LILIBETH SUNGA-CHAN and CECILIA prescribed period. The Civil Code provides that an
SUNGA, petitioners, action to enforce an oral contract prescribes in six
vs. (6) years while the right to demand an accounting
LAMBERTO T. CHUA, respondent. for a partner's interest as against the person
continuing the business accrues at the date of
Facts:
dissolution, in the absence of any contrary
On June 22, 1992, Lamberto T. Chua (hereafter agreement. Considering that the death of a partner
respondent) filed a complaint against Lilibeth Sunga results in the dissolution of the partnership , in this
Chan (hereafter petitioner Lilibeth) and Cecilia case, it was Jacinto's death that respondent as the
Sunga (hereafter petitioner Cecilia), daughter and surviving partner had the right to an account of his
wife, respectively of the deceased Jacinto L. Sunga interest as against petitioners. It bears stressing that
(hereafter Jacinto), for "Winding Up of Partnership while Jacinto's death dissolved the partnership, the
Affairs, Accounting, Appraisal and Recovery of dissolution did not immediately terminate the
Shares and Damages with Writ of Preliminary partnership. The Civil Code expressly provides that
Attachment" with the Regional Trial Court, Branch 11, upon dissolution, the partnership continues and its
Sindangan, Zamboanga del Norte. legal personality is retained until the complete
Respondent alleged that in 1977, he verbally winding up of its business, culminating in its
entered into a partnership with Jacinto in the termination. In a desperate bid to cast doubt on the
distribution of Shellane Liquefied Petroleum Gas validity of the oral partnership between respondent
(LPG) in Manila. For business convenience, and Jacinto, petitioners maintain that said
respondent and Jacinto allegedly agreed to register partnership that had initial capital of P200,000.00
the business name of their partnership, SHELLITE GAS should have been registered with the Securities and
APPLIANCE CENTER (hereafter Shellite), under the Exchange Commission (SEC) since registration is
name of Jacinto as a sole proprietorship. mandated by the Civil Code, True, Article 1772 of the
Respondent allegedly delivered his initial capital Civil Code requires that partnerships with a capital of
contribution of P100,000.00 to Jacinto while the latter P3,000.00 or more must register with the SEC,
in turn produced P100,000.00 as his counterpart however, this registration requirement is not
contribution, with the intention that the profits would mandatory. Article 1768 of the Civil Code explicitly
provides that the partnership retains its juridical February 1, 1919, between Serra, Lazaro Mota, now
personality even if it fails to register. The failure to deceased, and Juan J. Vidaurrazaga for himself and
register the contract of partnership does not in behalf of his brother, Felix and Dionisio
invalidate the same as among the partners, so long Vidaurrazaga, should be dissolved upon the
as the contract has the essential requisites, because execution of this contract, and that the said
the main purpose of registration is to give notice to partnership agreement should be totally cancelled
third parties, and it can be assumed that the and of no force and effect whatever. So it results that
members themselves knew of the contents of their the "Hacienda Palma," with the entire railroad, the
contract. In the case at bar, non-compliance with subject-matter of the contract of partnership
this directory provision of the law will not invalidate between plaintiffs and defendant, became the
the partnership considering that the totality of the property of Whitaker and Concepcion. Phil. C.
evidence proves that respondent and Jacinto Whitaker and Venancio Concepcion having failed
indeed forged the partnership in question. to pay to the defendant a part of the purchase
price, that is, P750,000, the vendor, the herein
defendant, foreclosed the mortgage upon the
22. G.R. No. L-22825 February 14, 1925
said hacienda, which was adjudicated to him at the
TESTATE ESTATE OF LAZARO MOTA, deceased, ET public sale held by the sheriff for the amount of
AL., plaintiffs-appellants, P500,000, and the defendant put in possession
vs. thereof, including what was planted at the time,
SALVADOR SERRA, defendant-appellee. together with all the improvements made by Messrs.
Facts: Phil. C. Whitaker and Venancio Concepcion.
Plaintiffs and defendant entered into a contract of Issue:
partnership, marked Exhibit A, for the construction Whether the dissolution of the partnership exempt
and exploitation of a railroad line from the "San defendant Serra with his obligation
Isidro" and "Palma" centrals to the place known as
Ruling:
"Nandong. The plaintiffs were entrusted with the
administration of the partnership. The defendant By virtue of the contract, the plaintiffs and Phil. C.
entered into a contract of sale with Venancio Whitaker and Venancio Concepcion, by common
Concepcion, Phil. C. Whitaker, and Eusebio R. de consent, decided to dissolve the partnership
Luzuriaga, whereby he sold to the latter the estate between the "Hacienda Palma" and "Hacienda San
and central known as "Palma" with its running Isidro," thus cancelling the contract of partnership of
business, as well as all the improvements, February 1, 1919.
machineries and buildings, real and personal Defendant's contention signifies that any person,
properties, rights, choses in action and interests, who has contracted a valid obligation with a
including the sugar plantation of the harvest year of partnership, is exempt from complying with his
1920 to 1921, covering all the property of the vendor. obligation by the mere fact of the dissolution of the
This contract was executed before a notary public partnership. Defendant's contention is untenable.
of Iloilo and is evidenced by Exhibit 1 of the The dissolution of a partnership must not be
defendant. Before the delivery to the purchasers of understood in the absolute and strict sense so that at
the hacienda thus sold, Eusebio R. de Luzuriaga the termination of the object for which it was
renounced all his rights under the contract of created the partnership is extinguished, pending the
January 29, 1920, in favor of Messrs. Venancio winding up of some incidents and obligations of the
Concepcion and Phil. C. Whitaker. This gave rise to partnership, but in such case, the partnership will be
the fact that on July 17, 1920, Venancio Concepcion reputed as existing until the juridical relations arising
and Phil. C. Whitaker and the herein defendant out of the contract are dissolved. This doctrine has
executed before Mr. Antonio Sanz, a notary public been upheld by the supreme court of Spain in its
in and for the City of Manila, another deed of decision of February 6, 1903, in the following case:
absolute sale of the said "Palma" Estate for the There was a partnership formed between several
amount of P1,695,961.90, of which the vendor persons to purchase some lands sold by the state.
received at the time of executing the deed the The partnership paid the purchase price and
amount of P945,861.90, and the balance was distributed among its members the lands so
payable by installments in the form and manner acquired, but after the lapse of some time, one of
stipulated in the contract. The purchasers the partners instituted an action in the court of
guaranteed the unpaid balance of the purchase Badajoz, praying that he be accepted as a partner
price by a first and special mortgage in favor of the with the same rights and obligations as the others, for
vendor upon the hacienda and the central with all the reason that he had not been allowed all that he
the improvements, buildings, machineries, and had a right to. The court granted the petition, which
appurtenances then existing on the said hacienda. judgment was affirmed by the Audiencia de
Afterwards, on January 8, 1921, Venancio Caceres.
Concepcion and Phil. C. Whitaker bought from the
plaintiffs the one-half of the railroad line pertaining
to the latter, executing therefor the document 23. G.R. No. 1011 May 13, 1903
Exhibit 5. The price of this sale was P237,722.15,
excluding any amount which the defendant might JOSE MACHUCA, plaintiff-appellee, vs.
be owing to the plaintiffs. Of the purchase price, CHUIDIAN, BUENAVENTURA & CO., defendants-
Venancio Concepcion and Phil. C. Whitaker paid appellants.
the sum of P47,544.43 only. In the deed Exhibit 5, the
FACTS:
plaintiffs and Concepcion and Whitaker agreed,
among other things, that the partnership "Palma"
and "San Isidro," formed by the agreement of
In 1882, defendants are organized as a regular the same form in which it may be obtained
general partnership in Manila; it was a continuation from said partnership," and "on the date
of a prior partnership of the same name. It was when Messrs. Chuidian, Buenaventura & Co.,
stipulated that the partners’ liability should be in liquidation, shall have effected the
"limited to the amounts brought in by them”. operations necessary in order to satisfy" the
Thereafter, partners contributed additional amounts. claims of D. Vicente Buenaventura.
During liquidation, the accounts-current of Telesforo The plaintiff will be entitled to receive from
Chuidian and Candelaria Chuidian had diminished the assets of the partnership, if any remain, at
while Mariano Buenaventura’s acct had increased. the termination of the liquidation.
Court did not discuss how would the partners
In 1894, Mariano Buenaventura died and his estate share in the remaining assets, if there is any,
passed to his children (among whom was Vicente in proportion to their contributions.
Buenaventura).
FACTS:
RULING:
NO. Garcia is NOT entitled. In 1984, Villareal, Carmelito Jose and Jesus Jose
formed a partnership with a capital of P750,000 for
Under clause 19 of the partnership agreement of the the operation of a restaurant and catering business.
parties, the partnership would be liquidated: Respondent Ramirez joined as a partner in the
business with the capital contribution of P250, 000.
liabilities to non-partners are to be In 1987, Jesus Jose withdrew from the partnership
discharged first; and within the same time, Villareal and Carmelito
claims of the Chuidian minors are to be next Jose, petitioners closed the business without prior
satisfied (does not appear how they knowledge of respondents.
acquired such);
advances made by a partner; Respondents wrote a letter to petitioners stating that
leaving the ultimate residue (if any) to be they were no longer interested in continuing the
distributed, among the partners in the partnership and that they were accepting the
proportions they may be entitled. latter’s offer to return their capital contribution. This
was left unheeded by the petitioners, and by reason
Hence, Vicente Buenaventura (rights are
of which respondents filed a complaint in the RTC.
those of his decesead father, Mariano) is NOT
entitled to receive any part of the assets until RTC ruled that the parties had voluntarily entered
the creditors who are nonpartners and the into a partnership, which could be dissolved at any
Chuidian minors are paid. Whatever rights time, and this dissolution was showed by the fact
Vicente had either as creditor or partner, he that petitioners stopped operating the restaurant.
could only transfer subject to this condition.
On appeal, CA upheld RTC’s decision that the
Vicente cannot transfer the partnership's assets to 3rd partnership was dissolved and it added that
person but may transfer/assign a partner's interest
respondents had no right to demand the return of
(share in profits & losses) on the partnership
their capital contribution. However since petitioners
did not give the proper accounting for the
By that instrument he undertakes to assign to
Garcia not a present interest in the assets of liquidation of the partnership, the CA took it upon
the partnership but an interest in whatever itself to compute their liabilities and the amount that
"may be obtained from the liquidation of the is proper to the respondent. The computation of
partnership," which Garcia is to receive "in which was :( capital of the partnership – outstanding
obligation) / remaining partners =amount due to Article 125 of the Code of Commerce provides that
private respondent. the articles of general copartnership must contain
the names of the partners the names, surnames, and
(Note: Both the trial and the appellate courts and domiciles of the partners; the firm name; the names,
the SC, actually, found that a partnership had and surnames of the partners to whom the
indeed existed, and that it was dissolved on March management of the firm and the use of its signature
1, 1987. They found that the dissolution took place is instrusted; the capital which each partner
when respondents informed petitioners of the contributes in cash, credits, or property, stating the
intention to discontinue it because of the formers value given the latter or the basis on which their
dissatisfaction with, and loss of trust in, the latter’s appraisement is to be made; the duration of the
management of the partnership affairs. These copartnership; and the amounts which, in a proper
case, are to be given to each managing partner
findings were amply supported by the evidence on
annually for his private expenses, while the
record.)
succeeding article of the
ISSUE: Code provides that the general copartnership must
Whether petitioners are liable to respondents for the transact business under the name of all its members,
latter’s equity share in the partnership of several of them, or of one only.
RULING: Teck Seing & Co., Ltd has complied with all the
requirements except that relating to the composition
NO. Respondents have no right to demand from of the firm name.
petitioner the return of their equity share. As found by
the court, petitioners did not personally hold its The contention of the creditors and appellants is that
equity or assets. “The partnership has a juridical the partnership contract established a general
personality separate and distinct from that of each partnership notwithstanding the fact that Teck Seing
of the partners.” Since the capital was contributed & Co., Ltd., a general copartnership failed to include
to the partnership, not to petitioners, it is the the name of one of the partners
partnership that must refund the equity of the retiring in the firm name.
partners.
RELEVANT PROVISIONS UNDER THE CODE OF
COMMERCE
However, before the partners can be paid their
shares, the creditors of the partnership must first be Article 119 - requires every commercial association
compensated. Therefore, the exact amount of before beginning its business to state its article,
refund equivalent to respondents’ one-third share in agreements, and conditions in a public instrument,
the partnership cannot be determined until all the which shall be presented for record in the mercantile
partnership assets will have been liquidated and all registry.
partnership creditors have been paid. CA’s
computation of the amount to be refunded to Article 120 - provides that the persons in charge of
the management of the association who violate the
respondents as their share was thus erroneous.
provisions of the foregoing article shall be
LIMITED PARTNERSHIP responsible in solidum to the persons not members of
Articles 1843 to 1867 the association with whom they may have
transacted business in the name of the association.
1. TECK SEING AND CO., LTD., petitioner-
Article 126 - requires a general partnership to
appellee. SANTIAGO JO CHUNG, ET AL.,
transact business under the name of all its members,
partners, vs. PACIFIC COMMERCIAL of several of them, or of one only to protect the
COMPANY, ET AL., creditorsappellants. G.R. public from imposition and fraud; and that the
No. 19892 September 6, 1923 provision of said article 126 is for the protection of the
creditors rather than of the partners themselves. And
“Doctrine of Substantial Compliance (Article 1844, consequently the doctrine was enunciated that the
last par.): Substantial, rather than strict, compliance law must be unlawful and unenforceable only as
in good faith with the legal requirements is all that is between the partners and at the instance of the
violating party, but not in the sense of depriving
necessary for the formation of a limited partnership;
innocent parties of their rights who may have dealt
otherwise, when there is not even substantial
with the offenders in ignorance of the latter having
compliance, the partnership becomes a general violated the law; and that contracts entered into by
partnership as far as third persons are concerned “ commercial associations defectively organized are
valid when voluntarily executed by the parties, and
FACTS:
the only question is whether or not they complied
In this case, the respondents who are creditors of the with the agreement.
petitioner partnership sought that TECK SEING AND
CO., LTD be adjudged insolvent. ISSUE:
Whether Teck Seing & Co. is a general partnership
The counsel for the petitioners asserted that Teck
Seing & Co., Ltd., is "una sociedad mercantil "de RULING:
facto" solamente" (only a de facto commercial YES. It would seem that Teck Seing & Co., Ltd. has
association) fulfilled the provisions of article 119.
The Supreme Court held that contract of partnership once every six (6) months at any time during ordinary
found in the document hereinbefore quoted business hours.
established a general partnership or, to be more
exact, a partnership as this word is used in the The lifetime of the partnership was fixed at ten
Insolvency Law. (10) years and also that —In the event of the death
of any of the partners at any time before the
The legal intention deducible from the acts of the expiration of said term, the co-partnership shall not
parties controls in determining the existence of a be dissolved but will have to be continued and the
partnership. If they intend to do a thing which in law deceased partner shall be represented by his heirs
constitutes a partnership, they are partners, although or assigns in said co-partnership (Art. XII, Articles of
their purpose was to avoid the creation of such Co- Partnership). However, the partnership could be
relation. dissolved and its affairs liquidated at any time upon
mutual agreement in writing of the partners.
Here, the intention of the persons making up Teck
Seing & co., Ltd. was to establish a partnership which "Tan Sin An and Goquiolay" purchased the three (3)
they erroneously denominated a limited partnership. parcels of land. Another 46 parcels were purchased
If this was their purpose, all subterfuges resorted to in by Tan Sin An in his individual capacity. The two
order to evade liability for possible losses, while separate obligations were consolidated in an
assuming their enjoyment of the advantages to be instrument executed by the partnership and Tan Sin
derived from the relation, must be disregarded. The An, whereby the entire 49 lots were mortgaged in
partners who have disguised their identity under a favor of the "Banco Hipotecario de Filipinas"
designation distinct from that of any of the members
of the firm should be penalized, and not the creditors In 1942, Tan Sin An died, leaving as surviving heirs his
who presumably have dealt with the partnership in widow, Kong Chai Pin, and four minor children.
good faith.
Repeated demands for payment were made by the
Banco Hipotecario on the partnership and on Tan Sin
2. G.R. No. L-11840 December 10, 1963 An. In 1944, the defendant Sing Yee and Cuan, Co.,
Inc., upon request of defendant Yutivo Sans
ANTONIO C. GOQUIOLAY, ET AL., plaintiffs- Hardware Co., paid the remaining balance of the
appellants, mortgage debt, and the mortgage was cancelled.
vs.
WASHINGTON Z. SYCIP, ET AL., defendants- Then in 1946, Yutivo Sons Hardware Co. and Sing Yee
appellees. and Cuan Co., Inc. filed their claims in the intestate
proceedings of Tan Sin An for P62,415.91 and
P54,310.13, respectively, as alleged obligations of
“The heir ordinarily becomes a limited partner for his
the partnership "Tan Sin An and Antonio C.
own protection, because he would normally prefer
Goquiolay" and Tan Sin An, for advances, interest
to avoid any liability in excess of the value of the
and taxes paid in amortizing and discharging their
estate inherited so as not to jeopardize his personal obligations to "La Urbana" and the "Banco
assets. But this statutory limitation of responsibility Hipotecario".
being designed to protect the heir, the latter may
disregard it and instead elect to become a Kong Chai Pin filed a petition with the probate court
collective or general partner, with all the rights and for authority to sell all the 49 parcels of land to
privileges of one, and answering for the debts of the Washington Z, Sycip and Betty Y. Lee, for the purpose
firm not only with the inheritance but also with the preliminary of settling the aforesaid debts of Tan Sin
heir's personal fortune. This choice pertains An and the partnership. Pursuant to a court order, a
exclusively to the heir, and does not require the deed of sale of the 49 parcels of land to the
assent of the surviving partner.” defendants Washington Sycip and Betty Lee.