1.

)
Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin
Misa
G.R. No. 109248 July 3, 1995
Vitug, J.

Facts:
 Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew in said firm.
 He filed with SEC a petition for dissolution and liquidation of partnership.
 SEC en banc ruled that withdrawal of Misa from the firm had dissolved the partnership.
Reason: since it is partnership at will, the law firm could be dissolved by any partner at
anytime, such as by withdrawal therefrom, regardless of good faith or bad faith, since no
partner can be forced to continue in the partnership against his will.

Issue: 1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo)
is a partnership at will; 2. WON the withdrawal of Misa dissolved the partnership regardless
of his good or bad faith;

Held: 1. Yes. The partnership agreement of the firm provides that ”[t]he partnership shall
continue so long as mutually satisfactory and upon the death or legal incapacity of one of
the partners, shall be continued by the surviving partners.”
2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of the
partnership at will (e.g. by way of withdrawal of a partner). He must, however, act in good
faith, not that the attendance of bad faith can prevent the dissolution of the
partnership but that it can result in a liability for damages

2.)

Isabelo Moran vs Court of

Appeals
Business Organization – Partnership, Agency, Trust – Profit and Loss Sharing –
Speculative Damages
In February 1971, Isabelo Moran and Mariano Pecson entered into a partnership agreement
where they agreed to contribute P15k each for the purpose of printing 95k posters of the
delegates to the then 1971 Constitutional Commission. Moran shall be in charge in
managing the printing of the posters. It was further agreed that Pecson will receive a
commission of P1k a month starting from April 1971 to December 1971; that the partnership
is to be liquidated on December 15, 1971.
Pecson partially fulfilled his obligation to the partnership when he issued P10k in favor of
the partnership. He gave the P10k to Moran as the managing partner. Moran however did
not add anything and, instead, he only used P4k out of the P10k in printing 2,000 posters.
He only printed 2,000 posters because he felt that printing all 95k posters is a losing venture
because of the delay by the COMELEC in announcing the full delegates. All the posters
were sold for a total of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court of
Appeals affirmed the decision of the trial court but modified the same as it ordered Moran to
pay P47.5k for unrealized profit; P8k for Pecson’s monthly commissions; P7k as return of
investment because the venture never took off; plus interest.
ISSUE: Whether or not the CA judgment is correct.
HELD: No. The award of P47.5k for unrealized profit is speculative. There is no evidence
whatsoever that the partnership between the Moran and Pecson would have been a
profitable venture (because base on the circumstances then i.e. the delay of the COMELEC
in proclaiming the candidates, profit is highly unlikely). In fact, it was a failure doomed from
the start. There is therefore no basis for the award of speculative damages in favor of
Pecson. Further, there is mutual breach in this case, Pecson only gave P10k instead of
P15k while Moran gave nothing at all.
As for the P8k monthly commission, this is without basis. The agreement does not state the
basis of the commission. The payment of the commission could only have been predicated
on relatively extravagant profits. The parties could not have intended the giving of a
commission inspite of loss or failure of the venture. Since the venture was a failure, Pecson
is not entitled to the P8k commission.
As for the P7k award as return for Pecson’s investment, the CA erred in his ruling too.
Though the venture failed, it did took off the ground as evidenced by the 2,000 posters
printed. Hence, return of investment is not proper in this case. There are risks in any
business venture and the failure of the undertaking cannot entirely be blamed on the
managing partner alone, specially if the latter exercised his best business judgment, which
seems to be true in this case.
Moran must however return the unused P6k of Pecson’s contribution to the partnership plus
P3k representing Pecson’s profit share in the sale of the printed posters. Computation of
P3k profit share is as follows: (P10k profit from the sale of the 2,000 posters printed) – (P4k
expense in printing the 2k posters) = (P6k profit); Profit ÷ 2 = P3k each.

3.)

MARTINEZ v. ONG PONG COArellano, CJ (1910) http://www.scribd.com/doc/111188629/Agency-and-Partnership-

Digests-8

MARTINEZ delivered to Ong Pong Co and Ong Lay (ONGS) thesum of P1,500. The ONGS, in a private document,
acknowledgedthat they had received the money with the agreement that theywill invest it in a store, and the profits or
losses therefrom was tobe divided with MARTINEZ in equal shares

Later, MARTINEZ filed a complaint in order to compel the ONGSto render him an accounting of the partnership, or else to
refundhim the P1,500 that he had given them

Ong Pong Co alone appeared to answer the complaint. Headmitted the fact of the agreement, but he alleged that Ong
Lay(deceased) was the one who had managed the business, and that nothing had resulted therefrom except the loss of the
capital of P1,500, to which loss MARTINEZ agreed to bear
 CFI rendered decision ordering Ong Pong Co to return toMARTINEZ one-half of the capital of P1,500 (P750) plus P90
asone-half of the profits, calculated at the rate of 12% per annumfor the six months that the store was supposed to have
been open(total of P840) with legal interest of 6% until the full payment,with costs. Hence, this appeal by Ong Pong Co

ISSUE: WON MARTINEZ is entitled to the capital hecontributed to the partnership

HELD: YES. The ONGS failed to fulfill their obligation as partners who, acting as MARTINEZ’s agents in receiving money, did not render
proper accounting therefor. Such renders them jointly liable for the losses, solidarity not having been established.CFI
decision is AFFRIMED in this regard but REVERSED inasmuchas it found that the capital invested earned profits. Thus, the
CFIruling awarding MARTINEZ another P840 is DELETED. Ong PongCo is only liable to pay MARTINEZ half of the capital, or
P750, representing half of the loss which both ONGS should jointly bear due to their omission, to earn legal interest of 6%
from time of filing this complaint, and costs

RATIO: In his defense, Ong Pong Co raised the issue of the closure/failureof the store by virtue of ejectment
proceedings instituted against them. THIS, however, has no real significance in the determination of the merits of this case

To be sure, the whole action is based upon the fact that the ONGS received capital from MARTINEZ for the purpose of
organizing a store. The ONGS, according to the agreement, were to handle the said money and invest it in a store which
was the object of the association

The ONGS had no special agreement vesting in one sole person the management of the business. Thus, both ONGS were
the actual administrators thereof; and as such administrators, they were the agents of the company and incurred the
liabilities peculiar to every agent, among which is that of rendering account to the principal of their transactions, and paying
him everything they may have received by virtue of the mandatum

Since neither of them has rendered such account nor proven the losses, they are therefore obliged to refund the money
that they received for the purpose of establishing the said store

There is no evidence presented that the entire capital or any part thereof was lost. Without proof, the allegation that the
effects of the store were ejected is, as earlier mentioned, of no moment. Even if we assume this to be true, it could still not
be inferred that the ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the
loss of the capital belonging to the partnership

4.)

United States vs Eusebio Clarin

Facts:
Sometime before 1910, Pedro Larin formed a partnership with Pedro Tarug, Eusebio Clarin
and Carlos de Guzman. Larin, being the capitalist, agreed to contribute P172.00 to the
partnership and the three others shall use said fund to trade mangoes. The three industrial
partners bought mangoes and sell them and they earned P203.00 but they failed to give
Larin’s share of the profits. Larin charged them with the crime of estafa, but the provincial
fiscal filed an information only against Eusebio Clarin in which he accused him of
appropriating to himself not only the P172 but also the share of the profits that belonged to
Larin, amounting to P15.50. Clarin was eventually convicted.
ISSUE: Whether or not the conviction is correct.
HELD: No. The P172.00 having been received by the partnership, the business
commenced and profits accrued, the action that lies with the partner who furnished the
capital for the recovery of his money is not a criminal action for estafa, but a civil one arising
from the partnership contract for a liquidation of the partnership and a levy on its assets if
there should be any.
The then Penal Code provides that those who are guilty of estafa are those “who, to the
prejudice of another, shall appropriate or misapply any money, goods, or any kind of
personal property which they may have received as a deposit on commission for
administration or in any other producing the obligation to deliver or return the same,” (as, for
example, in commodatum, precarium, and other unilateral contracts which require the return
of the same thing received) does not include money received for a partnership; otherwise
the result would be that, if the partnership, instead of obtaining profits, suffered losses, as it
could not be held liable civilly for the share of the capitalist partner who reserved the
ownership of the money brought in by him, it would have to answer to the charge of estafa,
for which it would be sufficient to argue that the partnership had received the money under
obligation to return it

5.)

Insurance Case Digest: Tai Tong Chuache &

Co. V. Insurance Commission (1988)
G.R. No. L-55397 February 29, 1988

FACTS:

 Azucena Palomo bought a parcel of land and building from Rolando Gonzales and assumed
a mortgage of the building in favor of S.S.S. which was insured with S.S.S.
Accredited Group of Insurers
 April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the
amount of P100,000 and to secure it, the land and building was mortgaged
 June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering the building for
P50,000 with Zenith Insurance Corporation
 July 16, 1975: another Fire Insurance policy was procured from Philippine British
Assurance Company, covering the same building for P50,000 and the contents
thereof for P70,000
 Before the occurrence of the peril insured against the Palomos had already paid their credit due the
 July 31, 1975: building and the contents were totally razed by fire
 Palomo was able to claim P41,546.79 from Philippine British Assurance Co.,
P11,877.14 from Zenith Insurance Corporation and P5,936.57 from S.S.S.
Group of Accredited Insurers but Travellers Multi-Indemnity refused so it
 demanded the balance from the other three but they refused so they filed
against them
 Insurance Commission, CFI: absolved Travellers on the basis that Arsenio Cua
was claiming and NOT Tai Tong Chuache
 Palomo Appealed
 Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage creditor
 Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire Insurance
Policy issued by travellers
 affirmative defense of lack of insurable interest that before the occurrence of the peril
insured against the Palomos had already paid their credit due the petitioner
ISSUE: W/N Tai Tong Chuache & Co. has insurable interest

HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache &
Co.

 when the creditor is in possession of the document of credit, he need not prove non-payment for it is
presumed
 The validity of the insurance policy taken b petitioner was not assailed by private respondent.
Moreover, petitioner's claim that the loan extended to the Palomos has not yet been paid was
corroborated by Azucena Palomo who testified that they are still indebted to herein petitioner
 Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership.
Being an agent, it is understood that he acted for and in behalf of the firm
 Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner,
Travellers must be held liable

6.)

Litton vs. Hill

Facts:

Litton sold and delivered to Ceron, one of the managing partners of Hill & Ceron, a certain
number of mining claims. By virtue of said transaction, Ceron delivered to plaintiff a document
(receipt) acknowledging that he received from Litton certain share certificates of Big Wedge
Mining Company totalingP1870.Ceron paid to Litton P1, 150 leaving a balance of P720. Litton
was unable to collect the unpaid balance from Hill & Ceron or from its surety. Litton filed a
complaint against the defendants for the recovery of the balance. The court ordered Ceron to
personally pay the amount claimed and absolved the partnership, Hill and the surety.CA affirmed
the decision of the court.
Issue: Did the transaction bind the partnership or Ceron only?

Held: While the transaction was entered into by Ceron, it bound the partnership. Robert Hill had
the same power to buy and sell; that in said partnership Hillas well as Ceron made the transaction
as partners in equal parts; that on the date of the transaction, February 14, 1934, the partnership
between Hill and Ceron was in existence. After this date, or on February 19th, Hill &Ceron sold
shares of the Big Wedge; and when the transaction was entered into with Litton, it was neither
published in the newspapers nor stated in the commercial registry that the partnership Hill &
Ceron had been dissolved.

The SC dissented from the view of the CA that for one of the partner’s tobind the partnership the
consent of the other is necessary. Third persons, like the plaintiff, are not bound in entering into a
contract with any of the two partners, to ascertain whether or not this partner with whom the
transaction is made has the consent of the other partner. The public need not make inquires as to
the agreements had between the partners. Its knowledge is enough that it is contracting with the
partnership which is represented by one of the managing partners.

The second paragraph of the articles of partnership of Hill & Ceron reads inpart: Second: That
the purpose or object for which this co-partnership is organized is to engage in the business of
brokerage in general, such as stock and bond brokers, real brokers, investment security brokers,
shipping brokers, and other activities pertaining to the business of brokers in general. The kind of
business in which the partnership Hill & Ceron is to engage being thus determined, none of the
two partners, under article 130 of the Code of Commerce, may legally engage in the business of
brokerage in general as stock brokers, security brokers and other activities pertaining to the
business of the partnership. Ceron, therefore, could not have entered into the contract of sale of
shares with Litton as a private individual, but as a managing partner of Hill & Ceron

The stipulation in the articles of partnership that any of the two managing partners may contract
and sign in the name of the partnership with the consent of the other, undoubtedly creates an
obligation between the two partners, which consists in asking the other's consent before
contracting for the partnership. This obligation of course is not imposed upon a third person who
contracts with the partnership. Neither is it necessary for the third person to ascertain if the
managing partner with whom he contracts has previously obtained the consent of the other. A
third person may and has a right to presume that the partner with whom he contracts has, in the
ordinary and natural course of business, the consent of his co-partner; for otherwise he would not
enter into the contract. The third person would naturally not presume that the partner with whom
he enters into the transaction is violating the articles of partnership but, on the contrary, is4By
Joy Co

Acting in accordance therewith. And this finds support in the legal presumption that the ordinary
course of business has been followed. If we are to interpret the articles of partnership in question
by holding that it is the obligation of the third person to inquire whether the managing co-partner
of the one with whom he contracts has given his consent to said contract, which is practically
casting upon him the obligation to get such consent, this interpretation would, in similar cases,
operate to hinder effectively the transactions, a thing not desirable and contrary to the nature of
business which requires promptness and dispatch one the basis of good faith and honesty which
are always presumed.

7.)

EVANGELISTA & CO. v. ABAD SANTOS

EVANGELISTA & CO. v. ABAD SANTOS

G.R. No. L-31684; June 28, 1973

Ponente: J. Makalintal

FACTS:

On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June
7, 1955 the Articles of Co-partnership were amended so as to include herein respondent, Estrella Abad
Santos, as industrial partner, with herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad
Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with a
contribution of P17,500 each

On December 17, 1963 herein respondent filed suit against the three other partners, alleging that
the partnership, which was also made a party-defendant, had been paying dividends to the partners
except to her; and that notwithstanding her demands the defendants had refused and continued to
refuse to let her examine the partnership books or to give her information regarding the partnership
affairs or to pay her any share in the dividends declared by the partnership

The defendants, in their answer, denied ever having declared dividends or distributed profits of
the partnership; denied likewise that the plaintiff ever demanded that she be allowed to examine the
partnership books; and by way of affirmative defense alleged that the amended Articles of Co-
partnership did not express the true agreement of the parties, which was that the plaintiff was not an
industrial partner; that she did not in fact contribute industry to the partnership.

ISSUE:

Whether Abad Santos is entitled to see the partnership books because she is an industrial partner
in the partnership

HELD:
Yes, Abad Santos is entitled to see the partnership books.

The Supreme Court ruled that according to

ART. 1299. Any partner shall have the right to a formal account as to partnership affairs:

(1)If he is wrongfully excluded from the partnership business or possession of its property by his co-
partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and reasonable."

In the case at hand, the company is estopped from denying Abad Santos as an industrial partner
because it has been 8 years and the company never corrected their agreement in order to show their
true intentions. The company never bothered to correct those up until Abad Santos filed a complaint.

8.)

Next page mga dzai

9.)

Teague vs. Martin, 53 Phil. 504

It was alleged, among others, by the plaintiff that he and the defendants formed a partnership for the operation of
a fish business and similar commercial transactions, which by mutual consent was called "Malangpaya Fish Co.,"
with a capital of P35,000, of which plaintiff paid P25,000, the defendants Martin P5,000, Maddy P2,500, and
Golucke P2,500; that he was named the general partner; that the share in the profits and losses is in proportion to
the amount of contributed capital; that there was no agreement as to the duration of the partnership; that he
wants to dissolve it, but the defendants refused to do so; that the partnership purchased and owns a lighter (Lapu-
Lapu), a motorship (Barracuda), and other properties, which are in the possession of the defendants who are
making use of them. It was alleged that it is the best interest of the parties to have a receiver appointed pending
this litigation, to take possession of the properties, and he prays that the Philippine Trust Company be appointed
receiver, and for judgment dissolving the partnership, with costs.
Each of the defendants filed a separate answer, but of the same nature. It is then alleged, among others, that
Maddy will have charge of the Barracuda and the navigating of the same, salary P300 per month; Martin will have
charge of the southern station, cold stores, commissary and procuring fish, salary P300 per month; Teague will
have charge of selling fish in Manila and purchasing supplies. No salary until business is on paying basis.

The CFI issued a decision: (1) dissolving the partnership and liquidating its assets; (2) that the barge Lapu-Lapu as
well as the Ford truck and adding machine belong exclusively to Teague, but he must return to and reimburse the
partnership the amount which was taken from its funds for the purchase of the Lapu-Lapu and the Ford truck.

Upon appeal, the plaintiff further contended that he is the managing partner of the partnership and the three
properties (Lapu-Lapu, Barracuda & Ford truck) are properties of the partnership since they were paid from the
profits of the partnership thus do not belong to him.

ISSUES:

WON the plaintiff was the manager of the unregistered partnership of Malangpaya Fish Company.

WON the three properties are owned by the partnership.

RULING:

Yes, the powers and duties of the three partners are specifically defined, and that each of them was more or less
the general manager in his particular part of the business. The plaintiff’s powers and duties were confined and
limited to "selling fish in Manila and the purchase of supplies."

No, the Lapu-Lapu, Barracuda, and the adding machine, although paid for by the partnership funds, are owned by
petitioner for it was registered in his own name. He is estopped from claiming otherwise. The purchase of the
properties in question are not within the scope of plaintiff’s authority. It is but right that the plaintiff reimburse the
partnership for the use of its funds. However, it noted that the partnership also made use of the Lapu-Lapu. In the
interest of justice, the plaintiff should be compensated for such use.

10.)

ROGER V. NAVARRO vs. HON. JOSE L. ESCOBIDO

FACTS: Respondent Karen T. Go filed two complaints before the RTC for replevin and/or sum of
money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue
writs of replevin for the seizure of two (2) motor vehicles in Navarro’s possession. In his Answers,
Navarro alleged as a special affirmative defense that the two complaints stated no cause of action,
since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the
lease agreements) — the actionable documents on which the complaints were based. RTC
dismissed the case but set aside the dismissal on the presumption that Glenn Go’s (husband)
leasing business is a conjugal property and thus ordered Karen Go to file a motion for the inclusion
of Glenn Go as co-plaintiff as per Rule 4, Section 3 of the Rules of Court. Navarro filed a petition for
certiorari with the CA. According to Navarro, a complaint which failed to state a cause of action could
not be converted into one with a cause of action by mere amendment or supplemental pleading. CA
denied petition.

ISSUE: Whether or not Karen Go is a real party in interest.

HELD: YES. Karen Go is the registered owner of the business name Kargo Enterprises, as the
registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be
injured by a judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real
party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action
because her name did not appear in the Lease Agreement that her husband signed in behalf of
Kargo Enterprises.
Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered
under this name; hence, both have an equal right to seek possession of these properties. Therefore,
only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable parties. They
are not even necessary parties, for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all co-owners.
We hold that since Glenn Go is not strictly an indispensable party in the action to recover possession
of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on
Section 4, Rule 4 of the Rules, which states:
Section 4.Spouses as parties. — Husband and wife shall sue or be sued jointly, except as provided
by law.
Even assuming that Glenn Go is an indispensable party to the action, misjoinder or non-joinder of
indispensable parties in a complaint is not a ground for dismissal of action as per Rule 3, Section 11
of the Rules of Court.

11.)

JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDENG

JASO
G.R. No. 178782 September 21, 2011

FACTS

Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis Eric Amaury Biondo, a
French national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and
Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the
remaining 20% to be used for the payment of the ice making machine which was purchased for the business. For and
in consideration of the sum of P500,000.00, however, Biondo subsequently executed a Deed of
Assignment transferring all his rights and interests in the business in favor of respondent Eden Jaso, the wife of
respondent Prosencio Jaso. With Biondo’s eventual departure from the country, the Spouses Jaso caused their
lawyer to send Josefina a letter apprising her of their acquisition of said Frenchmans share in the business and
formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant
suit for specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of
the joint venture, appointment of a receiver and damages. The said complaint alleged that the Spouses Realubit had
no gainful occupation or business prior to their joint venture with Biondo and that aside from appropriating for
themselves the income of the business, they have fraudulently concealed the funds and assets thereof thru their
relatives, associates or dummies. The Spouses Realubit claimed that they have been engaged in the tube ice trading
business under a single proprietorship even before their dealings with Biondo.

The RTC rendered its Decision discounting the existence of sufficient evidence from which the income,
assets and the supposed dissolution of the joint venture can be adequately reckoned. Upon the finding, however, that
the Spouses Jaso had been nevertheless subrogated to Biondos rights in the business in view of their valid
acquisition of the latters share as capitalist partner. On appeal before the CA, the foregoing decision was set aside

upon the following findings that the Spouses Jaso validly acquired Biondos share in the business which had been
transferred to and continued its operations and not dissolved as claimed by the Spouses Realubit.

ISSUES

1. Whether there was a valid assignment or rights to the joint venture

2. Whether the joint venture is a contract of partnership

3. Whether Jaso acquired the title of being a partner based on the Deed of Assignment

RULING

1. Yes. As a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a
presumption of regularitybut is also considered prima facie evidence of the facts therein stated. A party assailing the
authenticity and due execution of a notarized document is, consequently, required to present evidence that is clear,
convincing and more than merely preponderant. In view of the Spouses Realubits failure to discharge this onus, we
find that both the RTC and the CA correctly upheld the authenticity and validity of said Deed of Assignment upon
the combined strength of the above-discussed disputable presumptions and the testimonies elicited from Eden and
Notary Public Rolando Diaz.

2. Yes. Generally understood to mean an organization formed for some temporary purpose, a joint venture is
likened to a particular partnership or one which has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation. The rule is settled that joint ventures are governed by the
law on partnerships which are, in turn, based on mutual agency or delectus personae.

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

12.)

G.R. No. L-5963 May 20, 1953

THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI, petitioners, vs.SULPICIO V. CEA, in his capacity as Judge of the Court
of First Instance of Leyte and OLEGARIO LASTRILLA, respondents.

In civil case No. 193 of the Court of First Instance of Leyte, which is a suit for damages by the Leyte-Samar Sales Co. (hereinafter
called LESSCO) and Raymond Tomassi against the Far Eastern Lumber & Commercial Co. (unregistered commercial partnership
hereinafter called FELCO), Arnold Hall, Fred Brown and Jean Roxas, rendered judgment against defendants jointly and severally
for the amount of P31,589 plus cost on october 29, 1948.

The Court of Appeals confirmed the award in November 1950, minus P2,000 representing attorney's fees mistakenly included.
The decision having become final, the sheriff sold at auction on June 9, 1951 to Robert Dorfe and Pepito Asturias "all the rights,
interests, titles and participation" of the defendants in certain buildings and properties described in the certificate, for a total
price of eight thousand and one hundred pesos.

On June 4, 1951 Olegario Lastrilla filed in the case a motion, wherein he claimed to be the owner by purchase on September 29,
1949, of all the "shares and interests" of defendant Fred Brown in the FELCO. Over the plaintiffs' objection the judge in his
order of June 13, 1951, granted Lastrilla's motion by requiring the sheriff to retain 17 per cent of the money And on motion of
Lastrilla, the court on August 14, 1951, modified its order of delivery and merely declared that Lastrilla was entitled to 17 per
cent of the properties sold.

Hence, this petition for "Certiorari and Prohibition with preliminary Injunction" praying for the additional writ of mandamus.

issue:

(a) whether or not Lastrilla is a partner of FELCO, having purchased the share and interest of defendant Fred Brown after CFI
rendered an unfavorable judgment, but prior to the auction sale, hence he can claim to the proceeds of the sale?

(b) whether or not there was grave abuse of discretion on the part of the judge in granting lastrilla's motion and ordering the
delivery to him of the 17% of the properties.

ruling:

(a) In the situation it we can conclude that on June 9, 1951 when the sale was effected of the properties of FELCO to Roberto
Dorfe and Pepito Asturias, Lastilla was already a partner of FELCO. Now, does Lastrilla have any proper claim to the proceeds of
the sale? If he was a creditor of the FELCO, perhaps or maybe. But he was not. The partner of a partnership is not a creditor of
such partnership for the amount of his shares. That is too elementary to need elaboration.

(c) On this score the respondent judge's action on Lastrilla's motion should be declared as in excess of jurisdiction, which even
amounted to want of jurisdiction, considering specially that Dorfe and Austrias, and the defendants themselves, had
undoubtedly the right to be heard—but they were not notified.4Varied interest of necessity make Dorfe, Asturias and the
defendants indispensable parties to the motion of Lastrilla.A valid judgment cannot be rendered where there is a want of
necessary parties, and a court cannot properly adjudicate matters involved in a suit when necessary and indispensable parties
to the proceedings are not before it. In view of the foregoing, it is our opinion, and we so hold, that all orders of the
respondents judge requiring delivery of 17 per cent of the proceeds of the auction sale to respondent Olegario Lastrilla are null
and void.
13.)

Island Sales v. United 65 SCRA 554

DOCTRINE: Condonation by creditor of share in partnership debt of one partner does not
increase pro rata liability of other partners.

FACTS:
The defendant company ( UNITED PIONEERS GENERAL CONSTRUCTION COMPANY ET .AL ), a
general partnership duly registered under the laws of the Philippines, purchased from
theplaintiff ( ISLAND SALES, INC) a motor vehicle on installment basis and for this purpose
executed apromissory note for P9,440.00, payable in twelve (12) equal monthly installments of
P786.63, the first installment payable on or before May 22, 1961 and the subsequent
installments on the 22nd day of every month thereafter, until fully paid, with the condition that
failure to pay any of said installments asthey fall due would render the whole unpaid balance
immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant
company for the unpaid balance amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona,
Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-defendants in their
capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default.
Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant
Romulo B. Lumauig is concerned.

When the case was called for hearing, the defendants and their counsels failed to appear
notwithstanding the notices sent to them. Consequently, the trial court authorized the plaintiff
to present its evidence ex-parte , after which the trial court rendered the decision appealed
from.

The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming
that since there are five (5) general partners, the joint and subsidiary liability of each partner
should notexceed one-fifth (1/5) of the obligations of the defendant company. But the trial
court denied the said motion notwithstanding the conformity of the plaintiff to limit the liability
of the defendants Daco and Sim to only one-fifth (1/5 ) of the obligations of the defendant
company.Hence, this appeal.

ISSUE: Whether the condonation of a partner’s share in the debts of the company
increases the remaining partners’ liability?

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

RATIO: Article 1816 of the Civil Code provides:

“All partners including industrial ones, shall be liable pro rata with all their property
and after all the partnership assets have been exhausted, for the contracts which
may be entered into in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform”

14.)

Pahud vs CA
Facts:

Spouses Pedro San Agustin and Agatona Genil acquired a 246 m2 land in Brgy. Anos, Los Baños, Laguna. Both died
intestate, survived by their eight (8) children: respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva,
Isabelita and Virgilio.

Eufemia, Ferdinand and Raul sold the property to the petitioners, the Pahuds for P525,000.00. Eufemia also signed
the deed on behalf of her four (4) other co-heirs, namely: Isabelita on the basis of a special power of attorney
executed on September 28, 1991,7 and also for Milagros, Minerva, and Zenaida but without their apparent written
authority.8 The deed of sale was also not notarized.9

Pahuds paid the balance of the consideration. Virgilio, however, refused to sign in the extra judicial partition.

Virgilio’s co-heirs filed a complaint for judicial partition. In the course of the proceedings, a Compromise Agreement
was signed with seven (7) of the co-heirs agreeing to sell their undivided shares to Virgilio forP700,000.00.

Eufemia acknowledged having received P700,000.00 from Virgilio. Virgilio then sold the entire property to spouses
(Belarminos) sometime in 1994. The Belarminos immediately constructed a building on the subject property.

The Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold the property to the
Belarminos. Aggrieved, the Pahuds filed a complaint in intervention in the pending case for judicial partition.

After trial, the RTC upheld the validity of the sale to Pahuds. CA reversed it and ruled in favor of the heirs.

Issue: WON the sale of the property by Eufemia to the Pahuds are valid?

Held: Yes. We find the transaction to be valid and enforceable.

Under Art. 1874, a sale of a piece of land or any interest through an agent, requires that the authority of the latter
shall be in writing; otherwise, the sale shall be void.

Also, Article 1878, a special power of attorney is necessary for an agent to enter into a contract by which the
ownership of an immovable property is transmitted or acquired.

The express mandate required by law to enable an appointee of an agency in general terms to sell must be one that
expressly mentions a sale. A power of attorney must so express the powers of the agent in clear and unmistakable
language.

Absence of a written authority to sell a piece of land is, ipso jure, void, precisely to protect the interest of an
unsuspecting owner from being prejudiced by the unwarranted act of another.

In this case, the sale made by Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992 should be
valid only with respect to the 4/8 portion of the subject property.

The sale with respect to the 3/8 portion, representing the shares of Zenaida, Milagros, and Minerva, is void because
Eufemia could not dispose of the interest of her co-heirs in the said lot absent any written authority from the latter,
as explicitly required by law.

While the sale with respect to the 3/8 portion is void by express provision of law, it is still valid on the basis of the
principle of estoppel. Under Art 1431, Through estoppel an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying thereon.

Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8 portion of the property.
Initially, in their answer to the complaint in intervention, Eufemia and her other co-heirs denied having sold their
shares to the Pahuds. Later, however, they admitted that they had indeed sold 7/8 of the property to the Pahuds
sometime in 1992.33 Thus, the previous denial was superseded, if not accordingly amended, by their subsequent
admission.

Also, the three heir concerned did not assail the validity of the sale by Eufemia to the Pahuds on the basis of want of
written authority to sell. They opted to remain silent and left the task of raising the validity of the sale as an issue to
their co-heir, Virgilio, who is not privy to the said transaction.

It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latter’s
reliance upon a deceitful representation by an agent in the course of his employment (1) if the representation is
authorized; (2) if it is within the implied authority of the agent to make for the principal; or (3) if it is apparently
authorized, regardless of whether the agent was authorized by him or not to make the representation.37

By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to believe that they have indeed
clothed Eufemia with the authority to transact on their behalf. Clearly, the three co-heirs are now estopped from
impugning the validity of the sale from assailing the authority of Eufemia to enter into such transaction.

Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void because they no longer had any
interest over the subject property which they could alienate at the time of the second transaction. 38 Nemo dat quod
non habet. Virgilio, however, could still alienate his 1/8 undivided share to the Belarminos.

15.)

E.B. Villarosa & Partners Co., Ltd. i. Benito, 312 SCRA 65 ,1999|

FACTS:
E.B. Villarosa & Partners is a limited partnership with principal office
address at 102 Juan Luna St., Davao City and with branch offices at Parañaque and
Cagayan de Oro City (CDO). Villarosa and Imperial Development (ID) executed
an Agreement wherein Villarosa agreed to develop certain parcels of land in CDO
belonging to ID into a housing subdivision. ID, filed a Complaint for Breach of
Contract and Damages against Villarosa before the RTC allegedly for failure of the
latter to comply with its contractual obligation.
Summons, together with the complaint, were served upon Villarosa, through its
Branch Manager Wendell Sabulbero at the address at CDO but the Sheriff’s Return
of Service stated that the summons was duly served "E.B. Villarosa & Partner thru
its Branch Manager at their new office Villa Gonzalo, CDO, and evidenced by the
signature on the face of the original copy of the summons." Villarosa prayed for the
dismissal of the complaint on the ground of improper service of summons and for
lack of jurisdiction over the person of the defendant. Villarosa contends that the
RTC did not acquire jurisdiction over its person since the summons was
improperly served upon its employee in its branch office at CDO who is not one of
those persons named in Sec. 11, Rule 14 upon whom service of summons may be
made. ID filed a Motion to Declare Villarosa in Default alleging that Villarosa has
failed to file an Answer despite its receipt allegedly on May 5, 1998 of the
summons and the complaint, as shown in the Sheriff's Return.

Issue: Won an agent of a corporation can receive summons in behalf of their

corporation?

HELD: The court agrees with the contention of Villarosa. Earlier cases have
uphold service of summons upon a construction project manager; a corporation's
assistant manager; ordinary clerk of a corporation; private secretary of corporate
executives; retained counsel; officials who had charge or control of the operations
of the corporation, like the assistant general manager; or the corporation's Chief
Finance and Administrative Office. In these cases, these persons were considered
as "agent" within the contemplation of the old rule.”
“Notably, under the new Rules, service of summons upon an AGENT of the
corporation is NO LONGER authorized.”
“The designation of persons or officers who are authorized to accept summons for
a domestic corporation or partnership is now limited and more clearly specified in
Section11, Rule 14. The rule now states "general manager" instead of only
"manager";"corporate secretary" instead of "secretary"; and "treasurer" instead of
"cashier." The phrase “agent, or any of its directors" is conspicuously deleted in the
new rule.”
“A strict compliance with the mode of service is necessary to confer jurisdiction of
the court over a corporation. The officer upon whom service is made must be one
who is named in the statute; otherwise the service is insufficient. . . The liberal
construction rule cannot be invoked and utilized as a substitute for the plain legal
requirements as to the manner in which summons should be served on a domestic
corporation. .”

16.)

Elmo Muñasque vs CA

Facts:
Elmo Muñasque, in behalf of “Galan and Muñasque” partnership as Contractor, entered into a written
contract with Tropical Commercial Co., through its branch manager Ramon Pons, for remodelling of
Tropical’s building in Cebu. The consideration for the entire services is P25,000 to be paid: 30% upon
signing of contract, and balance on 3 equal instalments of P6,000 every 15working days.

First payment of check worth P7,000 was payable to Muñasque, who indorsed it to Galan for purposes
of depositing the amount and paying the materials already used. But since Galan allegedly
misappropriated P6,183.37 of the check for personal use, Muñasque refused to indorse the second
check worth P6,000. Galan then informed Tropical of the “misunderstanding” between him and
Muñasque and this prompted Tropical to change the payee of the second check from Muñasque to
“Galan and Associates” (the duly registered name of Galan and Muñasque partnership). Despite the
misappropriation, Muñasque alone was able to finish the project. The two remaining checks were
properly issued to Muñasque.

Muñasque filed a complaint for payment of sum of money plus damages against Galan, Tropical and
Pons for the amount covered by the first and second checks. Cebu Southern Hardware Co and Blue
Diamond Glass Palace were allowed as intervenors having legal interest claiming against Muñasue and
Galan for materials used.

TC:
- Muñasque and Pons jointly and severally liable to intervenors
- Tropical and Pons absolved
CA affirmed with modification:
- Muñasque and Pons jointly liable to intervenors

Issue:
1. W/N Muñasque and Galan are partners?
2. W/N payment made by Tropical to Galan was “good payment”?
3. W/N Galan should shoulder exclusively the amounts payable to the intervenors (granting he
misappropriated the amount from the two checks)?

Held:
yes-yes-no!

1. YES. Tropical had every right to presume the existence of the partnership:
a. Contract states that agreement was entered into by “Galan and Muñasque”
b. The first check issue in the name of Muñasque was indorsed to Galan
The relationship was made to appear as a partnership.

2. YES. Muñasque and Galan were partners when the debts to the intervenors were incurred,
hence, they are also liable to third persons who extended credit to their partnership.

There is a general presumption that each individual partner is an authorized agent for the firm
and that he has authority to bind the firm in carrying on the partnership transactions. The
presumption is sufficient to permit third persons to hold the firm liable on transactions entered
into by one of the members of the firm acting apparently in its behalf and within the scope of
his authority

3. NO. Article 1816 BUT construed together with Article 1824.

Art. 1816. “All partners, including industrial ones, shall be liable pro rata x x x for the contracts
which may be entered into the name and for the account of the partnership, under its signature
and by a person authorized x x x”
 Art. 1824. “All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823”

Art. 1822. “Where, by any wrongful act or omission of any partner acting in the ordinary course
of the business x x x or with the authority of his co-partners, loss or injury is caused to any
person x x x”

Art. 1823. “The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it, and
(2) Where the partnership in the course of its business receives money or property of a
third person x x x is misapplied by any partner while it is in the custody of the
partnership.”

GR: In transactions entered into by the partnership, the liability of the partners is merely joint
Exception: In transactions involving third persons falling under Articles 1822 and 1823, such
third person may hold any partner solidarily liable for the whole obligation with the partnership.

Reason for exception: the law protects him, who in good faith relied upon the authority if a
partner, whether real or apparent.

However, as between Muñasque and Galan, justice also dictates reimbursement in favour of
Muñasque as Galan was proven to be in bad faith in his dealings with his partner.

17.)

J. Tiosejo Investment Corp. v. Spouses Benjamin and Eleanor Ang

G.R. No. 174149, September 8, 2010

Facts:
In this case, the petitioners seek the reversal of the CA’s Resolution declaring
J. Tiosejo Investment Corp. solidarily liable with Primetown Property Group, Inc. (PPGI) to
pay Spouses Benjamin and Eleanor Ang their refund for their payments plus legal interest until fully
paid and damages.

J. Tiosejo entered into a Joint Venture Agreement with PPGI for the development of a
residential condominium project known as Meditel in Mandaluyong City. Petitioner contributed the
lot while PPGI undertook to develop the condominium. The parties further agreed to a 17%-83%
sharing as to developed units.

PPGI further undertook to use all proceeds from pre-selling of its saleable units for the
completion of the Condominium Project. Sometime in 1996, PPGI executed a Contract to Sell with
Spouses Ang on a certain condominium unit and parking slot for P2,077,334.25 and P313,500.00,
respectively. On July 1999, respondent Spouses filed before the Housing and Land Use
Regulatory Board(HLURB) a complaint for the rescission of the Contract to Sell,
against J. Tiosejo and PPGI. They claim that they were promised that the condo unit
would be available for turn -over and occupancy by December 1998, however the
project was not completed as of the said date. Spouses Ang instructed petitioner and
PPGI to stop depositing the post-dated checks they issued and to cancel said Contracts to Sell.
Despite several demands, petitioner and PPGI have failed and refused to refund the
P611,519.52 they already paid under the circumstances.

As defense, PPGI claim that the delay was attributable to the economic crisis
and to force majeure (unexpected and unforeseen inflation and increase rates and cost of
building materials). They also state that it offered several alternatives to Spouses Ang
to transfer their investment to its other feasible projects and for the amounts they
already paid to be considered as partial payment for the replacement unit/s.

On a separate answer, petitioner claims that its prestation under the JVA consisted of
contributing the property on which the condominium was to be constructed. Not being privy to
the Contracts to Sell executed by PPGI and respondents, it did not receive any portion of
the payments made by the latter; and, that without any contributory fault and negligence on its
part, PPGI (and not the petitioner) breached its undertakings under the JVA by failing to complete
the condominium project. The Housing and Land Use (HLU) arbiter ruled in favor of
respondents, rescinding the contract and ordering petitioner and PPGI to pay refund,
interest, damages, attorney’s fees and administrative fines. The HLURB Board of
Commissioners affirmed the HLU’s order. Motion for Reconsideration (MR) was
denied. The case was subsequently raised to the Office of the President (OP) which rendered a
decision dismissing petitioner’s appeal on the ground that the latter’s appeal memorandum was filed
out of time and that the HLURB Board committed no grave abuse of discretion in rendering the
appealed decision.MR was also denied. Petitioner filed before the CA a motion for extension within
which to file its petition for review, claiming heavy workload of its counsel. This was denied by the
CA. MR was denied for lack of merit. Hence, the present petition before the Supreme Court.

Issue:

Whether or not J. Tiosejo Investment Corp. is exempt from liability by claiming it

was not privy to the Contract to Sell executed by its JV partner, PPGI and the Spouses Ang

Held:

The Supreme Court held that J. Tiosejo Investment Corp. “cannot avoid liability by claiming
that it was not in any way privy to the Contracts to Sell executed by PPGI and respondents.” It was
stated in its ruling that a “joint venture” is considered as a form of partnership, and as such, it
should be governed by the law of partnerships.

Under Article 1824 of the Civil Code of the Philippines, all partners are solidarily liable with the
partnership for everything chargeable to the partnership, including loss or injury caused to a third
person or penalties incurred due to any wrongful act or omission of any partner acting in the
ordinary course of the business of the partnership or with the authority of his co-partners. Whether
innocent or guilty, all the partners are solidarily liable with the partnership itself.
18.)

Philippine National Bank vs

Eugenio Lo et al
Business Organization – Partnership, Agency, Trust – Firm Name
In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam and Peng
formed a commercial partnership under the name of “Tai Sing and Co.,” with a capital of
P40,000 contributed by said partners. The firm name was registered in the mercantile
registrar in the Province of Iloilo. Ping, in the articles of partnership, was assigned as the
general manager. However, in 1917, he executed a special power of attorney in favor of
Lam to act in his behalf as the manager of the firm. Subsequently, Lam obtained a loan
from PNB – the loan was under the firm’s name. In the same year, Ping died in China. From
1918 to 1920, the firm, via GM Lam, incurred other loans from PNB. The loans were not
objected by any of the partners. Later, PNB sued the firm for non-payment. Lo, in his
defense, argued that he cannot be liable as a partner because the partnership, according to
him, is void; that it is void because the firm’s name did not comply with the requirement of
the Code of Commerce that a firm name should contain the “names of all of the partners, of
several of them, or only one of them”. Lo also argued that the acts of Lam after the death of
Ping is not binding upon the other partners because the special power of attorney shall
have already ceased.
ISSUE: Whether or not Lo is correct in both arguments.
HELD: No. The anomalous adoption of the firm name above noted does not affect the
liability of the general partners to third parties under Article 127 of the Code of Commerce.
The object of the Code of Commerce in requiring a general partnership to transact business
under the name of all its members, of several of them, or of one only, is to protect the public
from imposition and fraud; it is for the protection of the creditors rather than of the partners
themselves. It is unenforceable as between the partners and at the instance of the violating
party, but not in the sense of depriving innocent parties of their rights who may have dealt
with the offenders in ignorance of the latter having violated the law; and that contracts
entered into by a partnership firm defectively organized are valid when voluntarily executed
by the parties, and the only question is whether or not they complied with the agreement.
Therefore, Lo cannot invoke in his defense the anomaly in the firm name which they
themselves adopted. Lo was not able to prove his second argument. But even assuming
arguendo, his second contention does not deserve merit because (a) Lam, in acting as a
GM, is also a partner and his actions were never objected to by the partners, and (b) it also
appeared from the evidence that Lo, Lam and the other partners authorized some of the
loans.
NOTE: Under the New Civil Code, a firm name may or may not include the name of one or
more of the partners (Article 1815).
19. )

Heirs of Tan Eng Kee vs Court of

Appeals
Business Organization – Partnership, Agency, Trust – Periodic Accounting – Profit Sharing
Benguet Lumber has been around even before World War II but during the war, its stocks
were confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng
Kee pooled their resources in order to revive the business. In 1981, Tan Eng Lay caused
the conversion of Benguet Lumber into a corporation called Benguet Lumber and Hardware
Company, with him and his family as the incorporators. In 1983, Tan Eng Kee died.
Thereafter, the heirs of Tan Eng Kee demanded for an accounting and the liquidation of the
partnership.
Tan Eng Lay denied that there was a partnership between him and his brother. He said that
Tan Eng Kee was merely an employee of Benguet Lumber. He showed evidence consisting
of Tan Eng Kee’s payroll; his SSS as an employee and Benguet Lumber being the
employee. As a result of the presentation of said evidence, the heirs of Tan Eng Kee filed a
criminal case against Tan Eng Lay for allegedly fabricating those evidence. Said criminal
case was however dismissed for lack of evidence.
ISSUE: Whether or not Tan Eng Kee is a partner.
HELD: No. There was no certificate of partnership between the brothers. The heirs were not
able to show what was the agreement between the brothers as to the sharing of profits. All
they presented were circumstantial evidence which in no way proved partnership.
It is obvious that there was no partnership whatsoever. Except for a firm name, there was
no firm account, no firm letterheads submitted as evidence, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the duration of the
partnership. There was even no attempt to submit an accounting corresponding to the
period after the war until Kee’s death in 1984. It had no business book, no written account
nor any memorandum for that matter and no license mentioning the existence of a
partnership.
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole
proprietorship. He registered the same as such in 1954; that Kee was just an employee
based on the latter’s payroll and SSS coverage, and other records indicating Tan Eng Lay
as the proprietor.
Also, the business definitely amounted to more P3,000.00 hence if there was a partnership,
it should have been made in a public instrument.
But the business was started after the war (1945) prior to the publication of the New Civil
Code in 1950?
Even so, nothing prevented the parties from complying with this requirement.
Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the profits and
losses. Each has the right to demand an accounting as long as the partnership exists. Even
if it can be speculated that a scenario wherein “if excellent relations exist among the
partners at the start of the business and all the partners are more interested in seeing the
firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly
plausible.” But in the situation in the case at bar, the deferment, if any, had gone on too long
to be plausible. A person is presumed to take ordinary care of his concerns. A demand for
periodic accounting is evidence of a partnership which Kee never did.
The Supreme Court also noted:
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other are
not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such
co-owners or co-possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property which the
returns are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie evidence
that he is a partner in the business, but no such inference shall be drawn if such profits
were received in payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the
business;
(e) As the consideration for the sale of a goodwill of a business or other property by
installments or otherwise.

20.)

G.R. No. 84157 July 28, 1989

JACOB S. LIM, petitioner, vs. COURT OF APPEALS, PIONEER INSURANCE AND SURETY
CORPORATION, BORDER MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO
and MODESTO CERVANTES and CONSTANCIO MAGLANA, respondents.

GUTIERREZ, JR., J.:

FACTS:
In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air
Lines (SAL) a single proprietorship. On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines
(JDA) and Lim entered into and executed a sales contract for the sale and purchase of two DC-
3A Type aircrafts and one set of necessary spare parts to be paid in installments. On May 22,
1965, Pioneer Insurance and Surety Corporation as surety executed and issued its Surety Bond
No. 6639 in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and
spare parts.

It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco
and Modesto Cervantes (Cervanteses) and Constancio Maglana contributed some funds used
in the purchase of the above aircrafts and spare parts. The funds were supposed to be their
contributions to a new corporation proposed by Lim to expand his airline business. They
executed two separate indemnity agreements in favor of Pioneer, one signed by Maglana and
the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. The indemnity
agreements stipulated that the indemnitors principally agree and bind themselves jointly and
severally to indemnify and reimburse Pioneer for any damages, loss, costs, tax or penalty it may
incur as surety. On June 10, 1965, Lim doing business under the name and style of SAL
executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in
favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two
aircrafts. The deed as duly registered. Lim defaulted on his subsequent installment payments
prompting JDA to request payments from the surety. Pioneer then filed a petition for the
extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. The
Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of
the aircrafts.

The appellate court held Lim liable to reimburse certain amounts given by the respondents to
the petitioner as their contributions to the intended corporation as well as additional payment for
the expenses incurred in the cross-complaint. Petitioner questions this order, on the theory that
as a result of the failure of respondents Bormaheco, Spouses Cervantes, Constancio Maglana
and petitioner Lim to incorporate, a de facto partnership among them was created, and that as a
consequence of such relationship all must share in the losses and/or gains of the venture in
proportion to their contribution.

Issue: Whether or not a de facto partnership was created

Held:

While it has been held that as between themselves the rights of the stockholders in a defectively
incorporated association should be governed by the supposed charter and the laws of the state
relating thereto and not by the rules governing partners, it is ordinarily held that persons who
attempt, but fail, to form a corporation and who carry on business under the corporate name
occupy the position of partners inter se. Thus, where persons associate themselves together
under articles to purchase property to carry on a business, and their organization is so defective
as to come short of creating a corporation within the statute, they become in legal effect
partners inter se, and their rights as members of the company to the property acquired by the
company will be recognized. However, such a relation does not necessarily exist, for ordinarily
persons cannot be made to assume the relation of partners, as between themselves, when their
purpose is that no partnership shall exist, and it should be implied only when necessary to do
justice between the parties; thus, one who takes no part except to subscribe for stock in a
proposed corporation which is never legally formed does not become a partner with other
subscribers who engage in business under the name of the pretended corporation, so as to be
liable as such in an action for settlement of the alleged partnership and contribution.

Petitioner never had the intention to form a corporation with the respondents despite his
representations to them. This gives credence to the cross-claims of the respondents to the
effect that they were induced and lured by the petitioner to make contributions to a proposed
corporation which was never formed because the petitioner reneged on their agreement. Lim in
an undertaking sometime on or about August 9,1965, promised to incorporate his airline in
accordance with their agreement and proceeded to acquire the planes on his own account.
Since then up to the filing of this answer, Lim has refused, failed and still refuses to set up the
corporation or return the money of Maglana. Lim has also ignored Bormaheco and Cervanteses,
who, after learning the chattel mortgage executed by Lim demanded for the possession of the
two planes and their accessories and or return the amount advanced.

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