Gregorio F. Ortega, Tomas O. Del Castillo, Jr., And Benjamin T. Bacorro, Petitioners,  Vs.

Hon. Court Of Appeals, Securities And Exchange Commission And Joaquin L.

Misa, Respondents.
G.R. No. 109248 July 3, 1995
Vitug, J.:

Facts:
A partnership of profession was formed by Ross, Lawrence, Selph and Carrascoso which is duly
registered in SEC. It had several amendments to its articles of partnership with regard to change of the
firm name over the years. In the present case it was called Bito, Misa and Lozada. 
Misa withdrew and retired from the partnership. He communicated on a different letter that the
partnership is no longer mutually satisfactory because of the working conditions of their employees. 
Misa filed with Commission's Secutrities Investigation and Clearing Department dissolution and
liquidation of the partnership. 
After petitioner filed his reply to respondent's answer, the hearing officer ruled in favor of the respondents
that the withdrawal of Misa from the partnership did not dissolved the partnership. 
On appeal, SEC en banc reversed the decision of the hearing officer and held that that the withdrawal of
Misa dissolved the partnership for being a partnership at will. 
The Commission ruled that, being a partnership at will, the law firm could be dissolved by any partner at
anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can
be forced to continue in the partnership against his will.
During the pendency of the case with the CA, partners Bito and Lozada passed away respectively on 5
September 1991 and 21 December 1991.
CA upholds the decision of SEC en banc. 
Issue:
Whether the withdrawal of Misa from the partnership dissolved the partnership. 
Ruling:
Yes, the withdrawal of Misa dissolved the partnership. The SC ruled that the partnership that was formed
was a particular partnership and it is a partnership at will. 
In finding that the partnership is one that is a partnership at will, SC ruled that this partnership does not
fix its term hence it is a partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito,
Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. The appellate
court's findings and disquisition of respondent SEC on this matter that the SC agreed to; viz:
The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period
or undertaking. The "DURATION" clause simply states. 
"5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the
death or legal incapacity of one of the partners, shall be continued by the surviving partners."
The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all
partnerships, which necessarily must have a purpose, would all be considered as partnerships for a
definite undertaking. There would therefore be no need to provide for articles on partnership at will as
none would so exist. Apparently what the law contemplates, is a specific undertaking or "project"
which has a definite or definable period of completion.
The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners.
The right to choose with whom a person wishes to associate himself is the very foundation and essence of
that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve,
along with each partner's capability to give it, and the absence of a cause for dissolution provided by the
law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership
at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership but that it can result in a liability for damages.
 William Uy Vs. Bartolome Puzon, Substituted By Franco Puzon
G.R. No. L-19819 October 26, 1977
Concepcion Jr., J.

FACTS:

Bartolome Puzon had a contract with the Bureau of Public Highways, for the construction of the
Ganyangan Bato Section of the Pagadian Zamboanga City Road and of five (5) bridges in the Malangas-
Ganyangan Road. Puzon sought the financial assistance of William Uy and proposed the creation of a
partnership between them. The said partnership would be the sub-contractor of the projects and the profits
will divided equally between Puzon and Uy. Upon acceptance of Uy, a partnership with the firm name
"U.P. Construction Company" was formed. The partners agreed that the partnership capital would be
P100,000.00 of which each partner shall contribute P50,000.00 in cash. But Puzon was short of cash and
he promised to contribute his share as soon as his loan application with the Philippine National Bank in
the amount of P150,000.00 shall have been approved. However, before his loan application could be
acted upon, he had to clear his collateral of its incumbrances first.

For this purpose, on October 1956, Uy gave Puzon P40,000.00 as advance contribution to the partnership
which will be used by Puzon to pay his obligations to effect the release of his mortgages with the PNB
and Rehabilitation Finance Corporation. In turn, Puzon promised Uy that the loan P150,000.00 from
would be given to the partnership to be applied thusly: P40,000.00, as reimbursement of Uy's capital
contribution which was used to clear the title of Puzon's property; P50,000.00, as Puzon's contribution to
the partnership; and the balance of P60,000.00 as Puzon's personal loan to the partnership.

Since Puzon was busy with his other projects, Uy was entrusted with the management of the projects and
whatever expenses he might incur would be considered as part of his contribution to the partnership and
by the end of December 1957, Uy had contributed the total amount of P115,453.39, including his capital.

Puzon's loan application was approved by PNB but Puzon only gave to Uy P60,000.00; and of this
amount, P40,000.00 was for the reimbursement of Uy's contribution which was used to clear the title to
Puzon's property, and the P20,000.00 as Puzon's contribution to the partnership capital. Aside from this,
to guarantee the repayment of the loan, Puzon, without the knowledge and consent of Uy, assigned to
PNB all the payments to be received on account of the contracts of the partnership with the Bureau of
Public Highways for the construction of the projects. Eventually, Bureau of Public Highways released an
amount of P1,047,181.07 out of which, P332,539.60 was applied by PNB in payment of Puzon's loan and
only the amount of P27,820.80 was deposited in the partnership funds.

As time passed, Uy found difficulty in obtaining the necessary funds with which to pursue the
construction projects. Uy correspondingly called on Bartolome Puzon to comply with his obligations and
to place his capital contribution at the disposal of the partnership. Despite several promises however,
Puzon failed to do so. After failing to reach an agreement with Uy, Puzon, as prime contractor, wrote the
U.P. Construction Company terminating their subcontract agreement as of December 1957.
Thereafter, Uy was not allowed anymore to hold office in the U.P. Construction Company and his
authority to deal with the Bureau of Public Highways in behalf of the partnership was revoked by Puzon
who continued with the construction projects alone.

Because of what transpired, Uy, instituted an action in court, seeking the dissolution of the partnership
and payment of damages on the ground that Puzon had violated the terms of their partnership agreement.

The trial ruled in favour of Uy and stated that Puzon failed to contribute his share in the partnership
capital; applied partnership funds to his personal use; ousted Uy from the management of the firm, and
caused the failure of the partnership to realize the expected profits of at least P400,000.00. As a
consequence, the trial court ordered the dissolution of the partnership and further ordered Puzon to pay
Uy the sum of P320,103.13.

Hence, the instant appeal by the defendant Bartolome Puzon. During the pendency of the appeal before
this Court, the said Bartolome Puzon died, and was substituted by Franco Puzon.

ISSUES: Whether or not Puzon had violated the terms of their partnership agreement

RULING:

YES. The findings of the trial court that the appellant failed to contribute his share in the capital of the
partnership is clear incontrovertible. The record shows that after the appellant's loan the amount of
P150,000.00 was approved by the Philippine National Bank in November, 1956, he gave the amount
P60,000.00 to the appellee who was then managing the construction projects. Of this amount, P40,000.00
was to be applied a reimbursement of the appellee's contribution to the partnership which was used to
clear the title to the appellant's property, and th balance of P20,000.00, as Puzon's contribution to the
partnership. Thereafter, the appellant failed to make any further contributions the partnership funds as
shown in his letters to the appellee wherein he confessed his inability to put in additional capital to
continue with the projects.

Parenthetically, the claim of the appellant that the appellee is equally guilty of not contributing his share
in the partnership capital inasmuch as the amount of P40,000.00, allegedly given to him in October, 1956
as partial contribution of the appellee is merely a personal loan of the appellant which he had paid to the
appellee, is plainly untenable. The terms of the receipts signed by the appellant are clear and unequivocal
that the sums of money given by the appellee are appellee's partial contributions to the partnership capital.

The findings of the trial court that the appellant misapplied partnership funds is, likewise, sustained by
competent evidence. It is of record that the appellant assigned to the Philippine National Bank all the
payments to be received on account of the contracts with the Bureau of Public Highways for the
construction of the aforementioned projects to guarantee the repayment of the bank.

That the assignment to the Philippine National Bank prejudicial to the partnership cannot be denied. The
record show that during the period from March, 1957 to September, 1959, the appellant Bartolome Puzon
received from the Bureau of Public highways, in payment of the work accomplished on the construction
projects, the amount of P1,047,181.01, which amount rightfully and legally belongs to the partnership by
virtue of the subcontract agreements between the appellant and the U.P. Construction Company. In view
of the assignment made by Puzon to the Philippine National Bank, the latter withheld and applied the
amount of P332,539,60 in payment of the appellant's personal loan with the said bank. The balance was
deposited in Puzon's current account and only the amount of P27,820.80 was deposited in the current
account of the partnership.

WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed with
costs against the appellant, it being understood that the liability mentioned herein shall be home by the
estate of the deceased Bartolome Puzon, represented in this instance by the administrator thereof, Franco
Puzon.
 Carmen Liwanag, Vs. The Hon. Court Of Appeals And The People Of The Philippines,
Represented By The Solicitor General
G.R. No. 114398. October 24, 1997
Romero, J.:

FACTS:

Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went to the house of complainant
Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes.
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 made periodic visits to Rosales to report on the
progress of the transactions. The visits, however, suddenly stopped, and all efforts by Rosales to obtain
information regarding their business proved futile.

Alarmed by this development and believing that the amounts she advanced were being misappropriated,
Rosales filed a case of estafa against Liwanag.

After trial on the merits, the trial court rendered a decision finding Liwanag guilty as charged. CA
Affirmed the decision.

ISSUE

Whether or not Liwanag may be held guilty of the case of estafa

HELD

The language of the receipt could not be any clearer. It indicates that the money delivered to Liwanag was
for a specific purpose, that is, for the purchase of cigarettes, and in the event the cigarettes cannot be sold,
the money must be returned to Rosales.

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

In the instant petition, however, it is evident that Liwanag could not dispose of the money as she pleased
because it was only delivered to her for a single purpose, namely, for the purchase of cigarettes, and if
this was not possible then to return the money to Rosales. Since in this case there was no transfer of
ownership of the money delivered, Liwanag is liable for conversion under Art. 315, par. 1(b) of the
Revised Penal Code.
 The United States Vs. Eusebio Clarin
Gr No. 5840 17 September 1910
C.J. Arellano

FACTS:

Pedro Larin delivered to Pedro Tarug P172, for the latter together with Eusebio Clarin and Carlos de
Guzman to buy and sell mangoes. Larin made an agreement with the three to have their profits divided
equally between him and them.

The three trade in mangoes and obtained P203 from the business but they did not give anything back to
Larin. This prompted Larin to file a case of Estafa against them. The provincial fiscal, however, filed an
information only against Clarin for embezzling the capital and Larin’s share from the profits. Tarug and
de Guzman were only presented as witnesses for Clarin.

Clarin was found guilty by the trial court. He was sentenced six months imprisonment plus accessory
penalties and the payment of Larin’s capital. Hence, this appeal.

ISSUES:

1. Whether a partnership has been created between the parties

2. Whether the appropriate charge is the criminal action for Estafa
RULING:

1. YES. When two or more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves, a contract is formed
which is called partnership. (Art. 1665, Civil Code.)

When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and Guzman,
he invested his capital in the risks or benefits of the business of the purchase and sale of mangoes,
and, even though he had reserved the capital and conveyed only the usufruct of his money, it
would not devolve upon one of his three partners to return his capital to him, but upon the
partnership of which he himself formed part, if it were to be done by one of the three specifically,
it would be Tarug, who, according to the evidence, was the person who received the money
directly from Larin.

2. NO. The P172 having been received by the partnership, the business commenced and profits
accrued, the action that lies with the partner who furnished the capital for the recovery of his
money is not a criminal action for estafa, but a civil one arising from the partnership contract for
a liquidation of the partnership and a levy on its assets if there should be any.

No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "who, to the
prejudice of another, shall appropriate or misapply any money, goods, or any kind of personal
property which they may have received as a deposit on commission for administration or in any
other 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.
Eusebio Clarin is acquitted. The complaint for Estafa is dismissed without prejudice to the institution of a
civil action.
 Josue Soncuya Vs. Carmen De Luna
G.R. No. L-45464 April 28, 1939
Villa-Real, J.:

FACTS:

In the amended complaint it is prayed that defendant Carmen de Luna be sentenced to pay plaintiff
damages in the sum of P700,432 as a result of the administration, said to be fraudulent, of the partnership,
"Centro Escolar de Señoritas", of which plaintiff, defendant and the deceased Librada Avelino were
members. For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a
partner by reason of the supposed fraudulent management of he partnership referred to, it is first
necessary that a liquidation of the business thereof be made to the end that the profits and losses may be
known and the causes of the latter and the responsibility of the defendant as well as the damages which
each partner may have suffered, may be determined. It is not alleged in the complaint that such a
liquidation has been effected nor is it prayed that it be made. Consequently, there is no reason or cause for
plaintiff to institute the action for damages which he claims from the managing partner Carmen de Luna.

ISSUE:

Whether the plaintiff may collect damages from the defendant as managing partner

RULING:

Having reached the conclusion that the facts alleged in the complaint are not sufficient to constitute a
cause of action on the part of plaintiff as member of the partnership "Centro Escolar de Señoritas", to
collect damages from defendant as managing partner thereof, without a previous liquidation, we do not
deem it necessary to discuss the remaining question of whether or not the complaint is ambiguous,
unintelligible and vague.

In view of the foregoing considerations, we are of the opinion and so hold that for a partner to be able to
claim from another partner who manages the general copartnership, damages allegedly suffered by him
by reason of the fraudulent administration of the latter, a previous liquidation of said partnership is
necessary.

Wherefore, finding no error in the order appealed from the same is affirmed in all its parts, with costs
against the appellant. So ordered.
 Pedro Martinez Vs. Ong Pong Co And Ong Lay
G.R. No. L5236 January 10, 1910

FACTS:
Pedro Martinez, the plaintiff herein delivered P1,500 to the defendants, Ong Po and Ong Lay, who, in a
private document, acknowledged that they had received the same with the agreement, as stated by them ,
"that we are to invest the amount in a store, the profits or losses of which we are to divide with the
former, in equal shares." The store business was a failure and the plaintiff filed a complaint in order to
compel the defendants either to render him an accounting of the partnership as agreed to, or else to refund
him the P1,500. Ong Pong Co alleged in his defense that his co-defendant, Ong Lay, now deceased, was
the one who had managed the business, and that nothing had resulted therefrom save the loss of the
capital of P1,500, to which loss the plaintiff had agreed. CFI: ordered Ong Pong Co to return to the
plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he had received from the
plaintiff, to wit, P750, plus P90 as one-half of the profits From this judgment Ong Pong Co appealed to
this court.

ISSUE:

Whether or not Ong Pong Co is liable? Up to what extent are the partners liable?

RULING:

Yes, Ong Pong Co is liable. The partners are liable jointly. The defendants acted as administrators and as
such, they were obliged to render an accounting of the business. Since both failed in this aspect, they are
obliged to return the capital. Article 1688 of the Civil Code which provides that "that the partnership is
liable' to every partner for the amounts he may have disbursed on account of the same and for the proper
interest," does not apply in the case at bar for the reason that no other money than that contributed as
capital is involved. The court ordered that Ong Pong Co shall only pay the plaintiff the sum of P750 with
the legal interest
 Juan Agustin, Et Al. Victor Del Rosario,  Vs. Bartolome Inocencio
G.R. No. L-3745, October 26, 1907
Tracey, J.:

FACTS:

The parties, who had been conducting a partnership as industrial partners without capital, contributed
from its profits the sum of P807.28 as a fund toward the construction of a casco for use in their business,
to which they added P3,500, borrowed from Maria del Rosario, the wife of Inocencio, he being the
managing partner. It is admitted that this total (a little over P4,300), was the estimated cost of the casco
but in the progress of the work Inocencio found that it called for additional funds, which he advanced to
the amount of P2,024.49. This amount is necessary in order to complete the work undertaken. Although it
would seem that he failed to notify his partners of the various items from time to time going to make up
this sum, it is shown that the books were at all times open to their inspection, and that, being asked to
examine them, they omitted to do so, and that the Agustin, representing all the partners, was also present
at the construction of the casco, in charge of the practical work and cognizant of its needs and its
progress.

ISSUE:
Whether Inocencio, in borrowing money and advancing funds, was acting within the scope of his
authority as a managing partner.

RULING:

Yes. The work done in the casco having been within the scope of the association and necessary to carry
out its express object, the borrowing of the money required to carry it on, with the acquiescence if not
with theaffirmative consent of his associates, was not outside the powers of the managing partner and
constitutes a debt for which all the associates are liable.

The note passed into the hands of Inocencio by reason of the successive deaths of his wife and of their
only child, each without debts, and for the amount thereof he became a creditor, subject, however, to the
deduction there from of his proportionate part of the indebtedness. The trial court treated his claim as an
addition to his capital in the firm, rather than as a loan, and this constitutes one of the grounds of error
stated by the appellant. We do not deem it necessary to pass upon this objection, for the reason that,
considered as a loan, this sum would place the defendant as a creditor in a stronger position as against his
associates than if regarded as a mere contribution to capital. The error, if it be an error, is not, therefore,
prejudicial to the plaintiff, but is rather beneficial to him. The respondent did not except to it.

Various small sums have been paid out of the profits to some of the partners and these were properly
allowed him in the judgment. On the theory on which the action was disposed of, the trial court
committed no error in the computation of the various shares. Of the four parties plaintiff, but one, Victor
del Rosario, is interested in this appeal, which has been dismissed as to the others, and as to him the
judgment of the trial court must be affirmed, with costs of this instance.
 Choithram Jethmal Ramnani And/Or Nirmla V. Ramnani And Moti G. Ramnani, Vs.
Court Of Appeals, Spouses Ishwar Jethmal Ramnani, Sonya Jethmal Ramnani And Overseas
Holding Co., Ltd.
G.R. No. 85494 May 7, 1991
Gancayco, J.:

FACTS:

Ishwar and his spouse Sonya had their main business based in New York. Realizing the difficulty of
managing their investments in the Philippines they executed a general power of attorney appointing
Navalrai and Choithram as attorneys-in-fact, empowering them to manage and conduct their business
concern in the Philippines.

Choithram, in his capacity as aforesaid attorney-in-fact of Ishwar, entered into two agreements for the
purchase of two parcels of land. A building was constructed thereon by Choithram in 1966 and this was
occupied and rented by Jethmal Industries and a wardrobe shop called Eppie's Creation.

Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these
properties during the period 1967 to 1970. Choithram failed and refused to render such accounting. As a
consequence, on February 4, 1971, Ishwar revoked the general power of attorney. Nevertheless,
Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Ishwar and Sonya in
favor of his daughter-in-law, Nirmla Ramnani.

Thus, Ishwar and Sonya filed a complaint for reconveyance of said properties or payment of its value and
damages.

Trial court rendered a decision dismissing the complaint. An appeal therefrom was interposed by Ishwar.
Court of Appeals reversed the appealed the decision and ordered Choithram to pay damages, accrued
rentals thereto, and the reconveyance of the property.

For his part, Choithram argued that because he was then a British citizen, as a temporary arrangement, he
arranged the purchase of the properties in the name of Ishwar who was an American citizen and who was
then qualified to purchase property in the Philippines under the then Parity Amendment, and that Ishwar
never gave him money to acquire the said disputed lands.

ISSUE:

Whether Choithram is entitled to any share over said properties.

HELD:

Yes. The Court finds that Ishwar entrusted US$150,000.00 to Choithram in 1965 for investment in the
realty business. Soon thereafter, a general power of attorney was executed by Ishwar in favor of both
Navalrai and Choithram. If it is true that the purpose only is to enable Choithram to purchase realty
temporarily in the name of Ishwar, why the inclusion of their elder brother Navalrai as an attorney-in-fact.

Choithram constructed three other buildings thereon. He managed the business and collected the rentals.
Due to their relationship of confidence it was only in 1970 when Ishwar demanded for an accounting
from Choithram. And even as Ishwar revoked the general power of attorney on February 4, 1971, of
which Choithram was duly notified, Choithram wrote to Ishwar on June 25, 1971 requesting that he
execute a new power of attorney in their favor.

When Ishwar did not respond thereto, Choithram nevertheless proceeded as such attorney-in-fact to
assign all the rights and interest of Ishwar to his daughter-in-law Nirmla in 1973 without the knowledge
and consent of Ishwar.

As the appellate court aptly observed if truly this temporary arrangement story is the only motivation,
why Ishwar of all people? Why not the own son of Choithram, Haresh who is also an American citizen
and who was already 18 years old at the time of purchase in 1966? The Court agrees with the observation
that this theory is an afterthought.

Clearly, this transfer to Nirmla is fictitious and, as admitted by Choithram, was intended only to place the
property in her name until Choithram acquires Philippine citizenship. What appears certain is that it
appears to be a scheme of Choithram to place the property beyond the reach of Ishwar should he
successfully claim the same. Thus, it must be struck down.

Nevertheless, under the peculiar circumstances of this case and despite the fact that Choithram, et al.,
have committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya
of their rightful share in the properties in litigation, the Court cannot ignore the fact that Choithram must
have been motivated by a strong conviction that as the industrial partner in the acquisition of said assets
he has as much claim to said properties as Ishwar, the capitalist partner in the joint venture.

Through the industry and genius of Choithram, Ishwar's property was developed and improved into what
it is now—a valuable asset worth millions of pesos.

We have a situation where two brothers engaged in a business venture. One furnished the capital, the
other contributed his industry and talent. Justice and equity dictate that the two share equally the fruit of
their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards their
reconciliation. However, since Choithram is in evident bad faith, he should pay moral and exemplary
damages.
JOSE GARCIA RON, plaintiff-appellee, vs. LA COMPANIA DE MINAS DE BATAN, defendant-
appellant.
G.R. No. 4597 | 1908-11-23
CARSON, J.:

FACTS
Plaintiff seeks to recover from the defendant the sum of 9,5581/3 Spanish pesetas for services rendered as
foreman or capataz by one Genaro Ansuategui, the local manager of certain mines of the defendant in the
island of Batan. The defendant denied having received such services and employing the plaintiff, and
attested that plaintiff neither appears as employee in their books nor was any record of his employment
forwarded to them in Manila. Defendant further insists that the letter of instructions given to the local
manager at the mines did not authorize him to enter into a contract of employment.

ISSUE

Whether or not the local manager had authority to enter into a contract of employement.

RULING

Yes. The instructions, among others, expressly authorized the local manager to discharge employees who
did not prove satisfactory, and thus leave no room for doubt that he was duly authorized to represent the
company at the mines so far as this was necessary for their proper local management.

Taking into consideration that the mines is some two days by steamer from Manila, that communication is
difficult, and that by the very nature of the enterprise, it was necessary to confer upon the local manager
wide scope in the employment and discharge of labor, there can be no doubt that Genaro Ansuategui was
fully and expressly authorized to enter into the alleged contract of employment. Evidence show that he in
fact did do so, and that the plaintiff worked for the company as set out in the findings of the trial court.

The plaintiff not having appealed from the judgment of the trial court denying him the alleged contract
value of the services rendered, and the evidence of record fully sustaining the findings as to the
reasonable value of these services, the judgment of the trial court should be and is hereby affirmed, with
the costs of this instance against the defendant.

Tai Tong Chuache v. Insurance Commission

 GR No. 55397 | February 29, 1988 | Gancayco, J.

FACTS:

Complainants acquired from Rolando Gonzales a parcel of land and a building located in Davao City.
Complainants assumed the mortgage of the building in favor of SSS, which building was insured with
respondent SSS Accredited Group of Insurers for P25,000.

Azucena Palomo obtained a loan from Tai Tong Chuache, Inc. in the amount of P100,000. To secure the
payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong
Chuache & Co.. Arsenio Chua, representative of Tai Tong Chuache & Co. insured the latter’s interest
with Travellers Multi-Indemnity Corporation for P100,000 (P70,000 for the building and P30,000 for the
contents thereof).

Pedro Palomo secured a Fire Insurance Policy, covering the building for P50,000 with respondent Zenith
Insurance Corporation. Another Fire Insurance Policy was procured from respondent Philippine British
Assurance Company, covering the same building for P50,000 and the contents thereof for P70,000.

The building and the contents were totally razed by fire. Adjustment Standards Corporation submitted a
report showing the apportioned share of each company and apportionment of the loss. Based on the
computation of the loss, respondents Zenith, Phil. British Assurance and SSS Accredited Group of
Insurers, paid their corresponding shares of the loss. Demand was made from respondent Travellers
Multi-Indemnity for its share in the loss but the same was refused. Hence, complainants demanded from
the other three (3) respondents the balance of each share in the loss based on the computation of the
Adjustment Standards report excluding Travellers Multi-Indemnity.

In their Answer, Philippine British and Zenith Insurance admitted the material allegations in the
complaint, but denied liability on the ground that the claim of the complainants had alreadby been
waived, extinguished or paid. Instead of an Answer, SSS informed the Commission that the claim of
complainants had been paid in the amount based on the Adjustment Standards report. Travellers
Insurance, admitted the issuance of the policy and alleged as a special and affirmative defense that they
are not liable to pay complainant.

Tai Tong Chuache & Co. filed a complaint-in-intervention claiming the proceeds of the Fire Insurance
Policy issued by Travellers Multi-Indemnity. Travellers Insurance, in its answer to the complaint-in-
intervention, alleged that the Intervenor is not entitled to indemnity under the Fire Insurance Policy for
lack of insurable interest before the loss of the insured premises and that the complainants, spouses
Palomo, had already paid in full their mortgage indebtedness to the intervenor.

Insurance Commission dismissed spouses Palomos’ complaint on the ground that the insurance policy
subject of the complaint was taken out by Tai Tong Chuache & Co. for its own interest only as mortgagee
of the insured property and thus complainants as mortgagors of the insured property have no right of
action. It likewise dismissed petitioner’s complaint in intervention.

ISSUE:
Whether respondent Insurance Commission decided an issue not raised in the pleadings of the parties in
that it ruled that a certain Antonio Chua is the one entitled to the insurance proceeds and not Tai Tong
Chuache & Co.

RULING:

The decision of the Insurance Commission reveals that it absolved the insurance company from liability
on the basis that at the time of the occurrence of the peril insured against petitioner as mortgagee had no
more insurable interest over the insured property. It was based on the inference that the credit secured by
the mortgaged property was already paid by the Palomos before the said property was gutted down by
fire.

Respondent insurance company did not assail the validity of the insurance policy taken out by petitioner
over the mortgaged property. Neither did it deny that the said property was totally razed by fire within the
period covered by the insurance. Respondent, as mentioned earlier advanced an affirmative defense of
lack of insurable interest on the part of the petitioner alleging that before the occurrence of the peril
insured against the Palomos had already paid their credit due the petitioner. Respondent having admitted
the material allegations in the complaint, has the burden of proof to show that petitioner has no insurable
interest over the insured property at the time the contingency took place. Upon that point, there is a failure
of proof. Respondent, it will be noted, exerted no effort to present any evidence to substantiate its claim,
while petitioner did. For said respondent's failure, the decision must be adverse to it.

However, as adverted to earlier, respondent Insurance Commission absolved respondent insurance

company from liability on the basis of the certification issued by the then Court of First Instance of
Davao, Branch II, that in a certain civil action against the Palomos, Arsenio Lopez Chua stands as the
complainant and not Tai Tong Chuache. From said evidence respondent commission inferred that the
credit extended by herein petitioner to the Palomos secured by the insured property must have been paid.
Such is a glaring error which this Court cannot sanction. Respondent Commission's findings are based
upon a mere inference.

respondent pointed out that the action must be brought in the name of the real party in interest. We agree.
It should be borne in mind that petitioner being a partnership may sue and be sued in its name or by its
duly authorized representative.

Thus Chua as the 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 pay their obligations when it became due
and demandable. Or at the very least, Chua being a partner of petitioner Tai Tong Chuache & Company is
an agent of the partnership. Being an agent, it is understood that he acted for and in behalf of the firm.
Public respondent's allegation that the civil case filed by Arsenio Chua was in his capacity as personal
creditor of spouses Palomo has no basis.

JOSE FORTIS v. MIGUEL ALONZO GUTIERREZ, HERMANOS

 GR No. 2484, Apr 11, 1906

FACTS:

Plaintiff Fortis, an employee of defendants during the years 1900, 1901 and 1902, brought this action to
recover a balance due him as salary for the year 1902. He alleged that he was entitled, as salary, to 5% of
the net profits of the business of the defendants for said year. The complaint also contained a cause of
action for the sum of 600 pesos, money expended by plaintiff for the defendants during the year 1903.

The court below, in its judgment, found that:

 the contract had been made as claimed by the plaintiff

 5% of the net profits of the business for the year 1902 amounted to 26,378.68 pesos, Mexican
currency
 the plaintiff had received on account of such salary 12,811.75 pesos, Mexican currenc
The lower ordered judgment against the defendants for the sum 13,566.93 pesos, Mexican currency, with
interest thereon from December 31, 1904. The court also ordered judgment against the defendants for the
600 pesos mentioned in the complaint, and interest thereon. The total judgment rendered against the
defendants in favor of the plaintiff, reduced to Philippine currency, amounted to P13,025.40.

ISSUE

Whether defendants were correct to argue that Fortis is a co-partner

RULING

No. Fortis was employed as a bookkeeper by Gutierrez although the contract made was not in writing.
However, it was not necessary that the contract between Fortis and Gutierrez be made in writing.

The evidence is sufficient to support the finding of the court below that the plaintiff worked for the
defendants during the year 1902 under a contract by which he was to receive as compensation 5% of the
net profits of the business. The contract was made on the part of the defendants by Miguel Alonzo
Gutierrez. By the provisions of the articles of partnership he was made one of the managers of the
company, with full power to transact all of the business thereof. As such manager he had authority
to make a contract of employment with the plaintiff.

It is claimed by the appellants that the contract alleged in the complaint made the plaintiff a co-partner of
the defendants in the business which they were carrying on. This contention cannot be sustained. It was a
mere contract of employment. The plaintiff had neither voice nor vote in the management of the affairs of
the company.

The fact that the compensation received by him was to be determined with reference to the profits made
by the defendants in their business did not in any sense make him a partner therein. The articles of
partnership between the defendants provided that the profits should be divided among the partners named
in a certain proportion. The contract made between the plaintiff and the then manager of the defendant
partnership did not in any way vary or modify this provision of the articles of partnership. The profits of
the business could not be determined until all of the expenses had been paid. It was undoubtedly
necessary in order to determine what the salary of the plaintiff was, to determine what the profits of the
business were, after paying all of the expenses except his, but that determination was not the final
determination of the net profits of the business. It was made for the purpose of fixing the basis upon
which his compensation should be determined.

E. M. BACHRACH, vs."LA PROTECTORA", ET AL., defendants-appellants.

G.R. No. L-11624            January 21, 1918
FACTS:

Nicolas Segundo, Antonio Adiarte, Ignacio Flores and Modesto Serrano (defendants) formed a civil
partnership called “La Protectora” for the purpose of engaging in the business of transporting passengers
and freight at Laoag, Ilocos Norte. Marcelo Barba, acting as manager, negotiated for the purchase of 2
automobile trucks from E. M. Bachrach for P16,500. Barba paid P3,000 in cash and for the balance
executed promissory notes.

One of these promissory notes was signed in the following manner:

“P.P La Protectora,
By Marcelo Barba
Marcelo Barba”
The other 2 notes were signed in the same way but the word “by” was omitted. It was obvious that in
signing the notes, Barba intended to bind both the partnership and himself.

The defendants executed a document in which they declared that they were members of La Protectora and
that they had granted to its President full authority to contract for the purchase of the 2 automobiles. The
document was delivered by Barba to Bachrach at the time the vehicles were purchased.

Barba incurred a debt amounting to P2,617.57 and Bachrach foreclosed a chattel mortgage on the trucks
but remains a balance. To recover the balance, action was instituted against the defendants. Judgment of
CFI was rendered against the defendants, upon the idea that the document executed by them constituted
an authority for Barba to bind them personally, as contemplated in the second clause of article 1698 of the
Civil Code.

ISSUES:

a. Whether or not the defendants are liable for the firm debts.
b. Whether or not Barba had authority to incur expenses for the partnership.
Held:

a. Yes. Promissory notes constitute the obligation exclusively of La Protectora and Barba. They do not
constitute an obligation directly binding the defendants. Their liability is based on the principles of
partnership liability. A member is not liable in solidum with his fellows for the entire indebtedness but is
liable with them or his aliquot part. Appellants are severally liable for their respective shares of the entire
indebtedness found to be due; and the Court of First Instance committed no error in giving judgment
against them.

b. Yes. Under Art 1804, every partner may associate another person with him in his share. All partners
are considered agents of the partnership. Barba must be held to have authority to incur these expenses. He
is shown to have been in fact the president/manager, and there can be no doubt that he had actual
authority to incur obligation.

GREAT COUNCIL OF US OF IMPROVED ORDER OF RED MEN v. VETERAN ARMY OF

PHILIPPINES
Facts:

A contract of lease of parts of a certain building in the city of Manila was signed by W. W. Lewis, E. C.
Stovall, and V. O. Hayes, as trustees of the Apache Tribe, No. 1, Improved Order of Red Men, as lessors,
and Albert E. McCabe, acting for and on behalf of Lawton Post, Veteran Army of the Philippines, as
lessee. The lease was for the term of two years. The Lawton Post occupied the premises in controversy
for thirteen months, and paid the rent for that time. It then abandoned them and this action was
commenced to recover the rent for the unexpired term.

Judgment was rendered in favor of the defendant McCabe, acquitting him of the complaint. Judgment was
rendered also against the Veteran Army of the Philippines. From this judgment, the last-named defendant
has appealed. The plaintiff did not appeal from the judgment acquitting defendant McCabe of the
complaint. It is claimed by the appellant that the action cannot be maintained by the plaintiff, The Great
Council of the United States of the Improved Order of Red Men, as this organization did not make the
contract of lease. It is also claimed that the action cannot be maintained against the Veteran Army of the
Philippines because it never contracted, either with the plaintiff or with Apache Tribe, No. 1, and never
authorized anyone to so contract in its name.

Issues:
Whether or not the trial court erred in its decision

Ruling:

It is difficult to determine the exact nature of the defendant organization. There is some doubt as to
whether it is a civil partnership, in view of the definition of the term in article 1665 of the Civil Code.
That article is as follows:

"Partnership is a contract by which two or more persons bind themselves to contribute

money, property, or industry to a common fund, with the intention of dividing the profits
among themselves."

It seems to be the opinion of the commentators that where the society is not constituted for the purpose of
gain, it does not fall within this article of the Civil Code. Article 1695 of the Civil Code provides that one
partner is empowered to contract in the name of the partnership only when the articles of partnership
make no provision for the management of the partnership business. In the case at bar we think that the
articles of the Veteran Army of the Philippines do so provide.

It is true that an express disposition to that effect is not found therein, but we think one may be fairly
deduced from the contents of those articles. They declare what the duties of the several officers are. In
these various provisions there is nothing said about the power of making contracts, and that faculty is not
expressly given to any officer. It is hardly conceivable that the members who formed this organization
should have had the intention of giving to any one of the sixteen or more persons who composed the
department the power to make any contract relating to the society which that particular officer saw fit to
make, or that a contract when so made without consultation with, or knowledge of the other members of
the department should bind it. We therefore hold, that no contract, such as the one in question, is binding
on the Veteran Army of the Philippines unless it was authorized at a meeting of the department. Judgment
against the appellant is reversed, and the Veteran Army of the Philippines is acquitted of the complaint.
JOSE MACHUCA vs. CHUIDIAN, BUENAVENTURA & CO.
FACTS:
CHUIDIAN, BUENAVENTURA & CO (defendants) is a regular general partnership. The original
partners were D. Telesforo Chuidian, Doña Raymunda Chuidian, Doña Candelaria Chuidian, and D.
Mariano Buenaventura. The partners each contributed a certain amount of money to the partnership.

Dona Raymunda retired from the partnership on November 1885. The partnership subsequently went into
liquidation (it does not appear that the liquidation has been terminated when this action was brought).

On January 1894, D. Mariano Buenaventura died, his estate passing by will to his children, including D.
Vicente Buenaventura. In 1898, D. Vicente Buenaventura executed a public instrument in which for a
valuable consideration he “assigns to D. Jose Gervasio Garcia . . . a 25 per cent share in all that may be
obtained by whatever right in whatever form from the liquidation of the partnership of Chuidian,
Buenaventura & Co., in the part pertaining to him in said partnership.

A subsequent assignment was made by Garcia in favor of Jose Machuca (now plaintiff), which has been
notified to the liquidator of the partnership. The liquidator, however, declined to record in the books of
the partnership Machuca’s claim under the assignment as a credit due to him. Hence, Machuca filed an
action to compel such record to be made, and he further asks that he be adjudicated to be a creditor of the
partnership in an amount equal to 25% of D. Vicente Buenaventura’s share (that he be immediately given
the 25% share).

ISSUE:

WON Machuca is entitled to 25% of D. Vicente Buenaventura’s share in the partnership

HELD:

No. According to clause 19 of the partnership agreement: "upon the dissolution of the company, the
pending obligations in favor of outside parties should be satisfied, the funds of the minors Jose and
Francisco Chuidian should be taken out, and afterwards the resulting balance of the account-current of
each one of those who had put in money should be paid."

Our construction of this clause is that it establishes a a basis for the final adjustment of the affairs of the
partnership; that that basis is that the liabilities to noncompartners are to be first discharged; that the
claims of the Chuidian minors are to be next satisfied; and that what is due to the respective partners on
account of their advances to the firm is to be paid last of all, leaving the ultimate residue, of course, if
there be any, to be distributed, among the partners in the proportions in which they may be entitled
thereto.

(PARDO)

PANG LIM and BENITO GALVEZ, plaintiffs-appellees, vs. LO SENG, defendant-appellant.

G.R. No. L-16318 | October 21, 1921
 (Jean Bandillo)

Facts:

Lo Seng and Pang Lim, Chinese residents of the City of Manila, were partners, under the firm name of Lo
Seng and Co., in the business of running a distillery, known as "El Progreso," in Paombong, Bulacan. The
land on which said distillery is located as well as the buildings and improvements originally used in the
business were the property of another Chinaman, who resides in Hongkong, named Lo Yao, who leased
the same to the firm of Lo Seng and Co. for the term of three years.

Upon the expiration of this lease, a new written contract, in the making of which Lo Yao was represented
by one Lo Shui as attorney in fact, became effective whereby the lease was extended for fifteen years.

However, on June 1, 1916, Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus
placing the latter in the position of sole owner. On June 28, 1918, Lo Shui, again acting as attorney in fact
of Lo Yao, executed and acknowledged before a notary public a deed purporting to convey to Pang Lim
and another Chinaman named Benito Galvez, the entire distillery plant including the land used in
connection therewith. As in case of the lease this document also was never recorded in the registry of
property.

Thereafter Pang Lim and Benito Galvez demanded possession from Lo Seng, but the latter refused to
yield. Hence, an action of unlawful detainer was initiated by Pang Lim and Benito Galvez in the court of
the justice of the peace of Paombong to recover possession of the premises. From the decision of the
justice of the peace the case was appealed to the Court of First Instance, where judgment was rendered for
Pang Lim and Galvez; and Lo Seng thereupon appealed to the Supreme Court.

Issue:

Whether Pang Lim can, to the detriment of Lo Seng, apply exclusively to his own benefit the results of
the knowledge and information gained in the character of a partner.

Ruling:

No. While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this
lease, and when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo Seng of
Pang Lim's interest in the firm assets, including the lease; and Pang Lim cannot now be permitted, in the
guise of a purchaser of the estate, to destroy an interest derived from himself, and for which he has
received full value.

The bad faith of the plaintiffs in seeking to deprive the defendant of this lease is strikingly revealed in the
circumstance that prior to the acquisition of this property Pang Lim had been partner with Lo Seng and
Benito Galvez an employee. Both therefore had been in relations of confidence with Lo Seng and in that
position had acquired knowledge of the possibilities of the property and possibly an experience which
would have enabled them, in case they had acquired possession, to exploit the distillery with profit. On
account of his status as partner in the firm of Lo Seng and Co., Pang Lim knew that the original lease had
been extended for fifteen years; and he knew the extent of valuable improvements that had been made
thereon.
Certainly, as observed in the appellant's brief, it would be shocking to the moral sense if the condition of
the law were found to be such that Pang Lim, after profiting by the sale of his interest in a business,
worthless without the lease, could intervene as purchaser of the property and confiscate for his own
benefit the property which he had sold for a valuable consideration to Lo Seng. The sense of justice
recoils before the mere possibility of such eventuality.

Above all other persons in business relations, partners are required to exhibit towards each other the
highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being
considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as
fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply
exclusively to his own benefit the results of the knowledge and information gained in the character of
partner. Thus, it has been held that if one partner obtains in his own name and for his own benefit the
renewal of a lease on property used by the firm, to commence at a date subsequent to the expiration of the
firm's lease, the partner obtaining the renewal is held to be a constructive trustee of the firm as to such
lease. And this rule has even been applied to a renewal taken in the name of one partner after the
dissolution of the firm and pending its liquidation.

CATALAN vs. GATCHALIAN

105 Phil 1270, G.R. No. L-11648, April 22, 1959
 
FACTS:
Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the
improvements thereon to secure a credit from the latter. The partnership failed to pay the obligation.  The
properties were sold to Dr. Marave at a public auction. Catalan redeemed the property and he contends
that title should be cancelled and a new one must be issued in his name.
 
ISSUE:
 
Did Catalan’s redemption of the properties make him the absolute owner of the lands?
 
HELD:
No. Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard to any
benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the properties
in question, he became a trustee and held the same in trust for his copartner Gatchalian, subject to his
right to demand from the latter his contribution to the amount of redemption.

R. Y. HANLON vs. JOHN W. HAUSSERMANN and A. W. BEAM

GEORGE C. SELLNER, intervener - G.R. No. L-14617 February 18, 1920
Facts:
This action was originally instituted by R. Y. Hanlon to compel the defendants, John W. Haussermann
and A. W. Beam, to account for a share of the profits gained by them in rehabilitating the plant of the
Benguet Consolidated Mining Company and in particular to compel them to surrender to the plaintiff
50,000 shares of the stock of said company, with dividends paid thereon. It was initially agreed by
Hanlon, Haussermann, Beam and Sellner that P75,000.00 was needed o rehabilitate the mine; P50,000.00
would come from Hanlon by securing and obtaining subscriptions for the company’s stocks, P25,000.00
would come from Haussermann and Beam. They were to receive compensation in the form of shares of
stock for the services rendered in the flotation of this proposition. The funds were needed on a certain
date. It was also stated in the contract that Haussermann and Beam would be discharged if Sellner could
not provide the amount due from him within the time frame stipulated. Hanlon was unable to raise the
P75,000.00.
Thereafter Haussermann and Beam assumed that they were absolved from the obligations of their
contract of November 5, 1913, with Hanlon and Sellner, and that the mining company was no longer
bound by its contract of November 6, 1913, with Hanlon. They therefore proceeded, as parties interest in
the rehabilitation of the mining company, to make other arrangements for financing the project. They
found it possible to effectuate this through the offices of Sendres of the Bank of the Philippine Islands,
and in order to do so, a new contract was made between the mining company and Beam. Because of this
new arrangement, the company became profitable that it was able to pay dividends. Because of this, the
value of the company’s stocks appreciated. The defendants about 1916 received 48,000 shares each as
their profits.
The trial court held that the plaintiffs, as coadventurers with the defendants in the project for the
rehabilitation of the mining company, are each entitled to recover the one-fourth part of the 96,000 shares
obtained from the mining company by the defendants, or 24,000 shares, with dividends paid, and to be
paid beginning with the year 1916. It is thus apparent that the value of the interest awarded to each of the
plaintiffs is considerably in excess of $25,000. So far as Beam's material scheme for the improvement of
the mining property is concerned it followed the same lines and embodied the same ideas as had been
entertained while the Hanlon project was in course of promotion; and it is contended for the plaintiffs that
there was an unfair appropriation by Beam of the labors and ideas of Hanlon. This is denied by the
defendants, whose testimony tends to minimize the extent of Hanlon's contribution to the project in labor
and ideas. We believe it unnecessary to enter into the merits of this contention, as in our opinion the
solution of the case must be determined by other considerations.
Issue:
Whether Hanlon is entitled to an accounting for his share in the profits of the company.
Held:
Hanlon is not entitled to an accounting for his share in the profits of the company.
No resolutory provision contemplating the possible failure of Hanlon to supply the necessary capital
within the period of six months is found in the contract of November 6, 1913, between Hanlon and the
mining company. Time was not expressly made of the essence of that contract. It should not be too hastily
inferred from this that the mining company continued to be bound by that contract after Hanlon had
defaulted in procuring the money which he had obligated himself to supply.
Hanlon earnestly insist that said contract did in fact continue to be binding upon the mining company
after May 6, 1914; and upon this assumption taken in connection with the power held by Beam as
attorney in fact of Hanlon, It is argued that the right of action of Hanlon is complete, as against Beam and
Haussermann, even without reference to the profit-sharing agreement of November 5.
We consider this contention to be unsound; and the correctness of our position on this point can be clearly
demonstrated by considering for a moment the question whether time was in fact of the essence of the
contract of November 6, 1913, in other words, Was the mining company discharged by the default of
Hanlon in the performance of that agreement? Whether a party to a contract is impliedly discharged by
the failure of the other to comply with a certain stipulation on or before the time set for performance,
must be determined with reference to the intention of the parties as deduced from the contract itself in
relation with the circumstances under which the contract was made.
Upon referring to the contract now in question — it will be seen that the leading stipulation following
immediately after the general paragraph at the beginning of the contract, is that which relates to the
raising of capital by Hanlon. It reads as follows:
1. Said party of the first part agrees to pay into the treasury of the party of the second part the sum of
Seventy-five Thousand Pesos ( P75,000) in cash within six (6) months from the date of this agreement.
Clearly, all the possibilities and potentialities of the situation with respect to the rehabilitation of the
Benguet mining property, depended upon the fulfillment of that stipulation; and in fact nearly all the other
subsequent provisions of the contract are concerned in one way or another with the acts and things that
were contemplated to be done with that money after it should be paid into the company's treasury. Only in
the event of such payment were shares to be issued to Hanlon, and it was stipulated that the money so to
be paid in should be disbursed to pay the expenses of the very improvements which Hanlon had agreed to
make. There can then be no doubt that compliance on the part of Hanlon with this stipulation was viewed
by the parties as the pivotal fact in the whole scheme.
The contract between Hanlon and the mining company was not in fact executed until the day following
that on which the profit-sharing agreement was executed by the four parties to this lawsuit. Haussermann
and Beam, as officials of the mining company, refrained from executing the company's contract until
Hanlon had obligated himself by the profit-sharing agreement. Indeed, these two contracts should really
be considered as constituting a single transaction. Therefore, when the contract of November 6, between
Hanlon and the mining company was signed, all the parties who participated therein acted with full
knowledge of the provisions contained in the profit-sharing agreement; and in particular the minds of all
must have riveted upon the provisions of paragraph II of the profit-sharing agreement, wherein is
described the manner in which the project to which the parties were then affixing their signatures should
be financially realized ("floated"). In subsection (d) of the same paragraph II, are found the words which
declare that Haussermann and Beam would be discharged if Sellner should fail to pay into the company's
treasury on or before the expiration of the prescribed period the money which he had agreed to raise.
Under these conditions it is apparent enough that the parties to the later contract treated time as of the
essence of the agreement and intended that the failure of Hanlon to supply the necessary capital within the
time stated should put an end to the whole project. Any extension of time, therefore, that the mining
company might have made after May 6, 1914, with respect to the date of performance by Hanlon would
have been purely a matter of grace, and not demandable by Hanlon as of absolute right. It is needless to
say in this connection that the default of Sellner was the default of Hanlon.
Time may be of the essence, without express stipulation to that effect, by implication from the nature of
the contract itself, or of the subject-matter, or of the circumstances under which the contract is made.
Most conspicuous among all the situations where time is presumed to be of the essence of a contract from
the mere nature of the subject-matter is that where the contract relates to mining property. The same idea
is clearly applicable to a contract like that now under consideration which provides for the rehabilitation
of a mining plant with funds to be supplied by the contractor within a limited period.
Under the doctrine above expounded it is evident that Hanlon would be entitled to no relief against the
mining company in an action of specific performance. Much less can he be considered entitled to relief
where he has remained in default throughout and has at no time offered to comply with the obligations
incumbent upon himself.
Our conclusion, upon a careful examination of the whole case, is that the action cannot be maintained.
The judgment is accordingly reversed and the defendants are absolved from the complaint.

DAN FUE LEUNG vs. HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU
G.R. No. 70926, January 31, 1989
Facts:
Leung Yiu filed a complaint with Court of First Instance of Manila, Branch II to recover the sum
equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah
Panciteria since October, 1955 from Dan Fue Leung. The Sun Wah Panciteria, a restaurant, located at
Florentino Torres Street, Sta. Cruz, Manila, was established sometime in October, 1955. It was registered
as a single proprietorship and its licenses and permits were issued to and in favor of Dan Fue Leung as the
sole proprietor. Leung Yiu adduced evidence during the trial of the case to show that Sun Wah Panciteria
was actually a partnership and that he was one of the partners having contributed P4,000.00 to its initial
establishment.

Leung Yiu’s contention was that about the time the Sun Wah Panciteria started to become operational, he
gave P4,000.00 as his contribution to the partnership. This is evidenced by a receipt wherein the Fue
Leung acknowledged his acceptance of the P4,000.00 by affixing his signature thereto. Furthermore,
Leung Yiu received from the petitioner the amount of P12,000.00 covered by the latter's Equitable
Banking Corporation Check from the profits of the operation of the restaurant for the year 1974. Fue
Leung denied having received from him the amount of P4,000.00. He contested and impugned the
genuineness of the receipt. He did not receive any contribution at the time he started the Sun Wah
Panciteria. He used his savings from his salaries as an employee at Camp Stotsenberg in Clark Field and
later as waiter at the Toho Restaurant amounting to a little more than P2,000.00 as capital in establishing
Sun Wah Panciteria. He presented various government licenses and permits showing the Sun Wah
Panciteria was and still is a single proprietorship solely owned and operated by himself alone. Fue Leung
also flatly denied having issued to the private respondent the receipt (Exhibit G) and the Equitable
Banking Corporation's Check No. 13389470 B in the amount of P12,000.00 (Exhibit B).

Dan Fue Leng asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G.R.
No. CV-00881 which affirmed the decision of the then Court of First Instance of Manila, Branch II in
Civil Case No. 116725 declaring private respondent Leung Yiu a partner of petitioner Dan Fue Leung in
the business of Sun Wah Panciteria and ordering the petitioner to pay to the private respondent his share
in the annual profits of the said restaurant.

Issue:
Whether Leung Yiu is a partner of the Dan Fue Leung in Sun Wah Panciteria? (YES)

Held:
The requisites of a partnership which are — 1) two or more persons bind themselves to contribute money,
property, or industry to a common fund; and 2) intention on the part of the partners to divide the profits
among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110) -have been
established. As stated by the respondent, a partner shares not only in profits but also in the losses of the
firm. If excellent relations exist among the partners at the start of business and all the partners are more
interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits
is perfectly plausible. It would be incorrect to state that if a partner does not assert his rights anytime
within ten years from the start of operations, such rights are irretrievably lost. The private respondent's
cause of action is premised upon the failure of the petitioner to give him the agreed profits in the
operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of his
interests in the partnership.

It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable.
Article 1842 states:
The right to an account of his interest shall accrue to any partner, or his legal representative as
against the winding up partners or the surviving partners or the person or partnership continuing
the business, at the date of dissolution, in the absence or any agreement to the contrary.
Regarding the prescriptive period within which the private respondent may demand an accounting,
Articles 1806, 1807, and 1809 show that the right to demand an accounting exists as long as the
partnership exists. Prescription begins to run only upon the dissolution of the partnership when the final
accounting is done.

Considering the facts of this case, the Court may decree a dissolution of the partnership under Article
1831 of the Civil Code which, in part, provides:

Art. 1831. On application by or for a partner the court shall decree a dissolution whenever:
xxx xxx xxx
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of
the business;
(4) A partner willfully or persistently commits a breach of the partnership agreement, or
otherwise so conducts himself in matters relating to the partnership business that it is not
reasonably practicable to carry on the business in partnership with him;
xxx xxx xxx
(6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership affairs, return of capital, and other
incidents of dissolution because the continuation of the partnership has become inequitable.
 SERGIO V. SISON v. HELEN J. MCQUAID

Facts:

Sergio Sison (Sison) lent P2,210 to Helen McQuaid to enable her to pay her obligation to the Bureau of
Forestry and to add to her capital in her lumber business. Helen was not able to pay the loan in 1938, as
she had promised, she proposed to take in plaintiff as a partner in her lumber business, plaintiff to
contribute to the partnership the said sum of P2,210 due him from defendant in addition to his personal
services; that plaintiff agreed to defendant's proposal and, as a result, there was formed between them,
under the provisions of the Civil Code, a partnership in which they were to share alike in the income or
profits of the business, each to get one-half thereof; that in accordance with said contract, plaintiff,
together with defendant, rendered services to the partnership without compensation from June 15, 1938 to
December, 1941.

The Partnership was able to gain P13,800 from a sale made to the United States Army. But defendant has
persistently refused to deliver one-half of it, or P6,900, to plaintiff notwithstanding repeated demands,
investing the whole sum of P13,800 for her own benefit. Plaintiff, therefore, prays for judgment declaring
the existence of the alleged partnership and requiring defendant to pay him the said sum of P6,900, in
addition to damages and costs.

Issue:

Whether or not the defendant may claim his share

Ruling:

No.Plaintiff seeks to recover from defendant one-half of the purchase price of lumber sold by the
partnership to the United States Army. But his complaint does not show why he should be entitled to the
sum he claims. It does not allege that there has been a liquidation of the partnership business and the said
sum has been found to be due him as his share of the profits. The proceeds from the sale of a certain
amount of lumber cannot be considered profits until costs and expenses have been deducted. Moreover,
the profits of a business cannot be determined by taking into account the result of one particular
transaction instead of all the transactions had. Hence, the need for a general liquidation before a member
of a partnership may claim a specific sum as his share of the profits.
 [ GR No. 413, Feb 02, 1903 ]
JOSE FERNANDEZ v. FRANCISCO DE LA ROS

FACTS:

Jose Fernandez alleges that in January 1900, he entered into a verbal agreement with the defendant,
Francisco De La Rosa, to form a partnership for the purchase of cascoes and the carrying on of the
business of letting the same for hire in Manila, for defendant to buy the cascoes, each partner to furnish
for that purpose such amount of money as he could and the profits to be divided proportionately.
Fernandez furnished De La Rosa 300 pesos to purchase a casco, furnished further sums aggregating about
300 pesos for repairs on this casco and another 825 pesos to purchase another casco. In April, the parties
undertook to draw up articles of partnership or the purpose of embodying the same in an authentic
document, but the defendant proposed a draft of such articles which differed materially from the terms of
the earlier verbal agreement. As a result, they were unable to come to any understanding and no written
agreement was executed. In the meantime, Fernandez made a demand for an accounting from the
defendant, having the control and management of the two cascoes, but De La Rosa refused to render and
denied the existence of the partnership altogether.

De La Rosa admits that the project of forming a partnership in the casco business in which he was already
engaged to some extent individually was discussed between himself and the plaintiff but he denied that
any agreement was ever consummated. He also denied that the plaintiff furnished any money in January,
1900, for the purchase of casco No. 1515, or for repairs on the same, but claims that he borrowed 300
pesos on his individual account in January from the bakery firm, consisting of the plaintiff, Marcos
Angulo, and Antonio Angulo. He also claimed to have paid, exclusive of repairs, 1,200 pesos for the first
casco and 2,000 pesos for the second one.

ISSUE:
1. Whether or not a partnership exists between the parties?
2. Whether or not the partnership, if such partnership existed, is terminated as a result of the act of the
defendant in receiving back the 1,125 pesos? !

RULING:
1. Yes. "Partnership is a contract by which two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves."
(Civil Code, art. 1665.) We have found as a fact that money was furnished by the plaintiff and received
by the defendant with the understanding that it was to be used for the purchase of the cascoes in question.
This establishes the first element of the contract, namely, mutual contribution to a common stock. The
second element, namely, the intention to share profits, appears to be an unavoidable deduction from the
fact of the purchase of the cascoes in common, in the absence of any other explanation of the object of the
parties in making the purchase in that form, and, it may be added, in view of the admitted fact that prior to
the purchase of the first casco the formation of a partnership had been a subject of negotiation between
them.

Under other circumstances the relation of joint ownership, a relation distinct though perhaps not
essentially different in its practical consequence from that of partnership, might have been the result of
the joint purchase. If, for instance, it were shown that the object of the parties in purchasing in company
had been to make a more favorable bargain for the two cascoes that they could have done by purchasing
them separately, and that they had no ulterior object except to effect a division of the common property
when once they had acquired it, the would be lacking and the parties would have become joint tenants
only; but, as nothing of this sort appears in the case, we must assume that the object of the purchase was
active use and profit and not mere passive ownership in common. It is thus apparent that a complete and
perfect contract of partnership was entered into by the parties. This contract, it is true, might have been
subject to a suspensive condition, postponing its operation until an agreement was reached as to the
respective participation of the partners in the profits, the character of the partnership as collective or , and
other details, but although it is asserted by counsel for the defendant that such was the case, there is little
or nothing in the record to support this claim, and that fact that the defendant did actually go on and
purchase the boat, as it would seem, before any attempt had been made to formulate partnership articles,
strongly discountenances the theory. The execution of a written agreement was not necessary in order to
give efficacy to the verbal contract of partnership as a civil contract, the contributions of the partners not
having been in the form of immovables or rights in immovables. (Civil Code, art. 1667.) The special
provision cited, requiring the execution of a public writing in the single case mentioned and dispensing
with all formal requirements in other cases, renders inapplicable to this species of contract the general
provisions of article 1280 of the Civil Code.

2. No. There was no intention on the part of the plaintiff in accepting the money to relinquish his rights as
a partner, nor is there any evidence that by anything that he said or by anything that he omitted to say he
gave the defendant any ground whatever to believe that he intended to relinquish them. On the contrary
he notified the defendant that he waived none of his rights in the partnership. Nor was the acceptance of
the money an act which was in itself inconsistent with the continuance of the partnership relation, as
would have been the case had the plaintiff withdrawn his entire interest in the partnership. There is,
therefore, nothing upon which a waiver, either express or implied, can be predicated. The defendant might
have himself terminated the partnership relation at any time, if he had chosen to do so, by recognizing the
plaintiff's right in the partnership property and in the profits. Having failed to do this he can not be
permitted to force a dissolution upon his co-partner upon terms which the latter is unwilling to accept. We
see nothing in the case which can give the transaction in question any other aspect than that of the
withdrawal by one partner with the consent of the other of a portion of the common capital.
The result is that we hold and declare that a partnership was formed between the parties in January,
1900, the existence of which the defendant is bound to recognize; that cascoes No. 1515 and 2089
constitute partnership property, and that the plaintiff is entitled to an accounting of the defendant's
administration of such property, and of the profits derived therefrom. This declaration does not involve an
adjudication as to any disputed items of the partnership account.
 JOSE GARRIDO vs. AGUSTIN ASENCIO
G.R. No. L-4281 March 30, 1908 CARSON, J.

FACTS:

Garrido and Asencio were members of a partnership doing business under the firm name of Asencio y
Cia. The business of the partnership did not prosper and it was dissolved by mutual agreement of the
members. The plaintiff brings this action to recover from the defendant, who appears to have been left in
charge of the books and the funds of the firm, the amount of the capital which he had invested in the
business.

The defendant, alleging that there had been considerable losses in the conduct of the business of the
partnership, denied that there was anything due the plaintiff as claimed, and filed a cross complaint
wherein he prayed for a judgment against the plaintiff for a certain amount which he alleged to be due by
the plaintiff under the articles of partnership on account of plaintiff's share of these losses.

The trial court found that the evidence substantially sustains the claim of the defendant as to the alleged
losses in the business of the partnership and gave judgment in his favor.

Garrido and Asencio made the following errors in their petitions. First. The trial court erred in holding
the statement of account of the partnership of Asencio y Cia as the plaintiff alleges the inadmissibility of
this account on the ground that the books were not kept in accordance with the provisions of the
Commercial Code which is submitted by the defendant as competent and sufficient evidence in this case.
Second. The trial court erred in holding that evidence of record proved the existence of losses in the
business of the said partnership. Third. The trial court erred in refusing to give judgment in favor of the
plaintiff.

ISSUE:

Whether or not Books of Account of the Partnership, not kept in accordance with the provisions of the
Code of Commerce are admissible in evidence, constituting competency and sufficiency of the evidence
as to the status of the accounts between Garrido and Asencio.

RULING:

The SC ruled that the Books of Account are kept in accordance with the law. The SC affirmed the trial
court. The SC ruled that Books of account, although not kept in accordance with the provisions of the
Code of Commerce, if not objected to, are admissible in evidence, and, in any event, they may be
admitted under Code of Civil Procedure.

By mutual agreement, the defendant had general charge and supervision of the books and funds of the
firm, but it appears that these books were at all times open to the inspection of the plaintiff, and there is
evidence which tends to show that the plaintiff himself made entries in these books touching particular
transactions in which he happened to be interested. It would appear that the plaintiff had equal rights with
the defendant in this regard, and that during the existence of the partnership they were equally responsible
for the mode in which the books were kept and that the entries made by one had the same effect as if they
had been made by the other.

The statement of account, the vouchers, and the books of the company were placed at the disposition of
the plaintiff for more than six weeks prior to the trial, and that during the trial he was given every
opportunity to indicate any erroneous or fraudulent items appearing in the account, yet he was unable, or
in any event he declined to specify such items, contenting himself with a general statement to the effect
that there must be some mistake, as he did not and could not believe that the business had been conducted
at a loss.

The defendant in support of his allegations offered in evidence the general statement of accounts of the
partnership, supported by a number of vouchers, and by his own testimony under oath as to the accuracy
and correctness of the items set out therein.

The trial court scrutinized the account with painstaking care, and to have been satisfied as to its accuracy,
except as to some unimportant items, which he corrected, but counsel for the appellant reiterates in this
court his general allegations as to the inaccuracy of the account, and points out some instances wherein he
alleges that items of expenditure appear to have been charged against the partnership more than once.
 Ornum v. Lasala

FACTS: Pedro Lasala, father of the respondents, and Emerenciano Ornum formed a partnership,
whereby the former, as capitalist, delivered the sum of P1,000 to the latter who, as industrial partner, was
to conduct business at his place of residence in Romblon.

Emerenciano Ornum, following the wishes of his wife, asked for the dissolution of Lasala, Emerenciano
Ornum looked for someone who could take his place and Lasala suggested the names of the petitioners
who accordingly became the new partners.

Upon joining the business, the petitioners, contributed P505.54 to their capital, with the result that in the
new partnership Pedro Lasala had a capital of P1,000, appraised value of the assets of the former
partnership, plus the said P505.54 invested by the petitioners who, as industrial partners, were to run the
business in Romblon.

After the death of Pedro Lasala, his children (the respondents) succeeded to all his rights and interest in
the partnership. The petitioners, as managing partners, were receiving one-half of the net gains, and the
other half was to be divided between them and the Lasala group in proportion to the capital

The petitioners accordingly let a greater part of their profits as an additional investment in the partnership.
After twenty years the business had grown to such an extent that is total value, including profits,
amounted to P44,618.67. Statements of accounts were periodically prepared by the petitioners and sent to
the respondents who invariably did not make any objection thereto. Before the last statement of accounts
was made, the respondents had received P5,387.29 by way of profits.

Spokesperson for the Lasala sent a letter stating therein that they will be collecting the capital and profit
due to them for payment of an outstanding debt.

Pursuant to the request contained in this letter, the petitioners remitted and paid to the respondents the
total amount corresponding to them under the above-quoted statement of accounts, which, however, was
not signed by the latter.

Respondents (Lasala) filed for the accounting and final liquidation of the assets of the partnership. The
Court of First Instance of Manila held that the last and final statement of accounts prepared by the
petitioners was tacitly approved and accepted by the respondents who, by virtue of the above-quoted
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 statement. This judgment was reversed by the Court of Appeals
principally on the ground that the final statement of accounts remains unsigned by the respondents, the
same stands disapproved.

ISSUE: Whether the account made was approved by herein respondents when they receive the part
of their share hence barred from asking another accounting
RULING: YES, it was tacitly approved hence they can no longer pray for another accounting of the
firm

We hold that the last and final statement of accounts hereinabove quoted, had been approved by the
respondents. This approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932,
quoted in part in the appealed decision from the failure of the respondent to object to the statement and
from their promise to sign the same as soon as they received their shares as shown in said statement. After
such shares had been paid by the petitioners and accepted by the respondents without any reservation, the
approval of the statement of accounts was virtually confirmed and its signing became a mere formality to
be complied with by the respondents exclusively. Their refusal to sign, after receiving their shares,
amounted to a waiver to that formality in favor of the petitioners who have already performed their
obligation.

This approval precludes any right on the part of the respondents to a further liquidation, unless the latter
can show that there was fraud, deceit, error or mistake in said approval.

In our review, the pronouncement that Tends to prove the evidence that there were there mistakes in the
Petitioners' statements of accounts, without specifying the mistakes, intimates merely a suspicion and is
not positive and unmistakable such a finding of fact as to justify a revision, especially because of the
Court of Appeals has relied on the bare allegations of the parties, Even if they were alleged by the
petitioners in their counterclaim, they overpaid the respondents in the sum of P575.12, this error is
essentially fatal to the latter's theory, what the statement of accounts shows, and is therefore not the kind
of error that calls for another accounting which will serve the purpose of the respondent's suit.

We are reversing the appealed decision on the legal ground that the petitioners' final statement of
accounts had been approved by the respondents and not justifiable reason (fraud, deceit, error or mistake)
has been positively and unmistakably found by the Court of Appeals so as to warrant the liquidations
sought by the respondents.
 Inocencia Deluao and Felipe Deluao vs. Nicanor Casteel and Juan Depra

Facts:

Nicanor Casteel filed a fishpond application for a big tract of swampy land in Davao. As his application
was pending, several perons, including Felipe Deluao filed their own fishpond application for the area
covered by Casteel's application.

Because of the threat poised upon his position by the above applicants who entered upon and spread
themselves within the area, Casteel realized the urgent necessity of expanding his occupation thereof by
constructing dikes and cultivating marketable fishes, in order to prevent old and new squatters from
usurping the land. But lacking financial resources at that time, he sought financial aid from his uncle
Felipe Deluao who then extended loans totalling more or less P27,000 with which to finance the needed
improvements on the fishpond. Hence, a wide productive fishpond was built. The loan extended by
Deluao was embodied in a contract between Inocencia Deluao (Felipe’s wife) and Casteel where it was
expressed that the latter will be the manager and sole buyer of all the produce from the fishpond, and
former will be the administrator of the fishpond, having financed its construction and improvement.

When Nicanor Casteel’s application was approved to the exclusion of the subsequent applicants, he then
forbade Deluao and her representative from further administering the fishpond and even ejected Deluao’s
representative Jesus Donesa from the premises.

Alleging violation of the contract of service entered into between Deluao and Casteel, an action in the
Court of First Instance of Davao for specific performance and damages against Nicanor Casteel and Juan
Depra (who, they alleged, instigated Casteel to violate his contract), was filed.

Issue:

Whether or not the contract entered into by Deluao and Casteel formed a partnership

Ruling:

In its decision, the Supreme Court construed the contract as one of partnership, divided into two parts —
namely, a contract of partnership to exploit the fishpond pending its award to either Felipe Deluao or
Nicanor Casteel, and a contract of partnership to divide the fishpond between them after such award. The
first is valid, the second illegal.

When the contract of service was entered into, there were two pending applications over the fishpond.
One was Casteel's which was appealed by him to the Secretary of Agriculture and Natural Resources after
it was disallowed by the Director of Fisheries. The other was Felipe Deluao's application and later on
withdrawn by him. Although the fishpond was then in the possession of Casteel, neither he nor, Felipe
Deluao was the holder of a fishpond permit over the area. But be that as it may, they were not however
precluded from exploiting the fishpond pending resolution of Casteel's appeal or the approval of Deluao's
application over the same area — whichever event happened first. No law, rule or regulation prohibited
them from doing so. Thus, rather than let the fishpond remain idle they cultivated it.

The evidence preponderates in favor of the view that the initial intention of the parties was not to form a
co-ownership but to establish a partnership — Inocencia Deluao as capitalist partner and Casteel as
industrial partner — the ultimate undertaking of which was to divide into two equal parts such portion of
the fishpond as might have been developed by the amount extended by the plaintiffs-appellees, with the
further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of
the fishpond that would pertain to him. This can be gleaned, among others, from the exchanges of letters
between the parties revealing their intent to divide the fishpond.

Apparently relying on the partnership agreement, the appellee Felipe Deluao saw no further need to
maintain his petition for the reinvestigation of Casteel's application. Thus, by letter addressed to the
Secretary of Agriculture and Natural Resources, he withdrew his petition on the alleged ground that he
was no longer interested in the area, but stated however that he wanted his interest to be protected and his
capital to be reimbursed by the highest bidder.

The arrangement under the so-called "contract of service" continued until the decisions both dated were
issued by the Secretary of Agriculture and Natural. This development, by itself, brought about the
dissolution of the partnership. Moreover, subsequent events likewise reveal the intent of both parties to
terminate the partnership because each refused to share the fishpond with the other.
The Leyte-Samar Sales Co., and Raymundo Tomassi vs. Sulpicio V. Cea and Olegario Lastrilla

Facts:

The Court of First Instance of Leyte rendered judgement against the Far Eastern Lumber & Commercial
Co. (unregistered commercial partnership hereinafter called FELCO), Arnold Hall, Fred Brown and Jean
Roxas, for P31,589.14 plus costs. The Court of Appeals confirmed the award and the decision having
become final, the sheriff sold at auction to Robert Dorfe and Pepito Asturias "all the rights, interests, titles
and participation" of the defendants in certain buildings and properties described, for a total price of eight
thousand and one hundred pesos.

Olegario Lastrilla then filed in the case a motion, wherein he claimed to be the owner by purchase on of
all the "shares and interests" of defendant Fred Brown in FELCO, and requested "under the law of
preference of credits" that the sheriff be required to retain in his possession so much of the deeds of the
auction sale as may be necessary "to pay his right". Lastrilla’s motion was granted by the court, entitling
him to 17 per cent of the properties sold.

The petitioners now seek relief by certiorari, their position being the such orders were null and void for
lack of jurisdiction.

Issue:

Whether or not Lastrilla has any proper claim to the proceeds of the sale

Ruling:

No. When the sale of properties of FELCO was effected, Lastrilla was already a partner. As such, he can
no longer have a claim to the proceeds of the sale, as an ordinary creditor would.

Granting arguendo that the auction sale did not include the interest or portion of the FELCO properties
corresponding to the shares of Lastrilla in the same partnership (17%), the resulting situation would be —
at most — that the purchasers Dorfe and Austrias will have to recognize dominion of Lastrilla’s over 17
per cent of the properties awarded to them. Also, if Lastrilla claims that the auction sale does not include
his interest in the partnership, he then acquired no right to demand any part of the money paid by Dorfe
and Austrias to the sheriff to the sheriff for the benefit of FELCO and Tomassi, the plaintiffs in that case.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM
NAME "OZAETA, ROMULO ETC.

Petitions were filed by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975 and by
the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be
allowed to continue using, in the names of their firms, the names of partners who had passed away.

Petitioners base their petitions on the following arguments:

1. Under the law, a partnership is not prohibited from continuing its business under a firm name
which includes the name of a deceased partner

2. In regulating other professions, such as accountancy and engineering, the legislature has
authorized the adoption of firm names without any restriction as to the use, in such firm name, of the
name of a deceased partner; the legislative authorization given to those engaged in the practice of
accountancy — a profession requiring the same degree of trust and confidence in respect of clients as that
implicit in the relationship of attorney and client

3. The Canons of Professional Ethics are not transgressed by the continued use of the name of a
deceased partner in the firm name of a law partnership

4. There is no possibility of imposition or deception because the deaths of their respective deceased
partners were well-publicized in all newspapers of general circulation for several days; the stationeries
now being used by them carry new letterheads indicating the years when their respective deceased
partners were connected with the firm; petitioners will notify all leading national and international law
directories of the fact of their respective deceased partners' deaths.

5. No local custom prohibits the continued use of a deceased partner's name in a professional firm's
name; there is no custom or usage in the Philippines, or at least in the Greater Manila Area, which
recognizes that the name of a law firm necessarily Identifies the individual members of the firm.

6. The continued use of a deceased partner's name in the firm name of law partnerships has been
consistently allowed by U.S. Courts and is an accepted practice in the legal profession of most countries
in the world

ISSUE:

WON the surviving partners may be allowed by the court to retain the name of the partners who already
passed away in the name of the firm?
Held:

NO. In the case of Register of Deeds of Manila vs. China Banking Corporation, the SC said:

The Court believes that, in view of the personal and confidential nature of the relations between attorney
and client, and the high standards demanded in the canons of professional ethics, no practice should be
allowed which even in a remote degree could give rise to the possibility of deception. Said attorneys are
accordingly advised to drop the names of the deceased partners from their firm name.

The public relations value of the use of an old firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able lawyer without connections will have to make a
name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride
on that old firm’s reputation established by deceased partners.

The court also made the difference from the law firms and business corporations:

A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a
particular purpose. … It is not a partnership formed for the purpose of carrying on trade or business or of
holding property.” Thus, it has been stated that “the use of a nom de plume, assumed or trade name in law
practice is improper.

We find such proof of the existence of a local custom, and of the elements requisite to constitute the
same, wanting herein. Merely because something is done as a matter of practice does not mean that
Courts can rely on the same for purposes of adjudication as a juridical custom.

Petition suffers legal and ethical impediment.

(Jo Chung Chang vs. Pacific Commercial Company – Espejo)

 PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
SEVERO EUGENIO LO, ET AL., defendants-appellants.
G.R. No. L-26937 October 5, 1927

FACTS:
The appellants Severo Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian Ping, Ko Tiao Hun,
On Yem Ke Lam and Co Sieng Peng formed a commercial partnership under the name of "Tai Sing and
Co.," duly engaged in the purchase and sale of local merchandise as well as Chinese and Japanese
products. The duration of partnership was for five years from the date of its organization with a capital of
P40,000 contributed by said partners. One of the partners, J. A. Say Lian Ping was appointed general
manager of the partnership. The general manager executed a power of attorney in favor of A. Y. Kelam,
authorizing him to act in his stead as manager and administrator of "Tai Sing & Co.," and obtained a loan
of P8,000 in current account from the plaintiff bank. As security for said loan, he mortgaged certain
personal property of "Tai Sing & Co. Kelam, as attorney-in-fact of "Tai Sing & Co., executed a chattel
mortgage in favor of plaintiff bank as security for a loan of P20,000 with interest. He executed another
chattel mortgage for the said sum of P20,000 in favor of plaintiff bank.

Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a general partnership,
and that the commercial credit in current account which "Tai Sing & Co. obtained from the plaintiff bank
had not been authorized by the board of directors of the company, nor was the person who subscribed said
contract authorized to make the same, under the article of co-partnership. RTC ruled that said defendants
are ordered jointly and severally to pay the Philippine National Bank the sum of P22,727.74 and to pay
P4.14 daily interest on the principal.
ISSUE:
Whether or not the partnership is still liable despite of the anomaly in its firm name pursuant to article
1815 of the Civil Code.
HELD:
Yes. The only anomaly noted in its organization is that instead of adopting for their firm name the names
of all of the partners, of several of them, or only one of them, the partners agreed upon "Tai Sing & Co."
as the firm name. The object of article 126 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; and that the provision of said article 126 is for the protection of the
creditors rather than of the partners themselves. Therefore, the defendants cannot invoke in their defense
the anomaly in the firm name which they themselves adopted.

As to the alleged death of the manager of the company, Say Lian Ping, the error would not justify the
reversal of the judgment for two reasons (1) Ou Yong Kelam was a partner who contracted in the name of
the partnership, without any objection of the other partners; (2) because it appears in the record that the
appellant-partners Severo Eugenio Lo, Ng Khey Ling and Yap Seng, appointed Sy Tit as manager, and he
obtained from the plaintiff bank the credit in current account, the debit balance of which is sought to be
recovered in this action. The judgment against the appellants is in accordance with article 127 of the Code
of Commerce which provides that all the members of a general partnership, be they managing partners
thereof or not, shall be personally and solidarily liable with all their property, for the results of the
transactions made in the name and for the account of the partnership, under the signature of the latter, and
by a person authorized to use it.
G.R. No. 44119             March 30, 1937

SHARRUF & CO., known also as SHARRUF & ESKENAZI, SALOMON SHARRUF and ELIAS
ESKENAZI,plaintiffs-appellees, 
vs.
BALOISE FIRE INSURANCE CO., SUN INSURANCE OFFICE, LTD., and SPRINGFIELD
INSURANCE CO., represented by KUENZLE & STREIFF, INC., defendants-appellants.

Carlos A. Sobral for appellants.

Ramon Diokno for appellee.

Facts

The plaintiffs Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf &
Co. As they had applied to the defendant companies for insurance of the merchandise they had in stock.
The defendant insurance companies issued insurance policies in favor of said firm Sharruf & Co., raising
the total amount of the insurance on said merchandise to P40,000

On August 26, 1933, the plaintiffs executed a contract of partnership between themselves (Exhibit A)
wherein they substituted the name of Sharruf & Co. with the Sharruf & Eskenazi, The total value of the
merchandise contributed by both partners amounted to P50,505.04.

September 22, 1933,  A fire ensued at their building at Muelle de la Industria.

ISSUE; whether or not Salomon Sharruf and Elias Eskenazi had juridical personality to bring this action,
either individually or collectively

As already seen, Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf
& Co. in whose name the insurance policies were issued, Elias Eskenazi having paid the corresponding
premiums.

In the present case, while it is true that at the beginning the plaintiffs had been doing business in said
name of "Sharruf & Co.", insuring their business in said name, and upon executing the contract of
partnership (exhibit A) on August 26, 1933, they changed the title thereof to "Sharruf & Eskenazi," the
membership of the partnership in question remained unchanged, the same and only members of the
former, Salomon Sharruf and Elias Eskenazi, being the ones composing the latter, and it does not appear
that in changing the title of the partnership they had the intention of defrauding the herein defendant
insurance companies. Therefore, under the above-cited doctrine the responsibility of said defendants to
the plaintiffs by virtue of the respective insurance policies has not been altered. If this is true, the
plaintiffs have juridical personality to bring this action.

Issue; whether or not they had insurable interest.

With respect to the question whether or not the claim of loss filed by the plaintiffs is fraudulent, the
difference between the amount of articles insured, which the plaintiffs claim to have been in the building
before the fire, and the amount thereof shown by the vestige of the fire to have been therein, that the most
liberal human judgment can not attribute such difference to a mere innocent error in estimate or counting
but to a deliberate intent to demand of the insurance companies payment of an indemnity for goods not
existing at the time of the fire, thereby constituting the so-called "fraudulent claim" which, by express
agreement between the insurers and the insured, is a ground for exemption of the insurers from civil
liability.

Therefore, as the herein plaintiffs-appellees have acted in bad faith in presenting a fraudulent claim, they
are not entitled to the indemnity claimed by them by virtue of the insurance policies issued by the
defendant-appellant companies in their favor.

For the foregoing considerations, this court is of the opinion and so holds: (1) that when the partners of a
general partnership doing business under the firm name of "Sharruf & Co." obtain insurance policies
issued to said firm and the latter is afterwards changed to "Sharruf & Eskenazi", which are the names of
the same and only partners of said firm "Sharruf & Co.", continuing the same business, the new firm
acquires the rights of the former under the same policies; (2) that when the evidence relative to the
cause of a fire and the author thereof is so vague and doubtful, the insured cannot be attributed incendiary
intervention therein for the mere fact that he had the keys to the unoccupied building in his possession;
(3) that a person who presents a claim for damages caused by fire to articles and goods not existing at the
time of the fire does so fradulently and his claim is fraudulent, and (4) that when immediately after a fire
that broke out inside a completely locked building, lasting scarcely 27 minutes, only about ten or eleven
partly burned and scorched cases, some containing textiles and wrapping paper and others, statutes of
saints, have been found without any trace of the destruction of other cases by said fire, it can neither
logically nor reasonably be inferred that 40 of said cases were inside the building when the fire broke out.

Wherefore, defendant companies are absolved from the complaint which is dismissed, with costs to the
appellees. So ordered.

(Compana Maritima vs. Munoz – Hizola)

TEODORO DE LOS REYES, plaintiff-appellee, vs. VICENTE LUKBAN and ESPERIDION

BORJA, defendants. VICENTE LUKBAN, appellant.

In October and November, 1904, the firm Lukban & Borja bought merchandise amounting to P1,086.65
on credit  from Teodoro de los Reyes’ ship supply store, named La Industria. On April 13, 1909, the firm
of Lukban & Borja was lawfully dissolved. On December 5, 1913, de los Reyes brought suit in the Court
of First Instance of this city against Vicente Lukban and Esperidion Borja, to recover from them
individually the sum of P853, the balance of a debt of P1,086.65. The assets of the firm of Lukban &
Borja had not been exhausted (by attachment) and for this reason, De los Reyes did not know what
property belonged to it.

In case No. 3759, Lukban & Borja was ordered to pay the said sum of P1,086.65, together with the
interest thereon, amounting to a total of P1,102.95, in addition to the costs, P46.24.

Borja paid P522.69 and the P610.21 still remains to be paid. P610.21 together with the costs and legal
interest thereon aggregates the total sum of P894.17. After hearing the case, the Honorable Judge Del
Rosario, on November 20, 1913, rendered judgment absolving the firm of Lukban & Borja from the
complaint without special finding as to costs.

De los Reyes prayed the court to order the defendants jointly or severally to pay him. Borja and Lukban,
in their separate answers to the complaint, entered a general and specific denial of each and all of the
allegations therein contained, and, as a special defense, alleged that it was res judicata and that the
plaintiff's action, if it existed, had already prescribed.
In addition to his answer, Lukban set forth the following:
a.      that he was merely an industrial partner in the firm of Lukban & Borja, Espiridion Borja
being the partner thereof who furnished the capital; and
b.      that the assets of the firm of Lukban & Borja had not been exhausted (by attachment),
wherefore the present action is premature.

TRIAL COURT:

The court rendered judgment, sentencing the defendants Lukban and Borja jointly and severally to pay de
los Reyes the sum of P610.20, together with the legal interest and the costs.

ISSUES:
1. Whether or not the action brought against this defendant is improper, inasmuch as prior to its
prosecution no attachment was levied on the assets of the said partnership.
2. Whether or not the action brought against this appellee [defendant] has not been proven.
3. Whether or not the present is not a true case of res judicata.

RULING:

The dissolved partnership of Lukban & Borja had absolutely no property whatever of its own. Had any
property whatever of the said partnership still remained, the defendant Lukban would have pointed it out
inorder to avoid being obliged to pay in solidum all the balance of the sum which the firm was sentenced
to pay by the said final judgment of October 19, 1905. He did not do so because the firm of Lukban &
Borja no longer had any kind of property or credits, as shown by the document setting forth the agreement
made by and between several creditors of the said firm, a third party named Ramon Tinsay and the former
partner of the firm, Espiridion Borja, in which document it appears that the firm Lukban & Borja owed
four creditors, among them the plaintiff De los Reyes, the total sum of P10,165.01 and these creditors
with some difficulty succeeded in collecting the sum of P5,000 through a transaction with the said Ramon
Tinsay who paid this last amount for the account of the partner Espiridion Borja. It appears that the latter
paid to the creditor De los Reyes the aforementioned sum of P522.69, on account of the firm's debt to
Teodoro de los Reyes, a debt which was recognized in the said judgment of October 19, 1905. The
attachment, or recourse to the property, the lack of which proceeding was complained of, is a proceeding
that was resorted to when attempt was made to execute the final judgment rendered against the
partnership of Lukban & Borja, which proceeding gave negative results; therefore, if the requirement of
article 237 of the Code of Commerce must be complied with by the creditor it is evident that it has
already been done for the defendant Lukban was unable to show that the partnership to which he
belonged actually possessed any more assets.

2. If Teodoro de los Reyes is entitled to collect individually from the partners Lukban and Borja the
amount of the debt that the dissolved partnership owed at the time of its dissolution, it is unquestionable
that such a right has given rise to the corresponding right of action to demand the payment of the debt
from the partners individually, or from each of them, by the insolvency of the partnership, inasmuch as
they are personally and severally liable with all their property for the results of the operations of the
partnership which they conducted.

Article 127 of the Code of Commerce provides:

All the member of the general copartnership, be they or be they not managing partners of the
same, are personally and severally liable with all their property for the results of the transactions
 made in the name and for the account of the partnership, under the signature of the latter, and by a
person authorized to make use thereof.

3. The action against Vicente Lukban and Espiridion Borja individually cannot be demurred to on the
ground of res judicata by the judgment of acquittal entered in case No. 10908.

Article 1252 of the Civil Code provides:

In order that the presumption of the res judicata may be valid in another suit, it is necessary that,
between the case decided by the sentence and that in which the name is invoked, there must be
the most perfect identity between the things causes, and persons of the litigants, and their capacity
as such.

There may be perfect identity between the cause of action and the things demanded in case no. 10908,
wherein the said partnership was absolved from the complaint, and in the present case No. 11296; it is,
however, undeniable that the parties defendant are not the same nor is their capacity as such. In the first
case it was the partnership that was sued, while in the present case it is Lukban and Borja individually, as
former members of that dissolved partnership, who are sued jointly and severally. Therefore, pursuant to
the above-cited article of the Civil Code, the provisions of which harmonize with those of section 307 of
the Code of Civil Procedure, the former judgment can not be set up as res judicata in the present action.
PACIFIC COMMERCIAL V ABOITIZ AND MARTINEZ ENTERPRISE
Art. 1816. 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 a partnership contract.
FACTS:
Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a "regular,
collective, merchantile partnership" with a capital of P40,000 of which each of the partners Aboitiz and
De Silva furnished one-third. The partner Jose Martinez was an industrial partner and furnished no
capital; it was provided in the partnership article that he was to receive 30 per cent of the profits and that
his responsibility for losses should not exceed the amount of the profits received by him.
Later, the partnership, through its duly authorized representative, Guillermo Aboitiz, executed a
promissory note in favor of the plaintiff the Pacific Commercial Company. As security for the payment of
the note, the partnership executed a chattel mortgage in favor of the plaintiff on certain personal property.
The partnership failed to pay the mortgage hence was foreclosed however proceed was not
sufficient, Pacific Commercial instituted the present case for the recovery of the unpaid balance.
Trial court ruled in favor of Pacific Commercial. It ordered the following: Execution must first
issue against the property of (a) De Silva and Aboitiz and in the event of insolvency to (b) Jose Martinez,
industrial partner.
Martinez appealed to this court and invoked that an industrial partner cannot be held liable for the
partnership's debts as provided for under Article 141 of the Code of Commerce.
ISSUE:
Whether Martinez, industrial partner, should be held liable for the unpaid partnership debt.
RULING:
 Yes, The Court upheld the decision of the lower court. It mentioned that the case is practically
identical with that of the Compania Maritima vs. Munoz (9 Phil., 326), in which this court held the
industrial partners secondarily liable for the debts of the partnership.

 Article 127 of the Code of Commerce reads as follows:

All the members of the general copartnership, be they or be they not managing partners of the
same are liable personally and in solidum with all their property for the results of the transaction
made in the name and for the account of the partnership, under the signature of the later, and by a
person authorized to make use thereof.

The language of this article is clear and specific that all the members of a general copartnership
are liable with all their property for the results of the duly authorized transactions made in the name and
for the account of the partnership. On the other hand, article 141, upon which the appellants relies and
which provides that "losses shall be computed in the same proportion among the capitalist partners
without including the industrial partners, unless by special agreement the latter have been constituted as
participants therein," is susceptible of two different interpretations of which that given it in the Compania
Maritima case, supra, i.e., that it relates merely to the distribution of losses among the partners
themselves in the settlement of the partnership affairs and has no reference to partnership
obligations to third parties, appears to us to be the more logical.

There is a marked distinction between a liability and a loss and the inability of a partnership to
pay a debt to a third party at a particular time does not necessarily mean that the partnership business as a
whole, has been operated at a loss. The partnership may have outstanding credits which for the moment
may have be unavailable for the payment of debts, but which eventually may be realized upon and yield
profits more than sufficient to cover all losses. Bearing this in mind it will be found that there in reality is
no conflict between the two articles quoted; one speaks of liabilities, the other of losses.
ISLAND SALES, INC., plaintiff-appellee, 
vs.
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL defendants.
BENJAMIN C. DACO, defendant-appellant.

(G.R. No. L-22493 July 31, 1975)

FACTS:

On April 22, 1961, the defendant company (United Pioneers), a general partnership duly registered under
the laws of the Philippines, purchased from the plaintiff (Island Sales) a motor vehicle on the installment
basis and for this purpose, executed a promissory note for P9,440.00, payable in twelve (12) equal
monthly installments of P786.63, 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 as they 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. 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 not exceed one-
fifth (1/5 ) of the obligations of the defendant company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit the liability of the defendants Daco and Sim to
only one-fifth (1/5 ) of the obligations of the defendant company. Hence, this appeal.

ISSUE: Whether or not the dismissal of the complaint to favor one of the general partners of a
partnership increases the joint and subsidiary liability of each of the remaining partners for the obligations
of the partnership.

RULING:

No. Article 1816 of the Civil Code provides:

Art. 1816. 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 a partnership contract.

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.

WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED, without pronouncement as
to costs.

Elmo Muñasque vs. Court Of Appeals, Celestino Galan Tropical Commercial Company and
Ramon Pons
G.R. No. L-39780 November 11, 1985

Facts: The present controversy began when petitioner Muñasque, in behalf of the partnership of "Galan
and Muñasque", as Contractor entered into a written contract with respondent Tropical for remodelling
the respondent's Cebu branch building. A total amount of P25,000.00 was to be paid under the contract
for the entire services of the Contractor. The terms of payment were as follows: thirty percent (30%) of
the whole amount upon the signing of the contract and the balance thereof divided into three equal
installments of P6,000.00 for every 15 working days.

The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of
the petitioner. Petitioner, however, indorsed the check in favor of respondent Galan to enable the latter to
deposit it in the bank and pay for the materials and labor used in the project.

Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the
second check in the amount of P6,000.00 came and Galan asked the petitioner to indorse it again, the
petitioner refused.

Since Galan informed Tropical that there was a"misunderstanding" between him and petitioner,
respondent Tropical changed the name of the payee in the second check from Muñasque to "Galan and
Associates" which was the duly registered name of the partnership between Galan and petitioner and
under which name a permit to do construction business was issued by the mayor of Cebu City. This
enabled Galan to encash the second check.

Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He stated that
he borrowed P12,000.00 from his friend, Mr. Espina and although the expenses had reached the amount
of P29,000.00 because of the failure of Galan to pay what was partly due the laborers and partly due for
the materials, the construction work was finished ahead of schedule with the total expenditure reaching
P34,000.00.

The two remaining checks, each in the amount of P6,000.00, were subsequently given to the petitioner
alone with the last check being given pursuant to a court order.

The petitioner filed a complaint for payment of sum of money and damages against the respondents,
seeking to recover the amounts covered by the first and second checks which fell into the hands of
respondent Galan, the additional expenses that the petitioner incurred in the construction, moral and
exemplary damages, and attorney's fees.

RTC and CA Rullings: The trial and appellate courts not only absolved respondents Tropical and its
Cebu Manager, Pons, from any liability but they also held the petitioner and respondent Galan, hable to
the intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace for the credit which
the intervenors extended to the partnership of petitioner and Galan

Issue: (1) Whether or not the appellate court erred in holding that a partnership existed between petitioner
and respondent Galan.

(2) Whether or not the court committed grave abuse of discretion in holding that the payment made by
Tropical through its manager Pons to Galan was "good payment"

Ruling:
 1.) No. The appellate court did not err in holding that a partnership existed between petitioner
and respondent Galan

The records will show that the petitioner entered into a contract with Tropical for the renovation of the
latter's building on behalf of the partnership of "Galan and Muñasque." There is nothing in the records to
indicate that the partnership organized by the two men was not a genuine one. If there was a falling out or
misunderstanding between the partners, such does not convert the partnership into a sham organization.

Likewise, when Muñasque received the first payment of Tropical in the amount of P7,000.00 with a
check made out in his name, he indorsed the check in favor of Galan. Respondent Tropical therefore, had
every right to presume that the petitioner and Galan were true partners. If they were not partners as
petitioner claims, then he has only himself to blame for making the relationship appear otherwise, not
only to Tropical but to their other creditors as well. The payments made to the partnership were,
therefore, valid payments.

2.) No error was committed by the appellate court in holding that the payment made by
Tropical to Galan was a good payment which binds both Galan and the petitioner.

Since the two were partners when the debts were incurred, they, are also both 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 members of the firm
acting apparently in its behalf and within the scope of his authority.

“Art. 1818. Every partner is an agent of the partnership for the purpose of its business, and the
act of every partner, including the execution in the partnership name of any instrument, for apparently
carrying on in the usual way the business of the partnership of which he is a member binds the
partnership, unless the partner so acting has in fact no authority to act for the partnership in the
particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such
authority.”

In the case at bar the respondent Tropical had every reason to believe that a partnership existed between
the petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan
and Associates" and delivering the same to Galan because as far as it was concerned, Galan was a true
partner with real authority to transact on behalf of the partnership with which it was dealing. This is even
more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace who supplied
materials on credit to the partnership. Thus, it is but fair that the consequences of any wrongful act
committed by any of the partners therein should be answered solidarily by all the partners and the
partnership as a whole.

However. as between the partners Muñasque and Galan, justice also dictates that Muñasque be
reimbursed by Galan for the payments made by the former representing the liability of their partnership to
herein intervenors, as it was satisfactorily established that Galan acted in bad faith in his dealings with
Muñasque as a partner.

ILDEFONSO DE LA ROSA, administrator of the intestate estate of the deceased Go-Lio, plaintiff,
vs. ENRIQUE ORTEGA GO-COTAY, defendant.

GR No. L-24243 | 15 January 1926 | En Banc| J. Villa-Real

FACTS

During the Spanish regime, Go-Lio, a Chinese, and Vicente Go-Sengco formed a partnership for the
purchase and sell of articles of commerce. They opened a store in San Isidro, Nueva Ecija with a capital
of P4,779.39.

While Go-Lio is in China, Vicente died and it was his son, Enrique Ortega Go-Cotay, who took charge of
the business. In 1916, Go-Lio died in China. His heirs filed a petition for the appointment of Ildefonso de
la Rosa as administrator of the intestate estate of Go-Lio.

The Court of First Instance of Nueva Ecija granted the petition. This capacitated de la Rosa to request
from Enrique to wind up the business and to deliver to him Go-Lio’s share. Enrique denied de la Rosa’s
request, claiming that the business was exclusively his.

In view of the denial, de la Rosa, as administrator, filed with the CFI an action claiming Go-Lio’s share
from Enrique. The trial court appointed Justo Cabo-Chan, Francisco Tentangco and Go-Tiao, as
commissioners who will make an inventory, liquidate and determine the one-half of all property of the
store. Enrique filed a bond amounting to P10,000.00 to prevent Cabo-Chan from assuming the office of a
commissioner. In 1920, the commissioners reported that the store had a net profit of P25,038.70 for the
period off 1913 to 1917. With the appeal taken by Enrique, the parties agreed to suspend the liquidation
until the case was decided. Enrique paid a bond of P20,000 which cancelled the former bond. This
authorized him to continue the possession of the property in litigation.

The Supreme Court held that the appeal was premature and ordered that the case be remanded to the
lower court for a decision in accordance with the liquidation of the commissioners.

The composition of the commissioners later included Cabo-Chan, Tentangco and Cua Poco. Two
conflicting reports were submitted: one made by Cabo-Chan stating that the business incurred losses
amounted to P89,099.22; and another by Tentangco and Cua Poco stating that “the books were prepared
in a careful way at a certain time.”

The trial court approved Cabo-Chan’s report with slight modifications, implicating that there was nothing
to recover from Enrique since there was no profit to divide. Hence, this petition.

It was noted that Enrique assumed complete responsibility for the business by his payment of bonds. Until
that date, his acts were those of a managing partner, binding against the partnership; but thereafter his acts
were those of a receiver whose authority is contained in section 175 of the Code of Civil Procedure.
ISSUE

Whether Enrique’s acts after the effectivity of the bonds were binding to the partnership

RULING

NO. A receiver has no right to carry on and conduct a business unless he is authorized or directed by the
court to do some, and such authority is not derived from an order of appointment to take and preserve the
property (34 Cyc., 283; 23 R. C. L., 73). It does not appear that the defendant as a receiver was authorized
by the court to continue the business of the partnership in liquidation. This being so, he is personally
liable for the losses that the business may have sustained. (34 Cyc., 296.) The partnership must not,
therefore, be liable for the acts of the defendant in connection with the management of the business until
August 3, 1918, the date when he ceased to be a member and manager in order to become receiver.

As to the first semester of 1918, during which time the defendant had seen managing the business of the
partnership as a member and manager, taking into account that the profits had been on the increase, said
profits having reached the amount of P10,174.69 in the year 1917, it would not be an exaggeration to
estimate that the profits for 1918 would have been at least the same as the profits of 1917; so that for the
first half of 1918, the profit would be P5,087.34.

The judgment appealed from is reversed and Enrique is ordered to pay the sum of P30,299.14, with
interest, representing Go-Lio’s one-half share.

(Litton vs. Hill – Onia)

Munasque vs Court of Appeals

G.R. No. L-39780 November 11, 1985

FACTS

Petitioner Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor entered into a
written contract with respondent Tropical for remodelling the respondent's Cebu branch building. A total
amount of P25,000.00 was to be paid under the contract for the entire services of the Contractor. The
terms of payment were as follows: thirty percent (30%) of the whole amount upon the signing of the
contract and the balance thereof divided into three equal installments at the lute of Six Thousand Pesos
(P6,000.00) every fifteen (15) working days.

The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of
the petitioner. Petitioner, however, indorsed the check in favor of respondent Galan to enable the latter to
deposit it in the bank and pay for the materials and labor used in the project.

Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the
second check in the amount of P6,000.00 came and Galan asked the petitioner to indorse it again, the
petitioner refused.

The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there
was a "misunderstanding" between him and petitioner, respondent Tropical changed the name of the
payee in the second check from Muñasque to "Galan and Associates" which was the duly registered name
of the partnership between Galan and petitioner and under which name a permit to do construction
business was issued by the mayor of Cebu City. This enabled Galan to encash the second check.

Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He stated that
he borrowed some P12,000.00 from his friend, Mr. Espina and although the expenses had reached the
amount of P29,000.00 because of the failure of Galan to pay what was partly due the laborers and partly
due for the materials, the construction work was finished ahead of schedule with the total expenditure
reaching P34,000.00.

The two remaining checks, each in the amount of P6,000.00,were subsequently given to the petitioner
alone with the last check being given pursuant to a court order.

Petitioner Elmo Muñasque filed a complaint for payment of sum of money and damages against
respondents Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons. Petitioner
seeking to recover the following: the amounts covered by the first and second checks which fell into the
hands of respondent Galan. The trial court ruled in favor of Cebu Southern Hardware Company and Blue
Diamond Glass Palace. The Court of Appeals affirmed the judgment of the trial court with the sole
modification that the liability imposed in the dispositive part of the decision on the credit of Cebu
Southern Hardware and Blue Diamond Glass Palace was changed from "jointly and severally" to
"jointly."

ISSUE

1. Whether or not Galan and Munasque are partners.

2. Whether or not Petitioner Munasque is liable with Galan solidarily

HELD

1. Yes. In the case at bar the respondent Tropical had every reason to believe that a partnership existed
between the petitioner and Galan and no fault or error can be imputed against it for making payments to
"Galan and Associates" and delivering the same to Galan because as far as it was concerned, Galan was a
true partner with real authority to transact on behalf of the partnership with which it was dealing. This is
even more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace who supplied
materials on credit to the partnership. Thus, it is but fair that the consequences of any wrongful act
committed by any of the partners therein should be answered solidarily by all the partners and the
partnership as a whole.

2. YES. While it is true that under Article 1816 of the Civil Code,"All partners, including industrial ones,
shall be liable prorate with all their property and after all the partnership assets have been exhausted, for
the contracts which may be entered into the name and fm the account cd the partnership, under its
signature and by a person authorized to act for the partner-ship. ...". this provision should be construed
together with Article 1824 which provides that: "All partners are liable solidarily with the partnership for
everything chargeable to the partnership under Articles 1822 and 1823." In short, while the liability of the
partners are merely joint in transactions entered into by the partnership, a third person who transacted
with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third
person falls under Articles 1822 or 1823.

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

WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the
liability of petitioner and respondent Galan to intervenors Blue Diamond Glass and Cebu Southern
Hardware is declared to be joint and solidary. Petitioner may recover from respondent Galan any amount
that he pays, in his capacity as a partner, to the above intervenors,

SANTIAGO SYJUCO, INC. petitioner, vs. HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF
THE REGIONAL TRIAL COURT OF THE NATIONAL CAPITAL JUDICIAL REGION,
BRANCH LXXXV, QUEZON CITY, THE CITY SHERIFF OF THE CITY OF MANILA, THE
CITY REGISTER OF DEEDS OF THE CITY OF MANILA, EUGENIO LIM, ARAMIS LIM,
MARIO LIM, PAULINO LIM, LORENZO LIM, NILA LIM and/ or THE PARTNERSHIP OF
THE HEIRS OF HUGO LIM and ATTORNEY PATERNO P. CANLAS, respondents.

G.R. No. 70403; July 7, 1989

Ponente: J. Narvasa

FACTS:

 The private respondents, Eugenio Lim, et al., borrowed from petitioner Santiago Syjuco, Inc., the
sum of P800,000.00. The loan was given on the security of a first mortgage on property registered
in the names of said borrowers as owners in common under Transfer Certificates of Title of the
Registry of Deeds of Manila.

 Thereafter, additional loans on the same security were obtained by the private respondents from
Syjuco, so that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of
interest, and the security had been augmented by bringing into the mortgage other property, also
registered as owned pro indiviso by the private respondents under two titles: TCT Nos. 75416 and
75418 of the Manila Registry.

 The private respondents failed to pay it despite demands therefore; that Syjuco consequently
caused extra-judicial proceedings for the foreclosure of the mortgage to be commenced by the
Sheriff of Manila; and that the latter scheduled the auction sale of the mortgaged property on
December 27, 1968.

 The attempt to foreclose triggered off a legal battle that has dragged on for more than twenty
years now, fought through five (5) cases in the trial courts,  two (2) in the Court of Appeals,  and
three (3) more in the Supreme Court.

   One of the complaints filed by the private respondents was filed not in their individual names,
but in the name of a partnership of which they themselves were the only partners: "Heirs of Hugo
Lim."
  The complaint advocated the theory that the mortgage which they, together with their mother, had
individually constituted (and thereafter amended during the period from 1964 to 1967) over lands
standing in their names in the Property Registry as owners pro indiviso, in fact no longer
belonged to them at that time, having been earlier deeded over by them to the partnership, "Heirs
of Hugo Lim," more precisely, on March 30, 1959, hence, said mortgage was void because
executed by them without authority from the partnership.

 CFI: Usury tainted the mortgage without, however, rendering it void, declaring the amount
due to be only P1,136,235.00 and allowing the foreclosure to proceed for satisfaction of the
obligation reckoned at only said amount.

 Syjuco moved for new trial to enable it to present additional evidence to overthrow the finding of
usury, and the Court ordered the case reopened for that purpose.

 CA: Upheld the Trial Court

 Syjuco filed an instant petition for certiorari, prohibition and mandamus. It prays in its petition
that the default judgment rendered against it by Judge Castro be annulled on the ground of,
among others, estoppel, res judicata, and Article 1819 of the Civil Code.

ISSUE: Whether or not the Lims are estopped from asserting the existence of Partnership?

RULING:

Yes. The court holds that the respondent partnership was inescapably chargeable with knowledge of the
mortgage executed by all the partners thereof, and therefore its silence and failure to impugn said
mortgage within a reasonable time, let alone a space of more than 17 years, brought into play the
doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized. The
principles of equitable estoppel, sometimes called estoppel in pais, are made part of our law by Art. 1432
of the Civil Code. Coming under this class is estoppel by silence, which obtains here and as to which it
has been held that: “x x x an estoppel may arise from silence as well as from words. ‘Estoppel by silence’
arises where a person, who by force of circumstances is under a duty to another to speak, refrains
from doing so and thereby leads the other to believe in the existence of a state of facts in reliance on
which he acts to his prejudice. Silence may support an estoppel whether the failure to speak is
intentional or negligent. “Inaction or silence may under some circumstances amount to a
misrepresentation and concealment of the facts, so as to raise an equitable estoppel. When the silence is of
such a character and under such circumstances that it would become a fraud on the other party to permit
the party who has kept silent to deny what his silence has induced the other to believe and act on, it will
operate as an estoppel. This doctrine rests on the principle that if one maintains silence, when in
conscience he ought to speak, equity will debar him from speaking when in conscience he ought to
remain silent. He who remains silent when he ought to speak cannot be heard to speak when he should be
silent.” The rule that where the title to real property is in the names of all the partners, a
conveyance executed by all partners passes all their rights in such property.—Equally or even more
preclusive of the respondent partnership’s claim to the mortgaged property is the last paragraph of Article
1819 of the Civil Code, which contemplates a situation duplicating the circumstances that attended the
execution of the mortgage in favor of Syjuco and therefore applies foursquare thereto: “Where the title to
real property is in the names of all the partners a conveyance executed by all the partners passes all their
rights in such property.” The term “conveyance” used in said provision, which is taken from Section 10
of the American Uniform Partnership Act, includes a mortgage. “Interpreting Sec. 10 of the Uniform
Partnership Act, it has been held that the right to mortgage is included in the right to convey. This is
different from the rule in agency that a special power to sell excludes the power to mortgage (Art.
1879).”Consequently, those members’ acts, declarations and omissions cannot be deemed to be
simply the individual acts of said members, but in fact and in law, those of the Partnership.

Aguila Jr. vs. CA, 316 SCRA 246

Facts:
Aguilar Jr., is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending activities.
Felicidad Abrogar
and her late husband, Ruben M. Abrogar, were the registered owners of a house and lot, in Marikina,
Metro Manila.
Felicidad with the consent of her late husband, and A.C. Aguila & Sons, Co., represented by Aguila,
entered into a
Memorandum of Agreement, which provided that Felicidad has the right to repurchase the lot from
Aguila within 90
days. If Felicidad fails to repurchase the lot from Aguila within the said period, Felicidad is obliged to
deliver the
property to Aguila within 15 days and the MOA is deemed cancelled with the Deed of absolute sale
(N.B.:buyer in the
contract is A.C. Aguila & Sons Co. not Aguilar Jr., himself) taking its place which was executed on the
same day.
Felicidad also excuted an SPA authorizing Aguila to cause the cancellation of the earlier TCT and
issuance of new
certificate in the name of A.C. Aguila & Sons, Co., in the event Felicidad failed to redeem the subject
property as
provided in the MOA.
Felicidad failed to redeem the property within the 90-day period. Hence, pursuant to the SPA mentioned
above,
Aguila Jr., caused the cancellation of TCT No. 195101 and the issuance of a new certificate of title in the
name of
A.C. Aguila and Sons, Co.
Felicidad then received a letter from the counsel for A.C. Aguila & Sons, Co., demanding she vacte the
premises
within 15 days after receipt of the letter and surrender its possession peacefully to A.C. Aguila & Sons,
Co. Otherwise,
the latter would bring the appropriate action in court, but Felicidad refused to vacate so A.C. Aguila &
Sons, Co. filed
an ejectment suit.
The MTC, RTC, CA, and SC all ruled in favor of A.C. Aguila & Sons, Co.
Felicidad filed a petition for declaration of nullity of a deed of sale with the RTC on December 4, 1993.
She alleged
the signature of her husband on the deed of sale was a forgery because he was already dead when the deed
was
supposed to have been executed on June 11, 1991.
Issue:
Whether the real party in interest is A.C. Aguila & Co. and not petitioner.
Ruling:
Yes. it is A.C. Aguila & Sons. Rule 6.9 of the Rules of Court of 1964, under which the complaint in this
case
was filed, provided that ever! action must be prosecuted and defended in the name of the real part! in
interest. A real
part! in interest is one who would be benefited or injured by the judgement, or who is entitled to the avails
of the
suit. Any decision rendered against a person who is not a real party in interest in the case cannot be
executed. Hence,
a complaint filed against such a person should be dismissed for failure to state a cause of action.
Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate and distinct from
that of each
of the partners." The partners cannot be held liable for the obligations of the partnership unless it is shown
that the
legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes.[ In
this case,
private respondent has not shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being
used for
fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the name of A.C.
Aguila & Sons,
Co. and the Memorandum of Agreement was executed between private respondent, with the consent of
her late
husband, and A. C. Aguila & Sons, Co., represented by petitioner. Hence, it is the partnership, not its
officers or
agents, which should be impleaded in any litigation involving property registered in its name. A violation
of this rule
will result in the dismissal of the complaint.
Since Aguila Jr. is not against whom this action should be prosecuted makes it unnecessary to discuss the
other issues

raised by him in his appeal.

Manuel Ormachea Tin-Congco vs. Santiago Trillana

Facts:

Manuel Ormachea Tin-Congco, a Chinaman, and Luis Vizmanos Ong Queco were engaged in business in
the pueblos of Hagonoy, Malolos, and other places in the Province of Bulacan, and that in the course
thereof the defendant purchased from them merchandise to the value of 4,000 pesos. Two years prior to
that date, a little more or less, the partnership was dissolved and the business was divided up between the
partners.
 All accounts and debts of the defendant were alloted to the plaintiff, and became the individual property
of Ormachea Tin-Congco; the indebtedness is proven by the documents signed by the defendant or his
agents in favor of Ormachea or of Vizmanos Ong Queco or their agent named Lawa in charge of the
business,

Defendant alleged that he had already settled his accounts and obligations contracted in the business to
which the complaint refers, by means of periodical payments in tuba or the liquor of the nipa palm. He
even presented a document signed by Lawa declaring that Trillana has no outstanding debt with the
distillery. After hearing the evidence presented by the parties, the trial judge, rendered judgment ordering
the defendant, Santiago Trillana.

However, Lopez Lawa affirms that he gave the said document marked as Exhibit A" to the debtor,
Santiago Trillana, because the latter was indebted not to him but to Manuel Ormachea, to whom the
credits standing against Trillana were transferred when Ormachea withdrew from the above-mentioned
partnership with Vizmanos Ong Queco.

Issue:

Whether the document issued by Lawa operates to extinguish the debt of Trillana.

Held:

NO.

If the business jointly carried on by Ormachea and Vizmanos was dissolved, and its transactions ceased,
Jose Lopez Lawa, who managed the distillery on behalf of the owners of the same, also ceased to act as
such manager in said year, and for said reason the document which he issued to the debtor two years after
ceasing to be manager cannot serve to relieve the debtor from paying what he owed by virtue of the
documents.

Lawa was not authorized by Ormachea to deliver to the debtor an acquittance releasing him from the
obligations that he had contracted, to the prejudice of the real creditor, the only person entitled to condone
a debt in the event of waiving the right to recover the same.

After the close of the business of the distillery owned by Ormachea and Vizmanos, and after Lawa had
ceased for two years to act in the administration and management thereof, he was not authorized to sign
the document made out by the debtor, by which the credit of Ormachea should be considered as settled,
and the obligation contracted by Santiago Trillana, as shown by the vales which appear in the record,
extinguished.

An admission made by a partner who was no longer a partner at the time of the declaration is not
admissible evidence against the partnership.
BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants, vs. WORKMEN'S
COMPENSATION COMMISSION, ET AL., respondents-appellees.

G.R. No. L-12164 | 1959-05-22

D E C I S I O N 

ENDENCIA, J.: 

FACTS

Appellants, as co-owners of Liwanag Auto Supply, employed Roque Balderama as security guard who,
while in line of duty, was killed by criminal hands. His widow and children filed a claim for
compensation with the Workmen's Compensation Commission, which awarded their claim with an order
against appellants to pay jointly and severally.

Appellants claim that, under the Workmen's Compensation Act (WCA), the compensation is divisible,
hence the Commission erred in ordering appellants to pay jointly and severally the amount awarded. They
argue that the WCA does not provide for solidary obligation; that the same should have been specifically
provided if such was the intention; and that, in the absence of such clear provision, the responsibility of
appellants should not be solidary but merely joint. 

ISSUE

Whether or not the liability of partners is solidary.

RULING
Yes. Although the WCA does not contain any provision expressly declaring solidary obligation of
business partners like the herein appellants, it can be gathered from the following provisions of the New
Civil Code (NCC) that the liability must be solidary:

"Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of
or injuries to their laborers, workmen, mechanics or other employees, even though the event may have
been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and
in the course of the employment. . . . ." 

"ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer
shall be solidarily liable for compensation. . . . ." 

And Section 2 of the WCA, as amended, reads in part as follows: 

". . . . The right to compensation as provided in this Act shall not be defeated or impaired on the ground
that the death, injury or disease was due to the negligence of a fellow servant or employee, without
prejudice to the right of the employer to proceed against the negligent party." 

The quoted provisions reasonably indicate that in compensation cases, the liability of business partners,
like appellants, should be solidary; otherwise, the right of the employee may be defeated, or at least
crippled. If the responsibility of appellants were to be merely joint and not solidary, and one of them
happens to be insolvent, the amount awarded to the appellees would only be partially satisfied, which is
evidently contrary to the intent and purposes of the Act.

Moreover, Art. 1207 of the new Civil Code provides: 

". . . . There is solidary liability only when the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity." 

Since the WCA was enacted to give full protection to the employee, reason demands that the nature of the
obligation of the employers to pay compensation to the heirs of their employee who died in line of duty,
should be solidary; otherwise, the purpose of the law could not be attained. 

Adriano Mirasol v. Municipality of Tabaco, Albay

GR No. 17877 | July 10, 1922 | Ostrand, J.

FACTS: Sometime in 1916, defendant municipality decided to have an artesian well drilled in the central
portion of the town. Three landowners expressed themselves as willing to furnish sites for the well
without compensation (Fausto Ormachea, Sabina Santiago, and Adriano Mirasol). The engineer in charge
of drilling artesian wells was of the opinion that Adriano Mirasol’s lot would be the more suitable site.

Few days thereafter, the machinery was taken to the lot and set up for operation. After the machinery was
installed, but before the drilling actually begun, Mirasol apparently changed his mind and objected to the
continuation of the work. The president of the municipality went to the store of Mirasol and expressed his
surprise of the latter’s change of attitude towards the boring of the well. He demanded a definite
statement from plaintiff as to whether he wanted the well to be placed on his lot as in the event of a
refusal the well would be bored on the lot of Ormachea or Santiago who were willing to donate land for
that purpose. Plaintiff, upon hearing that there was a possibility of the well being bored on the land of
someone else, again gave his consent to its being drilled on his lot and told the president to go ahead with
the work. The boring of the well was completed without any objections on the part of the plaintiff.

Plaintiff insists that he never agreed to the plcing of the well on his land, but consistently maintained an
attitude of opposition. It may be noted that though the plaintiff appears to be an intelligent and prosperous
man and evidently of some standing in the community, he did not make any claim for compensation for
the use of his lot by the municipality until in 1918 and did not bring the present action until 1919.

Ruling: There has been no valid donation of the land to the municipality ; according to Santillan's
testimony, the plaintiff, when asked to execute the necessary document, stated that such a document was
unnecessary as he would not be likely to have any disputes with the municipality over such a small
matter. It is therefore clear that the defendant municipality has acquired no title to the land occupied by
the well nor even an easement therein; its interest can only be regarded as a mere license.

Inasmuch as a license in respect to real property gives no estate in land it may be, and generally is,
created by parol or implied from acquiescence on the part of the owner of the land. (25 Cyc., 641-642,
and authorities there cited.) Ordinarily, a license is revokable at the pleasure of the licensor, but it has
been held in most jurisdictions in the United States that where a licensee has entered upon land under a
license and has with the express or implied consent of the owner expended money or labor for extensive
improvements on the strength of such license, the owner is estopped from revoking the license.

There are many cases laying down a contrary rule, but in general it will be found that in these cases the
land-owner's consent to the making of the improvements or expenditures has been implied and not
expressed and all of them are, we think, readily distinguishable from the case at bar.

The doctrine of estoppel having its origin in equity and therefore being based on moral right and natural
justice, its applicability to any particular case depends, to a very large extent, upon the special
circumstances of the case. In the present case the plaintiff is a participant in the benefits of the well in
question; he gave his express consent to the boring of the well upon the premises and thereby led the
defendant to believe that the license would not be revoked. Acting upon this belief, the defendant caused
the well to be bored and incurred large expenses. We doubt that any authoritative judicial decision will be
found where upon such or similar facts the applicability of the doctrine of estoppel has been denied.

To hold that under the circumstances stated the license might be revoked, would be putting a premium
upon fraud and deception which equity will not tolerate and would also be in conflict with the provisions
of subsection 1 of section 333 of the Code of Civil Procedure, which reads:

"Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another
to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of
such declaration, act, or omission, be permitted to falsify it."

We therefore hold that not only upon the general principles of equity, but also under subsection 1 of
section 333 of the Code of Civil Procedure, is the plaintiff estopped from revoking the license in question
without first reimbursing the defendant for the expenditures incurred upon the strength of said license.

LIM TONG LIM VS. PHILIPPINE FISHING GEAR INDUSTRIES

G.R. No. 136448. November 3, 1999

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract
dated February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear
Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a signatory to the agreement.

The buyers failed to pay the fishing nets and the floats they bought from respondents.
The respondent filed a collection suit against Chua, Yao, and Peter Lim Tong Lim. The suit was brought
against the three (3) in their capacities as general partners, on the allegation that Ocean Quest Fishing
Corporation was a non-existent corporation as shown by the SEC.

There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the
nets it sold. The only question here is whether petitioner should be held jointly liable with Chua and Yao.
Petitioner contests such liability, insisting that only those who dealt in the name of the ostensible
corporation should be held liable. Since his name does not appear on any of the contracts and since he
never directly transacted with the respondent corporation, ergo, he cannot be held liable.

The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of
the witnesses presented and (2) on a Compromise Agreement executed by the three.

CA held that petitioner Lim was a partner of Chua and Yao in a fishing business and may thus be held
liable as a such for the fishing nets and floats purchased by and for the use of the partnership.

Petitioners filed for a Petition for Review/Certiorari assailing the decision of the Court of Appeals

The compromise agreement:

a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in the
amount of P5,750,000.00 including the fishing net. This P5,750,000.00 shall be applied as full
payment for P3,250,000.00 in favor of JL Holdings Corporation and/or Lim Tong Lim;

b) If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5,750,000.00
whatever will be the excess will be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3
Peter Yao;

c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the deficiency
shall be shouldered and paid to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua;
1/3 Peter Yao.

ISSUE

Whether Ling Tong Lim is liable as a partner

RULING

YES. It is apparent from the case that the Chua, Yao and Lim really decided to engage in fishing
business. Their compromise agreement had revealed their intention to pay the loan with proceeds of the
sale and to divide equally among them the excess or the loss.

These boats, the purchase and the repair of which were financed with borrowed money, fell under the
term "common fund" under Article 1767. That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also shows that they had indeed formed a
partnership.

Corporation by Estoppel

One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on
the ground that there was in fact no corporation.

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

Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having
reaped the benefits of the contract entered into by persons with whom he previously had an existing
relationship, he is deemed to be part of said association and held liable as general partners and is covered
by the scope of the doctrine of corporation by estoppel.

Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped
from denying its corporate existence. "The reason behind this doctrine is obvious — an unincorporated
association has no personality and would be incompetent to act for itself the power of a corporation; it
cannot create agents or confer authority on another to act in its behalf; thus, those who act as its
representatives or agents do so without authority and at their own risk. And as it is an elementary
principle of law that a person who acts as an agent without authority is regarded as the principal,
possessed of all the right and subject to all the liabilities of a principal, a person acting or purporting to act
on behalf of a corporation which has no valid existence assumes such privileges and obligations and
becomes personally liable for contracts entered into or for other acts performed as such agent.

The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the
first instance, an unincorporated association, which represented itself to be a corporation, will be estopped
from denying its corporate capacity in a suit against it by a third person who relied in good faith on such
representation. It cannot allege lack of personality to be sued to evade its responsibility for a contract it
entered into and by virtue of which it received advantages and benefits.

On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it
as a corporation and received benefits from it, may be barred from denying its corporate existence in a
suit brought against the alleged corporation. In such case, all those who benefited from the transaction
made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for
contracts they impliedly assented to or took advantage of.

PIONEER INSURANCE & SURETY CORPORATION, petitioner, 

vs.
THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC.,
(BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents.

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.

Facts:

Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced
Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute funds and to buy two aircrafts which would form
part a corporation which will be the expansion of Southern Air Lines. Maglana et al then contributed and
delivered money to Lim.

But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of
Maglana et al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which
were brought in installment from Japan Domestic Airlines (JDA) using said aircrafts as security. When
Lim defaulted from paying JDA, the two aircrafts were foreclosed by Pioneer Insurance. The Cervanteses
and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts.

On July 19, 1966, Pioneer filed an action for judicial foreclosure with an application for a writ of
preliminary attachment against Lim and respondents, the Cervanteses, Bormaheco and Maglana. In their
Answers, Maglana, Bormaheco and the Cervanteses filed cross-claims against Lim alleging that they
were not privies to the contracts signed by Lim.

After trial on the merits, a decision was rendered holding Lim liable to pay Pioneer but dismissed
Pioneer's complaint against all other defendants.

CA modified the trial court's decision in that the plaintiff’s complaint against all the defendants was
dismissed.

Issue:

Whether or not Maglana et al must share in the loss as general partners.

Held:

No. There was no de facto partnership. Ordinarily, when co-investors agreed to do business through a
corporation but failed to incorporate, a de facto partnership would have been formed, and as such, all
must share in the losses and/or gains of the venture in proportion to their contribution.

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.

In this case, it was shown that Lim did not have the intent to form a corporation with Maglana et al. This
can be inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not using the
funds he got from Maglana et al. The record shows that Lim was acting on his own and not in behalf of
his other would-be incorporators in transacting the sale of the airplanes and spare parts.

LEONCIA VIUDA DE CHAN DIACO v. JOSE S. Y. PENG

Facts:
The San Miguel Brewery, Porta Pueo & Co., and Ruiz & Rementeria S. en C. instituted
insolvency proceedings against Leoncia Vda. de Chan Diaco, alleged to be the owner of a grocery store
on Calle Nueva, Binondo, known as the store of "La Viuda de G. G. Chan Diaco." The above-mentioned
firms alleged, among other things, that Leoncia was indebted to them. The petition for the declaration of
insolvency was set down for hearing. Leoncia did not appear at the hearing and the court declared her
insolvent and ordered the sheriff to take possession of her property.

Attorney for the insolvent filed a motion asking the court to dismiss the proceedings against her
on the ground that they should have been brought against the partnership "Lao Liong Naw & Co.," of
which she was only a member. The alleged partnership was evidenced by an agreement and from which it
appeared that Lao Liong Naw (Leoncia), Chan Chiaco Wa, Cua Yuk, Chan Bun Suy, Chan Bun Le, and
Juan Maquitan Chan had formed a partnership.

In view of the aforesaid motion Judge Del Rosario suspended for the time being the effects of the
decision. After several hearings in which various witnesses were examined and documents presented on
behalf of both sides, the referee rendered a second report, in which he found as facts that the alleged
partnership between the insolvent and some of her relatives and employees was only a fictitious
organization created for the purpose of deceiving the Bureau of Customs and enable some of the aforesaid
relatives, who were mere coolies, to come to the Philippines under the status of merchants.

The court, therefore, affirmed the suspension of the decision, dismissed the insolvency
proceedings, and ordered the assignee to return to the sheriff all the property of the insolvent which he,
the sheriff, might have in his possession.

Issues: Whether or not Leoncia Vda. de Chan Diaco is liable

Ruling:
Yes. All of the assignments of error are well taken. The evidence appearing in the record fully
supports the findings of the referee and his report should have been approved by the court below. It
clearly appears from the record that said partnership, as such, has no visible assets and that, therefore, the
partners individually must, jointly and severally, respond for its debts (Code of Commerce, art. 127). As
the appellee is one of the partners and admits that she is insolvent, we can see no reason for the dismissal
of the proceedings against her.

It is further to be noted that both the partnership and the separate partners thereof may be joined
in the same action, though the private property of the latter cannot be taken in payment of the partnership
debts until the common property of the concern is exhausted. The decision appealed from is hereby
reversed , the reports and recommendations of the referee are approved, and the order for the dismissal of
the case is set aside.