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1.

HEIRS OF TAN ENG KEE VS BENGUET LUMBER COMPANY, TAN


ENG
LAY
G.R. No. 126881
October 3, 2000
Facts of the Case:
Following the death of Tan Eng Kee, Matilde Abubo, the common-law spouse
of the decedent, joined by their children collectively filed suit against the
decedent's brother TAN ENG LAY
The complaint was for accounting, liquidation and winding up of the alleged
partnership formed after World War II between Tan Eng Kee and Tan Eng Lay.
The petitioners also impleaded private respondent herein BENGUET LUMBER
COMPANY, as represented by Tan Eng Lay.
The complaint alleged that:
After the second World War, Tan Eng Kee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership engaged in the
business of selling lumber and hardware and construction supplies.
They named their enterprise "Benguet Lumber" which they jointly managed
until Tan Eng Kee's death.
That the business prospered due to the hard work and thrift of the alleged
partners.
However, they claimed that in 1981, Tan Eng Lay and his children caused the
conversion of the partnership "Benguet Lumber" into a corporation called
"Benguet Lumber Company."
o That the incorporation was purportedly a ruse to deprive Tan Eng Kee
and his heirs of their rightful participation in the profits of the
business.
Petitioners prayed for accounting of the partnership assets, and the dissolution,
winding up and liquidation thereof, and the equal division of the net assets of
Benguet Lumber.
Regional Trial Court:
1. Declared that Benguet Lumber is a joint venture which is akin to a particular
partnership;
2. That the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers and/or
partners in a business venture and/or particular partnership called Benguet
Lumber and as such should share in the profits and/or losses of the business
venture or particular partnership;
3. That the assets of Benguet Lumber are the same assets turned over to Benguet
Lumber Co. Inc. and as such the heirs or legal representatives of the deceased
Tan Eng Kee have a legal right to share in said assets;
4. That all the rights and obligations of Tan Eng Kee as joint adventurer and/or as
partner in a particular partnership have descended to the plaintiffs who are his
legal heirs.
5. Ordering the defendant Tan Eng Lay and/or the President and/or General
Manager of Benguet Lumber Company Inc. to render an accounting of all the
assets so the plaintiffs know their proper share in the business;

Court of Appeals:Rendered the assailed decision reversing the judgment of the trial
court.
MAIN ISSUE: WON Tan Eng Kee and Tan Eng Lay (the brothers) were partners in
Benguet Lumber.
HELD: No partnership; hence there is no dissolution, winding up or liquidation to
speak of.
RATION DECIDENDI:
A CONTRACT OF PARTNERSHIP IS DEFINED BY LAW AS ONE WHERE TWO OR MORE
PERSONS BIND THEMSELVES TO CONTRIBUTE MONEY, PROPERTY, OR INDUSTRY TO A
COMMON FUND, WITH THE INTENTION OF DIVIDING THE PROFITS AMONG THEMSELVES
TWO OR MORE PERSONS MAY ALSO FORM A PARTNERSHIP FOR THE EXERCISE OF A
PROFESSION:
In order to constitute a partnership, it must be established that:
1. Two or more persons bound themselves to contribute money,
property, or industry to a common fund, and
2. They intend to divide the profits among themselves.
The agreement need not be formally reduced into writing, since statute
allows the oral constitution of a partnership, save in two instances:
1. When immovable property or real rights are contributed, and (
2. When the partnership has a capital of three thousand pesos or
more.

In both cases, a public instrument is required.


An inventory to be signed by the parties and attached to the public
instrument is also indispensable to the validity of the partnership whenever
immovable property is contributed to the partnership.
THE TRIAL COURT DETERMINED THAT TAN ENG KEE AND TAN ENG LAY HAD
ENTERED INTO A JOINT VENTURE, WHICH IT SAID IS AKIN TO A PARTICULAR
PARTNERSHIP:
A particular partnership is distinguished from a joint adventure:
1. A joint adventure (an American concept similar to our joint accounts)
is a sort of informal partnership, with no firm name and no legal
personality.
2. In a joint account, the participating merchants can transact business
under their own name, and can be individually liable therefor.
3. Usually, but not necessarily a joint adventure is limited to a SINGLE
TRANSACTION, although the business of pursuing to a successful
termination may continue for a number of years;
4. A partnership generally relates to a continuing business of various
transactions of a certain kind.
A JOINT VENTURE "PRESUPPOSES GENERALLY A PARITY OF STANDING BETWEEN THE
JOINT CO-VENTURES OR PARTNERS, IN WHICH EACH PARTY HAS AN EQUAL

PROPRIETARY INTEREST IN THE CAPITAL OR PROPERTY CONTRIBUTED, AND WHERE


EACH PARTY EXERCISES EQUAL RIGHTS IN THE CONDUCT OF THE BUSINESS:

Joint venture may be likened to a particular partnership;


The legal concept of a joint venture is of common law origin. It has no precise
legal definition, but it has been generally understood to mean an organization
formed for some temporary purpose.
It is hardly distinguishable from the partnership, since their elements are similar
community of interest in the business, sharing of profits and losses, and a
mutual right of control.
The main distinction cited by most opinions in common law jurisdiction is that
the partnership contemplates a general business with some degree of continuity,
while the joint venture is formed for the execution of a single transaction, and is
thus of a temporary nature.
This observation is not entirely accurate in this jurisdiction, since under the Civil
Code, a partnership may be particular or universal, and a particular
partnership may have for its object a specific undertaking. (Art. 1783, Civil
Code).
It would seem therefore that under Philippine law, a joint venture is a form of
partnership and should thus be governed by the law of partnerships.
The Supreme Court has however recognized a distinction between these two
business forms, and has held that although a corporation cannot enter into a
partnership contract, it may however engage in a joint venture with others.

THE BEST EVIDENCE WOULD HAVE BEEN THE CONTRACT OF PARTNERSHIP ITSELF, OR
THE ARTICLES OF PARTNERSHIP BUT THERE IS NONE:

The alleged partnership, though, was never formally organized.


The evidence presented by petitioners falls short of the quantum of proof
required to establish a partnership.
It should be noted that it is not with the number of witnesses wherein
preponderance lies; the quality of their testimonies is to be considered.

A CO-OWNERSHIP OR CO-POSSESSION (SPECIFICALLY HERE, OF THE G.I. SHEETS) IS


NOT AN INDICIUM OF THE EXISTENCE OF A PARTNERSHIP:
None of petitioners' witnesses could suitably account for the beginnings of
Benguet Lumber Company, except perhaps for Dionisio Peralta whose deceased
wife was related to Matilde Abubo (Widow).
He stated that when he met Tan Eng Kee after the liberation, the latter asked the
former to accompany him to get 80 pieces of G.I. sheets supposedly owned by
both brothers.
Tan Eng Lay, however, denied knowledge of this meeting or of the conversation
between Peralta and his brother.
Tan Eng Lay consistently testified that he had his business and his brother had
his, that it was only later on that his said brother, Tan Eng Kee, came to work
for him.
Be that as it may, co-ownership or co-possession (specifically here, of the G.I.
sheets) is not an indicium of the existence of a partnership.

THE ESSENCE OF A PARTNERSHIP IS THAT THE PARTNERS SHARE IN THE PROFITS


AND LOSSES:
Each has the right to demand an accounting as long as the partnership
exists.Besides, it is indeed odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan Eng Kee never asked for an
accounting.
We have allowed a scenario wherein "i] excellent relations exist among the
partners at the start of the business and all the partners are more interested in
seeing the firm grow rather than get immediate returns, a deferment of sharing in
the profits is perfectly plausible."
o But in the situation in the case at bar, the deferment, if any, had gone
on too long to be plausible.
o A person is presumed to take ordinary care of his concerns.
WHERE CIRCUMSTANCES TAKEN SINGLY MAY BE INADEQUATE TO PROVE THE
INTENT TO FORM A PARTNERSHIP, NEVERTHELESS, THE COLLECTIVE EFFECT OF
THESE CIRCUMSTANCES MAY BE SUCH AS TO SUPPORT A FINDING OF THE
EXISTENCE OF THE PARTIES' INTENT:

Private respondent's arguments to be well-taken; even the aforesaid


circumstances when taken together are not persuasive indicia of a partnership.
They only tend to show that Tan Eng Kee was involved in the operations of
Benguet Lumber, but in what capacity is unclear.
We cannot discount the likelihood that as a member of the family, he occupied a
niche above the rank-and-file employees.
He would have enjoyed liberties otherwise unavailable were he not kin, such as
his residence in the Benguet Lumber Company compound.
He would have moral, if not actual, superiority over his fellow employees,
thereby entitling him to exercise powers of supervision.
It may even be that among his duties is to place orders with suppliers.
Again, the circumstances proffered by petitioners do not provide a logical nexus
to the conclusion desired; these are not inconsistent with the powers and duties
of a manager, even in a business organized and run as informally as Benguet
Lumber Company.

2. SY VS HON. COURT OF APPEALS JAIME SAHOT


G.R. No. 142293, February 27, 2003
Facts of the Case:
1958: Private respondent Jaime Sahot started working as a truck helper for
petitioners family-owned trucking business named Vicente Sy Trucking.
1965: He became a truck driver of the same family business,
1994: Business Renamed 6Bs Trucking Corporation in, and thereafter known
as SBT Trucking Corporation since.
o Throughout all these changes in names and for 36 years, private
respondent continuously served the trucking business of petitioners.

April 1994:Sahot was already 59 years old. He had been incurring absences as
he was suffering from various ailments. Particularly causing him pain was his
left thigh, which greatly affected the performance of his task as a driver. He
inquired about his medical and retirement benefits with the Social Security
System (SSS) on April 25, 1994, but discovered that his premium payments had
not been remitted by his employer.
May 1994: Sahot had filed a week-long leave.
May 27th: He was medically examined and treated for EOR, presleyopia,
hypertensive retinopathy HPM, UTI, Osteoarthritis
On said grounds, Belen Paulino of the SBT Trucking Service management told
him to file a formal request for extension of his leave.
At the end of his week-long absence, Sahot applied for extension of his leave for
the whole month of June, 1994.
o It was at this time when petitioners allegedly threatened to terminate his
employment should he refuse to go back to work.
Sahots dilemma.
o Facing dismissal if he refused to work;
o But he could not retire on pension because petitioners never paid his
correct SSS premiums.
The fact remained he could no longer work as his left thigh
hurt abominably.
Petitioners ended his dilemma;
o They carried out their threat and dismissed him from work, effective
June 30, 1994. He ended up sick, jobless and penniless.

September 13, 1994: Sahot filed with the NLRC NCR Arbitration Branch, a
complaint for illegal dismissal;
Petitionerss Defenses: Admitted they had a trucking business in the 1950s but
denied employing helpers and drivers. They contend that private respondent was not
illegally dismissed as a driver because he was in fact petitioners industrial partner.
It was not until the year 1994, when SBT Trucking Corporation was
established, and only then did respondent Sahot become an employee of the
company, with a monthly salary that reached P4,160.00 at the time of his
separation.
THE NLRC NCR ARBITRATION BRANCH: No illegal dismissal in Sahots case:
Petitioners and private respondent were industrial partners before January 1994.
National Labor Relations Commission: Declared that private respondent was an
employee, not an industrial partner, since the start.
Court of Appeals: Held that private respondent was indeed an employee of
petitioners since 1958.
ISSUE: WON an employer-employee relationship existed between petitioners and
respondent Sahot
HELD: JAIME SAHOT was an employee, not an industrial partner

RATIO DECIDENDI:
A COMPUTATION OF THE AGE OF COMPLAINANT SHOWS THAT HE WAS ONLY TWENTYTHREE (23) YEARS WHEN HE STARTED WORKING WITH RESPONDENT AS TRUCK
HELPER:
How can we (SC) entertain in our mind that a twenty-three (23) year old
man, working as a truck helper, be considered an industrial partner.
Hence we (SC) rule that complainant was only an employee, not a partner
of respondents from the time complainant started working for respondent.
o There was no written agreement, no proof that he received a share
in petitioners profits, nor was there anything to show he had any
participation with respect to the running of the business.
THE ELEMENTS TO DETERMINE THE EXISTENCE OF AN EMPLOYMENT
RELATIONSHIP ARE:
(a) The selection and engagement of the employee;
(b) The payment of wages;
(c) The power of dismissal; and
(d) The employers power to control the employees conduct.
The most important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.
RECORDS OF THE CASE SHOW THAT PRIVATE RESPONDENT ACTUALLY ENGAGED IN
WORK AS AN EMPLOYEE:
During the entire course of his employment he did not have the freedom to
determine where he would go, what he would do, and how he would do it.
He merely followed instructions of petitioners and was content to do so, as
long as he was paid his wages.
o Hence, Sahot had worked as a truck helper and driver of petitioners
not for his own pleasure but under the latters control.
ARTICLE 1767 OF THE CIVIL CODE STATES THAT IN A CONTRACT OF PARTNERSHIP
TWO OR MORE PERSONS BIND THEMSELVES TO CONTRIBUTE MONEY, PROPERTY OR
INDUSTRY TO A COMMON FUND, WITH THE INTENTION OF DIVIDING THE PROFITS
AMONG THEMSELVES:
Not one of these circumstances is present in this case.
No written agreement exists to prove the partnership between the parties.
Private respondent did not contribute money, property or industry for the
purpose of engaging in the supposed business.
There is no proof that he was receiving a share in the profits as a matter of
course, during the period when the trucking business was under operation.
Neither is there any proof that he had actively participated in the management,
administration and adoption of policies of the business.
o Thus, Jaime Sahot was not an industrial partner but an employee of
petitioners from 1958 to 1994.
3. TORRES VS CA and MANUEL TORRES
G.R. No. 134559 December 9, 1999
Facts of the Case:

Sisters Antonia Torres and Emeteria Baring (Petitioners) entered into a "joint
venture agreement" with Respondent Manuel Torres for the development of a
parcel of land into a subdivision.
o They executed a Deed of Sale covering the said parcel of land in favor
of respondent, who then had it registered in his name.
By mortgaging the property, respondent obtained from Equitable Bank a loan of
P40,000 which, under the Joint Venture Agreement, was to be used for the
development of the subdivision.
All three of them also agreed to share the proceeds from the sale of the
subdivided lots.
o The project did not push through, and the land was subsequently
foreclosed by the bank.
Petitioners Contentions:
The project failed because of "respondent's lack of funds or means and skills."
That respondent used the loan not for the development of the subdivision, but in
furtherance of his own company
Respondents Allegation:
That he used the loan to implement the Agreement for a total expense of
P85,000
Effected the survey and the subdivision of the lots.
Secured City Council's approval of the subdivision project
Caused the construction of roads, curbs and gutters.
Entered into a contract with an engineering firm for the building of sixty lowcost housing units and actually even set up a model house on one of the
subdivision lots.
The subdivision project failed because petitioners and their relatives had
separately caused the annotations of adverse claims on the title to the land,
which eventually scared away prospective buyers.
o That petitioners refused to cause the clearing of the claims, thereby
forcing him to give up on the project.
Petitioners filed the civil case which
Civil case dismissed by the trial court.
Court of Appeals: Held that petitioners and respondent had formed a partnership for
the development of the subdivision.
Thus, they must bear the loss suffered by the partnership in the same proportion
as their share in the profits stipulated in the contract.
Disagreeing with the trial court's pronouncement that losses as well as profits in
a joint venture should be distributed equally, 7 the CA invoked Article 1797 of
the Civil Code which provides:
Art. 1797 The losses and profits shall be distributed in
conformity with the agreement. If only the share of each partner in
the profits has been agreed upon, the share of each in the losses
shall be in the same proportion.
ISSUE: WON partnership agreement exists between the parties

HELD: The Contract clearly manifested the intention of the parties to form a
partnership
RATIO DECIDENDI:
Content of the Joint Venture Agreement:
This AGREEMENT by and between MR. MANUEL R. TORRES, the FIRST
PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA
BARING, . . . the SECOND PARTY:
That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY,
this property to be sub-divided by the FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of:
TWENTY THOUSAND P20,000.00 upon the execution of this contract for the
property entrusted by the SECOND PARTY, for sub-division projects and
development purposes;
NOW THEREFORE, for and in consideration of the above covenants and
promises herein contained the respective parties hereto do hereby stipulate and
agree as follows:
That the SECOND PARTY signed an absolute Deed of Sale in the amount of
P25,513.50 for 1,700 square meters at P1.50 in favor of the FIRST PARTY, but
the SECOND PARTY did not actually receive the payment.
That the SECOND PARTY, had received from the FIRST PARTY, the
necessary amount of P20,000.00 pesos for their personal obligations and this
particular amount will serve as an advance payment from the FIRST PARTY for
the property mentioned to be sub-divided and to be deducted from the sales.
That the FIRST PARTY, will not collect from the SECOND PARTY, the
interest and the principal amount involving the amount of P20,000.00 Pesos
until the sub-division project is terminated and ready for sale to any interested
parties, and the amount of P20,000.00 pesos will be deducted accordingly.
That all general expenses and all costs involved in the sub-division project
should be paid by the FIRST PARTY, exclusively and all the expenses will not
be deducted from the sales after the development of the sub-division project.
That the sales of the sub-divided lots will be divided into 60% for the SECOND
PARTY and 40% for the FIRST PARTY, and additional profits or whatever
income deriving from the sales will be divided equally according to the
percentage agreed upon by both parties.
That the intended sub-division project of the property involved will start the
work and all improvements upon the adjacent lots will be negotiated in both
parties' favor and all sales shall [be] decided by both parties.
That the SECOND PARTIES, should be given an option to get back the
property mentioned provided the amount of P20,000.00 borrowed by the
SECOND PARTY, will be paid in full to the FIRST PARTY, including all
necessary improvements spent by the FIRST PARTY, and-the FIRST PARTY
will be given a grace period to turnover the property mentioned above.
That this AGREEMENT shall be binding and obligatory to the parties who
executed same freely and voluntarily for the uses and purposes therein stated.

A READING OF THE TERMS EMBODIED IN THE AGREEMENT INDUBITABLY SHOWS


THE EXISTENCE OF A PARTNERSHIP PURSUANT TO ARTICLE 1767 OF THE CIVIL
CODE: Art. 1767. By the contract of partnership two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves.
Under the above-quoted Agreement, petitioners would contribute property to the
partnership in the form of land which was to be developed into a subdivision;
while respondent would give, in addition to his industry, the amount needed for
general expenses and other costs.
Furthermore, the income from the said project would be divided according to the
stipulated percentage.
Clearly, the contract manifested the intention of the parties to form a
partnership.
Respondent's actions clearly belie petitioners' contention that he made no
contribution to the partnership.
o Under Article 1767 of the Civil Code, a partner may contribute not only
money or property, but also industry.

entered into a Quota Share Reinsurance Treaty and a Surplus Reinsurance


Treaty with the Munchener Ruckversicherungs-Gesselschaft (hereafter called
Munich), a non-resident foreign insurance corporation.
The reinsurance treaties required petitioners to form a pool.
o Accordingly, a pool composed of the petitioners was formed.
On April 14, 1976, the pool of machinery insurers submitted a financial
statement and filed an "Information Return of Organization Exempt from
Income Tax" for the year ending in 1975, on the basis of which it was assessed
by the Commissioner of Internal Revenue deficiency corporate taxes in the
amount of P1,843,273.60, and withholding taxes in the amount of P1,768,799.39
and P89,438.68 on dividends paid to Munich and to the petitioners, respectively.
Commissioner of Internal Revenue: Denied the protest and ordered the petitioners,
assessed as "Pool of Machinery Insurers," to pay deficiency income tax, interest, and
withholding tax.
Court of Appeals: Ruled that the pool of machinery insurers was a partnership
taxable as a corporation, and that the latter's collection of premiums on behalf of its
members, the ceding companies, was taxable income.

PETITIONERS ARGUE THAT THE JOINT VENTURE AGREEMENT IS VOID UNDER


ARTICLE 1773 OF THE CIVIL CODE: Art. 1773. A contract of partnership is void,
whenever immovable property is contributed thereto, if an inventory of said property
is not made, signed by the parties, and attached to the public instrument.
Petitioner contend that since the parties did not make, sign or attach to the
public instrument an inventory of the real property contributed, the
partnership is void.
ARTICLE 1773 WAS INTENDED PRIMARILY TO PROTECT THIRD PERSONS:
The execution of a public instrument would be useless if there is no
inventory of the property contributed, because without its designation and
description, they cannot be subject to inscription in the Registry of Property,
and their contribution cannot prejudice third persons.
This will result in fraud to those who contract with the partnership in the
belief in the efficacy of the guaranty in which the immovables may consist.
Thus, the contract is declared void by the law when no such inventory is
made." The case at bar does not involve third parties who may be
prejudiced.
4. AFISCO INSURANCE CORPORATION VS CA, CTA and CIR
G.R. No. 112675 January 25, 1999

On Appeal, PETITIONERS CONTENTION:


The Court of Appeals erred in finding that the pool of clearing house was an
informal partnership, which was taxable as a corporation under the NIRC.
That the reinsurance policies were written by them "individually and
separately," and that their liability was limited to the extent of their allocated
share in the original risk thus reinsured; hence, the pool did not act or earn
income as a reinsurer.
Its role was limited to its principal function of "allocating and distributing the
risks arising from the original insurance among the signatories to the treaty or
the members of the pool based on their ability to absorb the risks ceded; as well
as the performance of incidental functions, such as records, maintenance,
collection and custody of funds, etc."
PETITIONERS BELIE THE EXISTENCE OF A PARTNERSHIP:
That they were reinsurers, and did not share the same risk or solidary liability,
There was no common fund;
The executive board of the pool did not exercise control and management of its
funds, unlike the board of directors of a corporation;
The pool or clearing house "was not and could not possibly have engaged in the
business of reinsurance from which it could have derived income for itself."

Facts of the Case:


Pursuant to "reinsurance treaties," a number of local insurance firms formed
themselves into a insurance pool" or "clearing house" in order to facilitate the
handling of business contracted with a non-resident foreign insurance company.
The petitioners are 41 non-life insurance corporations, organized and existing
under the laws of the Philippines.
Upon issuance by them of Erection, Machinery Breakdown, Boiler Explosion
and Contractors' All Risk insurance policies, the petitioners on August 1, 1965

ISSUE: WON the Clearing House, acting as a mere agent and performing strictly
administrative functions, and which did not insure or assume any risk in its own
name, was a partnership or association subject to tax as a corporation;
HELD: The petition is denied. The pool is taxable as a corporation, and that the
government's right to assess and collect the taxes had not prescribed.

A PARTNERSHIP IS FORMED WHEN PERSONS CONTRACT "TO DEVOTE TO A


COMMON PURPOSE EITHER MONEY, PROPERTY, OR LABOR WITH THE INTENTION
OF DIVIDING THE PROFITS BETWEEN THEMSELVES:

Art. 1767 of the Civil Code recognizes the creation of a contract of partnership
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.
Its requisites are:
1. Mutual contribution to a common stock, and
2. A joint interest in the profits."
In other words, a partnership is formed when persons contract "to devote to a
common purpose either money, property, or labor with the intention of dividing
the profits between themselves."
Meanwhile, an association implies associates who enter into a "joint enterprise .
. . for the transaction of business."

THE CEDING COMPANIES ENTERED INTO A POOL AGREEMENT OR AN


ASSOCIATION THAT WOULD HANDLE ALL THE INSURANCE BUSINESSES COVERED
UNDER THEIR QUOTA-SHARE REINSURANCE TREATY AND SURPLUS REINSURANCE
TREATY WITH MUNICH. THE FOLLOWING UNMISTAKABLY INDICATES A PARTNERSHIP
OR AN ASSOCIATION COVERED BY SECTION 24 OF THE NIRC:

(1) The pool has a common fund, consisting of money and other valuables that are
deposited in the name and credit of the pool. This common fund pays for the
administration and operation expenses of the pool.
(2) The pool functions through an executive board, which resembles the board of
directors of a corporation, composed of one representative for each of the ceding
companies.
(3) True, the pool itself is not a reinsurer and does not issue any insurance policy;
however, its work is indispensable, beneficial and economically useful to the
business of the ceding companies and Munich, because without it they would not
have received their premiums.

The ceding companies share "in the business ceded to the pool" and in the
"expenses" according to a "Rules of Distribution" annexed to the Pool
Agreement.
Profit motive or business is, therefore, the primordial reason for the pool's
formation.
As aptly found by the CTA:
o The fact that the pool does not retain any profit or income does not
obliterate an antecedent fact that of the pool being used in the
transaction of business for profit. It is apparent, and petitioners admit,
that their association or co-action was indispensable to the transaction
of the business; if together they have conducted business, profit must
have been the object as, indeed, profit was earned. Though the profit
was apportioned among the members, this is only a matter of
consequence, as it implies that profit actually resulted.

5. SECOND DIVISION
G.R. No. 127347 November 25, 1999
ALFREDO
N.
AGUILA,
JR., petitioner,
vs.
HONORABLE COURT OF APPEALS and FELICIDAD S. VDA. DE
ABROGAR, respondents.

Petitioner is the manager of A.C. Aguila & Sons, Co., a partnership engaged
in lending activities. Private respondent and her late husband, Ruben M.
Abrogar, were the registered owners of a house and lot in Marikina, Metro
Manila.

On April 18, 1991, private respondent entered into a MOA w/ A.C. Aquila
&Sons involving a pacto de retro sale of said house & lot.

Private respondent failed to redeem the property within the 90-day period as
provided in the MOA. Hence, petitioner caused the cancellation of TCT
No. 195101 and the issuance of a new certificate of title in the name of A.C.
Aguila and Sons, Co.[5]

Private respondent filed a petition for declaration of the nullity of the deed
of sale and a criminal complaint for forgery against petitioner alleging that
the signature of her husband was a forgery because he was already dead
when the deed was supposed to have been executed.

Petitioner now contends that he is not the real party in interest but
A.C. Aguila & Co., against which this case should have been
broughtThe petition is meritorious.

ISSUE: W/N petitioner is the real party in interest.


HELD: No, petitioner is not the real party in interest.
RATIO:

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.[10]

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.
6. THIRD DIVISION
G.R. NOS. 166299-300
Litonjua jr. vs. Litonjua sr
DECISION
GARCIA, J.:

Petitioner Aurelio and herein respondent Eduardo are brothers.

Aurelio filed a suit against his brother Eduardo and herein respondent
Robert T. Yang (Yang) and several corporations for specific performance
and accounting.

Aurelio alleged that, since June 1973, he and Eduardo are into a joint
venture/partnership arrangement in the Odeon Theater business, which had
expanded thru investment in several corporations.

Aurelio showed as evidence a letter sent (ANNEX A-1 sa case) to him by


Eduardo that the latter is allowing Aurelio to manage their family business
(if Eduardos away) and in exchange thereof he will be giving Aurelio P1
million or 10% equity, whichever is higher. A memorandum (ANNEX A sa
case) was subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange of Aurelio, who just got
married, retaining his share in the family business (movie theatres, shipping
and land development) and some other immovable properties, he will be
given P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater.

In 1992 however, the relationship between the brothers went sour. And so
Aurelio demanded an accounting and the liquidation of his share in the
partnership. Eduardo did not heed and so Aurelio sued Eduardo.

On December 20, 2002, Eduardo and the corporate respondents filed a


joint ANSWER With Compulsory Counterclaim denying under oath the
material allegations of the complaint, more particularly that portion thereof
depicting petitioner and Eduardo as having entered into a contract of
partnership

ISSUE: Whether or not there exists a partnership.


HELD: No. The partnership is void and legally nonexistent. The
documentary evidence presented by Aurelio, i.e. the letter from Eduardo
and the Memorandum, did not prove partnership.

RATIO:
Art. 1771. A partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary.
Art. 1772. Every contract of partnership having a capital of three
thousand pesos or more, in money or property, shall appear in a public
instrument, which must be recorded in the Office of the Securities and Exchange
Commission.
Failure to comply with the requirement of the preceding paragraph shall
not affect the liability of the partnership and the members thereof to third
persons.
Art. 1773. A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said property is not made,
signed by the parties, and attached to the public instrument.

Annex A-1 on its face, contains typewritten entries, personal in tone, is


unsigned and undated. As an unsigned document, Annex A-1 does not
meet the public instrumentation requirements exacted under Article
1771 of the Civil Code. Moreover, being unsigned and referring to a
partnership involving more than P3,000.00 in money or property,
Annex A-1 cannot be presented for notarization, let alone registered
with the Securities and Exchange Commission (SEC), as called for
under the Article 1772.
As regards the inventory requirement under Article 1773 petitioner's
contribution to the so-called "partnership/jointventure" was his
supposed share in the family business, consisting of movie theaters,
shipping and landdevelopment, which are immovable properties and
real rights. Hence, an inventory of the contributed property dulysigned
by the parties should be attached to the public instrument, else there
is legally no partnership to speak of.

Insum, Annex A-1 cannot support the existence of the partnership sued
upon and sought to be enforced.

The Memorandum (ANNEX A) is also not a proof of the partnership


for the same is not a public instrument and again, no inventory was
made of the immovable property and no inventory was attached to the
Memorandum. Article 1773 of the Civil Code requires that if
immovable property is contributed to the partnership an inventory shall
be had and attached to the contract.

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;

7. THIRD DIVISION
G.R. No. 136448 November 3, 1999
LIM
TONG
LIM, petitioner,
vs.
PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

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;

PANGANIBAN, J.:

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.

Facts:

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and


Peter Yao entered into a Contract dated February 7, 1990, for the
purchase of fishing nets of various sizes from the Philippine Fishing
Gear Industries, Inc. (herein respondent). 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 total price of the
nets amounted to P532,045. Four hundred pieces of floats worth
P68,000 were also sold to the Corporation.
The buyers, however, failed to pay for the fishing nets and the floats;
hence, private respondents filed a collection suit against Chua, Yao and
Petitioner Lim Tong Lim, as general partners, on the allegation that
"Ocean Quest Fishing Corporation" was a nonexistent corporation as
shown by a Certification from the Securities and Exchange
Commission. On September 20, 1990, the lower court issued a Writ of
Preliminary Attachment, which the sheriff enforced by attaching the
fishing nets on board F/B Lourdes.

ISSUE: Whether by their acts, Lim, Chua and Yao could be deemed to have
entered into a partnership.
HELD: Yes.
RATIO:
Art. 1767 By the contract of partnership, two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves.

On November 18, 1992, the trial court rendered its Decision, ruling that
Philippine Fishing Gear Industries was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as general partners, were
jointly liable to pay respondent.
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 9 in Civil Case No.
1492-MN which Chua and Yao had brought against Lim in the RTC of
Malabon, Branch 72, for (a) a declaration of nullity of commercial
documents; (b) a reformation of contracts; (c) a declaration of
ownership of fishing boats; (d) an injunction and (e) damages. 10 The
Compromise Agreement provided:
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.

It is clear that Chua, Yao and Lim had decided to engage in a fishing
business, which they started by buying boats worth P3.35 million, financed
by a loan secured from Jesus Lim who was petitioner's brother. In their
Compromise Agreement, they subsequently revealed their intention to pay
the loan with the proceeds of the sale of the boats, and to divide equally
among them the excess or loss. These boats, the purchase and the repair of
which were financed with borrowed money, fell under the term "common
fund" under Article 1767. The contribution to such fund need not be
cash or fixed assets; it could be an intangible like credit or industry.
That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also shows
that they had indeed formed a partnership.
The partnership extended not only to the purchase of the boat, but also to
that of the nets and the floats. The fishing nets and the floats, both essential
to fishing, were obviously acquired in furtherance of their business. It
would have been inconceivable for Lim to involve himself so much in
buying the boat but not in the acquisition of the aforesaid equipment,
without which the business could not have proceeded.

They purchased the boats, which constituted the main assets of the partnership, and
they agreed that the proceeds from the sales and operations thereof would be divided
among them.

Petitioner: claims that the compromise agreement was entered into only to end the
dispute among them, but not to adjudicate their preexisting rights and obligations.
His arguments are baseless. The Agreement was but an embodiment of the
relationship extant among the parties prior to its execution.

SC: Petitioner entered into a business agreement with Chua and Yao, in which debts
were undertaken in order to finance the acquisition and the upgrading of the vessels
which would be used in their fishing business. The sale of the boats, as well as the
division among the three of the balance remaining after the payment of their loans,
proves beyond cavil that F/B Lourdes, though registered in his name, was not his
own property but an asset of the partnership. It is not uncommon to register the
properties acquired from a loan in the name of the person the lender trusts, who in
this case is the petitioner himself. After all, he is the brother of the creditor, Jesus
Lim.
8. Tacao vs CA
Facts:
Nenita A. Anay met William T. Belo, then the vice-president for operations
of Ultra Clean Water Purifier, through her former employer in Bangkok.
Belo introduced Anay to Marjorie Tocao, who conveyed her desire to enter
into a joint venture with her for the importation and local distribution of
kitchen cookwares.
Belo volunteered to finance the joint venture and assigned to Anay the job
of marketing the product considering her experience and established
relationship with West Bend Company, a manufacturer of kitchen wares in
Wisconsin, U.S.A
Under the joint venture, Belo acted as capitalist, Tocao as president and
general manager, and Anay as head of the marketing department and later,
vice-president for sales.
Anay organized the administrative staff and sales force while Tocao hired
and fired employees, determined commissions and/or salaries of the
employees, and assigned them to different branches.

The parties agreed that Belos name should not appear in any documents
relating to their transactions with West Bend Company. Instead, they agreed
to use Anays name in securing distributorship of cookware from that
company.

The parties agreed further that Anay would be entitled to: (1) ten percent
(10%) of the annual net profits of the business; (2) overriding commission
of six percent (6%) of the overall weekly production; (3) thirty percent
(30%) of the sales she would make; and (4) two percent (2%) for her
demonstration services.
The agreement was not reduced to writing on the strength of Belos
assurances that he was sincere, dependable and honest when it came to
financial commitments.

Anay having secured the distributorship of cookware products from the


West Bend Company, the business was successful.
They operated under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocaos name.
Thereafter, Roger Muencheberg of West Bend Company invited Anay to
the distributor meeting and to the south western regional convention in the
U.S.A., from July 25-26, 1987. Anay accepted the invitation with the
consent of Marjorie Tocao who, as president and general manager of
Geminesse Enterprise, even wrote a letter to the Visa Section of the U.S.
Embassy in Manila.
When Anay arrived from the U.S.A, she immediately undertook the task of
saving the business on account of the unsatisfactory sales record in the
Makati and Cubao offices. She even she received a plaque of appreciation
from the administrative and sales people through Marjorie Tocao [4] for her
excellent job performance.
On October 7, 1987, in the presence of Anay, Belo signed a
memo[5] entitling her to a thirty-seven percent (37%) commission for her
personal sales "up Dec 31/87. Belo explained to her that said commission
was apart from her ten percent (10%) share in the profits. On October 9,
1987,
After that Anay learned that Tocao had signed a letter[6] stating that she was
no longer the vice-president of Geminesse Enterprise. She also received a
note from Lina T. Cruz, marketing manager, stating thatTocao had barred
her from holding office in both Makati and Cubao offices. [7]
Anay attempted to contact Belo. She wrote him twice to demand her
overriding commission for the period of January 8, 1988 to February 5,
1988 and the audit of the company to determine her share in the net profits.
When her letters were not answered, Anay consulted her lawyer, who, in
turn, wrote Belo a letter. Still, that letter was not answered.
Anay still received her five percent (5%) overriding commission up to
December 1987. The following year, 1988, she did not receive the same
commission although the company netted a gross sales of P13,300,360.00.
So Anay filed a complaint for sum of money with damages[8] against
Marjorie D. Tocao and William Belo.
In their answer,[9] Tocao and Belo asserted that the alleged agreement
with Anay that was neither reduced in writing, nor ratified, was either
unenforceable or void or inexistent. That there could not have been a
partnership because, because Geminesse Enterprise was the sole
proprietorship of Marjorie Tocao and Anay merely acted as marketing
demonstrator of Geminesse Enterprise for an agreed remuneration, and her
complaint should have been lodged with the Department of Labor and not
with the regular court.
Petitioners further alleged that Anay filed the complaint on account of illwill and resentment because Tocao did not allow her to lord it over in the
Geminesse Enterprise. Hence, petitioners were the ones who suffered
actual damages including unreturned and unaccounted stocks of

Geminesse Enterprise, and serious anxiety, besmirched reputation and


various damages not less than P500,000.00 and also atty.s fees.
The trial court held that there was indeed an oral partnership agreement
between the plaintiff and the defendants, based on the following: (a) there
was an intention to create a partnership; (b) a common fund was established
through contributions consisting of money and industry, and (c) there was a
joint interest in the profits.
The trial court further held that the payment of commissions did not
preclude the existence of the partnership in asmuch as such practice is often
resorted to in business circles as an impetus to bigger sales volume.
CA affirms.
Defense:
Belo denied that Anay was supposed to receive a share in the profit of
the business. He admitted that the two had agreed that Anay would
receive a (3-4%) share in the gross sales of the cookware. He denied
contributing capital to the business or receiving a share in its profits as
he merely served as a guarantor of Marjorie Tocao, who was new in the
business.
Tocao denied having entered into an oral partnership agreement with
Anay. However, she admitted that Anay was an expert in the cookware
business and hence, they agreed to grant her the following
commissions: (37%) on personal sales; (5%) on gross sales; (2%) on
product demonstrations, and (2%) for recruitment of personnel.
Issue: WON ANAY was an employee or a partner.
Ruling: A partner
Ratio:
The issue of whether or not a partnership exists is a factual matter which are
within the exclusive domain of both the trial and appellate courts. This
Court cannot set aside factual findings of such courts absent any showing
that there is no evidence to support the conclusion drawn by the court a
quo.[14]

In this case, both TC and CA ruled that there established a business


partnership. This Court finds no reason to rule otherwise.
It does not matter if the agreement was not in writing because Article 1771
of the Civil Code provides that a partnership may be constituted in any
form.
The fact that Geminesse Enterprise was registered in Marjorie Tocaos
name is not determinative of whether or not the business was operated by a
sole proprietor or a partnership. What was registered was merely the
business .
To be considered a juridical personality, a partnership must fulfill these
requisites:
o (1) two or more persons bind themselves to contribute money,
property or industry to a common fund; and
o (2) intention on the part of the partners to divide the profits among
themselves.[15]

It may be constituted in any form; a public instrument is necessary


only where immovable property or real rights are contributed
thereto.[16]
This implies that since a contract of partnership is consensual, an oral
contract of partnership is as good as a written one. What matters is that the
parties have complied with the requisites of a partnership.
The fact that there appears to be no record in the Securities and Exchange
Commission of a public instrument embodying the partnership agreement
pursuant to Article 1772 of the Civil Code[17] did not cause the nullification
of the partnership.
o Art. 1768. The partnership has a juridical personality separate and
distinct from that of each of the partners, even in case of failure to
comply with the requirements of article 1772, first paragraph.
Petitioners admit that private respondent had the expertise to engage in the
business of distributorship of cookware. Private respondent contributed
such expertise to the partnership and hence, under the law, she was the
industrial or managing partner.
It was through her reputation with the West Bend Company that the
partnership was able to open the business of distributorship of that
companys cookware products; it was through the same efforts that the
business was propelled to financial success.
Belos claim that he was merely a guarantor is belied by his personal act of
proprietorship in the business. Moreover, if he was indeed a guarantor of
future debts of petitioner Tocao under Article 2053 of the Civil Code, [20] he
should have presented documentary evidence therefor.
Tocao was also a capitalist in the partnership. Her and Belos roles as both
capitalists to the partnership with ANAY are buttressed by petitioner
Tocaos admissions that petitioner Belo was her boyfriend and that the
partnership was not their only business venture together.
They also established a firm that they called Wiji, the combination of
petitioner Belos first name, William, and her nickname, Jiji. [23] The special
relationship between them dovetails with petitioner Belos claim that he
was acting in behalf of petitioner Tocao. Significantly, in the early stage of
the business operation, petitioners requested West Bend Company to allow
them to utilize their banking and trading facilities in Singapore in the
matter of importation and payment of the cookware products. [24]
The inevitable conclusion, therefore, was that petitioners merged their
respective capital and infused the amount into the partnership of distributing
cookware with ANAY as the managing partner.
The business venture operated under Geminesse Enterprise did not result in
an employer-employee relationship between petitioners and private
respondent.
o In the first place, private respondent had a voice in the
management
of
the
affairs
of
the
cookware
distributorship,[26] including selection of people who would
constitute the administrative staff and the sales force.

Secondly, Tocaos admissions militate against an employeremployee relationship because admitted that, like her, ANAY
received only commissions and transportation and representation
allowances and not a fixed salary.
If indeed petitioner Tocao was private respondents employer, it is difficult
to believe that they shall receive the same income in the business. In a
partnership, each partner must share in the profits and losses of the venture,
except that the industrial partner shall not be liable for the losses.[31]
As an industrial partner, private respondent had the right to demand for a
formal accounting of the business and to receive her share in the net
profit.[32].
It is not surprising then that, even after private respondent had been
unceremoniously booted out of the partnership in October 1987, she still
received her overriding commission until December 1987.
Undoubtedly, petitioner Tocao unilaterally excluded private respondent
from the partnership to reap for herself and/or for petitioner Belo financial
gains resulting from private respondents efforts to make the business
venture a success.
Her instruction to Lina Torda Cruz, marketing manager, not to allow private
respondent to hold office in both the Makati and Cubao sales offices
concretely spoke of her perception that private respondent was no longer
necessary in the business operation,[39] and resulted in a falling out between
the two.
However, a mere falling out or misunderstanding between partners does not
convert the partnership into a sham organization.[40] The partnership exists
until dissolved under the law. Since the partnership created by petitioners
and private respondent has no fixed term and is therefore a partnership at
will predicated on their mutual desire and consent, it may be dissolved by
the will of a partner.
An unjustified dissolution by a partner can subject him to action for
damages because by the mutual agency that arises in a partnership, the
doctrine
of delectus
personae allows
the
partners
to
have
the power, although not necessarily the right to dissolve the partnership.[42]
As the Trial court held a partner who is excluded wrongfully from a
partnership is an innocent partner. Hence, the guilty partner must give him
his due upon the dissolution of the partnership as well as damages or share
in the profits realized from the appropriation of the partnership business
and goodwill.
o

9. SUNGA-CHAN vs.CHUA,
Facts:
Lamberto T. Chua filed a complaint against Lilibeth Sunga Chan and
Cecilia Sunga, daughter and wife, respectively of the deceased Jacinto L.
Sunga for "Winding Up of Partnership Affairs, Accounting, Appraisal and
Recovery of Shares and Damages.

CHUA alleged that he verbally entered into a partnership with Jacinto in the
distribution of Shellane (LPG) in Manila.
For business convenience, CHUA and Jacinto agreed to register the
business name of their partnership, SHELLITE GAS APPLIANCE
CENTER under the name of Jacinto as a sole proprietorship.
CHUA and JACINTO both contributed P100,000.00, with the intention that
the profits would be equally divided between them.
The partnership had Jacinto as manager, assisted by Josephine Sy, a sister
of the wife respondent, Erlinda Sy.
As compensation, Jacinto would receive a manager's fee or remuneration of
10% of the gross profit and Josephine would receive 10% of the net profits,
in addition to her wages and other remuneration from the business.
From the time that Shellite opened for business, its business operation went
quite and was profitable.
Upon Jacinto's death, his surviving wife, petitioner Cecilia and particularly
his daughter took over the operations, control, custody, disposition and
management of Shellite without respondent's consent.
respondent demanded upon petitioners for accounting, inventory, appraisal,
winding up and restitution of his net shares in the partnership but petitioners
failed to comply..
CHUA claimed that after Lilibeth ran out the alibis and reasons to evade
respondent's demands, she disbursed out of the partnership funds the
amount of P200,000.00 and partially paid the same to respondent.
Petitioner Lilibeth allegedly informed respondent that the P200,000.00
represented partial payment of the latter's share in the partnership, with a
promise that the she would make the complete inventory and winding up of
the properties of the business establishment. Despite such commitment,
petitioners failed to comply with their duty to account, and continued to
benefit from the assets and income of Shellite to the damage and prejudice
of respondent.
TC ruled in favour of CHUA.
CA affirms.
Petitioners now question the correctness of the finding of the trial court and
the Court of Appeals that a partnership existed between respondent and
Jacinto in the absence of any written document to show such partnership
between CHUA and Jacinto.

Issue: WON there exists a partnership


Ruling: yes
Ratio:
A partnership may be constituted in any form, except where immovable
property of real rights are contributed thereto, in which case a public
instrument shall necessary.6
Hence, based on the intention of the parties, as gathered from the facts and
ascertained from their language and conduct, a verbal contract of
partnership may arise.7

The essential profits that must be proven to that a partnership was agreed
upon are
o mutual contribution to a common stock, and
o a joint interest in the profits.8
in view of the absence of the written contract of partnership between
respondent and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said partnership.
***The crucial issue to settle then is to whether or not the "Dead Man's Statute"
applies to this case so as to render inadmissible respondent's testimony and that of
his witness, Josephine.
The "Dead Man's Statute" provides that if one party to the alleged
transaction is precluded from testifying by death, insanity, or other mental
disabilities, the surviving party is not entitled to the undue advantage of
giving his own uncontradicted and unexplained account of the transaction. 9
REQUISITES:
"1. The witness is a party or assignor of a party to case or persons in whose
behalf a case in prosecuted.
2. The action is against an executor or administrator or other representative
of a deceased person or a person of unsound mind;
3. The subject-matter of the action is a claim or demand against the estate of
such deceased person or against person of unsound mind;
4. His testimony refers to any matter of fact of which occurred before the
death of such deceased person or before such person became of unsound
mind."10
Two reasons forestall the application of the "Dead Man's Statute" to this
case.
o First, petitioners filed a compulsory counterclaim11 against
respondents in their answer before the trial court, and with the
filing of their counterclaim, petitioners themselves effectively
removed this case from the ambit of the "Dead Man's
Statute".12 Well entrenched is the rule that when it is the executor
or administrator or representatives of the estates that sets up the
counterclaim, the plaintiff, herein respondent, may testify to
occurrences before the death of the deceased to defeat the
counterclaim.13
o Second, the testimony of Josephine is not covered by the "Dead
Man's Statute" for the simple reason that she is not "a party or
assignor of a party to a case or persons in whose behalf a case is
prosecuted."
Both TC & CA considered the evidence for respondent as sufficient to
prove the formation of partnership, albeit an informal one.
petitioners did not present any evidence in their favor during trial
This Court can no longer be tasked to go over the proofs presented by the
parties and analyze, assess and weigh them to ascertain if the trial court and
the appellate court were correct in according superior credit to this or that
piece of evidence of one party or the other.18

Petitioners also failed to attend the presentation of evidence of respondent.


Petitioners cannot now turn to this Court to question the admissibility and
authenticity of the documentary evidence of respondent when petitioners
failed to object to the admissibility of the evidence at the time that such
evidence was offered.19
With regard to petitioners' insistence that laches and/or prescription should
have extinguished respondent's claim, we agree with the TC and CA that the
action for accounting filed three (3) years after Jacinto's death was well
within the prescribed period.
o The Civil Code provides that an action to enforce an oral contract
prescribes in six (6) years20 while the right to demand an
accounting for a partner's interest as against the person continuing
the business accrues at the date of dissolution, in the absence of
any contrary agreement.21
While Jacinto's death dissolved the partnership, the dissolution did not
immediately terminate the partnership. The Civil Code23 expressly
provides that upon dissolution, the partnership continues and its legal
personality is retained until the complete winding up of its business,
culminating in its termination.24
In a desperate bid to cast doubt on the validity of the oral partnership
between respondent and Jacinto, petitioners maintain that said partnership
that had initial capital of P200,000.00 should have been registered with the
Securities and Exchange Commission (SEC) since registration is mandated
by the Civil Code, True, Article 1772 of the Civil Code requires that
partnerships with a capital of P3,000.00 or more must register with the SEC,
however, this registration requirement is not mandatory.
Article 1768 of the Civil Code25 explicitly provides that the partnership
retains its juridical personality even if it fails to register.
The failure to register the contract of partnership does not invalidate the
same as among the partners, so long as the contract has the essential
requisites, because the main purpose of registration is to give notice to third
parties, and it can be assumed that the members themselves knew of the
contents of their contract.26
In the case at bar, non-compliance with this directory provision of the law
will not invalidate the partnership considering that the totality of the
evidence proves that respondent and Jacinto indeed forged the partnership
in question..

10. LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and


CARMELITO JOSE, petitioners,
vs.
DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and
CARMELITA C. RAMIREZ,respondents.
A share in a partnership can be returned only after the completion of the latters
dissolution, liquidation and winding up of the business.
Facts:

Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership


with a capital of P750,000 for the operation of a restaurant and catering
business under the name Aquarius Food House and Catering Services.
Villareal was appointed general manager and Carmelito Jose, operations
manager.
Then Donaldo Ramirez joined as a partner on September 5, 1984 with a
capital contribution of P250,000 which was paid by his parents,
Respondents Cesar and Carmelita Ramirez.
After Jesus Jose withdrew from the partnership and his capital contribution
of P250,000 was refunded to him in cash by agreement of the partners.
In the same month, without prior knowledge of respondents, petitioners
closed down the restaurant, allegedly because of increased rental.
The restaurant furniture and equipment were deposited in the respondents
house for storage.
On March 1, 1987, respondent spouses wrote petitioners, saying that they
were no longer interested in continuing their partnership or in reopening the
restaurant, and that they were accepting the latters offer to return their
capital contribution.
Respondent wrote another letter informing petitioners of the deterioration of
the restaurant furniture and equipment stored in their house. She also
reiterated the request for the return of their one-third share in the equity of
the partnership. The repeated oral and written requests were, however, left
unheeded.
Respondents filed before the RTC for the collection of a sum of money
from petitioners.
Petitioners contended that respondents had expressed a desire to withdraw
from the partnership and had called for its dissolution under Articles 1830
and 1831; that respondents had been paid, upon the turnover to them of
furniture and equipment worth over P400,000; and that the latter had no
right to demand a return of their equity because their share, together with
the rest of the capital of the partnership, had been spent as a result of
irreversible business losses.
In their Reply, respondents alleged that had not received any regular report
or accounting from the latter, who had solely managed the business.
Respondents also alleged that they expected the equipment and the furniture
stored in their house to be removed by petitioners as soon as the latter found
a better location for the restaurant.
The trial court rendered a judgment in favor of respondents and ordering the
petitioners to pay jointly and severally.
It ruled that the parties had voluntarily entered into a partnership, which
could be dissolved at any time. Petitioners clearly intended to dissolve it
when they stopped operating the restaurant.
The CA held that, although respondents had no right to demand the return
of their capital contribution, the partnership was nonetheless dissolved
when petitioners lost interest in continuing the restaurant business with
them. Because petitioners never gave a proper accounting of the partnership

accounts for liquidation purposes, and because no sufficient evidence was


presented to show financial losses.
Issue: WON petitioners are liable to respondents for the latters share in the
partnership
Held: NO
Ratio:
Both the trial and the appellate courts found that a partnership had indeed
existed, and that it was dissolved on March 1, 1987.
They found that the dissolution took place when respondents informed
petitioners of the intention to discontinue. Respondents consequently
demanded from petitioners the return of their one-third equity in the
partnership.

SC ruled that respondents have no right to demand from petitioners the


return of their equity share. Except as managers of the partnership,
petitioners did not personally hold its equity or assets.
The partnership has a juridical personality separate and distinct from that
of each of the partners. Since the capital was contributed to the partnership,
not to petitioners, it is the partnership that must refund the equity of the
retiring partners.
The amount to be refunded is necessarily limited to its total resources. In
other words, it can only pay out what it has in its coffers, which consists of
all its assets. However, before the partners can be paid their shares, the
creditors of the partnership must first be compensated. After all the
creditors have been paid, whatever is left of the partnership assets becomes
available for the payment of the partners shares.
Petitioners further argue that respondents acted negligently by permitting
the partnership assets in their custody to deteriorate to the point of being
almost worthless. Supposedly, the latter should have liquidated these sole
tangible assets of the partnership and considered the proceeds as payment of
their net capital. Hence, petitioners argue that the turnover of the remaining
partnership assets to respondents was precisely the manner of liquidating
the partnership and fully settling the latter's share in the partnership.
We disagree. The delivery of the store furniture and equipment to private
respondents was for the purpose of storage. They were unaware that the
restaurant would no longer be reopened by petitioners. Hence, the former
cannot be faulted for not disposing of the stored items to recover their
capital investment.
Evidently, in the present case, the exact amount of refund equivalent to
respondents' one-third share in the partnership cannot be determined until
all the partnership assets will have been liquidated in other words, sold
and converted to cash and all partnership creditors, if any, paid.

14. G.R. No. 167379

June 27, 2006

PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION and


RAFAELITO
W.
LOPEZ, Petitioners,
vs.
MA. CLARITA T. LAZATIN-MAGAT, JOSE SERAFIN T. LAZATIN,
JAIME
TEODORO
T.
LAZATIN
and
JOSE
MARCOS
T.
LAZATIN, Respondents.

Subsequentlythe Lazatinsfileda complaint for rescission accounting and


damages, with prayer for temporary restraining order and/or preliminary
injunction against Primelink and Lopez (which was granted by the RTC)

Joint Venture

Petitioner: Primelink Properties and Development Corporation (Primelink


for brevity) is a domestic corporation engaged in real estate development.
Rafaelito W. Lopez is its President and CEO.
Respondent: Ma. Clara T. Lazatin-Magat and her brothersare co-owners of
two (2) adjoining parcels of land atTagaytay City.
On March 10, 1994, the Lazatins and Primelink, entered into a Joint
Venture Agreement5 (JVA) for the development of the aforementioned
property into a residential subdivision to be known as "Tagaytay Garden
Villas."
Under the JVA, the Lazatin siblings obliged themselves to contribute the
two parcels of land as their share in the joint venture.
For its part, Primelink undertook to contribute money, labor, personnel,
machineries, equipment, contractors pool, marketing activities, managerial
expertise and other needed resources to develop the property and construct
therein the units for sale to the public.
The parties agreed that any unsettled or unresolved misunderstanding shall
be referred to Voluntary Arbitration.

Violation of the JVA

The Lazatins agreed to subject the title over the subject property to an
escrow agreement. Conformably with the escrow agreement, the owners
duplicate of the title was deposited with the China Banking Corporation.
However, Primelink failed to immediately secure a Development
Permit from Tagaytay City, and applied the permit only on August 30,
1995. On October 12, 1995, the City issued a Development Permit to
Primelink.
In a Letter, the Lazatins, through counsel, demanded that Primelink comply
with its obligations under the JVA, otherwise the appropriate action would
be filed against it to protect their rights and interests.
This impelled the officers of Primelink to meet with the Lazatins and
enabled the latter to review its business records/papers. However, the
Lazatins informed Primelink that they had decided to rescind the JVA
effective upon its receipt of the said letter. The Lazatins demanded that
Primelink cease and desist from further developing the property.

The Lazatins alleged, among others, that, despite the lapse of almost four
(4) years from the execution of the JVA and the delivery of the title and
possession of the land to defendants, the land development aspect of the
project had not yet been completed, and the construction of the housing
units had not yet made any headway
They also alleged that Primelink completely disregarded previously agreed
accounting and auditing procedures, checks and balances system installed
for the mutual protection of both parties, and the scheduled regular
meetings were seldom held to the detriment and disadvantage of plaintiffs.
Plaintiffs also claimed that in a sales-income-costs projection prepared and
submitted by defendants, they (plaintiffs) stood to receive the amount
of P70,218,296.00 as their net share in the joint venture project; to date,
however, after almost four (4) years and despite the undertaking in the JVA
that plaintiffs shall initially get 20% of the agreed net revenue during the
first two (2) years (on the basis of the 60%-40% sharing) and their full 40%
share thereafter, defendants did not deliver these shares which would
amount to no less than P40,000,000.00.
Primelink, in its defense, said the complaint was premature as they havent
submitted to Arbitration, pursuant to the JVA stipulation
The RTC ruled for the Lazatins, rescinded the JVA and issued a TRO
againstPrimelink
The RTC found that as of September 30, 1995, the joint venture project
earned a net income of aboutP2,603,810.64. This amount, however, was
drastically reduced in a subsequent financial report submitted by the
defendants to P1,954,216.39. Shortly thereafter, and to the dismay of the
plaintiffs, the defendants submitted an income statement and a balance sheet
indicating a net loss of P5,122,906.39 as of June 30, 1997.
CA affirmed upon appeal and awarded to Lazatins "all improvements" on
the project without requiring them to pay the value thereof or to reimburse
Primelink for all expenses
Hence, this appeal
PRIMELINKs argument: argued that the LAZATINs in their complaint did
not allege, did not prove and did not pray that they are and should be
entitled to take over the development of the project, and that the
improvements and existing structures which were introduced by
PRIMELINK after spending more or less Forty Million Pesos be awarded
to them. They merely asked in the complaint that the joint venture
agreement be rescinded, and that the parcels of land they contributed to the
project be returned to them.

ISSUE: WON theLazatins are entitled to rescission with improvements

HELD: YES.PRIMELINKs argument lacks merit. The transfer of the possession of


the parcels of land and the improvements thereon to respondents was only for a
specific purpose: the winding up of partnership affairs, and the partition and
distribution of the net partnership assets as provided by law.

The order of the court for PRIMELINK to return the property with all the
improvements thereon is just a necessary consequence to the order of
rescission.
As a general rule, the relation of the parties in joint ventures is governed by
their agreement. When the agreement is silent on any particular issue, the
general principles of partnership may be resorted to. In Aurbach v. Sanitary
Wares Manufacturing Corporation, the Supreme Court discussed the
following points regarding joint ventures and partnership:
Joint venture is, in fact, hardly distinguishable from the
partnership, since elements are similar community of interest in
the business, sharing of profits and losses, and a mutual right of
control.
The main distinction is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is
formed for the execution of a single transaction, and is thus of a
temporary nature.
This observation is not entirely accurate in this jurisdiction, since
under the Civil Code, a partnership may be particular or universal,
and a particular partnership may have for its object a specific
undertaking. (Art. 1783, Civil Code).
It would seem therefore that, under Philippine law, a joint
venture is a form of partnership and should thus be governed
by the laws of partnership.
The Supreme Court has, however, recognized a distinction
between these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it may,
however, engage in a joint venture with others.
The LAZATINs were able to establish fraud on the part of PRIMELINK which
was a pattern of what appears to be a scheme or plot to reduce and eventually
blot out the net incomes generated from sales of housing units by the
defendants.
Under Article 1838 of the Civil Code, where the partnership contract is
rescinded on the ground of the fraud or misrepresentation of one of the
parties thereto, the party entitled to rescind is, without prejudice to any
other right is entitled to a lien on, or right of retention of, the surplus of
the partnership property after satisfying the partnership liabilities to third
persons for any sum of money paid by him for the purchase of an interest in the
partnership and for any capital or advance contributed by him. In the instant
case, the joint venture still has outstanding liabilities to third parties or the
buyers of the property.

When the RTC rescinded the JVA on complaint of respondents based on the
evidence on record that petitioners willfully and persistently committed a
breach of the JVA, the court thereby dissolved/cancelled the partnership.With
the rescission of the JVA on account of petitioners fraudulent acts, all
authority of any partner to act for the partnership is terminated except so far as
may be necessary to wind up the partnership affairs or to complete transactions
begun but not yet finished.
On dissolution, the partnership is not terminated but continues until the
winding up of partnership affairs is completed. 56 Winding up means the
administration of the assets of the partnership for the purpose of terminating the
business and discharging the obligations of the partnership.
The transfer of the possession of the parcels of land and the improvements
thereon to respondents was only for a specific purpose: the winding up of
partnership affairs, and the partition and distribution of the net partnership
assets as provided by law.57 After all, Article 1836 of the New Civil Code
provides that unless otherwise agreed by the parties in their JVA, respondents
have the right to wind up the partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who
have not wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent,
has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his
assignee, upon cause shown, may obtain winding up by
the court.
It must be stressed, too, that although respondents acquired possession of the
lands and the improvements thereon, the said lands and improvements
remained partnership property, subject to the rights and obligations of the
parties, inter se, of the creditors and of third parties under Articles 1837 and
1838 of the New Civil Code, and subject to the outcome of the settlement of
the accounts between the parties as provided in Article 1839 of the New Civil
Code, absent any agreement of the parties in their JVA to the contrary. 58 Until
the partnership accounts are determined, it cannot be ascertained how much
any of the parties is entitled to, if at all.
It was thus premature for petitioner Primelink to be demanding that it be
indemnified for the value of the improvements on the parcels of land owned by
the joint venture/partnership. Notably, the JVA of the parties does not contain
any provision designating any party to wind up the affairs of the partnership.
Thus, under Article 1837 of the New Civil Code, the rights of the parties when
dissolution is caused in contravention of the partnership agreement are as
follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
(a) All the rights specified in the first paragraph of this article, and

(b) The right, as against each partner who has caused the
dissolution wrongfully, to damages for breach of the agreement.
(2) The partners who have not caused the dissolution wrongfully, if they all
desire to continue the business in the same name either by themselves or
jointly with others, may do so, during the agreed term for the partnership
and for that purpose may possess the partnership property, provided they
secure the payment by bond approved by the court, or pay to any partner
who has caused the dissolution wrongfully, the value of his interest in the
partnership at the dissolution, less any damages recoverable under the
second paragraph, No. 1(b) of this article, and in like manner indemnify him
against all present or future partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(a) If the business is not continued under the provisions of the
second paragraph, No. 2, all the rights of a partner under the first
paragraph, subject to liability for damages in the second paragraph,
No. 1(b), of this article.
(b) If the business is continued under the second paragraph, No. 2,
of this article, the right as against his co-partners and all claiming
through them in respect of their interests in the partnership, to have
the value of his interest in the partnership, less any damage caused
to his co-partners by the dissolution, ascertained and paid to him in
cash, or the payment secured by a bond approved by the court, and
to be released from all existing liabilities of the partnership; but in
ascertaining the value of the partners interest the value of the
good-will of the business shall not be considered.

And under Article 1838 of the New Civil Code, the party entitled to rescind
is, without prejudice to any other right, entitled:
(1) To a lien on, or right of retention of, the surplus of the partnership
property after satisfying the partnership liabilities to third persons for any
sum of money paid by him for the purchase of an interest in the partnership
and for any capital or advances contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied, in the
place of the creditors of the partnership for any payments made by him in
respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership.

The accounts between the parties after dissolution have to be settled as


provided in Article 1839 of the New Civil Code:

Art. 1839. In settling accounts between the partners after dissolution, the following
rules shall be observed, subject to any agreement to the contrary:
(1) The assets of the partnership are:

(a) The partnership property,


(b) The contributions of the partners necessary for the payment of
all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as
follows:

(a) Those owing to creditors other than partners,


(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
(3) The assets shall be applied in the order of their declaration in No. 1 of
this article to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount
necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the
court shall have the right to enforce the contributions specified in the
preceding number.
(6) Any partner or his legal representative shall have the right to enforce the
contributions specified in No. 4, to the extent of the amount which he has
paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the
contributions specified in No. 4.
(8) When partnership property and the individual properties of the partners
are in possession of a court for distribution, partnership creditors shall have
priority on partnership property and separate creditors on individual
property, saving the rights of lien or secured creditors.

(9) Where a partner has become insolvent or his estate is insolvent, the
claims against his separate property shall rank in the following order:

(a) Those owing to separate creditors;


(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution.

15. G.R. No. 109248 July 3, 1995


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.

Facts:

The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was


duly registered in the Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange Commission on 4 August
1948.
One partner of the firm, Misawrote the respondents-appellees a series of
letters stating:
I am withdrawing and retiring from the firm of Bito, Misa
and Lozada, effective at the end of this month. "I trust that
the accountants will be instructed to make the proper
liquidation of my participation in the firm. "Further to my
letter to you today, I would like to have a meeting with all
of you with regard to the mechanics of liquidation, and
more particularly, my interest in the two floors of this
building. I would like to have this resolved soon because
it has to do with my own plans."
"The partnership has ceased to be mutually satisfactory
because of the working conditions of our employees
including the assistant attorneys. All my efforts to
ameliorate the below subsistence level of the pay scale of
our employees have been thwarted by the other partners.
Not only have they refused to give meaningful increases
to the employees, even attorneys, are dressed down
publicly in a loud voice in a manner that deprived them of
their self-respect. The result of such policies is the
formation of the union, including the assistant attorneys."

Petitioner Joaquin Misafiled with this Commission's Securities Investigation


and Clearing Department (SICD) a petition for dissolution and liquidation
of partnership"3. Enjoin respondents from using the firm name of Bito,
Misa&Lozada in any of their correspondence, checks and pleadings and to
pay petitioners damages for the use thereof despite the dissolution of the
partnership in the amount of at least P50,000.00;
SECs ruling: [P]etitioner's withdrawal from the law firm Bito,
Misa&Lozada did not dissolve the said law partnership. Accordingly,
the petitioner and respondents are hereby enjoined to abide by the
provisions of the Agreement relative to the matter governing the liquidation
of the shares of any retiring or withdrawing partner in the partnership
interest."
On appeal, the SEC en banc reversed the decision of the Hearing Officer
and held that the withdrawal of Attorney Joaquin L. Misa had dissolved the
partnership of "Bito, Misa&Lozada."
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, Attorney Jesus Bito and Attorney Mariano
Lozada both died. The death of the two partners, as well as the admission of
new partners, in the law firm prompted Attorney Misa to renew his
application for receivership.
The CA AFFIRMED in toto the SEC decision.
o (a) that Atty. Misa's withdrawal from the partnership had changed
the relation of the parties and inevitably caused the dissolution of
the partnership;
o (b) that such withdrawal was not in bad faith;
o (c) that the liquidation should be to the extent of Attorney Misa's
interest or participation in the partnership which could be
computed and paid in the manner stipulated in the partnership
agreement;

ISSUE: WON the partnership of Bito, Misa&Lozada (now Bito, Lozada, Ortega&
Castillo) is a partnership at will

HELD: YES

RATIO:

A partnership that does not fix its term is a partnership at will.


That the law firm "Bito, Misa&Lozada," and now "Bito, Lozada, Ortega
and Castillo," is indeed such a partnership.
As per SECs findings on this matter; viz:

be determined by two (2) independent appraisers, one to be appointed (by


the partnership and the other by the) retiring partner or the heirs of a
deceased partner, as the case may be. In the event of any disagreement
between the said appraisers a third appraiser will be appointed by them
whose decision shall be final. The share of the retiring or deceased partner
in the aforementioned two (2) floor office condominium shall be
determined upon the basis of the valuation above mentioned which shall be
paid monthly within the first ten (10) days of every month in installments of
not less than P20,000.00 for the Senior Partners, P10,000.00 in the case of
two (2) existing Junior Partners and P5,000.00 in the case of the new Junior
Partner. 11

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 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 4 but
that it can result in a liability for damages.
In passing, neither would the presence of a period for its specific duration or
the statement of a particular purpose for its creation prevent the dissolution
of any partnership by an act or will of a partner. 6 Among partners, 7 mutual
agency arises and the doctrine of delectus personae allows them to have
the power, although not necessarily theright, to dissolve the partnership. An
unjustified dissolution by the partner can subject him to a possible action
for damages.
The dissolution of a partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the carrying on, as might
be distinguished from the winding up of, the business. Upon its dissolution,
the partnership continues and its legal personality is retained until the
complete winding up of its business culminating in its termination.
The liquidation of the assets of the partnership following its dissolution is
governed by various provisions of the Civil Code; 10 however, an agreement
of the partners, like any other contract, is binding among them and normally
takes precedence to the extent applicable over the Code's general
provisions. We here take note of paragraph 8 of the "Amendment to Articles
of Partnership" reading thusly:
. . . In the event of the death or retirement of any partner, his interest in the
partnership shall be liquidated and paid in accordance with the existing
agreements and his partnership participation shall revert to the Senior
Partners for allocation as the Senior Partners may determine; provided,
however, that with respect to the two (2) floors of office condominium
which the partnership is now acquiring, consisting of the 5th and the 6th
floors of the Alpap Building, 140 Alfaro Street, Salcedo Village, Makati,
Metro Manila, their true value at the time of such death or retirement shall

The term "retirement" must have been used in the articles, as we so hold, in
a generic sense to mean the dissociation by a partner, inclusive of
resignation or withdrawal, from the partnership that thereby dissolves it.

16. G.R. No. 110782 September 25, 1998


IRMA
IDOS, petitioner,
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
Facts:

Eddie Alarilla supplied chemicals and rawhide to Irma L. Idos for use in the
latter's business of manufacturing leather.
In 1985, he joined the accused-appellant's business and formed with her a
partnership under the style "Tagumpay Manufacturing," with offices in
Bulacan and Cebu City.
However, the partnership was short lived. In January, 1986 the parties
agreed to terminate their partnership.
Upon liquidation of the business the partnership had as of May 1986
receivables and stocks worth P1,800,000.00. The Alarilla share of the assets
was P900,000.00 to pay for which Irma Idos issued 4 postdated checks
The complainant was able to encash the first, second, and fourth checks, but
the third check which is the subject of this case, was dishonored on October
14, 1986 for insufficiency of funds.
The complainant demanded payment from the accused-appellant but the
latter failed to pay.
Accordingly, on December 18, 1986, through counsel, he made a formal
demand for payment. (Exh. B) In a letter dated January 2, 1987, the
accused-appellant denied liability. She claimed that the check had been
given upon demand of complainant in May 1986 only as "assurance" of his
share in the assets of the partnership and that it was not supposed to be
deposited until the stocks had been sold.

Dissolution is the change in the


relation of the partners caused
by any partner ceasing to be
associated in the carrying on of
the business (Art. 1828). It is
that point of time the time the
partners cease to carry on the
business tonether. (Citation
omitted).

Complainant then filed his complaint in the Office of the Provincial Fiscal
of Bulacan which on August 22, 1988 filed an information for violation of
BP Blg. 22 against accused-appellant
The lower court found Idos guilty

ISSUE: Whether the subject check was issued by petitioner to apply on account or
for value, that is, as part of the consideration of a "buy-out" of said complainant's
interest in the partnership, and not merely as a commitment on petitioner's part to
return the investment share of complainant, along with any profit pertaining to said
share, in the partnership
(2) Winding Up Defined

Winding up is the process of


settling business affairs of
dissolution.

HELD: The check was issued merely to evidence the complainant's share in the
partnership property, or to assure the latter that he would receive in time his due
share therein

In the present case, with regard to the first issue, evidence on record would
show that the subject check was to be funded from receivables to be
collected and goods to be sold by the partnership, and only when such
collection and sale were realized.
There is sufficient basis for the assertion that Idos issued the subject check
(Metrobank Check No. 103115490 dated October 30, 1986, in the amount
of P135,828.87) to evidence only complainant's share or interest in the
partnership, or at best, to show her commitment that when receivables are
collected and goods are sold, she would give to private complainant the net
amount due him representing his interest in the partnership. It did not
involve a debt of or any account due and payable by the petitioner.
Two facts stand out. Firstly, three of four checks were properly encashed by
complainant; only one (the third) was not. But eventually even this one was
redeemed by petitioner. Secondly, even private complainant admitted that
there was no consideration whatsoever for the issuance of the check, whose
funding was dependent on future sales of goods and receipts of payment of
account receivables.
Now, it could not be denied that though the parties petitioner and
complainant had agreed to dissolve the partnership, such ageement did
not automatically put an end to the partnership, since they still had to sell
the goods on hand and collect the receivables from debtors. In short, they
were still in the process of "winding up" the affairs of the partnership, when
the check in question was issued.

Under the Civil Code, the three final stages of a partnership are (1) dissolution; (2)
winding-up; and (3) termination. These stages are distinguished, to wit:
(1) Dissolution Defined

(NOTE: Examples of winding


up: the paying of previous
obligations; the collecting of
assets previously demandable;
even new business if needed to
wind up, as the contracting
with a demolition company for
the demolition of the garage
used in a "used car"
partnership.)
(3) Termination Defined
Termination is the point in time after all the partnership affairs have been wound
up. 16 [Citation omitted] (Emphasis supplied).
These final stages in the life of a partnership are recognized under the Civil Code
that explicitly declares that upon dissolution, the partnership is not terminated, to
wit:
Art 1828. The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding up
of the business.
Art. 1829. On dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs is completed.
(Emphasis supplied.)

Since the partnership has not been terminated, the petitioner and private
complainant remained as co-partners. The check was thus issued by the
petitioner to complainant, as would a partner to another, and not as payment
from a debtor to a creditor.The more tenable view, one in favor of the
accused, is that the check was issued merely to evidence the complainant's
share in the partnership property, or to assure the latter that he would
receive in time his due share therein.
For there is nothing on record which even slightly suggest that petitioner
ever became interested in acquiring, much less keeping, the shares of the
complainant.
What is very clear therefrom is that the petitioner exerted her best efforts to
sell the remaining goods and to collect the receivables of the partnership, in
order to come up with the amount necessary to satisfy the value of
complainant's interest in the partnership at the dissolution thereof.
To go by accepted custom of the trade, we are more inclined to the view
that the subject check was issued merely to evidence complainant's interest
in the partnership. Thus, we are persuaded that the check was not intended
to apply on account or for value; rather it should be deemed as having been
drawn without consideration at the time of issue.

ISSUE: WON Idos committed a violation of BP 22


HELD: NO
RATIO:

In the case at bar, as earlier discussed, petitioner issued the check merely to
evidence the proportionate share of complainant in the partnership assets
upon its dissolution. Payment of that share in the partnership was
conditioned on the subsequent realization of profits from the unsold goods
and collection of the receivables of the firm. This condition must be
satisfied or complied with before the complainant can actually "encash" the
check. The reason for the condition is that petitioner has no independent
means to satisfy or discharge the complainant's share, other than by the
future sale and collection of the partnership assets. Thus, prior to the selling
of the goods and collecting of the receivables, the complainant could not, as
of yet, demand his proportionate share in the business. This situation would
hold true until after the winding up, and subsequent termination of the
partnership. For only then, when the goods were already sold and
receivables paid that cash money could be availed of by the erstwhile
partners.
Complainant did not present any evidence that petitioner signed and issued
four checks actually knowing that funds therefor would be insufficient at
the time complainant would present them to the drawee bank. For it was
uncertain at the time of issuance of the checks whether the unsold goods

would have been sold, or whether the receivables would have been collected
by the time the checks would be encashed. As it turned out, three were fully
funded when presented to the bank; the remaining one was settled only later
on.
Since petitioner issued these four checks without actual knowledge of the
insufficiency of funds, she could not be held liable under B.P. 22 when one
was not honored right away. For it is basic doctrine that penal statutes such
as B.P. 22 "must be construed with such strictness as to carefully safeguard
the rights of the defendant . . ." 24 The element of knowledge of
insufficiency of funds has to be proved by the prosecution; absent said
proof, petitioner could not be held criminally liable under that law.
Moreover, the presumption of prima facie knowledge of such insufficiency
in this case was actually rebutted by petitioner's evidence.

17. Rojas vs. Maglana


FACTS:
On January 14, 1955, Maglana and Rojas executed their Articles of Co-Partnership
(Exhibit "A") called Eastcoast Development Enterprises (EDE) with only the two of
them as partners. The partnership EDE with an indefinite term of existence was duly
registered on January 21, 1955 with the Securities and Exchange Commission.
One of the purposes of the duly-registered partnership was to "apply or secure timber
and/or minor forests products licenses and concessions over public and/or private
forest lands and to operate, develop and promote such forests rights and
concessions."
Under the said Articles of Co-Partnership, appelleeMaglana shall manage the
business affairs of the partnership, including marketing and handling of cash and is
authorized to sign all papers and instruments relating to the partnership, while
appellant Rojas shall be the logging superintendent and shall manage the logging
operations of the partnership. It is also provided in the said articles of co-partnership
that all profits and losses of the partnership shall be divided share and share alike
between the partners.
Because of the difficulties encountered, Rojas and Maglana decided to avail of the
services of Pahamotang as industrial partner.
Aside from the slight difference in the purpose of the second partnership which is to
hold and secure renewal of timber license instead of to secure the license as in the
first partnership and the term of the second partnership is fixed to thirty (30) years,
everything else is the same.
On October 25, 1956, Pahamotang, Maglana and Rojas executed a document entitled
"CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP, EASTCOAST
DEVELOPMENT ENTERPRISE" (Exhibits "C" and "D") agreeing among

themselves that Maglana and Rojas shall purchase the interest, share and
participation in the Partnership of Pahamotang assessed in the amount of P31,501.12

pursued the same purposes and the capital contributions of Rojas and Maglana as
stipulated in both partnerships call for the same amounts.

After the withdrawal of Pahamotang, the partnership was continued by Maglana and
Rojas without the benefit of any written agreement or reconstitution of their written
Articles of Partnership

fact that Maglana on March 17, 1957, wrote Rojas, reminding the latter of his
obligation to contribute either in cash or in equipment, to the capital investment of
the partnership as well as his obligation to perform his duties as logging
superintendent. This reminder cannot refer to any other but to the provisions of the
duly registered Articles of Co-Partnership. As earlier stated, Rojas replied that he
will not be able to comply with the promised contributions and he will not work as
logging superintendent. By such statements, it is obvious that Roxas understood what
Maglana was referring to and left no room for doubt that both considered themselves
governed by the articles of the duly registered partnership.

On January 28, 1957, Rojas entered into a management contract with another
logging enterprise, the CMS Estate, Inc. He left and abandoned the partnership
On February 4, 1957, Rojas withdrew his equipment from the partnership for use in
the newly acquired area
The equipment withdrawn were his supposed contributions to the first partnership
and was transferred to CMS Estate, Inc. by way of chattel mortgage
On March 17, 1957, Maglana wrote Rojas reminding the latter of his obligation to
contribute, either in cash or in equipment, to the capital investments of the
partnership as well as his obligation to perform his duties as logging superintendent.
Two weeks after March 17, 1957, Rojas told Maglana that he will not be able to
comply with the promised contributions and he will not work as logging
superintendent. Maglana then told Rojas that the latter's share will just be 20% of the
net profits. Such was the sharing from 1957 to 1959 without complaint or dispute
Meanwhile, Rojas took funds from the partnership more than his contribution.
Maglana notified Rojas that he dissolved the partnership
Rojas filed an action before the Court of First Instance of Davao against Maglana for
the recovery of properties, accounting, receivership and damages.
ISSUE:
1.The main issue in this case is the nature of the partnership and legal relationship of
the Maglana-Rojas after Pahamotang retired from the second partnership.
2.whether or not Maglana can unilaterally dissolve the partnership in the case at bar
RULING:
1.After a careful study of the records as against the conflicting claims of Rojas and
Maglana, it appears evident that it was not the intention of the partners to dissolve
the first partnership, upon the constitution of the second one, which they
unmistakably called an "Additional Agreement" Except for the fact that they took in
one industrial partner; gave him an equal share in the profits and fixed the term of
the second partnership to thirty (30) years, everything else was the same. Thus, they
adopted the same name, EASTCOAST DEVELOPMENT ENTERPRISES, they

Under the circumstances, the relationship of Rojas and Maglana after the withdrawal
of Pahamotang can neither be considered as a De Facto Partnership, nor a
Partnership at Will, for as stressed, there is an existing partnership, duly registered.
2. Yes
Hence, as there are only two parties when Maglana notified Rojas that he dissolved
the partnership, it is in effect a notice of withdrawal.
Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one
partner can cause its dissolution by expressly withdrawing even before the expiration
of the period, with or without justifiable cause. Of course, if the cause is not justified
or no cause was given, the withdrawing partner is liable for damages but in no case
can he be compelled to remain in the firm. With his withdrawal, the number of
members is decreased, hence, the dissolution. And in whatever way he may view the
situation, the conclusion is inevitable that Rojas and Maglana shall be guided in the
liquidation of the partnership by the provisions of its duly registered Articles of CoPartnership; that is, all profits and losses of the partnership shall be divided "share
and share alike" between the partners.
It is a settled rule that when a partner who has undertaken to contribute a sum of
money fails to do so, he becomes a debtor of the partnership for whatever he may
have promised to contribute (Article 1786, Civil Code) and for interests and damages
from the time he should have complied with his obligation (Article 1788, Civil
Code) (Moran, Jr. v. Court of Appeals, 133 SCRA 94 [1984]). Being a contract of
partnership, each partner must share in the profits and losses of the venture. That is
the essence of a partnership.
18. Philex Mining Corp vs. CIR
FACTS:
Petitioner entered into an agreement withBaguio Gold, where the former agreed
tomanage the mining operations of the latter. The agreement was evidenced by a
Powerof Attorney. It was indicated in the saiddocument, that Baguio Gold would

contribute P11M under its owner's account plus any of its income that is left in the
project, in addition to its actual mining claim. Meanwhile, petitioner's contribution
would consist of its expertise in the management and operation of mines, aswell as
the manager's account which is comprised of P11M in funds and property and
petitioner's "compensation" asmanager that cannot be paid in cash. The mining
suffered serious loses whichended business of both parties evidenced bytheir
execution of a compromiseagreement. The CIR assessed Philex Mining for
taxdeficiencies. It stressed that Philex enteredinto a partnership with Baguio
Gold.Petitioner denied the allegations of the CIRand maintained that its advances of
moneyand property to Baguio Gold were in a natureof a loan as evidenced by the
compromiseagreement.

venture, which is akin to a particular partnership. The PA indicates that the parties
had intended to create a PAT and establish a common fund for the purpose. They
also had a joint interest in the profits of the business as shown by the 50-50 sharing
of income of the mine.

ISSUE: 1. W/N Philex and Baguio Mining formedpartnership.


2. Whether or not it is an agency

19. Grimm vs Parsons

RULING:

Moreover, in an agency coupled with interest, it is the agency that cannot be revoked
or withdrawn by the principal due to an interest of a third party that depends upon it
or the mutual interest of both principal and agent. In this case the non-revocation or
non-withdrawal under the PA applies to the advances made by the petitioner who is
the agent and not the principal under the contract. Thus, it cannot be inferred from
the stipulation that it is an agency.

Facts:

The relationship of the parties may begleaned upon the power of attorney
document entered between the two.

Parsons and Edward Miller Grimm formed in 1952 a partnership in the import/export
and real estatebusiness. At the core of the controversy is a stock certificate of the
Manila Golf & Country Club, Inc.("MGCC" or the "Club", for short) covered by
Membership Certificate (MC) No. 1088 for 100 units,the playing rights over which
the Rizal Commercial Banking Corporation (RCBC), the court-appointed receiver,
had, in the meantime, leased out.

An examination of the "Power of Attorney" reveals that a partnership or joint venture


was indeed intended bythe parties. Under a contract of partnership, two or more
persons bindthemselves to contribute money,property, or industry to a commonfund,
with the intention of dividing theprofits among themselves.

The Club issued MC No. 1088 to replace MCNo. 590. Asserting clashing ownership
claims over MC No.1088, albeit recorded in the name ofCharles Parsons ("Parsons",
hereinafter) are petitioner Estate of Edward Miller Grimm andrespondent G-P and
Company Parsons and Grimm each owned proprietary membership share inMGCC.

The term compensation found in thesaid document could not be deemedas


wages. It is impossible for a company to give a salary to anemployee representing
50% of its netprofit.

After Grimm's demise on November 27, 1977, Parsons and Simon continued with
thepartnership under the same name, GP and Company, The articles of the
partnership undergoanother amendment to admit Parsons' son, Patrick, in the
partnership.

1.Yes. The parties entered into thecompromise agreements as aconsequence of the


dissolution of theirbusiness relationship. It did not definethat relationship or indicate
its realcharacter.

While a corporation, like petitioner,cannot generally enter into a contractof


partnership unless authorized bylaw or its charter, it has been held thatit may enter
into a joint venture whichis akin to a particular partnership:
under Philippine law, a joint venture isa form of partnership and should begoverned
by the law of partnerships

2. The lower courts correctly held that the Power of Attorney (PA) is the
instrument material that is material in determining the true nature of the business
relationship between petitioner and Baguio. An examination of the said PA reveals
that a partnership or joint venture was indeed intended by the parties. While a
corporation like the petitioner cannot generally enter into a contract of partnership
unless authorized by law or its charter, it has been held that it may enter into a joint

After Parsons died, anamended articles of partnership was executed on September


23, 1988 by and among Parsons'heirs, namely, Patrick, Michael, Peter and Jose, all
surnamed Parsons legal dispute started whenbrothers Patrick and Jose rejected the
existence of a trust arrangement between their father andGrimm involving MC No.
1088 the Estate of Grimm filed on August 31, 1992 before the RTC ofMakati City
the Estate of Grimm, represented by its judicial administrator, Ramon J.
Quisumbing,
alleged, among other things, the following:
1.
2.

Grimm transferred MC No. 590 in trust to Parsons,


That inseparate letters dated February 28, 1968 addressed to MGCC, both
Grimm and Parsons stated thatthe transfer of MC No. 590 was temporary.

3.

4.

That Patrick and Jose Parsons had, when reminded ofthe trust arrangement
between their late father and Grimm, denied the existence of a trust over
theClub share and refused to return the same Patrick Parsons averred that
his father was, with respectto MC No. 1088, a mere trustee of the true
owner thereof, G-P & Co., and alleged, by way of affirmative defense,
that the claim set forth in the complaint is unenforceable, barred inter alia
by thedead man's statute, prescription or had been waived or abandoned. the
trial court rendered decision

Ordering defendants ESTATE OF CHARLES PARSONS and PATRICK C.


PARSONS: to turn over[MC] No. 1088 to plaintiff ESTATE OF EDWARD
MILLER GRIMM;there after the petitionersappealed to the CA and the rtc decision
was reversed and set aside
ISSUE:
whether or not the transfer of MC No. 590 effected on September 7, 1964 by Grimm
in favorof Parsons resulted, as the petitioner would have it, in the formation of a trust
relation between thetwo, thus formed, the trust relationship would preclude the
trustee from disposing of the trustproperty
RULING:
Trust is the legal relationship between one having an equitable ownership in property
and anotherperson owning the legal title to such property, the equitable ownership of
the former entitling him tothe performance of certain duties and the exercise of
certain powers by the latter. Trust relationsbetween parties may be express, as when
the trust is created by the intention of the trustor.
Anexpress trust is created by the direct and positive acts of the parties, by some
writing or deed or bywords evidencing an intention to create a trust
Judging from their documented acts immediatelybefore and subsequent to the actual
transfer on September 7, 1964 of MC No. 590, Parsons, astransferee, and Grimm, as
transferor, indubitably contemplated a trust arrangement. Consider: In all,the facts
and circumstances attendant militate against the CA's finding pointing to G-P & Co.
as thebeneficial owner of MC No. 1088. What the evidence adduced instead proved
beyond cavil is thatGrimm or his estate is such owner. We therefore reverse.
decision of the Court