Case name and summed facts

Principles relevant to partnership

1.LYONS vs Rossentock, ELSER ( THE SAN JUAN

VENTURE CASE )

INTENT TO CREATE PARTNERSHIP

Mortgage property vs. the intention

Elser at first used the carriedo property as

mortgage for loan when he thought and expected
that Lyons would join him in the venture on Carriedo
property, but later on relieved it because he found
out from Lyons himself that Lyons is not joining the
project, but when Lyons came back from abroad, he
consented
Issue; whether or not Lyon is entitled to the 446k
and 2/3 shares of the JK pickering as the property
mortgaged thereon to aquire the same is co-owned
by him.
2. JM Tuazon vs Bolanos case ( MANAGING
PARTNER CASE )
This case arose because Defendant Bolanos claimed
that Gregorio Araneta,Inc. cannot act as managing
partner for plaintiff on the theory that it is illegal for
the two corporations to enter into partnership.

Ruling: no because he already manifested his desire not to be

a part of the Carriedo project. The mortgage of the land was
immaterial to the existence of partnership. It was clear that
Elser was not acting for any partneship composed of him and
Lyons, and the law could not be distorted into a proposition
which would make Lyons a participant in this deal. Contrary to
his express determination.

TOPIC: CLASSISFICATION OF PARTNERSHIP

PARTNERSHIP VS. JOINT VENTURE
An action brought in the name of, not necessarily by the real
party in interest.In fact the practice is for an attorney-at-law
to bring the action, that is to file the complaint, in the name
of the plaintiff. That practice appears to have been followed in
this case, since the complaint is signed by the law firm
of Araneta and Araneta, "counsel for plaintiff" and
commences with the statement "comes now plaintiff,
through its undersigned counsel.
As a rule, two corporations cannot enter into a partnership.
Nevertheless, a corporation may enter into a joint venture

with another where the nature of that venture is in line with

the business authorized by its charter.
In this case, there is nothing in the record to indicate that the
venture in which plaintiff is represented by Gregorio Araneta,
Inc. as its managing partner is not in line with the corporate
business of either of them.

3.LIM TONG LIM V PHIL FISHING GEAR ( FISHING

BUSINESS CASE)
FISHING BUSSINESS PARTENER RULES BY CA
Chua and Yao and Lim tong Lim purchased fishing
nets from FISHING GEAR INDUSTRIES
Petitioner filed this case arguing that he was not a
partner but a lessor because of the contract of lease
and the registration paper of the ownership of the
FB Lourdes
The trial court ruled that a partnership was
formed based on:
1. The testimonies of the witnesses
2. The compromise agreement on as follows:
a. That the parties plaintiffs and Lim agreed
to have the 4 vessels sold at 5,750,000
b. That if sold at a higher price, the money
will be divided among them at 1/3 each
c. That if sold at a lower price, the loss will
be shouldered at 1/3 each
This compromise agreement was silent as to
the nature of their obligation but joint liability

COMMON FUND
Article 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
RULE: CONTRIBUTION MAY BE IN THE FORM OF CREDIT OR
INDUSTRY, NOT NECESSARILY CASH OR FIXED ASSETS.
YES. A partnership may be deemed to exist among parties
who agree to borrow money to pursue a business and to
divide the profits or the losses that may arise
therefrom, even if it shown that they have not contributed
any capital of their own to a common fund Their
contribution may be in the form of credit or industry, not
necessarily cash or fixed assets. Being partners, they are
liable for debts incurred by or on behalf of the partnership.
In this case, the factual findings of the court show that they
engaged in the fishing business which they started by buying

can be inferred from the equal distribution of

the profits and lossamong them
THE CA AFFIRMED.
Petitioner Lim argued that he did not participate in
the purchase of the nets and the floats. That court
based its ruling on the Compromise agreement. He
argued that he is not a partner but a lessor. He just
leased the main asset of the partnership of to Chua
and Yao dated Feb 1, 1990.

boats using the money loaned from the brother of Lim Tong
Lim. Later on, their compromise agreements further revealed
their intention to divide the profits and losses from the
proceeds of the boat.
The boats, the purchase and the repair of which were
financed by the borrowed money fell under the term COMMON
FUND UNDER ART. 1767.
The contribution to the common fund need not be cash or
fixed assets but also the intangible like credits or industry.
Moreover, it is clear that the partnership is extended not only
to boats but also to the purchase of nets and floats which are
essential for the furtherance of the fishing business w ithout
which business could not have proceeded.

4. LITONJUA VS EDUARDO K. LITONJUA, SR.,

ROBERT T. YANG, ANGLO PHILS etc. ( ANNEX A
:ODEON THEATER CASE)
Cause of action:
AURELIO Litonjua, filed a case for specific
performance and accounting against his
brothers as he alleged that he and his brother
entered into a joint venture over the ODEON theater
business for the continuation of their family
business and common family funds.
Basis of action : Annex A-1

TOPIC: HOW PARTNERSHIP IS FORMED:

LACK OF DOCUMENTS REQUIRED UNDER ARTICLE 1773 OF
THE CIVIL CODE RENDERS THE PARTNERSHIP VOID HENCE
NO JURIDICAL PERSONALITY EVEN AS BETWEEN THE PARTIES
1771 SAYS IT MUST BE IN PUBLIC INSTRUMENT, IN
CONNECTION TO IT, REAL PROP CAN ONLY BE IN PUBLIC
INSTRUMENT ONCE SIGNED.
And if only to stress what has repeatedly been articulated, 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 it.

You have now your own life to live after having been married. .
I am trying my best to mold you the way I work so you can follow the
pattern . You will be the only one left with the company, among us
brothers and I will ask you to stay as I want you to run this office every
time I am away. I want you to run it the way I am trying to run it
because I will be all alone and I will depend entirely to you (sic). My
sons will not be ready to help me yet until about maybe 15/20 years
from now. Whatever is left in the corporation, I will make sure that you
get ONE MILLION PESOS (P1,000,000.00) or ten percent (10%) equity,
whichever is greater. We two will gamble the whole thing of what I have
and what you are entitled to. . It will be you and me alone on this. If
ever I pass away, I want you to take care of all of this. You keep my
share for my two sons are ready take over but give them the chance to
run the company which I have built.
xxx xxx xxx
Because you will need a place to stay, I will arrange to give you first
ONE HUNDRED THOUSANDS PESOS: (P100, 000.00) in cash or asset,
like Lt. Artiaga so you can live better there. The rest I will give you in
form of stocks which you can keep. This stock I assure you is good and
saleable. I will also gladly give you the share of Wack-Wack and Valley
Golf because you have been good. The rest will be in stocks from all the
corporations which I repeat, ten percent (10%) equity. [6]

A partnership may be constituted in any form, save

when immovable property or real rights are
contributed thereto or when the partnership has a
capital of at least P3,000.00, in which case a public
instrument shall be necessary.[25] And if only to
stress what has repeatedly been articulated, 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 it.
MY QUESTION IS, DOES THIS INCLUDE THIRD

1773 provides that partnership is void when an immovable

property is contributed and no inventory is done signed by
the parties and attached to the public instrument.
In this case, Annex A- 1 is unsigned and undated, hence, it
does not meet the requirements under art 1771 thus cannot
be presented for notarization in SEC as called for under
art.1772 and in 1773 petitioner himself admitted contributing
its share in the supposed shipping, movie thearters and realty
development family business which already owned
immovable even before annex 1-a was allegedly executed.

PERSON? Like that in the TORRES case where the

status of the patnership is void due to absence of
art 1773 compliance but the court considered it an
ordinary contract as regards parties thereto and
obligations to each other may be inferred and
enforced.

5. AFISCO VS CA ( THE INSURANCE POOL CASE)

RULE : UNREGISTERED PARTNERSHIPS ARE

CONSIDERED CORPORATIONS FOR TAX PURPOSES

CAUSE OF ACTION : THCA ruling: The pool of

machinery insurers created by herein petitioners are
taxed as partnership by corporation and that that
latters collection of premiums on behalf of its
members, the ceding companies, was taxable
income.

RULING: YES BY VIRTUE OF SECTION 24 OF THE NIRC.

Petitioner contended :
1. Not solidary. REASON: policy were written by
them individually and separately and their
liability was limited to the extent of their
allocated share in the original risks thus
reinsured
2. did not contribute to the common fund.
3. Could not have entered into the pool/clearing
house for business as it could earn in itself as
business inb itself.
SCS CONTENTION
The fact that the pool does not retain any profit
does not obliterate the fact that pool is used for the

Section 24(tax on domestic corporations) of the NIRC

includes in the concept of corporation those entities that
resembled them such as unregistered partnerships an
associations. And that corporation shall include partnerships
no matter how created but not the general professional when
no part of the income of which is from engaging in any trade
or business.
IN this case:
1. the pool entered into by petitioners had a common
fund , consisting of money and other valuables that are
deposited in the name and credit of the pool
2. The pool functions through an executive board which
resembles the BOD of a corporation, composed of one
rep for each one of the ceding companies
3. although the pool is not in itself a reinsurer and nor
does it issue insurance policy, its work is indispensable,
beneficial and economically useful to the ceding

transaction of business for profit . if together, they

have conducted a business, they must have , profit
must have been the object then.
6. ARBES VS POLITISCO CASE ( charitable
institution)
Cause of action :
The declaration of the CA to return the contribution
to Polistico associations administrators.
Petitioner contended that the fund should be given
to charitable institution and that they should be a
party to the case.
It added that since partnership is juridically non
existent it must not give rise to an action in favor of
the partners to judicially demand from the manager
or the administrator of the partnership capital of
each ones contribution
Court: The partners limited tehiir demands to
demanding only the amount contributed by them so
no need to resort to the paetnership contract on
which to base his action.
7. PASCUAL VS CIR (THE BROTHERS taxed as
corpo )

companies and munich and without it they would have

not received their premium.
UNLAWFUL PARTNERSHIP, RETURNED TO THE
PARTNERS if the recovery action is for contribution not
for the profits earned in the course of partnership
SC
No, the fund lawfully belongs to the administrator of Polistico
because what they were recovering was not profit but
contribution.
Under art. 1666, contribution of unlawful partnerships
dissolved lawfully will belong to the administrator if the
recovery action is for contribution.
Because the action in this case is not based on the contract
of partnership but just on the money claim. Unlike when
action is for profits. It would be otherwise.

TOPIC: ARTICLE 1769 : RULES IN DETERMINING

WHETHER PARTNERSHIP EXISTS

CAUSE OF ACTION : taxed as corporations

RULING SC: Not corporations but CO-OWNERSHIP

Petitioners herein maintained that they are not

partners but co-owners because the requisites for
partnerships are lacking.

They are Co-owners The two requisites for partnerships are:

Agreement to contribute money ,property or industry to the

common fund and the intent to divide profits among

themselves.
. The issue in this case is whether petitioners are
subject to the tax on corporations provided for in
section 24 of Commonwealth Act No. 466, otherwise
known as the National Internal Revenue Code, as
well as to the residence tax for corporations and the
real estate dealers' fixed tax. With respect to the tax
on corporations, the issue hinges on the meaning of
the terms corporation and partnership as used in
sections 24 and 84 of said Code, the pertinent parts
of which read:

In this case:
1. There was no evidence showing that they have in fact
agreed to contribute in the common fund unlike in the
case of Evangelista. The common ownership of
property does not itself create a partnership
between the owners, though they may use it for
purpose of making gains, and they may without
becoming partners; agree among themselves to the
management, and use of such property and
applications of the proceeds thereon.
2. The sharing of returns does not in itself establish
a partnership whether or not the persons sharing
therein have a joint or common right or interest in the
property.
There must be A CLEAR INTENT to form a partnership. The
existence of a juridicam personality different from the
individual partners and the freedom to transfer ot assign the
whole property.
In the present case, there is clear evidence of co-ownership
between the petitioners. There is no adequate basis to
support the proposition that they thereby formed an
unregistered partnership. The two isolated transactions
whereby they purchased properties and sold the same a few
years thereafter did not thereby make them partners. They
shared in the gross profits as co- owners and paid their capital
gains taxes on their net profits and availed of the tax amnesty
thereby. Under the circumstances, they cannot be considered

to have formed an unregistered partnership which is thereby

liable for corporate income tax, as the respondent
commissioner proposes.

8. EVANGELISTA CASE THE SISTERS TAXED

(INCOME,REAL ESTATE AND RESIDENCE)

TOPIC: ELEMENTS OF PARTNERSHIP: All present in this case.

PETITIONERS SUBJECT TO TAX ON CORPORATION

Nature of the case : Herein petitioners seek a review

of CTAs decision holding them liable for income tax,
real estate dealers tax and residence tax
Basis: They are mere co-owners, not copartners, for,
in consequence of the acts performed by them, a
legal entity, with a personality independent of that
of its members, did not come into existence, and
some of the characteristics of partnerships are
lacking in the case at bar. This pretense was
correctly rejected by the Court of Tax Appeals.
The issue hinges on the meaning of the terms
corporation and partnership as used in Section
24 (provides that a tax shall be levied on every
corporation no matter how created or organized
except general co-partnerships) and 84 (provides
that the term corporation includes among others,
partnership) of the NIRC.

REASONS:
1. The 2 elements of partnerships are: (1) 2 or more
persons agreed to contribute money property or
industry (2) Intent to divide the profit among
themselves.
THE FIRST ELEMNT is present in this case, the petitioners had
in fact agreed to contribute money and property to the
common fun .
As regards the second element, considering the factual
circumtances of this case, it is shown that the purpose was to
engage in the real estate transactions and then divide the
same among themselves
Accordingly, the lawmaker could not have regarded that
personality as a condition essential to the existence of the
partnerships therein referred to. For purposes of the tax on
corporations, NIRC includes these partnerships - with the
exception only of duly registered general co partnerships -

within the purview of the term "corporation." It is,

therefore, clear that petitioners herein constitute a
partnership, insofar as said Code is concerned and are
subject to the income tax for corporations.

1.
2.
3.
4.
5.

Fund created purposely. Borrowed from their father.

Invested fund in several transactions
Said properties not devoted for residential purposes
Under management of one person
Already existed for more than 10 years.

As regards the residence of tax for corporations

(Section 2 of CA No. 465), it is analogous to that of
section 24 and 84 (b) of the NIRC. It is apparent that
the terms "corporation" and "partnership" are used in
both statutes with substantially the same meaning.
Consequently, petitioners are subject, also, to the
residence tax for corporations.
3. Liable also for REAL ESTATE dealers TAX because of
their habitual engagement in the leasing whose yearly
gross rental exceeds 3,000.
For purposes of the tax on corporations, NIRC includes these
partnerships - with the exception only of duly registered
general co partnerships - within the purview of the term
"corporation." It is, therefore, clear that petitioners herein
constitute a partnership, insofar as said Code is concerned
and are subject to the income tax for corporations.
TOPIC :article 1767

Heirs of JOSE LIM represented by

Elenito vs Juliet Villa Lim ( The PAD in
9.

TrUCKING BUSINESS of Lim)

Cause : The CA ruled unfavorably to the prayer of
the petitioner on partition, accounting and damages
over the property of the late predecessor JOSe LIm.
PETITIONER contended that Jose was the liason
officer of the INterwood sawmill and that when he
died, Elfledo managed it being the son of Jose but
he was never a partner to the business and by that
time it ceased, it already had 9 trucks under
Elflledos name
Respondent Juliet Villa Lim contended that when
Jose died, the partnership was extinguished already
and that it was her husband who continued and
through her husbands effort the business became
succesfful. And since, the property is conjugal she
has the right to refuse PAD

RULING:
Partnership exists where parties agree to contribute money,
property or industry to a common fund with the intention of
dividing profits among themselves.
Pursuant to the abovementioned rule,art. 1767 states the rule
when partnership exists:
1. Persons who are not partners among themselves are
not partners as to third persons
2. Co-ownership does not of itself establish partnership
3. Gross return sharing does not of itself establish
partnership
4. The receipts of a share in profits is a prima facie
evidence of partnership except if made as payment for:
1. Debt
2. Wages
3. Annuity
4. Interest in loan
5. Consideration for the sale of goodwill.
Applying Art 1767 to the legal facts of this case, the
circumstances as follows show that Elfledo is indeed a
partner:
1.
Testimony that Jose was given 50,000 by his father late
Jose on the date that coincided with the initial payment on
the partnership was given
2.
Elfledo ran the partnership with absolute authority with
no intervention from petitioners
3.
He did not receive a salary from partnership, instead
shared from income and profits.

4.
All 9 trucks were named under Elfledo
5.
None of herein petitioners ever demanded for a
periodic accounting as evidence of partnership during
the lifetime of Elfledo
Furthermore, petitioners failed to adduce any evidence to
show that the real and personal properties acquired and
registered in the names of Elfledo and respondent formed
part of the estate of Jose, having been derived from Jose's
alleged partnership with Jimmy and Norberto.(DOCUMENTARY
EVIDENCE PREVAILS OVER ORAL EVIDENCE.
10 .Lamberto Chua vs Lilibeth Sunga et al ( VERBAL
AGREEMENT: DECEASED Jacintos SHELLITE GAS )
Cause of action: Despite respondents repeated
demands upon petitioners for accounting, inventory,
appraisal, winding up and restitution of his net
shares in the partnership, petitioners failed to
comply.
Petition grounds
1. 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.
2. ran out of alibis and reasons to evade
respondents demands, she disbursed out of
the partnership funds the amount of
P200,000.00 and partially paid the same to
respondent
In a desperate bid to cast doubt on the validity of

VERBAL AGREEMENT SO LONG AS PROVED

CONVINCINGLY PREVAILS OVER THE REQUIREMENT OF
ART 1772( 3K RULE )
Ruling:
Yes, a verbal contract of partnership may arise as partnership
may be constituted in any form.
Petitioners reliance on the DEAD MANS STATUTE to defeat
respondents claim cannot prevail over the factual findings of
the trial court and the CA that a partnership was established
between respondent and Jacinto.
In this case, the intention of the parties to form partnership
was ascertained base on the testimonial and documentary
evidence
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.

the oral partnership between respondent and

Jacinto, petitioners maintain that said partnership
that had an 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.

Article 1768 of the Civil Code[25] 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.

`11. Cir vs SUTER

CAUSE OF ACTION: Arose when the Suter and
Spielbergs individual income were consolidated
with the income of the firm thus resulted into a
deficiency.
CIRs contention:
that the marriage of the two dissolved the
partnership and hence their income tax should
include his and his wifes individual income and
their limited partnership under

Section 45(d) of the NIRC which provides as

follows:

TOPIC: ARTICLE 1768 : partnership has a

juridical personality separate and distinct
from that of each of the partner.
There must be no separate tax for the individual
income of the couple since they are partners deemed
by law.
1. Their partnership is not among those forbidden
under Article 1677 civil code 1889. Theirs was
not a general partnership when the
contributions of the partners were fixed sums of
money and neither one of them was an industrial
partner, it follows then that their partnership is
not a partnership wherein spouses are forbidden
to enter. Nor could the subsequent marriage of

(d) Husband and wife. In the case of married

persons, whether citizens, residents or nonresidents, only one consolidated return shall be filed
by either spouse to cover the income of both
spouses.
SUTER contended that Williams marriage with
Spirig and their acquisition of Carlsons interest in
the partnership is not a ground for the dissolution of
the partnership and that since its juridical
personality is not affected and that since it is a
limited partnership unlike the duly registered
general partnership, it is taxed like a corporation.

12. Aurbach vs Sanitary wares

Cause of action: the main issue hinges on who were
the duly elected directors of Saniwares for the year
1983 during its annual stockholders' meeting held
on March 8, 1983.
To answer this question the following factors should

the partners operate to dissolve it,such marriage

being one of those causes provided for that
purpose.
3. The MARRIAGE of the partners does not make
the company a sole proprietorship as their
capital contribution were separately owned
before their marriage and after they were joined
in their wedlock, such contribution remained
their respective separate property.

TOPIC:
A CORPORATION CANNOT ENTER INTO A
PARTNERSHIPBUT MAY ENGAGE IN A JOINT VENTURE
WITH OTHERS SO LONG AS IT IS IN LINE WITH THE
BUSINESS AUTHORIZED BY THEIR CHARTER.
ACTUAL INTENTION DETERMINES BUSINESS RELATIONS

be determined: (1) the nature of the business

whether it was a
joint venture or a corporation and (2)
established by the parties

whether or not the ASI Group may vote their

additional 10% equity during elections of Saniwares'
board of directors.
Petitioners
Respondents:
13. TIOSEJO VS SPS BENJAMIN

14. Gatchalian v. Collector, 67 Phil 666

(1939( THE LOTTO)

Yes, the business entered into is a joint venture NOT A

CORPORATION. To determine business relations, the actual
intention of the parties must be the basis.In this case, the
examination of the agreement between the parties as well as
the testimonies of the Lagdameos show that the parties
intended to form a joint venture as shown by the history of
the organization of the Saniwares and the unusual
arrangement that governs its policy making body.

1824: Solidarily liable with the partnership for everything

chargeable to the partnership, including loss or injury caused
to the 3rd person or penalties incurred due to any wrongful
act or omission of any partner or with the authority of his copartners. Whether innocent or guilty, all the patners are
solidarily liable with the partners itself.
There was a partnership formed not only a community of
property. Partnership is when 2 or more persons agree to
contribute money, property or industry to the common fund
with the purpose of dividing the profit among themselves.
In this case, it was clear that each of them contributed money
to buy a lottery ticket with the intention of dividing among
themselves the profits which it may derived from the same. In
fact shown, Gatchalian personally went to the Sweepstakes
office as a co-partner and was indeed issued

15. Yulo v. Yang Chiao Seng

TOPIC: Article 1767: the requisites o fpartnership: 1) two or

more parties agree to contribute money property or industry

to the common fund, 2. The intention is to divide profts

maong themselves.
In this case, Seng entered into a theatre business
with Yulo using Yulos lease property. Later, the
owner of the leased property cancelled the lease
conrtract duly with Yulo, thus pendng ejectment
case.
Yuloo then demanded the payment of Seng who
then refused to pay. Thus this case.
petitioner Yulo contended that since he the
partnership with Seng has already terminbated after
the cnacellation of the mbuilding lease, he should
be the owner of the building cine Astor as epr
partnership agreemtn
Respondent contend that the agreement btween
them was not a partnership but that of lease to
subterfuge the sublease.

16 Pioneer Insurance and surety

corporation vs CA
Facts: Airline business of Lim. He decided to

In this case, the reasons why tehres no partnership are as

follows:
1. Defendant did not give the 20k capital
2. She did not participate in the business
3. She did not request for accounting of the earnings and
expenses of the business
She was absolutely silent with respect to any of the acts that
a partner should have done; all that she did was to receive
her share of P3,000 a month, which can not be interpreted in
any manner than a payment for the use of the premises
which she had leased from the owners. Clearly, plaintiff had
always acted in accordance with the original letter of
defendant of June 17, 1945 (Exh. "A"), which shows that both
parties considered this offer as the real contract between
them.
Plaintiff claims the sum of P41,000 as representing her share
or participation in the business from December, 1949. But the
original letter of the defendant, Exh. "A", expressly states that
the agreement between the plaintiff and the defendant was to
end upon the termination of the right of the plaintiff to the
lease. Plaintiff's right having terminated in July, 1949 as found
by the Court of Appeals, the partnership agreement or the
agreement for her to receive a participation of P3,000
automatically ceased as of said date.
TOPIC: DE FACTO PARTNERSHIP ( when does it not
exist)
ISSUE: whether failure to incorporate automatically resulted
into a de facto partnership

purchase a plane from JDA( Japan Domestic Airlines.

When he could not to pay it, JDA asked the surety
Pioneer insurance to pay.
(Pioneer Insurance and Surety Corporation (Pioneer, petitioner in G.R.
No. 84197) as surety executed and issued its Surety Bond No. 6639
(Exhibit C) in favor of JDA, in behalf of its principal, Lim, for the balance
price of the aircrafts and spare parts.)

Pioneer then filed a petition for the extrajudicial

foreclosure of the said chattel mortgage before the
Sheriff of Davao City. The Cervanteses and Maglana,
however, filed a third party claim alleging that they
are co-owners of the aircrafts,
These questions are premised on the petitioner's
theory that as a result of the failure of respondents
Bormaheco, Spouses Cervantes, Constancio
Maglana and petitioner Lim to incorporate, a de
facto partnership among them was created, and
that as a consequence of such relationship all must
share in the losses and/or gains of the venture in
proportion to their contribution.
17. BENJAMIN YU VS nlrc ( THE JADEWELL
Benjamin Yu filed a case for illegal dismissal plus
damages of unpaid salaries accruing from
November 1984 to October 1988, moral and
exemplary damages and attorney's fees, against
Jade Mountain, Mr. Willy Co and the other private

Ruling: Partnership inter se does not necessarily exist,for

ordinary eprsons cannot be made assume the relations of
partners as between themselves,when their purpose is that
no partnership shall exist, and it shall be implued only when
necessary to do justice between the parties. Thus, one who
takes no part except to subscribe for stock in a proposed
corporation which is never legally formed does not become a
partner with other subscribers who engage in business under
the name of the pretended coorporaiton,so as to be liable as
such in an action for the settlement of the elleged
partnership and contribution
In this case, petitioner never really ahd the intention to form a
corporation between them despite his misrepresentation. In
fact, he denied having received any amount from respondents
Bormaheco, the Cervanteses and Maglana.

2 ISSUES:
1. Whether or not old partnership of YU and as Assistant
General
Manager extinguished and replaced by new
partnership.
Ruling: The new
partnership simply took over the business enterprise
owned by the
preceding partnership, and continued using the old

respondents
The partnership and Willy Co denied petitioner's
charges, contending in the main that Benjamin Yu
was never hired as an employee by the present or
new partnership
Labor Arbiter Nieves Vivar-De Castro rendered a
decision holding that petitioner had been illegally
dismissed.
NLRC reversed:
1. Anew partnership consisting of Mr. Willy Co
and Mr. Emmanuel Zapanta had bought the
Jade Mountain business, that the new
partnership had not retained petitioner Yu in
his original position as Assistant General
Manager, and that there was no law requiring
the new partnership to absorb the employees
of the old partnership
2. the NLRC held that Benjamin Yu's claim for
unpaid wages should be asserted against the
original members of the preceding
partnership, but these though impleaded had,
apparently, not been served with summons in
the proceedings before the Labor Arbiter
petitioners side :
basic contention of petitioner is that the NLRC has
overlooked the principle that a partnership has a
juridical personality separate and distinct from that
of each of its members. Such independent legal

name of Jade
Mountain
Products
Company
Limited,
without
winding up the
business affairs of the old partnership, paying off its debts,
liquidating
and distributing its net assets, and then re-assembling the
said assets
or most of them and opening a new business enterprise.
Not only the
retiring partners but also the new partnership itself which
continued
the business of the old, dissolved, one, are liable for the
debts of the
preceding partnership
THE APPLICABLE PROVISION THOUGH IS AS FOLLOWS:
Article 1828 of the Civil Code provides as follows:
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. (Emphasis supplied)
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx xxx xxx
(b) by the express will of any partner, who must act in good
faith, when no definite term or particular undertaking is
specified;
xxx xxx xxx

personality subsists, petitioner claims,

notwithstanding changes in the identities of the
partners. Consequently, the employment contract
between Benjamin Yu and the partnership Jade
Mountain could not have been affected by changes
in the latter's membership

(2) in contravention of the agreement between the partners,

where the circumstances do not permit a dissolution under
any other provision of this article, by the express will of any
partner at any time;
2. if indeed a new partnership had come into existence,
whether petitioner Yu could nonetheless assert his
rights under his employment contract as against the
new partnership.
The liability of the new partnership,is established in
Article 1840 of the Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved
partnership are also creditors of the person or partnership
continuing the business:
Under Article 1840 above, creditors of the old Jade
Mountain are also creditors of the new Jade Mountain
which continued the business of the old one without
liquidation of the partnership affairs. Indeed, a creditor
of the old Jade Mountain, like petitioner Benjamin Yu in
respect of his claim for unpaid wages, is entitled to priority
vis-a-visany claim of any retired or previous partner insofar as
such retired partner's interest in the dissolved partnership is
concerned. It is not necessary for the Court to determine
under which one or mare of the above six (6) paragraphs, the
case at bar would fall, if only because the facts on record are
not detailed with sufficient precision to permit such
determination. It is, however, clear to the Court that under
Article 1840 above, Benjamin Yu is entitled to enforce his
claim for unpaid salaries, as well as other claims relating to
his employment with the previous partnership, against the

new Jade Mountain.