EVANGELISTA & CO v. ABAD SANTOS (G.R. No.

31684; June 28, 1973)

FACTS: On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955
the Articles of Co-partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial
partner, with herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P.
Navarro, the original capitalist partners, remaining in that capacity, with a contribution of P17,500 each. The
amended Articles provided, inter alia, that "the contribution of Estrella Abad Santos consists of her industry being
an industrial partner", and that the profits and losses "shall be divided and distributed among the partners ... in the
proportion of 70% for the first three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo
Atienza Abad Santos to be divided among them equally; and 30% for the fourth partner Estrella Abad Santos."

On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance of
Manila, alleging that the partnership, which was also made a party-defendant, had been paying dividends to the
partners except to her; and that notwithstanding her demands the defendants had refused and continued to refuse and
let her examine the partnership books or to give her information regarding the partnership affairs to pay her any
share in the dividends declared by the partnership. She therefore prayed that the defendants be ordered to render
accounting to her of the partnership business and to pay her corresponding share in the partnership profits after such
accounting, plus attorney's fees and costs.

ISSUE: Whether or not Abad Santos is an industrial partner and is entitled to the shares of the partnership?

HELD: Yes. It is not disputed that the provision against the industrial partner engaging in business for himself seeks
to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful
compliance by said partner with this prestation. That appellee has faithfully complied with her prestation with
respect to appellants is clearly shown by the fact that it was only after filing of the complaint in this case and the
answer thereto appellants exercised their right of exclusion under the codal art just mentioned by alleging in their
Supplemental Answer, subsequent to the filing of defendants' answer to the complaint, defendants reached an
agreement whereby the herein plaintiff been excluded from, and deprived of, her alleged share, interests or
participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits or income, on the
ground plaintiff has never contributed her industry to the partnership, instead she has been and still is a judge of the
City Court (formerly Municipal Court) of the City of Manila, devoting her time to performance of her duties as such
judge and enjoying the privilege and emoluments appertaining to the said office, aside from teaching in law school
in Manila, without the express consent of the herein defendants'. Having always knows as a appellee as a City judge
even before she joined appellant company as an industrial partner, why did it take appellants many yearn before
excluding her from said company as aforequoted allegations? And how can they reconcile such exclusive with their
main theory that appellee has never been such a partner because "The real agreement was to grant the appellee a
share of 30% of the net profits which the appellant partnership may realize from June 7, 1955, until the mortgage of
P30,000.00 obtained from the Rehabilitation Finance Corporal shall have been fully paid.
Duterte v Rallos (2 P 509)

Facts: Duterte (plaintiff-appellant) claimed that Rallos (defendant), and one Castro were partners in the
management of a cockpit. However, Rallos denied said claim. The court found that no such partnership
existed and ordered judgment in favor with Rallos.

It is undisputed that the plaintiff rendered services in the management of the cockpit, and that the
defendant paid him money on account of the cockpit.

Rallos, after denying that the plaintiff was his partner, testified that the profits were divided. A portion of
which was given to two friends, Duterte and Castro, but not as partners. A portion was given to Duterte
solely because he was a friend who aided and encouraged the cockpit and had no duty to perform,
except when he had to preside at the cockpit. He added that he only paid them for his pleasure, as
friends, Duterte had no legal interest.

Duterte testified that he made a verbal contract of partnership with the Rallos for this business,
uncontradicted evidence that he performed services in connection with it; that Rallos paid him the
money on account thereof and sent him accounts for three months showing his interest to be one-third
of the profits in addition to the $5 each day, and wrote him a letter in which he said that he admitted the
Duterte into the partnership in order to collect what Duterte owed him on another transaction. The
lower court found that no such partnership existed and ordered judgment for the defendant. The
plaintiff moved for a new trial, which was denied.

Issue: Whether or not Duterte and Rallos entered into a contract of partnership.

Held: Yes, Duterte and Rallos entered into a contract of partnership.

The SC have examined the evidence and are of the opinion that the finding of the lower court as to the
existence of the copartnership is manifestly against the evidence. The Court see no other way of
explaining the accounts submitted by the defendant to the plaintiff. The evidence (letters and
testimonies) presented clearly showed than that there was a partnership between them up. That there
was an agreement to share the profits is clearly proved by the accounts submitted. The plaintiff testified
that the profits and losses were to be shared equally. But even omitting this testimony, the case is
covered by article 1689 of the Civil Code, which provides that, in the absence of agreement as to the
losses, they shall be shared as the gains are. Article 1668 of the Civil Code is not applicable to the case.
No real estate was contributed by any member. The partnership did not become the owner of the
cockpit. It is undisputed that this was owned by the defendant and that the partnership paid him ten
dollars a day for the use of it. The finding of fact by the court below, that there was no partnership, at
least to September 1, 1901, was plainly and manifestly against the evidence, and for that reason a new
trial of this case must be had.

Estanislao vs CA Digest
By this petition for certiorari the Court is asked to determine if a partnership exists between members of
the same family arising from their joint ownership of certain properties.

Elijio Estanislao and Remedios Estanislao are brothers and sisters who are co-owners of certain lots at
the corner of Annapolis and Aurora Blvd., QuezonCity which were then being leased to the Shell
Company of the Philippines Limited (SHELL).

They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station
with an initial investment of P 15,000.00 to be taken from the advance rentals.

Elijio applied for the dealership (SHELL had a policy that there an only be one dealer.)

Remedios Helped in Managing the business.

parties herein entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated
that the P 15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel

a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed
by the co-owners."
Elijio submitted financial statements regarding the business to Remedios but stopped after some time

demand was made on petitioner by Remedios to render an accounting of the profits

Remedios won the case, petitioner ordered to render formal accounting of business, give Remedios her
lawful share in the profits, execute in public instrument embodying all the provisions of the partnership
agreement, and attys fees.

Elijio filed certiorari after CA affirmed decision of lower court. He raised that the court erred In
declaring that a partnership was established by and among the petitioner and the private respondents as
regards the ownership and or operation of the gasoline service station business.
Petitioner contends that because of the said stipulation cancelling and superseding that previous Joint
Affidavit, whatever partnership agreement there was in said previous agreement had thereby been
abrogated.

We find no merit in this argument

Moreover other evidence in the record shows that there was in fact such partnership agreement
between the parties. This is attested by the testimonies of private respondent Remedies Estanislao and
Atty. Angeles. Petitioner submitted to private respondents periodic accounting of the business.

There is no doubt that the parties hereto formed a partnership when they bound themselves to
contribute money to a common fund with the intention of dividing the profits among themselves

WHEREFORE, the judgment appealed from is AFFIRMED

Moran, Jr. v. CA
G.R. No. L-59956 Oct. 31, 1984

Justice Gutierrez, Jr.

Facts:

Pecson and Moran entered into an agreement for the printing of posters featuring the delegates
of the 1971 Constitutional Convention

o That 95k posters were supposed to be printed and sold at P2/each

o That each would contribute P15k

o That Moran will supervise the work, while Pecson would receive a P1k monthly
commission

Pecson gave Moran P10k for which the latter issued a receipt

Only 2k posters were printed, but each was sold for P5

o Moran then executed 2 promissory notes in favor of Pecson

Pecson then filed an action for the recovery of a sum of money for the return of his P10k
contribution, payment of his share in the profits that the partnership would have earned

TC: each party is entitled to rescind the contract since both failed to fulfill their respective
promises (Moran the printing of the 95k posters; Pecson the P15k contribution)
 CA: Moran must pay Pecson, among others, the amount of expected profits and the latters
commission in the partnership

Issue:

WON Moran is obliged to give Pecson the amount of expected profits from their partnership.

Held:

No, he is not.

Rule: 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 (Art.
1786) and for interests and damages from the time he should have complied with his obligations
(Art. 1788)

Being a contract of partnership, each partner must share in the profits and losses of the venture,
for that is the essence of partnership.

o Even in the assurance of the other partner that they would earn a huge amount of
profits, in the absence of fraud, the other cannot claim a right to recover the highly
speculative profits

o In the present case, the fantastic nature of expected profits is obvious that various
factors need to be considered

o The failure of COMELEC to proclaim all 320 candidates of the Constitutional Convention
on time was a major factor in Morans decision not to go on with the printing of all
95,000 posters

o Hidden risks in any business venture have to be considered

However, as it was shown that Pecson gave money to Moran (P10k) which the latter used to
print the first batch of posters, and since these posters were sold and profits were realized from
such sale, Pecson is entitled to recover his share of such profits

ADRIANO ARBES, ET AL vs. VICENTE POLISTICO, ET AL., G.R. No. 31057 September 7, 1929 VILLAMOR

FACTS:

This is an action to bring about liquidation of the funds and property of the association called "Turnuhan
Polistico & Co." The plaintiffs were members or shareholders, and the defendants were designated as
president-treasurer, directors and secretary of said association. This case is brought for 2 nd time. In the
1 st one, the court court held then that in an action against the officers of a voluntary association to wind
up its affairs and enforce an accounting for money and property in their possessions, it is not necessary
that all members of the association be made parties to the action. The court appointed commissioner of
Insular Auditor's Office, to examine all the books, documents, and accounts of "Turnuhan Polistico &
Co.," and to receive whatever evidence. Commissioner's report show a balance of P24, 607.80 cash on
hand. Despite defendants objection to the report, the trial court rendered judgment holding said
association is unlawful. And sentenced defendants jointly and severally to return the amount and
documents to the plaintiffs and members of the association. The Appellant alleged that the association
being unlawful, some charitable institution to whom the partnership funds may be ordered to be turned
over, should be included, as a party defendant. Referring to article 1666 of the Civil Code, which
provides: A partnership must have a lawful object, and must be established for the common benefit
of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to
charitable institutions of the domicile of the partnership, or, in default of such, to those of the province.

ISSUE: Whether or not charitable institution is a necessary party to this case.

HELD:

No. No charitable institution is a necessary party in the present case of determination of the rights of the
parties. The action which may arise from said article, in the case of unlawful partnership, is that for the
recovery of the amounts paid by the member from those in charge of the administration of said
partnership, and it is not necessary for the said parties to base their action to the existence of the
partnership, but on the fact that of having contributed some money to the partnership capital. And
hence, the charitable institution of the domicile of the partnership, and in the default thereof, those of
the province are not necessary parties in this case. The article cited above permits no action for the
purpose of obtaining the earnings made by the unlawful partnership, during its existence as result of the
business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to
base his action upon the partnership contract, which is to annul and without legal existence by reason of
its unlawful object; and it is self evident that what does not exist cannot be a cause of action. Hence,
paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is
decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable
institution.The profits are so applied, and not the contributions, because this would be an excessive and
unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the partner of the
portion of the capital that he contributed, the circumstances of the two cases being entirely different.
Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any
profits derived by him without the consent of the other partners from any transaction connected with
the formation, conduct, or liquidation of the partnership or from any use by him of its property.

Evangelista vs. Collector of Internal Revenue

Facts: Petitioners borrowed money from their father and purchased several lands. For several years,
these lands were leased to tenants by the petitioners. In 1954, respondent Collector of Internal Revenue
demanded from petitioners the payment of income tax on corporations, real estate dealer's fixed tax and
corporation residence tax for the years 1945-1949. A letter of demand and
correspondingassessments were delivered to petitioners. Petitioners claim that they should be absolved
from paying said taxes since they are not a corporation.

Issue: 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.

Held: Yes. Petitioners are subject to the income tax and residence tax for corporation.

As defined in section 84 (b) of the Internal Revenue Code, "the term corporation includes partnerships,
no matter how created or organized." This qualifying expression clearly indicates that a joint venture
need not be undertaken in any of the standard forms, or in conformity with the usual requirements of
the law on partnerships, in order that one could be deemed constituted for purposes of the tax on
corporations. Partnership, as has been defined in the civil code refers to two or more persons
who bind themselves to contribute money, properly, or industry to a common fund, with the intention of
dividing the profits among themselves. Thus, petitioners, being engaged in the real estate transactions
for monetary gain and dividing the same among themselves constitute a partnership so far as the Code is
concerned and are subject to income tax for corporation.

Since Sec 2 of the Code in defining corporations also includes joint-stock company, partnership, joint
account, association or insurance company, no matter how created or organized, it follows that
petitioners, regardless of how their partnership was created is also subject to the residence tax for
corporations.

Fortis vs. Hermanos

Facts:

Plaintiff Fortis is an employee of defendant Gutierrez Hermanos. Theformer brought an action to

recover a balance due him as salary forthe year 1902. He also alleged that he was entitled, as
salary, to 5 percent of the net profits of the business of the defendants for said year. The complaint
also contained a cause of action for the sum of 600pesos, money expended by plaintiff for the
defendants during the year1903. The lower court ruled in favor of the plaintiff. The total
judgmentrendered amounted to P13, 025.40, which was reduced to Philippinecurrency. The
defendants moved for new trial but were denied. They brought the case in the SC thru bill of
exceptions; the appellants(defendants) alleged that that the contract made the plaintiff acopartner of
the defendants in the business, which they were carrying on.

Issue: WON the plaintiff is a co-partner of the defendants in the business.

Ruling:

NO. It was a mere contract of employment. The plaintiff had neithervoice nor vote in the
management of the affairs of the company. Thefact that the compensation received by him was to be
determined withreference to the profits made by the defendants in their business didnot in any sense
make by a partner therein. The articles of partnershipbetween the defendants provided that the
profits should be dividedamong the partners named in a certain proportion. The contract
madebetween the plaintiff and the then manager of the defendantpartnership did not in any way vary
or modify this provision of thearticles of partnership.

Pastor vs. Gaspar

Facts:

On November 1900, Macario Nicasio and the defendant Gaspar entered into a contract of
partnership under the name Nicasio and Gaspar.
The said partnership owned the steam launch Luisa, and its only business was relating to this
launch.
On November 24, 1900, with the desire to enlarge their business, a contract was made between
the firm of Nicasio and Gaspar on the one side, and on the other side the plaintiff and 4 others
from whom N and G secured a sum of P28, 000 in order to finance the purchase of 6 additional
launches.
 In the contract, N and G undertakes to return the amount loaned to the plaintiff within a period
of ten years from the date of the instrument and to guarantee the fulfillment of the said
payment they pledge to the same parties the 6 launches.
Barely 7 months after the execution of the contract, it was terminated and was sold by mutual
consent.
The plaintiff brought action alleging that the contract was one of partnership, and that the
consent of his agent to terminate the contract and the sale of the launches was obtained by
fraud and the dissolution of the partnership was null and void.

Issue: WON the transaction between the parties a loan or a contract of partnership.

Ruling: It was a LOAN in view of the ff. features contained in the contract as found by the SC:

(a) It is twice stated positively that N and G are the only partners and the only persons interested in the
partnership of N and G, to which statements Pastor and his associates assented to when he signed the
document;

(b) It is stated, also distinctly and positively, that the money has been furnished as a loan;

(c) N and G bind themselves in the contract to repay the amount something that they would not be
bound to do were the contract one of partnership;

(d) In the contract, N and G create in favor of Pastor and his associates a right of pledge over the
launches, a thing inconsistent with the idea of partnership;

(e) N and G are to be considered as consignees only as long as they do not pay the debt. This indicates
that they had a right to pay it;

(f) They bind themselves not to alienate the launches until they had paid the debt indicating clearly that
by paying the debt they could do so, a thing inconsistent with the idea of a partnership; and

(g) It is also stated that the launch Luisa is not included in the contract.

It was also ruled that, the fact that Pastor et. al., was to share in the profits and losses of the business
and that N and G should answer for the payment of the debt only with the launches and not with their
property, indicate that the petitioner was a partner. But these provisions are not conclusive. The rights of
third persons are not concerned. The parties could, in making the contract, if they choose, take some
provisions from the law of partnership and others from the law of loans. Loans with a right to receive a
part of the profits in lieu of interests are not uncommon. As between the parties, such a contract is not
one of a partnership.

Alfredo Aguila Jr vs Court of Appeals et al

Business Organization Partnership, Agency, Trust Identity Separate and Distinct
In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan agreement with a lending
firm called A.C. Aguila & Sons, Co., a partnership. The loan was for P200k. To secure the loan, the
spouses mortgaged their house and lot located in a subdivision. The terms of the loan further stipulates
that in case of non-payment, the property shall be automatically appropriated to the partnership and a
deed of sale be readily executed in favor of the partnership. She does have a 90 day redemption period.

Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so the firm
filed an ejectment case against her (wherein she lost). She also failed to redeem the property within the
period stipulated. She then filed a civil case against Alfredo Aguila, manager of the firm, seeking for the
declaration of nullity of the deed of sale. The RTC retained the validity of the deed of sale. The Court of
Appeals reversed the RTC. The CA ruled that the sale is void for it is a pactum commissorium sale which
is prohibited under Art. 2088 of the Civil Code (note the disparity of the purchase price, which is the loan
amount, with the actual value of the property which is after all located in a subdivision).

ISSUE: Whether or not the case filed by Felicidad shall prosper.

HELD: No. Unfortunately, the civil case was filed not against the real party in interest. As pointed out by
Aguila, he is not the real party in interest but rather it was the partnership A.C. Aguila & Sons, Co. The
Rules of Court provide that every action must be prosecuted and defended in the name of the real party
in interest. A real party in interest is one who would be benefited or injured by the judgment, or who is
entitled to the avails of the suit. Any decision rendered against a person who is not a real party in
interest in the case cannot be executed. Hence, a complaint filed against such a person should be
dismissed for failure to state a cause of action, as in the case at bar.

Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct from
that of each of the partners. The partners cannot be held liable for the obligations of the partnership
unless it is shown that the legal fiction of a different juridical personality is being used for fraudulent,
unfair, or illegal purposes. In this case, Felicidad 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. 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.

CIR VS. SUTER

FACTS:

A limited partnership named William J. Suter 'Morcoin' Co., Ltd was formed 30September 1947 by
William J. Suter as the general partner, and Julia Spirig andG u s t a v C a r l s o n . T h e y c o n t r i b
u t e d , r e s p e c t i v e l y , P 2 0 , 0 0 0 . 0 0 , P 1 8 , 0 0 0 . 0 0 a n d P2,000.00. it was also duly
registered with the SEC. On 1948 Suter and Spirig got m a r r i e d a nd i n effect Carlson sold his
share to the couple, the same was a l s o registered with the SEC. T h e l i m i t e d p a r t n e r s h i p
h a d b e e n f i l i n g i t s i n c o m e t a x r e t u r n s a s a corporation, without objection by the
herein petitioner, Commissioner of InternalRevenue, until in 1959 when the latter, in an assessment,
consolidated the incomeof the firm and the individual incomes of the partners-spouses Suter and
Spirigresulting in a determination of a deficiency income tax against respondent Suter inthe amount
of P2,678.06 for 1954 and P4,567.00 for 1955.

ISSUE:

Whether or not the limited partnership has been dissolved after the marriageof Suter and Spirig
and buying the interest of limited partner Carlson.

RULING:

No, the limited partnership was not dissolved . A h u s b a n d a n d a w i f e m a y n o t e n t e r i n t o

a c o n t r a c t o f g e n e r a l copartnership, because u nder the Civil Code, which applies in the
absence of expre ss provision in the Code of Commerce, persons prohibited f r o m m a k i n g
donations to each other are prohibited from entering into universal partnerships. (2Echaverri 196)
It follows that the marriage of partners necessarily brings about thedissolution of a pre-existing
partnership. W h a t t h e l a w p r o h i b i t s w a s w h e n t h e s p o u s e s e n t e r e d i n t o a g e n
e r a l partnership. In the case at bar, the partnership was limited

PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME SYCIP, SALAZAR, FELICIANO,
HERNANDEZ & CASTILLO".

Facts:
Petitions were filed by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975 and by
the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be
allowed to continue using, in the names of their firms, the names of partners who had passed away.
Petitioners contend that the continued use of the name of a deceased or former partner when
permissible by local custom, is not unethical but care should be taken that no imposition or deception is
practiced through this use. They also contend that no local custom prohibits the continued use of a
deceased partners name in a professional firms name; there is no custom or usage in the Philippines, or
at least in the Greater Manila Area, which recognizes that the name of a law firm necessarily identifies
the individual members of the firm.

Issue:
WON the surviving partners may be allowed by the court to retain the name of the partners who already
passed away in the name of the firm? NO
Held:
In the case of Register of Deeds of Manila vs. China Banking Corporation, the SC said:
The Court believes that, in view of the personal and confidential nature of the relations between
attorney and client, and the high standards demanded in the canons of professional ethics, no practice
should be allowed which even in a remote degree could give rise to the possibility of deception. Said
attorneys are accordingly advised to drop the names of the deceased partners from their firm name.
The public relations value of the use of an old firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able lawyer without connections will have to make a
name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride
on that old firms reputation established by deceased partners.
The court also made the difference from the law firms and business corporations:
A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a
particular purpose. It is not a partnership formed for the purpose of carrying on trade or business or of
holding property. Thus, it has been stated that the use of a nom de plume, assumed or trade name in
law practice is improper.
We find such proof of the existence of a local custom, and of the elements requisite to constitute the
same, wanting herein. Merely because something is done as a matter of practice does not mean that
Courts can rely on the same for purposes of adjudication as a juridical custom.
Petition suffers legal and ethical impediment.

Ortega vs. CA

FACTS:

On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners
Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a letter
stating that he is withdrawing and retiring from the firm and asking for a meeting with the petitioners to
discuss the mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to the Commision's
Securities Investigation and Clearing Department for the formal dissolution and liquidation of the
partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the withdrawal of
the petitioner has not dissolved the partnership. On appeal, the SEC en banc reversed the decision and
was affirmed by the Court of Appeals. Hence, this petition.

ISSUE:

Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will and
whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad faith
HELD:

No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated
that a partnership that does not fix its term is a partnership at will. 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 dissolution of the partnership at will. He must, however,
act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but
that it can result in a liability for damages.

Eligio Estanislao, Jr. v. Court of Appeals ,REMEDIOS ESTANISLAO, EMILIO and LEOCADIO
SANTIAGO

FACTS:

Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the
corner of Annapolis and Aurora Blvd., Quezon City which were then being leased to the Shell Company
of the Philippines Limited (SHELL). They agreed to open and operate a gas station thereat to be known as
Estanislao Shell Service Station with an initial investment of P15,000.00 to be taken from the advance
rentals due to them from SHELL for the occupancy of the said lots owned in common by them.

On May 26, 1966, the parties herein entered into an Additional Agreement with a proviso that said
agreement cancels and supersedes the original agreement executed by the co-owners.

For sometime, the petitioner submitted financial statements regarding the operation of the business to
private respondents, but thereafter petitioner failed to render subsequent accounting.

A demand was made on petitioner:

to render an accounting of the profits;

to execute a public document embodying all the provisions of the partnership agreement;

to pay the plaintiffs their lawful shares and participation in the net profits of the business.
ISSUE: IS A PARTNERSHIP a FORMED WHERE MEMBERS OF THE SAME FAMILY BIND THEMSELVES TO
CONTRIBUTE MONEY TO A COMMON FUND WITH THE INTENTION OF DIVIDING THE PROFITS AMONG
THEMSELVES?

HELD:

YES. The Joint Affidavit of April 11, 1966 (Exhibit A), clearly stipulated by the members of the same
family that the P15,000.00 advance rental due to them from SHELL shall augment their "capital
investment" in the operation of the gasoline station.

other evidence in the record:

Petitioner submitted to private respondents periodic accounting of the business.

Petitioner gave a written authority to private respondent Remedios Estanislao, his sister, to examine
and audit the books of their "common business" (aming negosyo).

Respondent Remedios assisted in the running of the business.

Campos Rueda & Co v Pacific Commercial (44 Phil 916)

Facts:

Campos, Rueda & Co., a limited partnership, is indebted to the appellants: Pacific Commercial Co. ,
Asiatic Petroleum Co, and International Banking Corporation amounting to not less than P1,000.00
(which were not paid more than 30 days prior to the date of the filing by petitioners of the application
for voluntary insolvency).

The trial court denied their petition on the ground that it was not proven, nor alleged, that the members
of the firm were insolvent at the time the application was filed. It also held that the partners are
personally and solidarily liable for the consequences of the transactions of the partnership.

Issue:

Whether or not a limited partnership may be held to have committed an act of insolvency.

Held:

Yes. A limited partnerships juridical personality is different from the personality of its members. On
general principle, the limited partnership must answer for and suffer the consequence of its acts. Under
our Insolvency Law, one of the acts of bankruptcy upon w/c an adjudication of involuntary insolvency can
be predicated is the failure to pay obligations.

The failure of Campos, Rueda & Co., to pay its obligations constitutes an act w/c is specifically provided
for in the Insolvency Law for declaration of involuntary insolvency. The petitioners have a right to a
judicial decree declaring the involuntary insolvency of said partnership.

VARGAS and COMPANY, plaintiff-appellee, vs. CHAN HANG CHIU, ET AL., defendants-appellants.

Facts: On the 19th day of August, 1911, an action was begun by Chan Hang Chiu against the plaintiff in
this case as a mercantile association duly organized under the laws of the Philippine Islands, to recover a
sum of money. The summons and complaint were placed in the hands of the sheriff, delivering to and
leaving with one Jose Macapinlac personally true copies thereof, he being the managing agent of said
Vargas & Co. at the time of such service. On July 2, 1912, the justice's court rendered judgment against
Vargas & Co. for the sum of 372.28. It is plaintiffs contention that Vargas & Co. being a partnership, it is
necessary, in bringing an action against it, to serve the summons on all of the partners, delivering to each
one of them personally a copy thereof; and that the summons in this case having been served on the
managing agent of the company only, the service was of no effect as against the company and the
members thereof and the judgment entered by virtue of such a service was void.

Issue:

Whether or not it is indispensable in bringing an action to a partnership to serve summons to all parties
thereof.

Held:

No, it is dispensable.

Reasons: 1. It has been the universal practice in the Philippine Islands since American occupation, and
was the practice prior to that time, to treat companies of the class to which the plaintiff belongs as legal
or juridical entities and to permit them to sue and be sued in the name of the company, the summons
being served solely on the managing agent or other official of the company specified by the section of
the Code of Civil Procedure referred to. The plaintiff brings this action in the company name and not in
the name of the members of the firm. Actions against companies of the class to which plaintiff belongs
are brought, according to the uninterrupted practice, against such companies in their company names
and not against the individual partners constituting the firm. In case the individual members of the firm
must be separately served with process, the rule also prevails that they must be parties to the action,
either plaintiffs or defendant, and that the action cannot be brought in the name of or against the
company itself. 2. If it is necessary to serve the partners individually, they are entitled to be heard
individually in the action and they must, therefore, be made parties thereto so that they can be heard. It
would be idle to serve process on individual members of a partnership if the litigation were to be
conducted in the name of the partnership itself and by the duly constituted officials of the partnership
exclusively. In this case, is apparent that the plaintiff is acting contrary to its own contention by bringing
the action in the name of the company. If not served with process, then the action should be brought in
the individual names of the partners and not in the name of the company itself.

NGO TIAN TEK & NGO HAY, PETITIONER, VS. PHILIPPINE EDUCATION CO., INC., RESPONDENT. DECISION

PARAS, J.: The plaintiff, Philippine Education Co., Inc., instituted in the Court of First Instance of Manila an
action against the defendants, Vicente Tan alias Chan Sy and the partnership of Ngo Tian Tek and Ngo
Hay, for the recovery of some P16,070.14, unpaid cost of merchandise purchased by Lee Guan Box
Factory from the plaintiff and five other corporate entities which, though not parties to the action, had
previously assigned their credits to the plaintiff, together with attorney's fees, interest and costs. By
agreement of the parties, the case was heard before a referee, Attorney Francisco Dalupan, who in due
time submitted his report holding the defendants jointly and severally liable to the plaintiff for the sum
of P16,070.14, plus attorney's fees and interest at the rates specified in the report. On March 6, 1939,
the Court of First Instance of Manila rendered judgment in accordance with said report, except as to
attorney's fees which were reduced to a total of P1,596.39. This judgment was affirmed by the Court of
Appeals in its decision of January 31, 1941, now the subject of our review at the instance of the
partnership Ngo Tian Tek and Ngo Hay, petitioner herein. "It appears that," quoting from the decision of
the Court of Appeals whose findings of fact are conclusive, "as far back as the year 1925, the Modern
Box Factory was established at 603 Magdalena Street, Manila. It was at first owned by Ngo Hay, who
three years later was joined by Ngo Tian Tek as a junior partner. The Modern Box Factory dealt in paper
and similar merchandise and purchased goods from the plaintiff and its assignors in the names of the
Modern Box Factory, Ngo Hay and Co., Go Hay Box Factory, or merely Go Hay. Then about the year 1930,
the Lee Guan Box Factory was established a few meters from the Modern Box Factory, under the
management of Vicente Tan. When that concern, through Vicente Tan, sought credit with the plaintiff
and its assignors, Ngo Hay, in conversations and interviews withe their officers and employees,
represented that he was the principal owner of such factory, that the Lee Guan Box Factory and the
Modern Box Factory belonged to the same owner, and that the Lee Guan Box Factory was a subsidiary of
the Modern Box Factory.

There is evidence that many goods purchased in the name of the Lee Guan Box Factory were delivered
to the Modern Box Factory by the employees of the plaintiff and its assignors upon the express direction
of Vicente Tan. There is also evidence that the collectors of the sellers were requested by Vicente Tan to
collectand did collectfrom the Modern Box Factory the bills against the Lee Guan Box Factory. In fact
the record shows many checks signed by Ngo Hay or Ngo Tian Tek in payment of accounts of the Lee
Guan box Factory. Furthermore,and this seems to be conclusiveNgo Hay, testifying for the defense,
admitted that 'he' was the owner of the Lee Guan Box Factory in and before the year 1934, but that in
January, 1935, 'he' sold it, by the contract of sale Exhibit 7, to Vicente Tan, who had been his manager of
the business. Tan declared also that before January, 1935, the Lee Guan Box Factory pertained to Ngo
Hay and Ngo Tian Tek. The contract Exhibit 7 was found by the referee to be untrue and simulated, for
various convincing reasons that need no repetition here. And the quoted statements serve effectively to
confirm the evidence for the plaintiff that it was Ngo Hay's representations of ownership of, and
responsibility for, Lee Guan Box Factory that induced them to open credit for that concern. It must be
stated in this connectionto answer appellant's fitting observationthat the plaintiff and the assignors
have considered Ngo Hay, the Modern Box Factory and Ngo Hay and Co. as one and the same, through
the acts of the partners themselves, and that the proof as to Ngo Hay's statements regarding the
ownership of Lee Guan Box Factory must be taken in that view. Ngo Hay was wont to say 'he' owned the
Modern Box Factory, meaning that he was the principal owner, his other partner being Ngo Tian Tek.
Now, it needs no demonstrationfor appellant does not deny itthat the obligations of the Lee Guan
Box Factory must rest upon its known owner. And that owner is Ngo Tian Tek and Ngo Hay."

We must overrule petitioner's contention that the Court of Appeals erred in holding that Lee Guan Box
Factory was a subsidiary of the Modern Box Factory and in disregarding the fact that the contracts
evidencing the debts in question were signed by Vicente Tan alias Chan Sy, without any indication that
tended to involve the Modern Box Factory or the petitioner. In the first place, we are concluded by the
finding of the Court of Appeals regarding the ownership by the petitioner of Lee Guan Box Factory.
Secondly, the circumstance that Vicente Tan alias Chan Sy acted in his own name cannot save the
petitioner, in view of said ownership, and because contracts entered into by a factor of a commercial
establishment known to belong to a well-known enterprise or association, shall be understood as made
for the account of the owner of such enterprise or association, even when the factor has not so stated at
the time of executing the same, provided that such contracts involve objects comprised in the line and
business of the establishment. (Article 286, Code of Commerce.) The fact that Vicente Tan did not have
any recorded power of attorney executed by the petitioner will not operate to prejudice third persons,
like the respondent Philippine Education Co., Inc., and its assignors. (3 Echavarri, 133.) Another defense
set up by the petitioner is that prior to the transactions which gave rise to this suit, Vicente Tan had
purchased Lee Guan Box Factory from Ngo Hay under the contract, Exhibit 7; and the petitioner assails,
under the second assignment of error, the conclusion of the court of Appeals that said contract is
simulated. This contention is purely factual and must also be overruled. The petitioner questions the
right of the respondent Philippine Education Co., Inc., to sue for the credits assigned by the five entities
with which Lee Guan Box Factory originally contracted, it being argued that the assignment, intended
only for purposes of collection, did not make said respondent the real party in interest. The
petitioner has cited 5 Corpus Juris, section 144, page 958, which points out that "under statutes
authorizing only a bona fide assignee of choses in action to sue thereon in his own name, an assignee for
collection merely is not entitled to sue in his own name." The finding of the Court of Appeals that there
is nothing "simulated in the assignment," precludes us from ruling that the respondent company is not a
bona fide assignee. Even assuming, however, that said assignment was only for collection, we are not
prepared to say that, under section 114 of the Code of Civil Procedure, in force at the time this action
was instituted, ours is not one of those jurisdictions following the rule that "when a chose, capable of
legal assignment, is assigned absolutely to one, but the assignment is made for purpose of collection, the
legal title thereto vests in the assignee, and it is no concern of the debtor that the equitable title is in
another, and payment to the assignee discharges the debtor." (5 C. J., section 144, p. 958.) No substantial
right of the petitioner could indeed be prejudiced by such assignment, because section 114 of the Code
of Civil Procedure reserves to it "any set-off or other defense existing at the time of or before notice of
the assignment.' " Petitioner's allegations that "fraud in the inception of the debt is personal to the
contracting parties and does not follow assignment," and that the contracts assigned to the respondent
company "are immoral and against public policy and therefore void," constitute defenses on the merits,
but do not affect the efficacy of the assignment. It is obvious that, apart from the fact that the petitioner
cannot invoke fraud of its authorship to evade liability, the appealed decision is founded on an obligation
arising, not from fraud, but from the very contracts under which merchandise had been purchased by
Lee Guan Box Factory, a subsidiary of petitioner's Modern Box Factory. The fourth and fifth assignments
of error relate to the refusal of the court of Appeals to hold that the writ of attachment issued at the
commencement of this action by the Court of First Instance is illegal, and to award in favor of the
petitioner damages for such wrongful attachment. For us to sustain petitioner's contention will amount
to an unauthorized reversal of the following conclusion of fact of the Court of Appeals: "The stereotyped
manner in which defendants obtained goods on credit from the six companies, Vicente Tan's sudden
disappearance, the execution of the fake sale Exhibit 7 to throw the whole responsibility upon the
absent or otherwise insolvent Tan, defendant's mercurial and unbelievable theories as tolthe ownership
of the Modern Box Factory and" Lee Guan Box Factoryobviously adopted in a vain effort to meet or
explain away the evidentiary force of plaintiff's documentary evidenceare much too significant to
permit a declaration that the attachment was not justified." Regarding the suggestion in petitioner's
memorandum that this case should be dismissed because of the death of Ngo Hay, it is sufficient to state
that the petitioner Ngo Tian Tek and Ngo Hay is sued as a partnership possessing a personality distinct
from any of the partners.

The appealed decision is affirmed, with costs against the petitioner. So ordered. Moran, C.J., Pablo,
Perfecto, Hilado, Briones, Hontiveros, and Tuason, JJ., concur.
ANG PUE & COMPANY, ET AL., vs SECRETARY OF COMMERCE AND INDUSTRY

Facts:

On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue &
Company for aterm of five years. Prior to the expiration of the five-year term, the partners amended the
original articles of partnership soas to extend the term of life of the partnership to another five years.
However, when the amended articles were presentedfor registration in the Office of the SEC, registration
was refused upon the ground that the extension was in violation of RA1180 an act prohibiting the
extension of the term of a partnership not wholly formed by Filipinos.

Law:

On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It provided, among
other things,that, after its enactment, a partnership not wholly formed by Filipinos could continue to
engage in the retail business untilthe expiration of its term.

Ruling:

To organize a corporation or a partnership that could claim a juridical personality of its own and transact
business assuch, is not a matter of absolute right but a privilege which may be enjoyed only under such
terms as the State may deem necessary to impose.

PASCUAL v. Commissioner of InternalRevenue

FACTS:

On June 22, 1965, petitioners bought two (2)parcels of land from Santiago Bernardino, et al.and on May
28, 1966, they bought anotherthree (3) parcels of land from Juan Roque. Thefirst two parcels of land
were sold by petitionersin 1968 to Marenir Development Corporation,while the three parcels of land
were sold bypetitioners to Erlinda Reyes and Maria Samsonon March 19,1970. Petitioner realized a
netprofit in the sale made in 1968 in the amount of P165, 224.70, while they realized a net profit
of P60,000 in the sale made in 1970. Thecorresponding capital gains taxes were paid bypetitioners in
1973 and 1974 .Respondent Commissioner informed petitionersthat in the years 1968 and 1970,
petitioners asco-owners in the real estate transactions formedan unregistered partnership or joint
venturetaxable as a corporation under Section 20(b)and its income was subject to the taxesprescribed
under Section 24, both of theNational Internal Revenue Code; that theunregistered partnership was
subject tocorporate income tax as distinguished fromprofits derived from the partnership by themwhich
is subject to individual income tax.

ISSUE:
Whether petitioners formed an unregisteredpartnership subject to corporate income tax(partnership vs.
co-ownership)

RULING:

Article 1769 of the new Civil Code lays down therule for determining when a transaction shouldbe
deemed a partnership or a co-ownership.Said article paragraphs 2 and 3, provides:(2) Co-ownership or
co-possession does not itself establish a partnership, whether such co-ownersor co-possessors do or do
not share any profits

LORENZO OA V CIR

Facts:

Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her five children. A civil case
was instituted for the settlement of her state, in which Oa was appointed administrator and later on the
guardian of the three heirs who were still minors when the project for partition was approved. This
shows that the heirs have undivided interest in 10 parcels of land, 6 houses and money from the War
Damage Commission.

Although the project of partition was approved by the Court, no attempt was made to divide the
properties and they remained under the management of Oa who used said properties in business by
leasing or selling them and investing the income derived therefrom and the proceeds from the sales
thereof in real properties and securities. As a result, petitioners properties and investments gradually
increased. Petitioners returned for income tax purposes their shares in the net income but they did not
actually receive their shares because this left with Oa who invested them.

Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore,
subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners asked for
reconsideration, which was denied hence this petition for review from CTAs decision.

Issue:

W/N there was a co-ownership or an unregistered partnership

W/N the petitioners are liable for the deficiency corporate income tax

Held:

Unregistered partnership. The Tax Court found that instead of actually distributing the estate of the
deceased among themselves pursuant to the project of partition, the heirs allowed their properties to
remain under the management of Oa and let him use their shares as part of the common fund for their
ventures, even as they paid corresponding income taxes on their respective shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into an
unregistered partnership the moment the said common properties and/or the incomes derived
therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their
respective shares in the inheritance as determined in a project partition either duly executed in an
extrajudicial settlement or approved by the court in the corresponding testate or intestate proceeding.
The reason is simple. From the moment of such partition, the heirs are entitled already to their
respective definite shares of the estate and the incomes thereof, for each of them to manage and
dispose of as exclusively his own without the intervention of the other heirs, and, accordingly, he
becomes liable individually for all taxes in connection therewith. If after such partition, he allows his
share to be held in common with his co-heirs under a single management to be used with the intent of
making profit thereby in proportion to his share, there can be no doubt that, even if no document or
instrument were executed, for the purpose, for tax purposes, at least, an unregistered partnership is
formed.

For purposes of the tax on corporations, our National Internal Revenue Code includes these
partnerships

The term partnership includes a syndicate, group, pool, joint venture or other unincorporated
organization, through or by means of which any business, financial operation, or venture is carried on
(8 Mertens Law of Federal Income Taxation, p. 562 Note 63; emphasis ours.)

with the exception only of duly registered general copartnerships within the purview of the term
corporation. It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar
as said Code is concerned, and are subject to the income tax for corporations. Judgment affirmed.

Gatchalian vs.Collector of Internal Revenue

GR L-45425

FACTS:

Jose Gatchalian along with 14 others bonded together to purchase a sweeptakes ticket in the amount of
Ps 2.00 and registered the same as Jose Gatchalian and Co. This ticket has eventually won 3rd prize
amounting to Ps 50,000.00 which theydivided in accordance with their aliquot share in the cost of the
ticket. Gatchalianreceiving Ps 4425 for his Ps .18 cost.

A month after winning the ticket they were assessed by the Collector of Internal Revenue for the
payment of Income Tax of their unregistered partnership requesting them to pay Ps 1,499.94. They
replied that that they merely formed a co-ownership not Partnership and requested the CIR that they be
exempted from paying such assessed income tax. They also submitted evidence of payment of income
tax by each of them for their corresponding individual taxable pertaining to their share in the winnings.
However it was denied by the CIR. Demand letter ensued until it resulted to the issuance of Warrant of
distraint and levy on the property of the petitioner. Through the the 2 co-owner of Gatchalian they paid
a portion of the tax assessed amounting to Ps 602.51 to avoid the embargo of the property and
promised to pay the balance in installments guaranteed by 2 solvent persons as required by the CIR. The
payment was made under protest and petitioner filed for request for refund at the same time. The
protest was overruled and the demand for refund was denied.

Another warrant for distraint and levy on the property was issued for failure to pay the monthly
installments. Finally the balance was paid Ps 1,260.93 which includes legal interest and penalties. Again a
formal protest and request for refund was filed and was denied.

Petitioners elevated the matter to SC requesting refund of amount of Ps 1,863.44and legal interest
hereon.

ISSUE:

Whether or not Petitioners formed Co-Ownership or Unregistered Partnership when they purchased the
winning sweepstakes ticket?

RULING:

SC ruled that when they bonded together and contributed to the cost of the ticket they formed an
Unregistered Partnership. For they contributed money or property into a common fund which they
invest in the ticket and when it won, they divided the profit among themselves.

SARDANE VS. COURT OF APPEALS

FACTS:

Petitioner Sardane is the owner of a Sardane Trucking Services. One day Sardane borrowed money from
the other guy by making promises and issuing several promissory notes. On the due date the other guy
wanted his money back but instead of paying Sardane apologized for his failure to pay on time, and he
promised the other guy that he would pay him next time. After so many failed attempts to collect his
money the other guy got mad and finally decided to seek the intervention of the court. Now after so
many failed attempts to collect the promised payment, the other guy, Mr.Acojedo (Private Respondent),
with so much hate on his heart, finally filed a collection case against Sardane. Even during the scheduled
date of the trial, Sardane, as usual he did not show up. On motion by the petitioner(herein private
respondent), the Court issued an order declaring the Sardane in default and eventually after
presentation of evidence ex parte, the court rendered judgment by default in favor of the petitioner.
Sardane then appealed to the CFI, and he claimed that the promissory notes were his contribution to the
partnership; and that there is no contract of loan; thus he is not indebted to the other guy. The CFI,
believing the arguments of Sardane, ruled on his favor thereby reversing the decision of the lower court
by dismissing the complaint and ordered the plaintiff-appellee Acojedo to pay said defendant-appellant
P500.00 for moral damages

ISSUE:

whether or not a partnership existed?

HELD:

NONE .The fact that he had received 50% of the net profits does not conclusively establish that he was a
partner of the private respondent herein. Article 1769(4) of the Civil Code is explicit that while the
receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in
the business, no such inference shall be drawn if such profits were received in payment as wages of an
employee. Furthermore, herein petitioner had no voice in the management of the
affairs of the basnig. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos,
denied the claim of the plaintiff therein that he was a partner in the business of the defendant. The
same rule was reiterated in Bastida vs. Menzi & Co., Inc., et al. which involved the same factual and legal
milieu.

DELUAO v. CASTEEL

FACTS:
In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy land, 178.76
hectares, in the then sitio of Malalag, municipality of Padada, Davao for 3 consecutive times because the
Bureau of Fisheries did not act upon his previous applications.
Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon his position
by the other applicants who entered upon and spread themselves within the area, Casteel realized the
urgent necessity of expanding his occupation thereof by constructing dikes and cultivating marketable
fishes. But lacking financial resources at that time, he sought financial aid from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were already occupied by rival
applicants, Casteel immediately filed a protest. Consequently, two administrative cases ensued involving
the area in question.

However, despite the finding made in the investigation of the above administrative cases, the Director of
Fisheries nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the
improvements which he had introduced on the land, and ordered that the land be leased through public
auction

On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor
Casteel as party of the second part, executed a contract denominated a "contract of service". On the
same date the above contract was entered into, Inocencia Deluao executed a special power of attorney
in favor of Jesus Donesa

On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on
November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the same area in the two
administrative cases and asked for reinvestigation of the application of Nicanor Casteel over the subject
fishpond.

The Secretary of Agriculture and Natural Resources rendered a decision ordering Casteel to be reinstated
in the area and that he shall pay for the improvement made thereupon.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the
fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the premises.

ISSUE:
Whether the reinstatement of Casteel over the subject land constitute a dissolution of the partnership
between him and Deluao

HELD:
Yes, the reinstatement of Casteel dissolved his partnership with Deluao.

The Supreme Court ruled that the arrangement under the so-called "contract of service" continued until
the decision both dated Sept. 15, 1950 were issued by the Secretary of Agriculture and Natural
Resources in DANR Cases 353 and 353-B.

This development, by itself, brought about the dissolution of the partnership. Since the partnership had
for its object the division into two equal parts of the fishpond between the appellees and the appellant
after it shall have been awarded to the latter, and therefore it envisaged the unauthorized transfer of one
half thereof to parties other than the applicant Casteel, it was dissolved by the approval of his
application and the award to him of the fishpond.

The approval was an event which made it unlawful for the members to carry it on in partnership.
Moreover, subsequent events likewise reveal the intent of both parties to terminate the partnership
because each refused to share the fishpond with the other.
Kiel vs. Estate of Sabert

Facts

Albert F. Kiel commenced to work on certain public lands situated in the municipality of Parang,
Cotabato, known as Parang Plantation Company. In 1910, Kiel and P. S. Sabert entered into an agreement
to develop the plantation. Sabert was to furnish the capital and Kiel was to manage it. It seems that this
partnership was formed so that the land could be acquired in the name of Sabert, Kiel being a German
citizen and not deemed eligible to acquire public lands in the Philippines.

During the World War, Kiel was deported from the Philippines. Five persons, including P. S. Sabert,
organized the Nituan Plantation Company, to which Sabert transferred all the rights and interests of the
Parang Plantation Company. Kiel appears to have tried to secure a settlement from Sabert. But Sabert's
death came before any amicable arrangement could be reached and before an action by Kiel against
Sabert could be decided. So these proceedings against the estate of Sabert.

Issue

What is the nature of the proceeding? Is this an action to establish a resulting trust in the land of Sabert?
NO

Held

The court held that a ruling on the issue of establishing trust is not needed. Note that the complaint as
framed asks for a straight money judgment against an estate. In no part of the complaint did plaintiff
allege any interest in land, claim any interest in land, or pretend to establish a resulting trust in land.
This is not an action to establish trust in the land, because a trust will not be created when, for the
purpose of evading the law prohibiting one from taking or holding real property, he takes a
conveyance thereof in the name of a third person.

Also, no partnership agreement in writing was entered into by Kiel and Sabert. Thus the real issue is
whether or not the alleged verbal copartnership formed by Kiel and Sabert has been proved. The court
held that declarations of one partner, not made in the presence of his copartner, are not competent to
prove the existence of a partnership between them, and that the existence of a partnership cannot be
established by general reputation, rumor, or hearsay.

Although we feel that competent evidence exists establishing the partnership, Kiel under the facts had
no standing in court to ask for any part of the land and in fact he does not do so. His only legal right is
to ask for what is in effect an accounting with reference to its improvements and income when Sabert
became the trustee of the estate on behalf of Kiel.

Kiel is not entitled to any share in the land itself, but he has clearly shown his right to one-half of the
value of the improvements and personal property on the land. The value of these improvements and of
the personal property cannot be ascertained from the record and the case must therefore be remanded
for further proceedings.
 JO CHUNG CANG vs. PACIFIC COMMERCIAL Co.

Facts: In an insolvency proceedings of petitioner-establishment, Sociedad Mercantil, Teck Seing & Co., Ltd.,
creditors, Pacific Commercial and others filed a motion with the Court to declare the individual partners parties to
the proceeding, for each to file an inventory, and for each to be adjudicated as insolvent debtors.

Issue: What is the nature of the mercantile establishment, Teck Seing & Co., Ltd.?

Held: The contract of partnership established a general partnership.

By process of elimination, Teck Seing & Co., Ltd. Is not a corporation nor an accidental partnership (joint account
association).

To establish a limited partnership, there must be, at least, one general partner and the name of at least one of the
general partners must appear in the firm name. This requirement has not been fulfilled. Those who seek to avail
themselves of the protection of laws permitting the creation of limited partnerships must the show a substantially
full compliance with such laws. It must be noted that all the requirements of the Code have been met w/ the sole
exception of that relating to the composition of the firm name.

The legal intention deducible from the acts of the parties controls in determining the existence of a partnership. If
they intend to do a thing w/c in law constitutes a partnership, they are partners although their very purpose was to
avoid the creation of such relation. Here the intention of the persons making up, Teck Seing & Co., Ltd. Was to
establish partnership w/c they erroneously denominated as a limited partnership.

Agad vs Mabato

Facts: Petitioner Mauricio Agad claims that he and defendant Severino Mabato are partners in a fishpond
business to which they contributed P1000 each. As managing partner, Mabato yearly rendered the
accounts of the operations of the partnership. However, for the years 1957-1963, defendant failed to
render the accounts despite repeated demands. Petitioner filed a complaint against Mabato to which a
copy of the public instrument evidencing their partnership is attached. Aside from the share of
profits(P14,000) and attorneys fees (P1000), petitioner prayed for the dissolution of the partnership and
winding up of its affairs. Mabato denied the existence of the partnership alleging that Agad failed to pay
hisP1000 contribution. He then filed a motion to dismiss on the ground of lack of cause of action. The
lower court dismissed the complaint finding a failure to state a cause of action predicated upon the
theory that the contract of partnership is null and void, pursuant to Art. 1773 of our Civil Code, because
an inventory of the fishpond referred in said instrument had not been attached thereto.Art. 1771. A
partnership may be constituted in any form, except where immovable property or rea lrights are
contributed thereto, in which case a public instrument shall be necessary. Art. 1773. A contract of
partnership is void, whenever immovable property is contributed thereto, if inventory of said property
is not made, signed by the parties; and attached to the public instrument.

Issue: Whether or not immovable property or real rights have been contributed to the partnership.
Held: Based on the copy of the public instrument attached in the complaint, the partnership was
established to operate a fishpond", and not to "engage in a fishpond business. Thus, Mabatos
contention that it is really inconceivable how a partnership engaged in the fishpond business could exist
without said fishpond property (being) contributed to the partnership is without merit. Their
contributions were limited to P1000 each and neither a fishpond nor a real right thereto was contributed
to the partnership. Therefore, Article 1773 of the Civil Code finds no application in the case at bar. Case
remanded to the lower court for further proceedings

TUASON VS. BOLANOS GR. No. L-4935. May 28, 195495 Phil. 106CASE DIGEST

Facts:

Plaintiffs complaint against defendant was to recover possession of a registered land. In the complaint,
the plaintiff is represented by its Managing Partner, Gregorio Araneta, Inc., another corporation.
Defendant, in his answer, sets up prescription and title in himself thru"open, continuous, exclusive and
public and notorious possession under claim of ownership, adverse to the entire world by defendant and
his predecessors in interest" from "time immemorial". After trial, the lower court rendered judgment for
plaintiff, declaring defendant to be without any right to the land in question and ordering him to restore
possession thereof to plaintiff and to pay the latter a monthly rent. Defendant appealed directly to the
Supreme Court and contended, among others, that Gregorio Araneta, Inc. can not act as managing
partner for plaintiff on the theory that it is illegal for two corporations to enter into a partnership

Issue: Whether or not a corporation may enter into a joint venture with another corporation.

Ruling:

It is true that the complaint states that the plaintiff is "represented herein by its Managing Partner
Gregorio Araneta, Inc.", another corporation, but there is nothing against one corporation being
represented by another person, natural or juridical, in a suit in court. The contention that Gregorio
Araneta, Inc. cannot act as managing partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership is without merit, for the true rule is that "though a corporation
has no power to enter into a partnership, it may nevertheless enter into a joint venture with another
where the nature of that venture is in line with the business authorized by its charter."

(Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2.Fletcher Cyc. of Corp., 1082.). There
is nothing in the record to indicate that the venture inwhich plaintiff is represented by Gregorio Araneta,
Inc. as "its managing partner" is not in linewith the corporate business of either of them.
Aurbach vs. Sanitary Wares

(Partnership; Joint Venture; Foreign and Domestic Corp)F: This consolidated petition assailed the
decision of the CA directing a certain MANNER OF ELECTION OFOFFICERS IN THE BOARD OF
DIRECTORS*There are two groups in this case, the

Lagdameo group composed of Filipino investors and the American Standard Inc. (ASI) composed of
foreign investors.The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual
intention of theparties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it is
clearly statedthat the parties' intention was to form a corporation and not a joint venture.

I:

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 be determined:*(1) the nature of the business established by the parties whether it was a joint
venture or a corporation

H:

While certain provisions of the Agreement would make it appear that the parties theretodisclaim being
partners or joint venturers such disclaimer is directed at third parties and is notinconsistent with, and
does not preclude, the existence of two distinct groups of stockholders inSaniwares one of which (the
Philippine Investors) shall constitute the majority, and the other ASIshall constitute the minority
stockholder. In any event, the evident intentionof the Philippine Investors and ASI in entering into the
Agreement is to enter into a joint venture enterprise. An examination of the Agreement shows
that certain provisions were inccuded to protect theinterests of ASI as the minority. For example, the
vote of 7 out of 9 directors is required incertain enumerated corporate acts. ASI is contractually entitled
to designate a member of theExecutive Committee and the vote of this member is required for certain
transactions.

The Agreement also requires a 75% super-majority vote for the amendment of the articles and by-laws
of Saniwares. ASI is also given the right to designate the president and plant manager. The Agreement
further provides that the sales policy of Saniwares shall be that which is normally followed by ASI and
that Saniwares should not export "Standard" products otherwise than through ASI's Export Marketing
Services. Under the Agreement, ASI agreed to provide technology and know-how to Saniwares and the
latter paid royalties for the same.

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 in fact
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 jurisdictions is that the partnershipcontemplates 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.

TORRES vs. CA

Facts:
TRDC is a small family owned corporation engaged in the realty business. Tormil Realty & Development
Corporation. 81% of its capital stocks were owned by Judge Manuel Torres. The other 19% thereof were
owned by his nieces and nephews.

Heres his dilemma. Even though Judge Torres owns majority of the stocks of TRDC and was also the
president thereof, he is only entitled to one vote among the 9-seat Board of Directors. So do the math
his vote can be easily overridden by minority stockholders. (Geez must have been a wonderful family
gathering each and every board meeting)

So heres what the judge did. In 1987, before the regular election of the companys officers, Judge Torres
assigned one share (qualifying share) each to 5 outsiders for the purpose of qualifying them to be
elected as directors in the board to thereby strengthen Judge Torres power over other family members.

However, the said assignment of shares were not recorded by the corporate secretary, Ma. Christina
Carlos (niece) in the Stock and Transfer Book of TRDC. (So hinarang ng pamangkin na babae)
Lets take a close look on what the judge did, thereafter.

Heres what happened. The validity of said assignments were of course questioned. But the judge
asserted that it is impractical for him to order the CORSEC (Carlos) to make the entries because Carlos is
one of his opposition.

So what Judge Torres did was he made the entries himself because HE WAS KEEPING THE STOCK AND
TRANSFER BOOK. He further rationalized that he can do what a mere secretary can do because in the
first place, he is the president.

Since the other family members were against the inclusion of the five outsiders, they refused to take
part in the election. Judge Torres and his five assignees then decided to conduct the election among
themselves considering that the 6 of them constitute a quorum.

ISSUE: Whether or not the inclusion of the five outsiders were valid. And whether or not the subsequent
election is valid. In other words DOES THE ASSIGNMENT HAD A VALID EFFECT?
HELD:
No. The assignment of the shares of stocks did not comply with procedural requirements.
Stockholders who transfer shares has no authority to effect their entries in the Stock and Transfer Book
even when the Corporate Secretary is at odds with such stockholder.

1. It did not comply with the by laws of TRDC

2. Nor did it comply with Section 74 of the Corporation Code.

Section 74 provides that the stock and transfer book should be KEPT AT THE PRINCIPAL OFFICE OF THE
CORPORATION. Here, IT WAS JUDGE TORRES WHO WAS KEEPING IT AND WAS BRINGING IT WITH HIM. It
also provides that the CORPORATE SECRETARY is the CUSTODIAN OF CORPORATE RECORDS in the
absence of any provision to the contrary. (I presume there was no contrary provision in the By-laws)
Hence, transfer effected were therefore VOID.

Further, his excuse of not ordering the secretary to make the entries have no weight. There are remedies
in the law that the transferor-stockholder could have availed of, instead of taking the law in his
hands. (Writing it himself).

The proper procedure is to order the secretary to make the entry of said assignment in the book, and if
she refuses, Judge Torres can come to court and ask for specific performance to compel her to make the
entry.

In other words, there are judicial remedies for this. Needless to say, the subsequent election is invalid
because the assignment of shares is invalid by reason of procedural infirmity.

The Supreme Court also emphasized: all corporations, big or small, must abide by the provisions of the
Corporation Code. Being a simple family corporation is not an exemption. Such corporations cannot have
rules and practices other than those established by law.

Tai Tong v Insurance G.R. No. L-55397 February 29, 1988

Facts:

Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure
the payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong
Chuache & Co. Arsenio Chua, representative of Thai Tong Chuache & Co. insured the latter's interest with
Travellers Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for
the contents thereof)
Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent
Zenith Insurance Corporation. On July 16, 1975, another Fire Insurance was procured from respondent
Philippine British AssuranceCompany, covering the same building for P50,000.00 and the contents
thereof for P70,000.00.

The building and the contents were totally razed by fire.

Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith
Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding
shares of the loss. Complainants were paid the following: P41,546.79 by Philippine British Assurance Co.,
P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by S.S.S. Group of Accredited Insurers
Demand was made from respondent Travellers Multi-Indemnity for its share in the loss but the same was
refused. Hence, complainants demanded from the other three (3) respondents the balance of each
share in the loss in the amount of P30,894.31 (P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and
P2,866.90, SSS Accredited) but the same was refused, hence, this action.

In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on the
ground that the claim of the complainants had already been waived, extinguished or paid. Both
companies set up counterclaim in the total amount of P 91,546.79.

SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the
balance had been paid in the amount in full.

Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire Policy,
covering the furniture and building of complainants was secured by a certain Arsenio Chua and that the
premium due on the fire policy was paid by Arsenio Chua.

Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire Insurance
Policy issued by respondent Travellers Multi-Indemnity.

As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the
ground that the insurance policy subject of the complaint was taken out by Tai Tong Chuache &
Company, for its own interest only as mortgagee of the insured property and thus complainant as
mortgagors of the insured property have no right of action against the respondent. It likewise dismissed
petitioner's complaint in intervention in the following words:

From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was
likewise denied hence, the present petition.

Issue: WON Tai Tong had insurable interest

Held: Yes. Petition granted.

Ratio:
Respondent advanced an affirmative defense of lack of insurable interest on the part of the petitioner
that before the occurrence of the peril insured against, the Palomos had already paid their credit due the
petitioner. However, they were never able to prove that Tai had a lack of insurable interest. Hence, the
decision must be adverse against them.

However respondent Insurance Commission absolved respondent insurance company from liability on
the basis of the certification issued by the then Court of First Instance of Davao, Branch II, that in a
certain civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai Tong
Chuache.

From said evidence respondent commission inferred that the credit extended by petitioner to the
Palomos secured by the insured property must have been paid. These findings was based upon a mere
inference.

The record of the case shows that the petitioner to support its claim for the insurance proceeds offered
as evidence the contract of mortgage which has not been cancelled nor released. It has been held in a
long line of cases that when the creditor is in possession of the document of credit, he need not prove
non-payment for it is presumed. The validity of the insurance policy taken by petitioner was not assailed
by private respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not yet
been paid was corroborated by Azucena Palomo who testified that they are still indebted to herein
petitioner.

Public respondent argues however, that if the civil case really stemmed from the loan granted
to Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by its
representative in its own behalf. From the above premise, respondent concluded that the obligation
secured by the insured property must have been paid. However, it should be borne in mind that
petitioner being a partnership may sue and be sued in its name or by its duly authorized representative.
Petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of the partnership was
corroborated by respondent insurance company. Thus Chua as the managing partner of the partnership
may execute all acts of administration including the right to sue debtors of the partnership in case of
their failure to pay their obligations when it became due and demandable. Public respondent's allegation
that the civil case flied by Arsenio Chua was in his capacity as personal creditor of spouses Palomo has no
basis. The policy, then had legal force and effect.

HONGKONG BANK, Plaintiffs-Appellants, v. JURADO & CO., Defendants-Appellees.

Gibbs & Kincaid for Appellants.

Hartigan, Marple & Solignac for Appellees.

SYLLABUS

1. PLEADING AND PRACTICE;. JOINDER OF PARTIES; PARTNER AS CODEFENDANT WITH FIRM. In an

action against a partnership which is a juridical person, one partner is not entitled to be made a party as an
individual separate from the firm.
 2. ID.; SERVICE OF PROCESS AND NOTICES; PARTNERSHIP IN LIQUIDATION; DEATH OF LIQUIDATOR.
When upon the death of the liquidator of a commercial partnership which is a defendant in a suit the
partners fail to appoint a new liquidator, all necessary process and notices may be served upon any member
of the partnership found within the jurisdiction of the court in which the case is pending.

DECISION

ON MOTION TO BE MADE A CODEFENDANT.

WILLARD, J. :

By the order of April 16, 1895, Don Ricardo Regidor was expressly included in the bankruptcy as a general
partner of Jurado & Co. No order setting aside this order has been called to the courts attention, except the
order of December 12, 1898, dismissing the entire proceeding. The order of April 6, 1898, upon which Seor
Regidor relies, simply decided that his motion, in which he claimed that he was not properly included in the
bankruptcy, should come up for hearing in the ordinary way. It expressly stated that the merits of said
motion were not passed upon. We have seen nothing in the progress of this suit to show that this order of
April 16, 1895, was not correct. On the contrary, it appears from the records of the court that, in the
hearing on October 15, 1903, Seor Regidor as one of such partners, in open court, appointed an attorney
to argue for the firm the motion then before this court.

As a partner of Jurado & Co. he is represented by the firm and has no right to appear as an individual
separate from the firm. If he has this right, then every partner would have the same right. We see nothing
in the case to indicate that his rights will not be protected by the lawyers whom the firm may see fit to
employ. His motion to be made a codefendant is denied.

Torres, Cooper, Mapa, McDonough and Jonhson, JJ., concur.

Arellano, C.J., did not sit in this case.

CIR VS. SUTER

FACTS:A limited partnership named William J. Suter 'Morcoin' Co., Ltd wasformed 30September 1947 by
William J. Suter as the generalpartner, and Julia SpirigandGustav Carlson. They contributed, respectively,
P20,000.00, P18,000.00 andP2,000.00. it was also duly registeredwith the SEC. On 1948 Suter and
Spirig gotmarried and ineffect Carlson sold his share to the couple, the same wasalsoregistered with
theSEC. The limited partnership had been filing its
income tax returns as acorporation, without objection bythe herein petitioner, Commissioner of
InternalRevenue, until in1959 when the latter, in an assessment, consolidated the incomeof thefirm and
the individual incomes of the partners-spouses Suter and Spirigresulting in a determination of
a deficiency income tax againstrespondent Suter inthe amount of P2,678.06 for 1954 and P4,567.00
for 1955.

ISSUE:Whether or not the limited partnership has been dissolved after themarriageof Suter and Spirig
and buying the interest of limited partner Carlson.

RULING:No, the limited partnership was not dissolved.A husband and a wife may not
enter into a contract of generalcopartnership, because under the Civil Code, which applies in the
absence of express provision in the Code of Commerce, persons prohibitedfrom makingdonations to
each other are prohibited from entering intouniversal partnerships. (2Echaverri 196) It follows that the
marriage of partners necessarily brings about thedissolution of a pre-existingpartnership.What the law
prohibits was when the spouses
entered into a generalpartnership. In the case at bar, the partnership waslimited

Hung Man Yoc vs Kieng Chiong Seng

Facts:
Man Yoc sued Kieng Chiong Seng, a partnership, for collection of sum of money. The said partnership
was composed of four partners: Kiong Tiao Eng , Chua Che Co, Yu Yec Pin, and Ang Chu Keng. It was
found by the trial court that the firm is liable to Man Yoc.

ISSUE: Whether or not all the partners are liable.

HELD: No. The partnership is neither a general partnership nor is it a limited partnership. This is because
of the infirmity of the firm name which is neither the name of a general partner because it does not
contain the name of at least one of the general partners, nor is it a limited partnership because the word
limited is not attached to the firm name Kieng Chiong Seng.
But it is still a partnership of sorts hence the provision of Article 120 of the Code of Commerce applies
which provides that for these types of partnerships the person managing it shall be the one directly liable
to third persons. In this case, it was established that only Kiong Tiao Eng and Yu Yec Pin are managing
the partnership, hence only they are liable to Man Yoc.

NOTE: Obviously, this is the old law hence obsolete. See provisions of the new Civil Code on Liabilities of
the Partners.

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Macdonald vs national city bank

Facts:

Stasikinocey is a partnership formed by Alan Gorcey, Louis Da Costa Jr., WilliamKusik and Emma Badong
Gavino.

It was denied registration in the

SECdue to the confusion between thispartnership and the business CardinalRattan, which is treated as a
co-partnership where Gorcey and Da Costa are the general partners. It appears that Cardinal Rattan
ismerely the business name or style used bythe partnership, Stasikinocey.

Prior to June 3, 1949 - Stasikinoceyhad an overdraft account with the

Nationality Bank of New York, a foreign banking association duly licensed to do business inthe
Philippines.

June 3, 1949 - said overdraft account has a P6,134.92 balance. Due to thefailure of Stasikinocey to make
the required payment, said balance was converted into an ordinary loan
for which a promissory jointnote, non-negotiable was executed on thesame day by Da Costa for and in
the name of Cardinal Rattan, himself and Gorcey.

June 7, 1949 - said promissory notewas secured by a chattel mortgage executedby Da Costa, general
partner for and in the name of Stasikinocey. Said mortgage was constituted over the following:

Fargo truck with motor No. T-118-202839, Serial No. 81410206 and withplate No. T-7333
(1949)2.Plymouth Sedan automobile motor No. T-5638876, Serial No. 11872718 and withplate No.
10372

Fargo Pick-Up FKI-16, with motor No. T-112800032, Serial No. 8869225 and withplate No. T-7222 (1949)

The mortgage deed was duly registered with the Office of the Register
of Deeds Pasig, Rizal. It has the followingstipulations:1.mortgagor shall not sell or otherwisedispose of
the said chattels without the mortgagees written consent mortgagee may foreclose the mortgage at any
time, after breach of any condition thereof, the mortgagor waiving the 30-day notice of foreclosure

June 7, 1949 - Gorcey and Da Costa executed an agreement purporting to

conveyand transfer all their rights, title andparticipation in Stasikinocey to Shaeffer,allegedly in
consideration of the cancellation of an indebtedness of P25,000 owed by them
and Stasikinocey to the latter. Said agreement is said to be in violation of the Bulk Sales Law.

June 24, 1949 - during thesubsistence of the loan and chattelmortgage, Stasikinocey,, through Gorcey
andDa Costa transferred to MacDonald the Fargotruck and Plymouth sedan

June 28, 1949 - Shaeffer sold the Fargo pick-up to MacDonald

July 19, 1944 [what the case

statedbut I guess it should be 1949] - PaulMacDonald sold the Fargo truck andPlymouth sedan to
Benjamin Gonzales

When the National City Banklearned of these transactions, it filed anaction against Stasikinocey, Da Cost
a,Gorcey, MacDonald and Gonzales to recoverits credit and to foreclose the chattelmortgage.

CFI: annulled the sale of thevehicles to Gonzales; ordered Da Costa andGorcey to pay the Bank jointly
and severallyP6,132.92 with legal interest; orderedGonzales to deliver the vehicles to the Bankfor sale at
public auction if Da Costa
andGorcey fails to pay; ordered Da Costa,Gorcey and MacDonald to pay the Bank jointly and severally an
y deficiency thatremains unpaid should the proceeds of the auction sale be insufficient

MacDonald and Gonzales appealed to the CA.



CA: modified the CFI decision byruling that MacDonald is not jointly andseverally liable with Gorcey and
Da Costa topay any deficiency

Issue:

WON the partnership, Stasikinocey is estoppedfrom asserting that it does not have juridicalpersonality
since it is an unregistered commercial partnership [

YES]Ratio:

While
an unregistered commercialpartnership has no juridical personality,nevertheless, where two or more per
sonsattempt to create a partnership failing to comply with all the legal formalities, the law
considers them as partners and the association is a partnership in so far as it is a favorable to third
persons, by reason of the equitable principle of estoppel.

Da Costa and Gorcey cannot

denythat they are partners of the partnershipStasikinocey, because in all theirtransactions with the
National City Bank they represented themselves as such.
McDonaldcannot disclaim knowledge of thepartnership Stasikinocey because he dealtwith said entity in
purchasing two of thevehicles in question through Gorcey and DaCosta. The sale of the vehicles to
MacDonald being void, the sale to Gonzales is also void since a buyer cannot have a better right than the
seller.

As was held in Behn Meyer & Co. vs.Rosatzin, where a partnership not dulyorganized has been
recognized as such in itsdealings with certain persons, it shall beconsidered as partnership by estoppel
andthe persons dealing with it are estopped from denying its partnership existence.

If the law recognizes a defectively organized partnership as de facto as far asthird persons are concerned,
for purposes of its de facto existence it should have suchattribute of a partnership as domicile.

On the Validity of the Chattel Mortgage

The chattel mortgage is in the formrequired by law, and there is therefore

thepresumption of its due execution whichcannot be easily destroyed by the biasedtestimony of the one
who executed it.

The interested version of Da Costathat the affidavit of good faith appearing

inthe chattel mortgage was executed inQuezon City before a notary public for and inthe City of Manila
was correctly rejected bythe trial court and the Court of Appeals.
In view of the conclusion thatStasikinocey is a de facto partnership, andDa Costa appears as a co-
manager in theletter of Gorcey to the National City Bank
andin the promissory note executed by DaCosta, and that even the partners consideredhim as such

1, the partner who executedthe chattel mortgage in question must bedeemed to be so fully
authorized.

Section 6 of the Chattel MortgageLaw provides that when a partnership is aparty to the mortgage, the
affidavit may bemade and subscribed by one member thereof.

In this case the affidavit was executed and subscribed by Da Costa, not only as a partner but as a
managing partner.

Dispositive:

CA decision affirmed

Pioneer Insurance & Surety Corporation vs Court of Appeals

Facts: Petitioner Jacob Lim, owner-operator of Southern Airlines (SAL) entered in to a contract with Japan Domestic
Airlines (JDA) for the sale and purchase of 2 aircrafts and 1 set of spare parts for $109k to be paid in installments.
Pioneer Insurance as surety executed and issued its surety bond in favor of JDA on behalf of its principal Lim for the
balance. Border Machinery and Heavy Equip. Co. (BorMaHeCo), Francisco and Modesto Cervantes and Maglana gave
some funds used in the purchase or aircrafts and spare parts as contribution to new corporation proposed by Lim to
expand his airline business. They executed 2 indemnity agreements stipulating that the indemnitors principally
agree and bind themselves solidarily to indemnify, hold and save Pioneer from damages, losses, costs, taxes,
penalties, etc. which Pioneer may incur from becoming surety. Lim, (acting under SAL), executed in favor of pioneer
a deed of chattel mortgage as security, stipulating that Lim was to transfer and convey to the surety the 2
aircrafts. Lim defaulted on installment payments and JDA asked Pioneer to pay, which Pioneer did in the amount of
P298k. Pioneer filed for extrajudicial foreclosure of chattel mortgage (to which Cervanteses and Maglana filed a 3 rd
party claim alleging co-ownership over aircrafts) and judicial foreclosure with writ of prelim attachment against Lim,
Cervanteses, Bormaheco and Maglana. Trial Court held that Lim was liable and dismissed Pioneers claim against all
other defendants.

CA: Pioneer reinsured its risk of liability under the surety bond in favor of JDA and collected proceeds of such
reinsurance. Pioneer is no longer real party in interest to institute action as it does not stand to be benefited.

ISSUES: IS Pioneer a real party in interest?

Was there a de facto partnership created among Cervantes, Maglana and Lim as a result of their failure to
incorporate?

SC: Petitioner is not the real party in interest and has no cause of action against respondents. Pioneer, having
foreclosed the chattel mortgage on the planes and spare parts no longer has any further action against defendants
as indemnitors to recover any unpaid balance of the price.

La Compaia Maritama vs Francisco Muoz et al

Business Organization Partnership, Agency, Trust Liability of Industrial Partners to Third Persons

In 1905, Francisco Muoz, Emilio Muoz, and Rafael Naval formed an ordinary general mercantile
partnership in accordance with the Code of Commerce. They named the partnership Francisco Muoz &
Sons. Francisco was the capitalist partner while the other two were industrial partners. In the articles of
partnership, it was agreed upon by the three that for profits, Francisco shall have a 3/4th share while the
other two would have 1/8th each. For losses, only Francisco shall bear it.
Later, the partnership was sued by La Compaia Martitama for collection of sum of money amounting to
P26,828.30. The partnership lost the case and was ordered to make said payment; that in case the
partnership cant pay the debt, all the partners should be liable for it.
The ruling is in accordance with Article 127 of the Code of Commerce which states:
All the members of the general copartnership, be they or be they not managing partners of the same, are
liable personally and in solidum with all their property for the results of the transactions made in the name
and for the account of the partnership, under the signature of the latter, and by a person authorized to
make use thereof. (emphasis supplied)
Francisco now argues that the industrial partners should NOT be liable pursuant to Article 141 of the
Code of Commerce which states:
Losses shall be charged in the same proportion among the partners who have contributed capital, without
including those who have not, unless by special agreement the latter have been constituted as
participants therein. (emphasis supplied)

ISSUE: Whether or not the industrial partners are liable to third parties like La Compaia Martitama.

HELD: Yes. The controlling law is Article 127. There is no injustice in imposing this liability upon the
industrial partners. They have a voice in the management of the business, if no manager has been
named in the articles; they share in the profits and as to third persons it is no more than right that they
should share in the obligations. It is admitted that if in this case there had been a capitalist partner who
had contributed only P100 he would be liable for this entire debt of P26,000.
Article 141 relates exclusively to the settlement of the partnership affairs among the partners themselves
and has nothing to do with the liability of the partners to third persons; that each one of the industrial
partners is liable to third persons for the debts of the firm; that if he has paid such debts out of his private
property during the life of the partnership, when its affairs are settled he is entitled to credit for the amount
so paid, and if it results that there is not enough property in the partnership to pay him, then the capitalist
partners must pay him.
In relation to this, the Supreme Court noted that partnerships under the Civil Code provides for a scenario
where all partners are industrial partners (like when it is a partnership for the exercise of a profession). In
such case, if it is permitted that industrial partners are not liable to third persons then such third persons
would get practically nothing from such partnerships if the latter is indebted.
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Lozana vs. Depakakibo
FACTS:
Lozana and Depakakibo established a partnership for the purpose of maintaining, operating,
anddistributing electric light and power in the Municipality of Dumangas. The partnership is capitalized at
the sum ofP30, 000.00 where Lozana agreed to furnish 60% while Depakakibo, 40%.However, the
franchise for venture in favor of Buenaflor was cancelled and revoked by the Public ServiceCommission.
Lozana thereafter sold Generator Buda [Lozanas contribution to the partnership; no liquidationmade] to
Decologon. When the decision was appealed, a temporary certificate of public convenience was issued
inthe name of Decolongon. Depakakibo sold one Crossly Diesel Engine [Depakakibos contribution to
thepartnership] to Spouses Jimenea and Harder.Lozana brought action against Depakakibo alleging
the latter wrongfully detained the Generator Buda andwooden posts to which he is entitled to the
possession of. Lozano prayed the properties be delivered back to him.CFI ordered sheriff to take
possession of the properties and the delivery thereof to Lozano. Depakakiboalleged properties have been
contributed to the partnership and therefor he is not unlawfully detaining them. Inaddition, Lozano sold his
contribution to partnership in violation of terms of their agreement.CFI declared Lozano owner of and
entitled to the equipment. Depakakibo appealed decision to theSupreme Court.
ISSUE:
W/N partnership is void or the act of the partnership in furnishing electric current to the franchise holder
withoutprevious approval of Public Service Commission render the partnership void?W/N disposal of
contribution of parties is allowed.
RULING:
Validity of the Partnership
. Partnership is valid. The fact of furnishing the current to the holder of thefranchise alone, without the
previous approval of the Public Service Commission, does not per se make thecontract of partnership null
and void from the beginning and render the partnership entered into by the parties forthe purpose also
void and non-existent
Disposal of Contributed Property to the Partnership.
Facts show that parties entered into the contract ofpartnership, Lozana contributing the amount of P18,
000, and there has not been liquidation prior to the sale ofthe contributed properties: Buda Diesel Engine
and 70 posts. It necessarily follows that the Buda diesel enginecontributed by the plaintiff had become the
property of the partnership. As properties of the partnership, thesame could not be disposed of by the
party contributing the same without the consent or approval of thepartnership or of the other partner.
(Clemente vs. Galvan, 67 Phil., 565)

Sancho vs Lizarraga
FACTS:
The plaintiff brought an action for the rescission of the partnership contract between himself and the defendant
and the reimbursement of his investment worth 50,000php with interest at 12 per cent per annum form October
15, 1920, with costs, and any other just and equitable remedy against said defendant. The defendant denies
generally and specifically all the allegations of the complaint and asked for the dissolution of the partnership,
and the payment to him as its manager and administrator P500 monthly from October 15, 1920 until the final
dissolution with interest.

The CFI found that the defendant had not contributed all the capital he had bound himself to invest hence it
demanded that the defendant liquidate the partnership, declared it dissolved on account of the expiration of the
period for which it was constituted, and ordered the defendant, as managing partner, to proceed without delay
to liquidate it, submitting to the court the result of the liquidation together with the accounts and vouchers
within the period of thirty days from receipt of notice of said judgment. The plaintiff appealed from said
decision praying for the rescission of the partnership contract between him and the defendant in accordance
with Art. 1124.

ISSUE:
WON plaintiff acquired the right to demand rescission of the partnership contract according to article 1124 of
the Civil Code.

HELD:
The SC ruled that owing to the defendants failure to pay to the partnership the whole
amount which he bound himself to pay, he became indebted to the partnership for the
remainder, with interest and any damages occasioned thereby, but the plaintiff did not
thereby acquire the right to demand rescission of the partnership contract according to
article 1124 of the Code. Article 1124 cannot be applied to the case in question,
because it refers to the resolution of obligations in general, whereas articles 1681 and
1682 specifically refer to the contract of partnership in particular. And it is a well known
principle that special provisions prevail over general provisions. Hence, SC dismissed
the appeal left the decision appealed from in full force.
Advertisements

Uy Vs. Puzon
Facts:
Bartolome Puzon had two contracts with the government for the construction of roads and
bridges. (Bureau of Public Highways)
He sought the financial assistance of William Uy, so he proposed that they create a partnership
which would be the sub-contractor of the projects.
They also agreed that the profits will be divided among themselves.
William Uy agreed to the formation of the partnership "U.P. Construction Company". They agreed
to contribute P50,000 each. (Note: P40,000 was advanced by William Uy while Puzon was
waiting for the approval of his P150,000 PNB Loan. Upon release of the loan, he promised to
reimburse William Uy of the P40,000; pay his share of P50,000 and loan P60,000 to the
partnership).
Loan was approved by November 1956. Note: At the end of 1957, Uy contributed a total of P115,
The partnership agreement was signed in 1957 (January 18) although the work for the projects
began as early as 1956 (October 1).
Since Puzon was busy with other projects, Uy was the one who managed the partnership.
In order to guarantee the PNB Loan, Puzon, without the knowledge of Uy, assigned the payments
to the payments to be received from the projects to PNB.
Due to the financial demands of the projects, Uy demanded that Puzon comply with his obligation
to place his capital contribution in the company.
However, Puzon failed to comply even after formal demand letters were sent to him.
Thereafter, Puzon (as the primary contractor of the projects) wrote terminated the subcontract
agreement with the partnership to which he is also a partner. (November 27, 1957)
Thereafter, Uy was not allowed to hold office in the UP Construction Company and his authority to
negotiate with the Bureau was revoked by Puzon.
Uy clamied that Puzon had violated the terms of their partnership agreement. He sought for the
dissolution of the partnership with damages.
The lower court ruled in favor of Uy.

Issue: WON Puzon failed to comply with his obligation of paying the capital contribution to the
company. YES

Ruling: YES
According to the court, there was failure on the part of Puzon to contribute capital to the partnership.
When his load with PNB was approved, he only gave P60,000 to Uy; P40,000 was for reimbursement to
the payments made by Uy and the other P20,000 was for the capital contribution. Thereafter, Puzon
never made additional contribution.
Also, it was found by the SC that Puzon misapplied partnership funds by assigning all payments for the
projects to PNB.
Such assignment was prejudicial to the partnership since the partnership only received a small share from
the total payments made by the Bureau of Public Highways. As a result, the partnership was unable to
discharge its obligations.
Here, the Court ordered Puzon to reimburse whatever amount Uy had invested in or spent for the
partnership on account of construction projects. The amount P200,000 as compensatory damages was
also awarded in favor of Uy.
RULING:
Had the appellant not been remiss in his obligations as partner and as prime contractor of the
construction projects in question as he was bound to perform pursuant to the partnership and subcontract
agreements, and considering the fact that the total contract amount of these two projects is
P2,327,335.76, it is reasonable to expect that the partnership would have earned much more than the
P334,255.61 We have hereinabove indicated. The award, therefore, made by the trial court of the amount
of P200,000.00, as compensatory damages, is not speculative, but based on reasonable estimate.
WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed with
costs against the appellant, it being understood that the liability mentioned herein shall be home by the
estate of the deceased Bartolome Puzon, represented in this instance by the administrator thereof,
Franco Puzon.

United States vs Eusebio Clarin

7 Phil 504 Business Organization Partnership, Agency, Trust Co-Partners Liability

Misappropriation

Sometime before 1910, Pedro Larin formed a partnership with Pedro Tarug, Eusebio Clarin and Carlos de
Guzman. Larin, being the capitalist, agreed to contribute P172.00 to the partnership and the three others
shall use said fund to trade mangoes. The three industrial partners bought mangoes and sell them and
they earned P203.00 but they failed to give Larins share of the profits. Larin charged them with the crime
of estafa, but the provincial fiscal filed an information only against Eusebio Clarin in which he accused him
of appropriating to himself not only the P172 but also the share of the profits that belonged to Larin,
amounting to P15.50. Clarin was eventually convicted.

ISSUE: Whether or not the conviction is correct.

HELD: No. The P172.00 having been received by the partnership, the business commenced and profits
accrued, the action that lies with the partner who furnished the capital for the recovery of his money is not
a criminal action for estafa, but a civil one arising from the partnership contract for a liquidation of the
partnership and a levy on its assets if there should be any.

The then Penal Code provides that those who are guilty of estafa are those who, to the prejudice of
another, shall appropriate or misapply any money, goods, or any kind of personal property which they
may have received as a deposit on commission for administration or in any other producing the obligation
to deliver or return the same, (as, for example, in commodatum, precarium, and other unilateral contracts
which require the return of the same thing received) does not include money received for a partnership;
otherwise the result would be that, if the partnership, instead of obtaining profits, suffered losses, as it
could not be held liable civilly for the share of the capitalist partner who reserved the ownership of the
money brought in by him, it would have to answer to the charge of estafa, for which it would be sufficient
to argue that the partnership had received the money under obligation to return it.

Martinez v. Ong Pong Co

Facts:

Martinez delivered P1,500 to Ong Pong Co and Ong Lay to invest in a store. They agreed that the profits
and losses would be equally shared by all of them. Martinez was demanding for the two Ongs to render
an accounting or tore fund him the P1,500.Ong Pong Co alleged that Ong Lay, now deceased, was the
one who managed the business, and the capital of P1,500 resulted in a loss so that he should not be
made liable

Issue: WON Ong Pong Co is liable? YES What is the extent of his liability? joint

Held:

The 2 partners (Ongs) were the administrators/managers and are obliged to render accounting. Since
neither of them rendered an account, nor proved the alleged losses, they are obliged to return the capital
to Martinez. Where two partners receive from another a sum of money for the establishment of a
business, and agree to share with the latter the profits or losses that may result there from, the said two
persons, as the apparent administrators of the partnership, acted as agents for the capitalist partner, and
by virtue thereof are bound to fulfill the contract which implies the management of the business. Article
1796 is not applicable because no other money than that contributed as capital was involved. The liability
of the partners is joint. Ong Pong Co shall only pay P750 to Martinez.

RAMNANI v. CA

FACTS:

Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood. Ishwar and
his spouse Sonya had their main business based in New York. Realizing the difficulty of managing their
investments in the Philippines they executed a general power of attorney on January 24, 1966 appointing
Navalrai and Choithram as attorneys-in-fact, empowering them to manage and conduct their business
concern in the Philippines

On February 1, 1966 and on May 16, 1966, Choithram entered into two agreements for the purchase of
two parcels of land located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership. A
building was constructed thereon by Choithram in 1966. Three other buildings were built thereon by
Choithram through a loan of P100,000.00 obtained from the Merchants Bank as well as the income
derived from the first building.

Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these
properties during the period 1967 to 1970. Choithram failed and refused to render such accounting.
Thereafter, Ishwar revoked the general power of attorney. Choithram and Ortigas were duly notified of
such revocation on April 1, 1971 and May 24, 1971, respectively. Said notice was also registered with the
Securities and Exchange Commission on March 29, 1971 and was published in the April 2, 1971 issue
of The Manila Times for the information of the general public.
Nevertheless, Choithram, transferred all rights and interests of Ishwar and Sonya in favor of his daughter-
in-law, Nirmla Ramnani, on February 19, 1973.

On October 6, 1982, Ishwar and Sonya filed a complaint against Choitram and/or spouses Nirmla and
Moti and Ortigas for reconveyance of said properties or payment of its value and damages.

ISSUE: Whether Ishram can recover the entire properties subject in the ligitation

HELD:

No, Ishram cannot recover the entire properties subject.

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

Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in
question from Ortigas as attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he paid in
installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings.
Although the buildings were burned later, Choithram was able to build two other buildings on the property.
He rented them out and collected the rentals. Through the industry and genius of Choithram, Ishwar's
property was developed and improved into what it is now.

Justice and equity dictate that the two share equally the fruit of their joint investment and efforts.
Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain.
No one would end up the loser. After all, blood is thicker than water.

Isabelo Moran vs Court of Appeals

In February 1971, Isabelo Moran and Mariano Pecson entered into a partnership agreement where they
agreed to contribute P15k each for the purpose of printing 95k posters of the delegates to the then 1971
Constitutional Commission. Moran shall be in charge in managing the printing of the posters. It was
further agreed that Pecson will receive a commission of P1k a month starting from April 1971 to
December 1971; that the partnership is to be liquidated on December 15, 1971.

Pecson partially fulfilled his obligation to the partnership when he issued P10k in favor of the partnership.
He gave the P10k to Moran as the managing partner. Moran however did not add anything and, instead,
he only used P4k out of the P10k in printing 2,000 posters. He only printed 2,000 posters because he felt
that printing all 95k posters is a losing venture because of the delay by the COMELEC in announcing the
full delegates. All the posters were sold for a total of P10k.

Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court of Appeals
affirmed the decision of the trial court but modified the same as it ordered Moran to pay P47.5k for
unrealized profit; P8k for Pecsons monthly commissions; P7k as return of investment because the
venture never took off; plus interest.

ISSUE: Whether or not the CA judgment is correct.

HELD: No. The award of P47.5k for unrealized profit is speculative. There is no evidence whatsoever that
the partnership between the Moran and Pecson would have been a profitable venture (because base on
the circumstances then i.e. the delay of the COMELEC in proclaiming the candidates, profit is highly
unlikely). In fact, it was a failure doomed from the start. There is therefore no basis for the award of
speculative damages in favor of Pecson. Further, there is mutual breach in this case, Pecson only gave
P10k instead of P15k while Moran gave nothing at all.

As for the P8k monthly commission, this is without basis. The agreement does not state the basis of the
commission. The payment of the commission could only have been predicated on relatively extravagant
profits. The parties could not have intended the giving of a commission inspite of loss or failure of the
venture. Since the venture was a failure, Pecson is not entitled to the P8k commission.

As for the P7k award as return for Pecsons investment, the CA erred in his ruling too. Though the venture
failed, it did took off the ground as evidenced by the 2,000 posters printed. Hence, return of investment is
not proper in this case. There are risks in any business venture and the failure of the undertaking cannot
entirely be blamed on the managing partner alone, specially if the latter exercised his best business
judgment, which seems to be true in this case.

Moran must however return the unused P6k of Pecsons contribution to the partnership plus P3k
representing Pecsons profit share in the sale of the printed posters. Computation of P3k profit share is as
follows: (P10k profit from the sale of the 2,000 posters printed) (P4k expense in printing the 2k posters)
= (P6k profit); Profit 2 = P3k each.

----------------------------------------------------------------------------------------------------------------------

1. NG YA v. SUGBU COMMERCIAL CO
Facts
* Ng Ya, a Chinese merchant based in Surigao, Surigao ordered from Sugbu Commercial
(based in Cebu) 1,000 galvanized iron and aluminium sheets. It was agreed that the
goods would be delivered in a weeks time, or on or before January 5, 1950. The amount
of these goods is P5,400, which appears to have been paid by Ng Ya in full.
* However, the said goods were not delivered on the said date. And as Ng Ya kept on
inquiring from Sugbu Commercial Co. about the status of the goods, the latter failed to
deliver the same but kept promising that the said goods would be delivered at some
future time.
* Sugbu Commercial later found out that Ng Ya is also in need of cigarettes that she will
sell on resale in Surigao. The former then offered the latter cigarettes. Ng Ya was enticed
by the offer and then entered into another contract of sale with Sugbu.
* She paid the amount of the cigarettes worth P4,000 with the help of Lana Bakery, with
whom she had an understanding of splitting the profits she hoped to realize from the
buy and sell of cigarettes.
* However, after a couple of months, in July, neither the cigarettes nor the galvanized
iron and aluminium sheets reached Ng Ya. Consequently, Tan Chun Pia of Lana Bakery,
from whom she obtained the P4,000 got angry with her and, for this reason, Ng Ya was
forced to reimburse him of the amount.
* She then kept coming back to Sugbu to demand either the delivery of the goods she
ordered or the payment of P 9,400. Unfortunately, every time she dropped there, poor
Ng Ya was challenged by Shih Tiong Chu to file a complaint, and she had to seek the
help of the Chinese Chamber of Commerce for the settlement of her claim.
* Ng Ya finally filed a complaint with the CFI Cebu.
* Sugbu Commercial then filed a 3rd-party complaint against Pow Sun Gee, alleging that
the latter received the amounts of P5,400 and P4,000 in his capacity as manager of Sugbu
Commercial when he was not authorized to issue official receipts and that only his co-
partner Shih Tiong Chu, who was most of the time in Manila, could do so. In this regard,
Sugbu Commercial prayed that Pow Sun gee be ordered to indemnify Sugbu
Commercial for whatever is adjudged against the latter in favor of plaintiff Ng Ya.
* TC decided in favor of Ng Ya and sentenced Sugbu to pay plaintiff the sum of P9,400
and condemning Pow Sun Gee to reimburse Sugbu Commercial Company.
* Sugbu Commercial appealed.
Issue
W/N Sugbu Commercial should not be held liable because Pow Sun Gee, as the one who
received the payments and issued receipts to Ng Ya, is not authorized to do so.
Holding
No.
Ratio Decidendi
A manager of a partnership is presumed to have all the incidental powers to carry out
the object of the partnership in the transaction of the business. There is of course an
exception to the general rule: when the powers of a manager are specifically restricted,
he could not exercise the powers expressly limited of him. But when the articles of
association do not specify the powers of the manager, it is admitted on principle that
a manager has the powers of a general agent, and even more. When the object of the
company is determined, the manager has all the powers necessary for the attainment
of such object.
Reasoning
Sugbu Commercial was not able to present articles of co-partnership that would show
any limitation upon the powers of the manager an indication that there was none. For
this reason, we hold and declare that the minor power of issuing official receipt is
included in the general powers of the manager.
Indeed, it would be quite queer that the manager of any juridical entity would not be
authorized to issue official receipts for amounts delivered to that entity through said
manager, and that only his co-partner Shih Tiong Chu, who was most of the time in
Manila, could do so. This is not in keeping with the present day business dealings, for it
is slow and inconvenient to those who transact with the company.
 TEAGUE VS. FERNANDEZ

FACTS: The Realistic Institute, admittedly owned and operated by defendant-appellee Mercedes M.
Teague was a vocational school for hair and beauty culture situated on the second floor of the Gil-Armi
Building. At about four o'clock in the afternoon of October 24, 1955, a fire broke out in a store for surplus
materials located about ten meters away from the institute. Soler Street lay between that store and the
institute. Upon seeing the fire, some of the students in the Realistic Institute shouted 'Fire! Fire!' and
thereafter, a panic ensued. Indeed, no part of the Gil-Armi Building caught fire. But, after the panic was
over, four students, including Lourdes Fernandez, a sister of plaintiffs-appellants, were found dead and
several others injured on account of the stampede. The deceased's five brothers and sisters filed an action
for damages against Mercedes M. Teague as owner and operator of Realistic Institute. The Court of First
Instance of Manila found for the defendant and dismissed the case. CA reversed.

ISSUE: W/N petitioner is liable.

RULING: Decision affirmed.

RATIO: Petitioner was negligent and that such negligence was the proximate cause of the death of
Lourdes Fernandez. This finding of negligence is based primarily on the fact that the provision of Section
491 Of the Revised Ordinances of the City of Manila had not been complied with in connection with the
construction and use of the Gil-Armi building where the petitioner's vocational school was housed. The
mere fact of violation of a statute is not sufficient basis for an inference that such violation was the
proximate cause of the injury complained. However, if the very injury has happened which was intended
to be prevented by the statute, it has been held that violation of the statute will be deemed to be proximate
cause of the injury.

Bachrach v La Protectora

Facts:

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

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

P.P La Protectora, By Marcelo Barba Marcelo Barba

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

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

Barba incurred a debt amounting to P2,617.57 and Bachrach foreclosed a chattel mortgage on the trucks
but there was still balance. To recover the balance, action was instituted against the defendants.
Judgment was rendered against the defendants.

Issue:
a.Whether or not the defendants are liable for the firm debts.

b.Whether or not Barba had authority to incur expenses for the partnership (relevant issue)

Held:

a.Yes. Promissory notes constitute the obligation exclusively of La Protectora and Barba. They do not
constitute an obligation directly binding the defendants. Their liability is based on the principles of
partnership liability. A member is not liable in solidum with his fellows for the entire indebtedness but is
liable with them or his aliquot part.

SC obiter: the document was intended merely as an authority to enable Barba to bind the partnership
and that the parties to the instrument did not intend to confer upon Barba an authority to bind them
personally.

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

JOSE MACHUCA, plaintiff-appellee, vs. CHUIDIAN, BUENAVENTURA & CO., defendants-appellants.

FACTS:

CHUIDIAN, BUENAVENTURA & CO (defendants) is a regular general partnership. The original partners were D. Telesforo
Chuidian, Doa Raymunda Chuidian, Doa Candelaria Chuidian, and D. Mariano Buenaventura. The partners each
contributed a certain amount of money to the partnership.

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

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

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

ISSUE: WON Machuca is entitled to 25% of D. Vicente Buenaventuras share in the partnership NO

HELD:

According to clause 19 of the partnership agreement: "upon the dissolution of the company, the pending obligations in favor
of outside parties should be satisfied, the funds of the minors Jose and Francisco Chuidian should be taken out, and
afterwards the resulting balance of the account-current of each one of those who had put in money should be paid."

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

Hence, it follows that D. Vicente Buenaventura, whose rights are those of his father, is in no case entitled to receive any
part of the assets until the creditors, who are nonpartners, and the Chuidian minors are paid. Whatever rights he had, he
could only transfer subject to this condition. It is clear, from the language of the instrument under which plaintiff claims,
that this conditional interest was all that Vicente ever intended to transfer had actual authority to incur obligation.

1.) DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.

G.R. No. 70926 January 31, 1989

GUTIERREZ, JR., J.:

FACTS:

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

This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila, Branch II
to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah
Panciteria since October, 1955 from petitioner Dan Fue Leung.

The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established sometime in
October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to and in favor of
petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to
show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4,000.00
to its initial establishment.

The private respondents evidence is summarized as follows:

About the time the Sun Wah Panciteria started to become operational, the private respondent gave P4,000.00 as his
contribution to the partnership. This is evidenced by a receipt wherein the petitioner acknowledged his acceptance of the
P4,000.00 by affixing his signature thereto. Furthermore, the private respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking Corporation Check from the profits of the operation of the restaurant
for the year 1974

The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned
the genuineness of the receipt. His evidence is summarized as follows:

The petitioner did not receive any contribution at the time he started the Sun Wah Panciteria. He used his savings from his
salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho Restaurant amounting to a little
more than P2,000.00 as capital in establishing Sun Wah Panciteria. Petitioner presented various government licenses and
permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone.
Fue Leung also flatly denied having issued to the private respondent the receipt (Exhibit G) and the Equitable Banking
Corporation's Check No. 13389470 B in the amount of P12,000.00 (Exhibit B).

ISSUE: WON Private respondent is a partner of the petitioner in Sun Wah Panciteria?

HELD:

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

It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. Article 1842 states:

The right to an account of his interest shall accrue to any partner, or his legal representative as against
the winding up partners or the surviving partners or the person or partnership continuing the business, at
the date of dissolution, in the absence or any agreement to the contrary.

Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806, 1807, and
1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run only
upon the dissolution of the partnership when the final accounting is done.

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

Art. 1831. On application by or for a partner the court shall decree a dissolution whenever:

xxx xxx xxx

(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the
business;

(4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so
conducts himself in matters relating to the partnership business that it is not reasonably practicable to
carry on the business in partnership with him;

xxx xxx xxx

(6) Other circumstances render a dissolution equitable.

There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents of dissolution because
the continuation of the partnership has become inequitable.

Sison v. Helen McQuaidDecember 29, 1953

Principle: Liquidation shall happen before a partner may claim his share of profit from the partnership.

Facts:

Plaintiff brought an action in the CFI against defendant. Defendant borrowed from him money (P 2,210) to enable her to
payher obligations and to add to her capital in her lumber business. She could not pay so she proposed to take plaintiff as
apartner in her business, plaintiff to contribute the P 2,210 due him from defendant.Before the last World War,
the partnership sold 230,000boardft. of lumber to the US Army for P 13,800.00. Defendantrefused to deliver of it (P
6,900.00) to plaintiff despite his repeated demands. Plaintiff filed an action to compel defendant topay him his half of the
profit from the partnership.The case was dismissed upon the ground of prescription.

Issue: Whether or not plaintiff is entitled to the sum he claims

Held:

NO. Order of dismissal was affirmed, but on the ground that the complaint states no cause of action.Ratio: It is not clear from
the complaint just when the cause of action accrued. Thus the dismissal of the case is erroneous.However order should be
retained on the ground that the complaint has no cause of action. Plaintiff seeks to recover fromdefendant one-half of the
purchase price of lumber sold by the partnership to the United States Army. But his complaint doesnot show why he should
be entitled to the sum he claims. It does not allege that there has been a liquidation of the partnershipbusiness and the said
sum has been found to be due him as his share of the profits. The proceeds from the sale of a certainamount of lumber
cannot be considered profits until costs and expenses have been deducted. Moreover, the profits of thebusiness cannot be
determined by taking into account the result of one particular transaction instead of all the transactionshad. Hence, the need
for a general liquidation before a member of a partnership may claim a specific sum as his share of theprofits.

ORNUM v. LASALA

1. In 1908 Pedro Lasala, father of the respondents, andEmerenciano Ornum formed a partnership

2. Lasala as capitalist while Ornum will be the industrial partner

3. Lasala delivered the sum of P1,000 to Ornum who will conducta business at his place of residence in Romblon.

4. In 1912, when the assets of the partnership consisted ofoutstanding accounts and old stock of
merchandise,Emerenciano Ornum, following the wishes of his wife, asked forthe dissolution of the Lasala,
Emerenciano

5. Ornum looked for some one who could take his place and hesuggested the names of the petitioners who
accordinglybecame the new partners.

6. Upon joining the business, the petitioners, contributed P505.54as their capital

7. the new partnership Pedro Lasala had a capital of P1,000,appraised value of the assets of the former partnership,
plusthe said P505.54 invested by the petitioners who, as industrialpartners, were to run the business in Romblon.

8. After the death of Pedro Lasala, his children (the respondents)succeeded to all his rights and interest in the
partnership

.9. The partners never knew each other personally

.10. No formal partnership agreement was ever executed.

11. The petitioners, as managing partners, were receivedone-half of the net gains, and the other half was to be
dividedbetween them and the Lasala group in proportion to the capitalput in by each group.

12. During the course divided, but the partners were given theelection, as evidenced by the statements of accounts
referredto in the decision of the Court of Appeals, to invest theirrespective shares in such profits as additional capital.

13. The petitioners accordingly let a greater part of theirprofits as additional investment in the partnership.

14. After twenty years the business had grown to such anextent that is total value, including profits, amounted
toP44,618.67.

15. Statements of accounts were periodically prepared by thepetitioners and sent to the respondents who invariably
did notmake any objection thereto.

16. Before the last statement of accounts was made, therespondents had received P5,387.29 by way of profits.

17. The last and final statement of accounts, dated May 27,1932, and prepared by the petitioners after the
respondentshad announced their desire to dissolve the partnership,

18. Pursuant to the request contained in this letter, thepetitioners remitted and paid to the respondents the
totalamount corresponding to them under the above-quotedstatement of accounts which, however, was not signed by
thelatter.
19. Thereafter the complaint in this case was filed by therespondents, praying for an accounting and final liquidation
ofthe assets of the partnership.

20. The Court of First Instance of Manila held that the lastand final statement of accounts prepared by the petitioners
wastacitly approved and accepted by the respondents who, byvirtue of the above-quoted letter of Father Mariano
Lasala, losttheir right to a further accounting from the moment theyreceived and accepted their shares as itemized in
saidstatement

.21. This judgment was reversed by the Court of Appealsprincipally on the ground that as the final statement of
accountsremains unsigned by the respondents, the same standsdisapproved.

22. The decision appealed by the petitioners

ISSUES:

(1) WoN the accounting stated in the letter including the last andfinal statement of account was tacitly accepted by
the petitioners as the final liquidation and accounting of the assets of the partnership?(2) Are there really mistakes
and misrepresentations made in the statement of accounts made?

Petitioners contention:

To support a plea of a stated account so as t oconclude the parties in relation to all dealings between them, the
accounting must be shown to have been final. (1 Cyc. 366.) All the first nine statements which the defendants sent
the plaintiffs werepartial settlements, while the last, although intended to be final, has not been signed.

HELD FOR ISSUE

NO. 1: YES. SC stated that the last and final statement of accounts hereinabove quoted, had been approved bythe
respondents.

This approval resulted, by virtue of the letter of Father MarianoLasala of July 19, 1932, quoted in part in the appealed
decisionfrom the failure of the respondents to object to the statementand from their promise to sign the same as soon
as theyreceived their shares as shown in said statement.

After such shares had been paid by the petitioners andaccepted by the respondents without any reservation,
theapproval of the statement of accounts was virtually confirmedand its signing thereby became a mere formality to
be compliedwith by the respondents exclusively. Their refusal to sign, afterreceiving their shares, amounted to a
waiver to that formality infavor of the petitioners who has already performed theirobligation.

This approval precludes any right on the part of therespondents to a further liquidation, unless the latter can showthat
there was fraud, deceit, error or mistake in said approval.(Pastor ,vs .Nicasio, 6 Phil., 152; Aldecoa & Co.,vs. Warner,
Barnes & Co., 16 Phil., 423; Gonsalez vs. Harty, 32 Phil. 328.)The Court of Appeals did not make any findings that
there wasfraud, and on the matter of error or mistake it merely said

HELD FOR ISSUE

NO. 2: the pronouncement that the evidencetends to prove that there were mistakes in the petitioners' statementsof
accounts, without specifying the mistakes, merely intimates assuspicion and is not such a positive and unmistakable
finding of factas to justify a revision, especially because the Court of Appeals hasrelied on the bare allegations of the
parties, Moreover, as thepetitioners did not appeal from the decision of the Court abandonedsuch allegation in the
Court of Appeals. no justifiable reason (fraud, deceit, error or mistake) has beenpositively and unmistakably found by
the Court of Appeals soas to warrant the liquidations sought by the respondents. In justice to the petitioners. It should
be borne in mind that this case has been pending fornearly nine years and that, if another accounting is ordered,
acostly action or proceeding may arise which may not bedisposed of within a similar period, it is not improbable that
theintended relief may in fact be the respondents' funeral.

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PABALAN VS VELEZ

Pabalan owned two lots, a rural real estate devoted to agricultural purposes and an urban lot. In his desire to put the two lots
to productive use, he agreed to enter into a regular mercantile partnership with Walter Fitton.

The agreement stipulates that they form a partnership known by the name of AM Pabalan and Company with a capital
stock at P9,000; that Pabalan would contribute P3,000 in cash while Fitton would contribute P6,000 in real property; that
Pabalan would sell his two lots to Fitton for P6,000; that Pabalan would receive P3,000 of the purchase price while the
remaining will be his contribution to the capital; and that Fitton would contribute the said two lots as his agreed capital
contribution.

Pabalan received P3,000 of the purchase price. When Fitton died, he failed to pay into the partnership funds the remaining
P3,000. Owing to the failure of Fitton to comply with his obligation, the properties in question had been entirely unproductive,
resulting in losses and damages to Pabalan. Plaintiff prayed for the rescission of the double contract (partnership and sale)
entered into. Defendant Velez is the administrator of Fittons estate.

ISSUE: WON recission is the proper remedy.

RULING:

Yes, in bilateral contracts, when one of the parties fails to comply with his engagements, the party prejudiced is entitled to
choose between enforcement of the obligation or a rescission of the contract, with the payment of damages and interest in
either case. In the case at bar, enforcement cannot be had because the defaulting partner is already dead. Justice requires
the dissolution of the company and the rescission of the said sale.

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ILDEFONSO DE LA ROSA vs. ENRIQUE ORTEGA GO-COTAYG.R. No. L-24243, January 15, 1926

Art. 1818

Chinamen Go-Lio and Vicente Go-Sengco formed a society for the purchase and sale of articlesof commerce, and they
opened a store for this purpose. Later Go-Lio went to China. Vicenyte Go-Sengcodied and his son Enrique Ortega Go-Cotay
took charge of the businesses. Go-Lio died in China inOctober, 1916, Ildefonso de la Rosa was administrator by the CFI for
the intestate estate of his deceasedfather.de la Rosa requested Go-Cotay to wind up the business and to deliver to him the
portioncorresponding to the deceased Go-Lio. Go-Cotay denied the petition, alleging that the business was hisexclusively. In
view of this denial, de la Rosa filed with the CFI a complaint against Co-Cotay in which heprayed that the defendant be
sentenced to deliver to the plaintiff one-half of all the property of thepartnership. The assets of the partnership, as well as the
value of its property, could not be determinedwhen making the liquidation because there was no inventory and for this
reason it was not possible todetermine the capital of the partnership. The plaintiff, however, seems to be agreeable to
consideringthe initial partnership capital as the capital at the time of the winding up of the business.

ISSUE:

Should the partnership bear the losses incurred under the management of defendant?

RULING:

NO. Go-Cotay assumed complete responsibility for the business by objecting to theappointment of a receiver as prayed for
by plaintiff, and giving a bond therefor. Until that date his actswere those of a managing partner, binding against the
partnership; but thereafter his acts were those of a receiver whose authority is contained in section 175 of the Code of Civil
Procedure.A receiver has no right to carry on and conduct a business unless he is authorized or directed by thecourt to do
some, and such authority is not derived from an order of appointment to take and preservethe property (34 Cyc., 283; 23 R.
C. L., 73). It does not appear that the defendant as a receiver wasauthorized by the court to continue the business of the
partnership in liquidation. This being so, he ispersonally liable for the losses that the business may have sustained. (34 Cyc.,
296.) The partnershipmust not, therefore, be liable for the acts of the defendant in connection with the management of
thebusiness until August 3, 1918, the date when he ceased to be a member and manager in order tobecome receiver.

NOTES:PARTNERSHIPS; LIQUIDATION OF THEIR BUSINESS; DETERMINING PROFITS

When in liquidating apartnership the profits for a given period of time cannot be exactly determined for lack of evidence,
butthe profits for certain periods prior and subsequent thereto are known, the profits corresponding to thesaid given time
may be determined by finding the average of those profits already known andmultiplying it by the length of the time included
between said periods.MANAGING PARTNER; His AUTHORITY; RECEIVER.

When to prevent a receiver from taking charge of abusiness in dissolution, the managing partner gives a bond and continues
the business, he ceases to bemanaging partner from that time in order to become receiver; and while before that date the
propertywas liable for his acts, yet that is not the case with his subsequent acts, which are regulated by theprovisions of
section 175 of the Code of Civil Procedure, and without express judicial authority he

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Soncuya v. de Luna G.R. No. L-45464, April 28, 1939, Villa-Real, J

Fact:

Petitioner filed a complaint against respondent for damages as a result of the fraudulent administration of
the partnership, Centro Escolar de Senoritas of which petitioner and the deceased Avelino Librada were
members. For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a
partner, it is necessary that a liquidation of the business be made that the end profits and losses maybe
known and the causes of the latter and the responsibility of the defendant as well as the damages in
which each partner may have suffered, maybe determined.

Issue: Whether the petitioner is entitled to damages.

Ruling: According to the Supreme Court the complaint is not sufficient to constitute a cause of action on
the part of the plaintiff as member of the partnership to collect damages from defendant as managing
partner thereof, without previous liquidation. Thus, for a partner to be able to claim from another partner
who manages the general co-partnership, allegedly suffered by him by reason of the fraudulent
administration of the latter, a previous liquidation of said partnership is necessary.

GOQUIOLAY, ET. AL. VS. SYCIP, ET. AL.

Facts: Tan Sin An and Antonio Goquiolay entered into a general commercial partnership which was to last for 10
years for the purpose of dealing in real estate. The agreement lodged upon Tan Sin An the sole management of the
partnership affairs and his co partner, Goquiolay, has no voice or participation in the management of the affairs of
the co partnership. They further agreed upon that in the event of the death of any of the partners at any time
before the expiration of the term, the co partnership shall not be dissolved but will have to be continued and the
deceased partner shall be represented by his heirs or assigns in the said co partnership. A general power of
attorney (GPA) was executed by Goquiolay in favor of Tan Sin An which included buy, sell, alienate and convey
properties of the partnership as well as obtain loans as he may deem advisable for the best interest of the co
partnership. With the authority of the GPA, the partnership through Tan Sin An purchased 3 parcels of land which
was mortgaged to La Urbana Sociedad and another 46 parcels of land which which were purchased by Tan Sin An in
his individual capacity, and assumed mortgaged debt thereon. The downpayment for the 46 parcels of land was
advanced by Yutivo and Co. The two separate obligations were consolidated in an instrument executed by the
partnership and Tan Sin An, whereby the entire 49 lots were mortgaged in favor of the Banco Hipotecario de
Filipinas (as successor to La Urbana). When Tan Sin An died, his wife Kong Chia Pin was appointed administratix of
the intestate estate of her deceased husband. Repeated demands for payment were made by Banco Hipotecario on
the partnership and on Tan Sin An which was initially paid by Yutivo and Co. and Sing Yee Cuan and Co. (at the
request of Yutivo and Co.) The mortgage was eventually cancelled. Now Yutivo and Sing Yee Cuan Company filed
their claims in the intestate proceedings of Tan Sin An. Kong Chai Pin filed a petition with the probate court for
authority to sell all the 49 parcels of land to Washington Sycip and Betty Lee for the purpose primarily of settling
the aforesaid debts of her husband and the partnership. The court ordered the execution of deed of sale in favor of
Sycip and Lee in consideration of P37,000.00 and assuming payment of the claims filed by Yutivo & Co. and Sing
Yee Co. Later, Sycip and Lee executed in favor of the Insular Devt. Co. a deed of transfer covering said 49 parcels of
land.

Upon learning the sale, the surviving partner Goquiolay filed a petition to set aside the decision of the
probate court and annul the sale of the parcels of land by Kong Chai Pin in favor of Sycip and Lee and their
subsequent conveyance in favor of Insular Devt. Co. in so far as the 3 lots owned by the partnership is concerned.
Kong Chai Pin averred the validity of the sale as successor partner, in lieu of the late Tan Sin An. The complaint was
dismissed by the lower court and appeal was directly taken to the SC by Goquiolay.

Issue:

1. W/N Kong Chai Pin acquired the managerial rights of her late husband Tan Sin An NO.

2. W/N there was a valid sale of property to Sycip and Lee YES.

3. W/N the consent of the other partner was necessary to perfect the sale of the partnership properties to Sycip
and Betty NO.

Held: 1. The right of exclusive management conferred upon Tan Sin An, being premised upon trust and confidence,
was a mere personal right that terminated upon Tans demise. The provision in the articles of partnership stating
that the deceased partner shall be represented by his heirs could not have referred to the managerial rights given
to Tan Sin An but it more appropriately relates to the succession in the propriety interest of each partner (heir
becomes limited partner only).

2. However, consonant with the articles of co partnership providing for the continuation of the firm
notwithstanding the death of one of the partners, the heir of the deceased, by never repudiating or refusing to be
bound under said provision, became individual partner with Goquiolay upon Tans demise. By allowing Kong Chai Pin
to retain control of the partnership properties from 1942 to 1949, Goquiolay is estopped from denying her legal
representation of the partnership, with the power to bind it with proper contracts. By authorizing the widow of the
managing partner to manage partnership property (which a limited partner could not be authorized to do), the
other general partner recognized her as a general partner, and is now in estoppel to deny her position as a general
partner, with authority to administer and alienate partnership property.

3. Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co
partnership agreement, that every general partner has the power to bind the partnership and has the requisite
authority from his co partners.

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ADRIANO BUENAVENTURA Y DEZOLLIER, palintiff- appellant, vs.ANTONIO DAVID y ABELIDO, defendant-appellee.

By an agreement effective from April 20, 1906, a partnership was formed by Antonio David y Abelido and Adriano
Buenaventura y Dezollier for the conduct of the business of real estate brokers in the city of Manila, under the firm name
"Abelido and Co." The first named party was the capitalist member of the firm and its manager., while the last named was
the industrial member and bookkeeper. The firm maintained a feeble external existence for a few months, during which
period the capitalist associate placed P209.86 in the enterprise. This was consumed in office rent and other incidental
expenses. Only two profitable transactions were ever accomplished by the firm of Abelido and Co. during its existence.
These produced a total income of P42, which sum was noted on the credit side of the company's ledger.

It was agreed in the articles that the partnership should be liquidated upon April 20, 1907, in the absence of any agreement
for the extension of its life; but upon February 1, 1908, it was agreed in writing that the partnership should not be liquidated
until the sale of a piece of real estate in which the firm had become interested should be effected with profit. The property to
which reference was thus made consisted of a farm in the municipality of Murcia, in the Province of Tarlac, known as the
"Hacienda de Guitan."
This farm had been formerly owned by the spouses Loni Diangco and Epifania Torres; and long before the firm of Abelido
and Co. had come into existence Antonio David y Abelido had been their creditor by reason of certain sums of money from
time to time loaned them. After the death of Lino Diangco in 1890 still other sums of money were advanced by David to the
widow, Epifania Torres, in behalf of herself and her minor son Pablo Diangco. Upon July 10, 1906, Epifania agreed to convey
the Hacienda de Guitan to Abelido and Buenaventura for a consideration stated at P2,050 (Exhibit C). The purpose of the
transaction was to settle the debt of several thousand pesos owing by her and her son to Antonio David y Abelido. The
conveyance by which this contract was finally carried into effect was executed upon January 30, 1908. The grantee named
in the deed was Antonio David y Abelido; and no reference was made in this instrument to the firm of Abelido and Co., or to
Buenaventura as a partner therein. Buenaventura was present at the time of the execution of this deed and signed as a
subscribing witness. The total consideration for the conveyance was P7,170, of which the sum of P5,870 was consumed in
satisfying the old indebtedness due to David. The balance (according to the recitals of the deed) was paid by him to Epifania
Torres. It further appears that Antonio David y Abelido proceeded to procure the registration of the hacienda in his own name
and a Torrens title was in due course issued to him.

Upon the same day that the above-mentioned deed was executed by Epifania Torres to Antonio David, a declaration was
drawn up and ratified by Antonio David and Adiano Buenaventura in which it was stated that Epifania Torres had sold the
estate above mentioned to Antonio David for the sum of P7,170 and that of this amount the sum of P3,370 had been
advanced by Abelido & Co., while P3,800 had been paid by David individually. It was then said that the firm thereby became
the owner of the property in the proportion of the value satisfied by it; and this was followed by an obscure clause meaning,
probably, that the right of the firm to acquire this participation was dependent on the reimbursement of David for the outlay
made by him with respect to such share. A further statement was added to the effect that Buenaventura should have the
option to advance half of the sum paid out by Antonio David y Abelido, to wit, the sum of P1,900, in the event Buenaventura
should desire to have a half interest in the property in his own name.

From the date of the conveyance above mentioned David exercised all the rights of an owner over the property. Upon one
occasion he mortgaged it for the sum of P5,000 and Buenaventura was paid P300 for assisting in the securing of this loan.
At another time David mortgaged the property for the sum of P15,000 and applied the money thus secured to his own use.

Upon February 18, 1915, or more than seven years after the day upon which the deed to the property had been executed to
David, Buenaventura filed the complaint in this action. In this proceeding he seeks relief embracing the following features:
(1) a dissolution of the partnership of Abelido and Co.; (2) judgment for a balance of some P2,344.85. alleged to be due as
arrears upon salary account; (3) a transfer of the title of the Hacienda de Guitan to Abelido and Co.; (4) and accounting for,
and division of all money, property and other effects of the firm; and especially an accounting for profits alleged to have been
made by the defendant David from investments of money derived from the hacienda, which profits were alleged to amount
to the sum of P5,190; (5) a judgment for damages in the sum of P10,000; (6) such and further relief as might seem to the
court just and equitable.

At the hearing the court entered a judgment declaring that the partnership of Abelido and Co. was dissolved and denying all
other relief sought in the complaint. From this judgment the plaintiff Buenaventura has appealed.

As regards the Hacienda de Guitan, it is in our opinion clear upon the oral testimony and other proof adduced in the cause
that every cent of the consideration for the purchase of this property was supplied by David; and it consisted, as we have
seen, mostly of money previously loaned. Buenaventura had no resources, and it was evidently quite beyond his power to
raise the funds necessary to participate in a business transaction of the size of that in question. His pretension that he
supplied P1,025 or half of the consideration named in the original contract (Exhibit C) was rightly rejected by the court.
Furthermore it appears that the firm of Abelido and Co., as distinguished from the individual David Abelido, never in fact
advanced a single peso in the transaction, although the "declaration" of January 30, 1908, states that the firm advanced
P3,370. That declaration constitutes an admission which entitles it to weight but its recital as to the money paid or received
may be explained and even contradicted, as in case of a simple receipt. David's explanation is that the plaintiff, as
bookkeeper, had made it appear in the firm books that the firm was debtor to David in the amount of P3,370 in respect to
this transaction and that the plaintiff had requested David to sign the declaration showing the firm to be a participant.
Throughout this affair David exhibited considerable complaisance in signing papers at Buenaventura's request. He
apparently considered Buenaventura an amiable old friend and was willing to indulge the latter's fancy with the idea that he
was party to an important transaction, well knowing that he could never put up the necessary money to enable him to share
in the deal. Whatever may be the explanation of David's imprudence in allowing himself to be thus drawn into an admission
showing that the firm participated in the deal, it is quite clear that he supplied all the money for the purchase in question.

The situation then, as regards the title to the hacienda is this: David, who supplied all the funds, has obtained the legal title
in his own individual name. This was accomplished with knowledge on the part of Buenaventura. Furthermore he has
registered his title by means of legal proceedings which were probably known to Buenaventura. Still later, the latter is seen
acting as broker for David in securing a loan on the hacienda and receives a fee for his services. Meanwhile the original
partnership enterprise is abandoned. Finally more than seven years after the day when Buenaventura stood by and signed
as a witness the deed conveying the property to David, he comes into court and seeks to reach this property through the
ghost of the firm of Abelido and Co. and bring the defendant to account for the profits which he has obtained from the
investments of its proceeds in various enterprises.

The purpose of the action is to impress a trust on the property in favor of Abelido and Co., to divest the title out of the
present owner, and to have it, or its proceeds, liquidated and administered as firm assets. We are of the opinion that there is
no merit in the plaintiff's contention. It is true that a court will not hesitate, under certain circumstances, to divest a title out of
the holder and impress a trust upon it in favor of another, or to require the holder of the title to administer the property for the
true owner (Uy Aloc vs. Cho Jan Ling, 19 Phil. Rep., 202); yet this will not be done in the absence of a sufficient contract, an
express trust, or other strong equitable circumstances requiring the intervention of equity. No such relief can be granted,
upon purely equitable grounds, against a party who has himself paid the entire purchase price in favor of one who advanced
nothing. But the declaration of January 30, 1908, is relied upon as evidence of a contract establishing the right of Abelido
and Co. The reply is that by the terms of that instrument Buenaventura's personal right was dependent upon the
advancement of money by him which was in fact never supplied, and as to the statement contained in that declaration that
Abelido and Co. had advanced a certain sum, it clearly appears that this is not true; and we hold that the defendant is not
precluded, or estopped, by that admission from showing the actual facts.

Furthermore, it is evident that the plaintiff's case is adversely affected by his long delay in bringing this action. Undue delay
in the enforcement of a right is strongly persuasive of a lack of merit in the claim, since it is human nature for a person to
assert his rights most strongly when they are threatened or invaded. It is hard to believe that, if the plaintiff had been
convinced of the justice of his contention, he would have failed to assert his right to a division at the time when the
defendant was pocketing the proceeds of the loans obtained upon the security of the Hacienda de Guitan. The probabilities
are that Buenaventura realized at the time that his hopes of sharing in this investment were doomed to disappointment and
that with full knowledge of all the facts he decided to abandon the claim, or not assert it. However, the documents which
appear on their face to establish his right to a participation in this property remained in existence; and in course of time said
claim was made the basis of this action. The assertion of doubtful claims, after long delay, can not be favored by the courts.
Time inevitably tends to obliterate occurrences from the memory of witnesses, and even where the recollection appears to
be entirely clear, the true clue to the solution of a case may be hopelessly lost. These consideration constitute one of the
pillars of the doctrine long familiar in equity jurisprudence to the effect that laches or unreasonable delay on the part of a
plaintiff in seeking to enforce a right is not only persuasive of a want of merit but may, according to the circumstances, be
destructive of the right itself. Vigilantibus non dormientibus equitas subvenit.

The decision of the main issue relative to the hacienda renders unnecessary any discussion of other features of the case
presented in the appellant's brief. Upon the whole it is our opinion that there was no error prejudicial to the plaintiff in the

the appellant.

Emilio Emnace vs Court of Appeal

Business Organization Partnership, Agency, Trust Dissolution and Winding Up Prescription

Emilio Emnace, Jacinto Divinagracia and Vicente Tabanao formed a partnership engaged in the fishing industry. In 1986,
Jacinto decided to leave the partnership hence they agreed to dissolve the partnership. At that time, the partnership has an
estimated asset amounting to P30,000,000.00.

HOWEVER, until the death of Vicente Tabanao in 1994, Emnace never rendered an accounting either to Vicente or his
heirs. Emnace reneged on his promise to turn over Tabanaos share which is 1/3 of the P30M. The heirs of Tabanao then
sued Emnace. Emnace argued, among others, that the heirs are barred by prescription hence they can no longer demand
an accounting. He contends that the partnership was dissolved in 1986 and that was the time when Tabanaos (and his
heirs) right to inquire into the business affairs accrued; that said right has expired in 1990 or 4 years after. So beyond 1990,
they can no longer inquire.

ISSUE: Whether or not Emnace is correct.

HELD: No. Prescription has not run in this case, it has never begun. The three final stages of partnership are: a) dissolution,
b) winding up, and c) termination. In this case, Emnace and his partners dissolved their partnership but such did not perfect
the dissolution because no accounting took place. The partnership, although dissolved, continues to exist and its legal
personality is retained, at which time it completes the winding up of its affairs, including the partitioning and distribution of the
net partnership assets to the partners. For as long as the partnership exists, any of the partners (or legal representative in
this case the heirs of Tabanao) may demand an accounting of the partnerships business. Prescription of the said right
starts to run only upon the dissolution of the partnership when the final accounting is done.
When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has
been made, and that is precisely what the heirs are seeking in their action before the trial court, since Emnace has failed or
refused to render an accounting of the partnerships business and assets. Hence, the said action is not barred by
prescription.

NOTE: Under Article 1809 of the Civil Code, right to demand an accounting may also be invoked under certain agreements
these are just one of the exceptions. General Rule: Accounting only when there is dissolution. Exception: Article 1807 and

MARGARITA VILLANUEVA, as judicial administratrix of the deceased Lorenzo Villanueva, Plaintiff-Appellant,

vs. JUAN SANTOS, Defendant-Appellee.

This appeal was taken by the plaintiff from the order of the Court of First Instance of Bulacan, holding that the consignation
made by said plaintiff was invalid and that the sale with the right of repurchase of the parcels of land in litigation was final,
and ordering her to yield possession thereof to the defendant within ten days from receipt of notice of the said
order.chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff, as judicial administratrix of the deceased Lorenzo Villanueva, commenced in the Court of First Instance of
Bulacan civil case No. 5249 against the defendant to annul the deed of sale with the right of repurchase of two parcels of
land executed by the said Lorenzo Villanueva while living in favor of the defendant. The following decision was rendered in
the said case:

When this case was called for trial, the parties through their respective attorneys submitted the following stipulation for the
decision of the court:chanrobles virtual law library

"Both parties, assisted by their respective attorneys, agree that the plaintiff shall pay on December 4, 1936, to the defendant
to repurchase the two parcels of land described in the complaint, the sum of three hundred fifty-nine pesos and sixty
centavos (P356.60), with legal interest thereon from January 8, 1934 until the said date, December 4, 1936; and that should
she fail to pay the said sum of P359.60, or a part thereof, or the interest thereon, wholly or partially, then the sale with the
right of repurchase of said parcels, as they appear in the deed of sale Exhibit A of the complaint, shall be deemed final; and
that the plaintiff shall deliver the possession of said parcels.chanroblesvirtualawlibrary chanrobles virtual law library

"They likewise agree that should the plaintiff pay the aforesaid sums within the stipulated period, the expenses for the
execution of the corresponding deed and the transfer of certificates shall be defrayed by the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library

"They also agree that the plaintiff shall on this very date ask the authority of the court to enter into this stipulation in the
intestate of the deceased Lorenzo Villanueva; and to render a decision in accordance therewith."chanrobles virtual law
library

Wherefore, the court approves this stipulation and orders the parties to observe and comply strictly with the conditions
thereof, without pronouncement as to the costs. So ordered.chanroblesvirtualawlibrary chanrobles virtual law library

Malolos, Bulacan, today November 5, 1936.

(Sgd.) PEDRO MA. SISON

Judge (B. E., p. 7.)

On the night of December 4, 1936, the date of the expiration of the period granted to the plaintiff to pay the repurchase price,
the latter offered to the defendant the check No. D-8695 for P421.04, issued by Ramon Meneses against the Bank of the
Philippines Islands in payment of the repurchase price. As the defendant refused to accept the check on the allegation that
the payment should be made in money or legal tender, the plaintiff, through counsel, deposited the check with the clerk of
court who received the same, and at the same time put in a motion asking that the payment be deemed effected and the two
parcels of land redeemed, and, further, that the defendant be ordered to pay her the sum of P120 as damages. After hearing
the motion, the court on April 30, 1937, issued the aforementioned order from which the plaintiff
appealed.chanroblesvirtualawlibrary chanrobles virtual law library
In her sole assigned error the plaintiff contends that the court erred in holding that the consignation of the check with the
clerk of court was invalid and that it did not have the effect of paying her obligation. The court correctly held that the
consignation was unavailing and that it did not produce any legal effect because the defendant did not accept it and it was
not in the form of money or legal tender. Article 1170 of the Civil Code provides that payment of debts of money shall be
made in the specie stipulation and, should it not be possible to deliver such specie, in silver or gold coin legally current; and
provides, further, that the delivery of promissory notes payable to order, or drafts or other commercial paper, shall produce
the effects of payment only when realized or when, by the fault of the creditor, the privileges inherent in their negotiable
character have been lost. Under this legal provision the defendant was not under a duty to accept the check because it is
known that it does not constitute legal tender, and the consignation having been refused, it did not produce any legal effect
and could not be considered as payment made by the plaintiff of the repurchase price. In Belisario vs. Natividad ([1934]), 60
Phil., 156), it was held that a creditor is not bound to accept a check in satisfaction of his demand, because a check, even if
good when offered, does not meet the requirements of a legal tender.chanroblesvirtualawlibrary chanrobles virtual law library

The defendant, in turn, alleges that the court erred in concluding that he testified that the plaintiff's indebtedness was
P421.04, and in not holding that the consignation was invalid because the plaintiff's debt was P422.29 and the check only
amounted to P421.04. These assigned errors can neither be considered nor passed for the simple reason that the defendant
did not appeal from any part of the court's order.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the foregoing, the appealed order is affirmed, with the costs of this instance to the plaintiff-appellant. So ordered.

Avancea, C.J., Villa-Real, Diaz, Laurel, Concepcion and Moran, JJ., concur.

CAMPOS RUEDA & CO. VS. PACIFIC COMMERCIAL CO. ET. AL.

Facts: This case involves the application by the petitioner for a judicial decree adjudging itself insolvent. The
limited partnership of Campos Rueda & Co. was, and is, indebted to Pacific Commercial Co., the Asiatic Petroleum
Co. and the International Banking Corporation in various sums amounting to not less than Php1000.00, payable in
the Philippines, which were not paid more than thirty days prior to the date of their filing of the application for
involuntary insolvency. The lower court denied the petition because it was not proven, nor alleged, that the
members of the aforesaid firm were insolvent at the time of the application was filed; and that as said partners are
personally and solidarily liable for the consequences of the transaction of partnership, it cannot be adjudged
insolvent so long as the partners are not alleged and proven to be insolvent. From this judgment, the petitioners
appeal to the Supreme Court.

Issue: Whether or not a limited partnership, such as the petitioner, which has failed to pay its obligations with
three creditors for more than thirty days, may be held to have committed an act of insolvency, and thereby be
adjudged insolvent against its will.

Held: In the Philippines, a limited partnership duly organized in accordance with law has a personality distinct from
that of its members. If it commits an act of bankruptcy, such as that of failing for more than 30 days to pay debts
amounting to PhP1000.000 or more, it may be adjudged insolvent on the petition of three of its creditors although
its members may not be insolvent. Under our Insolvency Law, one of the acts of bankruptcy upon which an
adjudication of involuntary