BUSINESS ORGANIZATION I (1) The pool has a common fund, consisting of money and other valuables that are
deposited in the name and credit of the pool. This common fund pays for the
Article 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing
the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession.
JARANTILLA vs JARANTILLA (APC)
Under Article 1767 of the Civil Code, there are two essential elements in a contract of
partnership: (a) an agreement to contribute money, property or industry to a common
fund; and (b) intent to divide the profits among the contracting parties. The first
element is undoubtedly present in the case at bar, for, admittedly, all the parties in this
case have agreed to, and did, contribute money and property to a common fund.
Hence, the issue narrows down to their intent in acting as they did. It is not denied that
all the parties in this case have agreed to contribute capital to a common fund to be
able to later on share its profits. They have admitted this fact, agreed to its veracity,
and even submitted one common documentary evidence to prove such partnership -
the Acknowledgement of Participating Capital. The petitioner himself claims his share
to be 6%, as stated in the Acknowledgement of Participating Capital. However,
petitioner fails to realize that this document specifically enumerated the businesses
covered by the partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City
and Remotigue Trading in Cotabato City. Since there was a clear agreement that the
capital the partners contributed went to the three businesses, then there is no reason
to deviate from such agreement and go beyond the stipulations in the document.
There is no evidence that the subject real properties were assets of the partnership
referred to in the Acknowledgement of Participating Capital. Petition denied.
SY vs CA (EMPLOYEE)
ISSUE: Whether Sahot is an industrial partner
HELD: No. Article 1767 of the Civil Code states that in a contract of partnership two or
more persons bind themselves to contribute money, property or industry to a common
fund, with the intention of dividing the profits among themselves. Not one of these
circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is no
proof that he was receiving a share in the profits as a matter of course, during the
period when the trucking business was under operation. Neither is there any proof that
he had actively participated in the management, administration and adoption of
policies of the business. Thus, the NLRC and the CA did not err in reversing the
finding of the Labor Arbiter that private respondent was an industrial partner from 1958
to 1994.
TORRES vs CA (INDUSTRY)
WON the contract entered into by petitioners and respondent is a contract of
partnership. YES
Under the Agreement between petitioners and respondent, petitioners would
contribute property to the partnership in the form of land which was to be developed
into a subdivision; while respondent would give, in addition to his industry, the amount
needed for general expenses and other costs. Furthermore, the income from the said
project would be divided according to the stipulated percentage. Clearly, the contract
manifested the intention of the parties to form a partnership. Under Article 1767 of the
Civil Code, a partner may contribute not only money or property, but also industry.
LIM TONG LIM vs PHIL FISHING GEAR INDUSTRIES (CREDIT)
The contribution to such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that any loss or profit from the
sale and operation of the boats would be divided equally among them also shows that
they had indeed formed a partnership.
AFISCO INSURANCE CORP vs CA (STRETCHED DEFINITION)
Pool Agreement or an association that would handle all the insurance businesses
covered under their quota-share reinsurance treaty and surplus reinsurance treaty with
Munich may be considered a partnership because it contains the following elements:
administration and operation expenses of the pool. (2) The pool functions through an
executive board, which resembles the board of directors of a corporation, composed of
one representative for each of the ceding companies. (3) While, the pool itself is not a
reinsurer and does not issue any policies; its work is indispensable, beneficial and
economically useful to the business of the ceding companies and Munich, because
without it they would not have received their premiums pursuant to the agreement with
Munich. Profit motive or business is, therefore, the primordial reason for the pools
formation.
PHILEX MINING vs CIR
The strongest indication that petitioner was a partner in the Sto Nio mine is the fact
that it would receive 50% of the net profits as compensation under paragraph 12 of the
agreement. The entirety of the parties contractual stipulations simply leads to no other
conclusion than that petitioners compensation is actually its share in the income of the
joint venture.
Article 1769 (4) of the Civil Code explicitly provides that the receipt by a person of a
share in the profits of a business is prima facie evidence that he is a partner in the
business. Petitioner asserts, however, that no such inference can be drawn against it
since its share in the profits of the Sto. Nio project was in the nature of compensation
or wages of an employee, under the exception provided in Article 1769 (4) (b).
petitioner was not an employee of Baguio Gold who will be paid wages pursuant to an
employer-employee relationship. To begin with, petitioner was the manager of the
project and had put substantial sums into the venture in order to ensure its viability and
profitability. By pegging its compensation to profits, petitioner also stood not to
be remunerated in case the mine had no income. It is hard to believe that
petitioner would take the risk of not being paid at all for its services, if it were
truly just an ordinary employee.
Article 1768. The partnership has a juridical personality separate and distinct from that
of each of the partners, even in case of failure to comply with the requirements of
article 1772, first paragraph.
AGUILA vs AGUILA (REAL PARTY IN INTEREST)
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.
VILLAREAL vs RAMIREZ (EQUITY FROM PARTNERSHIP)
Respondents have no right to demand from petitioner the return of their equity share.
As found by the court petitioners did not personally hold its equity or assets. The
partnership has a juridical personality separate and distinct from that of each of the
partners. Since the capital was contributed to the partnership, not to petitioners,
it is the partnership that must refund the equity of the retiring partners. However,
before the partners can be paid their shares, the creditors of the partnership must first
be compensated. Therefore, the exact amount of refund equivalent to respondents
one-third share in the partnership cannot be determined until all the partnership assets
will have been liquidated and all partnership creditors have been paid. CAs
computation of the amount to be refunded to respondents as their share was thus
erroneous.
Article 1769: In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners
as to each other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of the property;
(3) The sharing of gross returns dos not of itself establish a partnership,
whether or not the persons sharing them have a joint or common
right or interest in any property from which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner in the business, but no
such inference shall be drawn if such profits were received I
payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased
partner;
(d) As interest on a loan, though the amount of payment vary
with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise.
OBILLOS vs CIR (LOTS UNFIT FOR RESIDENTIAL PURPOSES)
four brothers and sisters acquired lots with the original purpose to divide the lots
among themselves for residential purposes; when later they found it not feasible to
build their residences thereon because of the high cost of construction, they decided to
resell the properties to dissolve the co-ownership. The Court ruled that no partnership
was constituted among the siblings, since the original intention was merely to
collectively purchase the lots and eventually to partition them among themselves to
build their residences; and that in fact they had no choice but to resell the same to
dissolve the co-ownership. SC found that the division of the profits was merely
incidental to the dissolution of the co-ownership which was in the nature of
things a temporary state; and that there could not have been any partnership,
but merely a co-ownership, since there was utter lack of intent to form a
partnership or joint venture
REYES vs CIR (FATHER AND SON; INTENTION TO DERIVE PROFIT)
where father and son purchased a lot and building and had it administered by an
administrator, and divided equally the net income, there was a partnership formed
because profit was the original intention for the common fund.
EVANGELISTA VS CIR (SISTERS LEASED OUT REAL PROPERTY)
where three sisters bought four pieces of real property with every intention to lease
them out, and which they in fact leased to various tenants and derived rentals
therefrom, there was a partnership formed.
BASTIDA vs MENZI (EER; COMPENSATION BASED ON NET PROFITS)
The relationship established between the parties was not that of partners, but that of
employer and employee, whereby the plaintiff was to receive 35% of the net profits of
the fertilizer business of Menzi in compensation for his services for supervising the
mixing of the fertilizers. Neither the provisions of the contract nor the conduct of
the parties prior or subsequent to its execution justified the finding that it was a
contract of co-partnership. The written contract was, in fact, a continuation of the
verbal agreement between the parties, whereby the plaintiff worked for the defendant
corporation for one-half of the net profits derived by the corporation form certain
fertilizer contracts.
In this case, there was no common fund. The business belonged to Menzi & Co. The
plaintiff was working for Menzi, and instead of receiving a fixed salary, he was to
receive 35% of the net profits as compensation for his services. The phrase in the
written contract en sociedad con, which is used as a basis of the plaintiff to prove
partnership in this case, merely means en reunion con or in association with.
It is also important to note that although Menzi agreed to furnish the necessary
financial aid for the fertilizer business, it did not obligate itself to contribute any fixed
sum as capital or to defray at its own expense the cost of securing the necessary
credit.
HEIRS OF TANG ENG KEE vs CA (DEMAND FOR PERIODIC ACCOUNTING)
ISSUE: Whether or not Tan Eng Kee is a partner. NO
Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the profits
and losses. Each has the right to demand an accounting as long as the
partnership exists. Even if it can be speculated that a scenario wherein if excellent
relations exist among the partners at the start of the business and all the partners are
more interested in seeing the firm grow rather than get immediate returns, a deferment
of sharing in the profits is perfectly plausible. But in the situation in the case at bar,
the deferment, if any, had gone on too long to be plausible. A person is presumed to
take ordinary care of his concerns. A demand for periodic accounting is evidence
of a partnership which Kee never did.
TOCAO vs CA (NOT AN EE; VOICE IN THE MANAGEMENT)
that while it is true that the receipt of a percentage of net profits constitutes only prima
facie evidence that the recipient is a partner in the business, the evidence in the case
at bar controverts an employer-employee relationship between the parties. In the first
place, private respondent had a voice in the management of the affairs of the
cookware distributorship, including selection of people who would constitute the
administrative staff and the sales force.
YULO vs YANG CHIAO SENG (MERE SUBLEASE)
No partnership exists. It was a sublease contract.
The ff. facts belie her allegation of partnership:
a. Yulo did not furnish the supposed P20K capital;
b. She did not help or intervene in the management of the theatre;
c. She never demanded any accounting of the expenses and earnings of the
business (Were she really a partner, her first concern should have been to find
out how the business was progressing, whether the expenses were legitimate,
whether the earnings were correct, etc.)
d. She only received her of P3K a month, which cannot be interpreted in any manner
than a payment for the use of the premises which she had leased from the
owners.
EVANGELISTA vs CIR
the first element is undoubtedly present for petitioners have agreed to, and did,
contribute money and property to a common fund. As to the second element, the Court
fully satisfied that their purpose was to engage in real estate transactions for monetary
gain and then divide the same among themselves as indicated by the following
circumstances:
1. The common fund was not something they found already in existence nor a
property inherited by them pro indiviso. It was created purposely, jointly
borrowing a substantial portion thereof in order to establish said common fund;
2. They invested the same not merely in one transaction, but in a series of
transactions. The number of lots acquired and transactions undertake is strongly
indicative of a pattern or common design that was not limited to the
conservation and preservation of the aforementioned common fund or even of
the property acquired. In other words, one cannot but perceive a character of
habitually peculiar to business transactions engaged in the purpose of
gain;
3. Said properties were not devoted to residential purposes, or to other personal
uses, of petitioners but were leased separately to several persons;
4. They were under the management of one person where the affairs relative to
said properties have been handled as if the same belonged to a corporation or
business and enterprise operated for profit;
5. Existed for more than ten years, or, to be exact, over fifteen years, since the first
property was acquired, and over twelve years, since Simeon Evangelista
became the manager;
6. Petitioners have not testified or introduced any evidence, either on their purpose
in creating the set up already adverted to, or on the causes for its continued
existence.
The collective effect of these circumstances is such as to leave no room for doubt on
the existence of said intent in petitioners herein
ONA vs CIR (INHERITANCE CONTRIBUTED TO COMMON FUND)
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.
HEIRS OF JOSE LIM vs JULIET VILLA LIM (G.R. No. 172690)
Elfledo was not just a hired help but one of the partners in the trucking business, active
and visible in the running of its affairs from day one until this ceased operations upon
his demise. The extent of his control, administration and management of the
partnership and its business, the fact that its properties were placed in his name, and
that he was not paid salary or other compensation by the partners, are indicative of the
fact that Elfledo was a partner and a controlling one at that. It is apparent that the other
partners only contributed in the initial capital but had no say thereafter on how the
business was ran. Evidently it was through Elfredos efforts and hard work that the
partnership was able to acquire more trucks and otherwise prosper. Even the appellant
participated in the affairs of the partnership by acting as the bookkeeper sans salary.
Article 1773: A contract of partnership is void, whenever immovable property is
contributed thereto, if an inventory of said property is not made, signed by the parties,
and attached to the public instrument.
AGAD vs MABATO
(TO OPERATE A FISHPOND, NOT ENGAGE IN FISHPOND BUSINESS)
Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall
be necessary.
Art. 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.
It should be noted that the partnership was established "to operate a fishpond", not
to "engage in a fishpond business. Moreover, none of the partners contributed either a
fishpond or a real right to any fishpond. We find that said Article 1773 of the Civil Code
is not in point and that, the order appealed from should be, as it is hereby set aside
and the case remanded to the lower court for further proceedings.
TORRES vs CA (ORDINARY CONTRACT AS BETWEEN THE PARTNERS)
Petitioners argue that the Joint Venture Agreement is void under Article 1773 since the
parties did not make, sign or attach to the public instrument an inventory of the real
property contributed.
First, Article 1773 was intended primarily to protect third persons. The execution of a
public instrument would be useless if there is no inventory of the property contributed,
because without its designation and description, they cannot be subject to inscription
in the Registry of Property, and their contribution cannot prejudice third persons. This
will result in fraud to those who contract with the partnership in the belief in the efficacy
of the guaranty in which the immovables may consist. Thus, the contract is declared
void by the law when no such inventory is made. The case at bar does not involve
third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their
claim that respondent should pay them 60 percent of the value of the property. They
cannot in one breath deny the contract and in another recognize it, depending on what
momentarily suits their purpose. Parties cannot adopt inconsistent positions in regard
to a contract and courts will not tolerate, much less approve, such practice.
In short, the alleged nullity of the partnership will not prevent courts from
considering the Joint Venture Agreement an ordinary contract from which the
parties' rights and obligations to each other may be inferred and enforced.
LITONJUA vs LITONJUA (VOID, FAILURE TO COMPLY 1773)
failure to comply with the public instrument and SEC-registration requirements under
Article 1772 of the Civil Code renders the contract of partnership as unenforceable. It
is at once apparent that what respondent Eduardo imposed upon himself under the
above passage, if he indeed wrote Annex A-1, is a promise which is not to be
performed within one year from contract execution on June 22, 1973. Accordingly,
the agreemend embodied in Annex A-1 is covered by the Statute of Frauds and
ergounenforceable for non-compliance therewith. By force of the statute of frauds, an
agreement that by its terms is not to be performed within a year from the making
thereof shall be unenforceable by action, unless the same, or some note or
memorandum thereof, be in writing and subscribed by the party charged. Corollarily,
no action can be proved unless the requirement exacted by the statute of frauds is
complied with.
Lest it be overlooked, the contract-validating inventory requirement under Article 1773
of the Civil Code applies as long [as] real property or real rights are initially brought
into the partnership. In short, it is really of no moment which of the partners, or, in this
case, who between petitioner and his brother Eduardo, contributed immovables. In
context, the more important consideration is that real property was contributed, in
which case an inventory of the contributed property duly signed by the parties should
be attached to the public instrument, else there is legally no partnership to speak of.
(at p. 586).
Article 1782: Persons who are prohibited from giving each other any donation or
advantage cannot enter into universal partnership.
CIR vs SUTER (27 SCRA 152)
A husband and a wife may not enter into a contract of GENERAL COPARTNERSHIP,
because under the CivilCode, which applies in the absence of express provision in the
Code of Commerce, persons prohibitedfrom making donations to each other are
prohibited from entering into UNIVERSAL PARTNERSHIPS. It follows that the
marriage of partners necessarily brings about the dissolution of a pre-
existingpartnership.
William suter morcoin ltd. Was not a general partnership but a particular partnership.
Hence, it is not a prohibited partnership entered into by the spouses. CIR evidently
failed to observe the fact that William J. Suter "Morcoin" Co., Ltd. was not auniversal
partnership, but a particular one.
Contributions by the spouses remained as their separate properties even after
marriage. Nor could the subsequent marriage of the partners operate to dissolve it,
such marriage not being one of thecauses provided for that purpose either by the
Spanish Civil Code or the Code of Commerce.The capital contributions of partners
William J. Suter and Julia Spirig were separately ownedand contributed by them
before their marriage, and after they were joined in wedlock, such contributions
remained their respective separate property under the Spanish Civil Code (Article
1396):
Article 1786: Every partner is a debtor of the partnership for whatever he may have
promised to contribute thereto. He shall also be bound for warranty in case of eviction
with regard to specific and determinate things which he may have contributed to the
partnership, in the same cases and in the same manner as the vendor is bound with
respect to the vendee. He shall also be liable for the fruits thereof from the time they
should have been delivered, without the need of any demand.
SANCHO vs LIZARAGA (SPECIFIC PERFORMANCE, NOT RESCISSION)
Lizarragas failure to pay the partnership, he became indebted to it. But Sancho
cannot demand rescission. Owing to the defendant's failure to pay to the partnership
the whole amount which he bound himself to pay, he became indebted to it 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. This article cannot be applied to the case in question,
because it refers to the resolution of obligations in general,whereas article 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.
Article 1800: The partner who has been appointed manager in the articles of
partnership may execute all acts of administration despite the opposition of his
partners, unless he should act in bad faith; and his power is irrevocable without just or
lawful cause. The vote of the partners representing the controlling interest shall be
necessary for such revocation of power. A power granted after the partnership has
been constituted may be revoked at any time.
TAI TONG CHUACHE & CO vs INSURANCE COMMISSION (MANAGING
PARTNER AS AGENT)
a partnership may sue and be sued in its name or by its duly authorized
representative, and when it has a designated managing partner, he may execute all
acts of administration including the right to sue debtors of the partnership. The fact that
Arsenio Lopez Chua is the representative of petitioner is not questioned. Thus Chua
as the managing partner of the partnership may execute all acts of administration
including the right to sue debtors of the partnership in case of their failure to pay their
obligations when it became due and demandable. Or at the very least, Chua being a
partner of petitioner Tai Tong Chuache& Company is an agent of the partnership.
Being an agent, it is understood that he acted for and in behalf of the firm. Public
respondent's allegation that the civil case flied by Arsenio Chua was in his capacity as
personal creditor of spouses Palomo has no basis.
Article 1802: In case it should have been stipulated that none of the managing
partners shall act without the consent of the others, the concurrence of all shall be
necessary for the validity of the acts, and the absence or disability of any one of them
cannot be alleged, unless there is imminent danger of grave or irreparable injury to the
partnership.
LITTON vs HILL & CERON (PRESUMPTION OF AUTHORITY)
persons, like the plaintiff, are not bound in entering into a contract with any of the two
partners ,to ascertain whether or not this partner with whom the transaction is made
has the consent of the other partner. The public need not make inquiries as to the
agreements had between the partners. Its knowledge, is enough that it is contracting
with the partnership which is represented by one of the managing partners.
There is a general presumption that each individual partner is an authorized agent for
the firm and that he has authority to bind the firm in carrying on the partnership
transactions. The presumption is sufficient to permit third persons to hold the firm liable
on transactions entered into by one of members of the firm acting apparently in its
behalf and within the scope of his authority.
Article 1809: Any partner shall have the right to a formal account as to partnership
affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its
property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by Article 1807;
(4) Whenever other circumstances render it just and reasonable.
FUE LEUNG vsIAC (PRESCRIPTION FOR ACCOUNTING)
They are partners in Sun WahPanciteria as they fit the requisites of a partnership. If
excellent relations exist among the partners 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 10 years from the start of operations, such rights are
irretrievably lost. NCC 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.
EMNACE vs CA (370 SCRA 431)
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.
Article 1815: Every partnership shall operate under a firm name, which may or may not
include the name of one or more of the partners.Those who, not being members of the
partnership, include their name in the firm name, shall be subject to the liability of a
partner.
JO CHUNG CANG vs. PACIFIC COMMERCIAL CO (REPEALED BY 1815)
What is the nature of the mercantile establishment TeckSeing& Co., Ltd.?
HELD: The contract of partnership established a general partnership. By process of
elimination, TeckSeing& Co., Ltd. Is neither 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, TeckSeing& Co., Ltd. was to establish
partnership w/c they erroneously denominated as a limited partnership.

Article 1816: All partners, including industrial ones, shall be liable pro rata with all their
property and after all the partnership assets have been exhausted, for the contracts
which may be entered into in the name and for the account of the partnership, under
its signature and by a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a partnership contract.
COMPANIA MARITIMA vs MUNOZ (INDUSTRIAL PARTNERS, ALSO LIABLE)
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. The Courts construction of the article is that it
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.
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.
DELOS REYES vs LUKBAN (NO PARTNERSHIP ASSETS LEFT)
ISSUE:WON Creditor delos Reyes may collect individually from the partners, Lukban
and Borja, the balance of the debt that the partnership firm owed at the time of its
dissolution. (YES)
HELD: Creditor delos Reyes may collect individually from the partners.
It should be noted that the dissolved partnership of Lukban&Borja had absolutely no
property whatever of its own, based on the contents of the writ, the return of the
execution of the final judgment, and the fact that respondent Lukban did not pointed
this out to avoid liability in solidum. As to Creditor delos Reyes right to collect
individually from the partners Lukban and Borja the amount owed by the partnership
firm, it is unquestionable that such a right has given rise to the corresponding right of
action to demand the payment of the debt from the partners individually, or from each
of them, by the insolvency of the partnership, inasmuch as they are personally and
severally liable with all their property for the results of the operations of the partnership
which they conducted.
Article 1818: Every partner is an agent of the partnership for the purpose of its
business, and the act of every partner, including the execution in the partnership name
of any instrument, for apparently carrying on in the usual way the business of the
partnership of which he is a member binds the partnership, unless the partner so
acting has in fact no authority to act for the partnership in the particular matter, and the
person with whom he is dealing has knowledge of the fact that he has no such
authority,
(1) An act of a partner which is not apparently for the carrying on of business of the
partnership in the usual ay does not bind the partnership unless authorized by
the other partners .Except when authorized by the other partners or unless they
have abandoned the business, one or more but less than all partners have no
authority to: Assign the partnership property in trust for creditors or on the
assignees promise to pay the debts of the partnership;
(2) Dispose of the goodwill of the business;
(3) Do any other act which would make it impossible to carry on the ordinary
business of a partnership;
(4) Confess a judgment;
(5) Enter into a compromise concerning a partnership claim or liability;
(6) Submit a partnership claim or liability to arbitration;
(7) Renounce a claim of the partnership.
No act of a partner in contravention of a restriction on authority shall bind the
partnership to persons having knowledge of the restriction
MUNASQUE vs CA (139 SCRA 533)
Petitioner is liable to the creditors for liabilities incurred by the partnership.
Since the 2 were partners when the debts were incurred, they are also both liable to
third persons who extended credit to their partnership. There is a general
presumption that each individual partner is an authorized agent for the firm and that he
has authority to bind the firm in carrying on the partnership transactions. (Mills
vsRiggle)
Petitioner is solidarily-liable with co-partner Galan as against the creditors.
While under ART. 1816, the liability of partners under the law to third persons for
contracts executed in connection with the partnership business is only pro rata (i.e.
joint liability), this should be construed together with ART. 1824, which renders all
partners solidarily liable for everything chargeable to the partnership under ART. 1822
and 1823.
RATIONALE FOR SOLIDARY LIABILITY: The obligation is solidary because the law
protects him, who in good faith relied upon the authority of a partner, whether such
authority is real or apparent. That is why under ART. 1824, all partners, whether
innocent or guilty, as well as the legal entity which is the partnership, are solidarily
liable.
In the case at bar, Tropical had all the reason to believe that a partnership existed
between petitioner and Galan. As such, Tropical should not be faulted for making
payments to Galan and Associates and for delivering it to Galan because, as far as
Tropical is concerned, Galan was a true partner with real authority to transact on
behalf of the partnership with which it was dealing. Same is true with the other
creditors who supplied materials to the partnership. Thus, it is but fair that the
consequences of the wrongful act of any of the partners (Galan, in this case) should
be answered solidarily by all the partners and the partnership as a whole.
GOQUIOLAR vs SYCIP (105 Phi 757)
Kong Chai Pin, as managing partner, can sell properties of the partnership to
respondents Sycip& Lee, even without consent of the co-partner. As a rule, 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 power to bind
the partnership, especially those partners acting with ostensible authority.
The public need not make inquiries as to the agreements between the partners. Its
knowledge is enough that it is contracting with the partnership which is represented by
one of the managing partners.
There is a general presumption that each individual partner is an agent for the firm
and that he has authority to bind the firm in carrying on the partnership transactions.
The presumption is sufficient to permit third persons to hold the firm liable on
transactions entered into by one of the members of the firm acting apparently in its
behalf and within the scope of his authority.
The regular course of business procedure does not require that each time a
third person contracts with one of the managing partners, he should inquire as
to the latters authority to do so, or that he should first ascertain whether or not
the other partners had given their consent thereto.
Article 1819: Where title to real property is in the partnership name, any partner may
convey title to such property by a conveyance executed in the partnership name; but
the partnership may recover such property unless the partners act binds the
partnership under the provisions of the first paragraph of Article 1818, or unless such
property has been conveyed by the grantee or a person claiming through such grantee
to a holder for value without knowledge that the partner, in making the conveyance,
has exceeded his authority.
Where title to real property is in the name of the partnership, a conveyance executed
by a partner, in his own name, passes the equitable interest of the partnership,
provided the act is one within the authority of the partner under the provisions of the
first paragraph of Article 1818.
Where title to real property is in the name of one or more but not all the partners, and
the record does not disclose the right of the partnership, the partners in whose name
the title stands may convey title to such property, but the partnership may recover
such property if the partners act does not bind the partnership under the provisions of
the first paragraph of Article 1818, unless the purchaser of his assignee, is a holder for
value, without knowledge.
Where the title to real property is in the name of one or more or all partners, or in a
third person in trust for the partnership, a conveyance executed by a partner in the
partnership name, or in his own name, passes the equitable interest of the partnership,
provided the act is one within the authority of the partner under the provisions of the
first paragraph of Article 1818.
Where title to real property is in the names of all the partners a conveyance executed
by all the partners passes all their rights in such property.
SANTIAGO INC vs CASTRO (175 SCRA 171)
ARTICLE 1819. XXX Where the title to real property is in the names of all the
partners, a conveyance executed by all the partners passes all their rights in such
property.
The term conveyance includes a mortgage. In this case, the mortgaged property is
still registered in the names of partners; hence, the conveyance (i.e. the mortgage)
executed by all the partners passes all their rights in such property.
Article 1822. Where, by any wrongful act or omission of any partner acting in the
ordinary course of the business of the partnership or with the authority of his co-
partners, loss or injury is caused to any person, not being a partner in the partnership,
or any penalty is incurred, the partnership is liable therefor to the same extent as the
partner so acting or omitting to act.
Article 1823. The partnership is bound to make good the loss:
(1) Where one partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it; and
(2) Where the partnership in the course of its business receives money or property of a
third person and the money or property so received is misapplied by any partner while
it is in the custody of the partnership.
MUASQUE v. CA
In the case at bar the respondent Tropical had every reason to believe that a
partnership existed between the petitioner and Galan and no fault or error can be
imputed against it for making payments to "Galan and Associates" and delivering the
same to Galan because as far as it was concerned, Galan was a true partner with real
authority to transact on behalf of the partnership with which it was dealing. This is even
more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace
who supplied materials on credit to the partnership. Thus, it is but fair that the
consequences of any wrongful act committed by any of the partners therein
should be answered solidarily by all the partners and the partnership as a whole
INFORMATION TECHNOLOGY FOUNDATION V. COMELEC
In the case of WeSolv and SK C&C, their MOAs state that their liabilities, while joint
and several with MPEI, are limited only to the particular areas of work wherein their
services are engaged or their products utilized. As for Election.com and ePLDT, their
separate Teaming Agreements specifically ascribe to them the role of subcontractor
vis--vis MPEI as contractor and, based on the terms of their particular agreements,
neither Election.com nor ePLDT is, with MPEI, jointly and severally liable to
Comelec.[45] It follows then that in the instant case, there is no justification for anyone,
much less Comelec, to resort to the rules on partnership and partners liabilities.
Article 1830. Dissolution is caused:
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular undertaking specified
in the agreement;
(b) By the express will of any partner, who must act in good faith, when no
definite term or particular is specified;
(c) By the express will of all the partners who have not assigned their
interests or suffered them to be charged for their separate debts, either
before or after the termination of any specified term or particular
undertaking;
(d) By the expulsion of any partner from the business bona fide in accordance
with such a power conferred by the agreement between the partners;
(2) In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of this
article, by the express will of any partner at any time;
(3) By any event which makes it unlawful for the business of the partnership to be
carried on or for the members to carry it on in partnership;
(4) When a specific thing which a partner had promised to contribute to the
partnership, perishes before the delivery; in any case by the loss of the thing,
when the partner who contributed it having reserved the ownership thereof, has
only transferred to the partnership the use or enjoyment of the same; but the
partnership shall not be dissolved by the loss of the thing when it occurs after
the partnership has acquired the ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following article.
ORTEGA V. CA
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 a dissolution of the partnership at will. He
must, however, act in good faith, not that the attendance of bad faith can prevent
the dissolution of the partnership but that it can result in a liability for damages.
TOCAO vs CA
An unjustified dissolution by a partner can subject him to action for damages because
by the mutual agency that arises in a partnership, the doctrine of delectus personae
allows the partners to have the power, although not necessarily the right to dissolve
the partnership. In this case, petitioner Tocaos unilateral exclusion of private
respondent from the partnership is shown by her memo to the Cubao office plainly
stating that private respondent was, as of October 9, 1987, no longer the vice-
president for sales of Geminesse Enterprise.[43] By that memo, petitioner Tocao
effected her own withdrawal from the partnership and considered herself as having
ceased to be associated with the partnership in the carrying on of the business.
Nevertheless, the partnership was not terminated thereby; it continues until the
winding up of the business. The winding up of partnership affairs has not yet been
undertaken by the partnership. This is manifest in petitioners claim for stocks that had
been entrusted to private respondent in the pursuit of the partnership business
BEARNEZA vs. DEQUILLA
The partnership having been dissolved by the death of Perpetua Bearneza, its
subsequent legal status was that of a partnership in liquidation, and the only rights
inherited by her testamentary heir, the herein plaintiff, were those resulting from the
said liquidation in favor of the deceased partner, and nothing more. Before this
liquidation is made, which up to the present has not been effected, it is impossible to
determine what rights or interests, if any, the deceased had, the partnership bond
having been dissolved. Neither can it be said that the partnership continued between
the plaintiff and the defendant. It is true that the latter's act in requiring the heirs of
Perpetua to contribute to the payment of the expenses of exploitation of the aforesaid
fishing industry was an attempt to continue the partnership, but it is also true that
neither the said heirs collectively, nor the plaintiff individually, took any action in
response to that requirement, nor made any promise to that effect, and therefore no
new contract of partnership existed.

ROJAS vs MAGLANA
where there has been duly registered articles of partnership, and subsequently the
original partners accept an industrial partner but do not register a new partnership, and
thereafter the industrial partner retires from the business, and the original partners
continue under the same set-up as the original partnership, then although the second
partnership was dissolved with the withdrawal of the industrial partner, there resulted a
reversion back into the original partnership under the terms of the registered articles of
partnership. There is not constituted a new partnership at will.

Yes. Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one
partner can cause its dissolution by expressly withdrawing even before the expiration
of the period, with or without justifiable cause. Of course, if the cause is not justified or
no cause was given, the withdrawing partner is liable for damages but in no case can
he be compelled to remain in the firm. With his withdrawal, the number of members is
decreased, hence, the dissolution. And in whatever way he may view the situation, the
conclusion is inevitable that Rojas and Maglana shall be guided in the liquidation of the
partnership by the provisions of its duly registered Articles of Co-Partnership; that is,
all profits and losses of the partnership shall be divided "share and share alike"
between the partners.

Article 1842. 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 of any agreement to the contrary.

EMNACE vs CA
Whatever claims and rights Vicente Tabanao had against the partnership and
petitioner were transmitted to respondents by operation of law, more particularly by
succession, which is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance of a person are transmitted.
Moreover, respondents became owners of their respective hereditary shares from the
moment Vicente Tabanao died.

A prior settlement of the estate, or even the appointment of SalvacionTabanao as

executrix or administratrix, is not necessary for any of the heirs to acquire legal
capacity to sue. As successors who stepped into the shoes of their decedent upon his
death, they can commence any action originally pertaining to the decedent.From the
moment of his death, his rights as a partner and to demand fulfillment of petitioners
obligations as outlined in their dissolution agreement were transmitted to respondents.
They, therefore, had the capacity to sue and seek the courts intervention to compel
petitioner to fulfill his obligations.