J
Fernando Santos vs Spouses Arsenio and Nieves Reyes
Facts:
This is a petition for review on certiorari assailing CA decision which affirmed
the RTC decision. Santos and Nieves Reyes verbally agreed that Santos
would act as financier while Nieves and Meliton Zabat would act as solicitors
for membership and collectors of loan payment. 70% of the profits would go to
Santos while Nieves and Zabat would get 15% each.
It was a lending venture business.
Nieves introduced Gragera of Monte Maria Corp, who obtained short term
loans for the partnership in consideration of commissions. In 1986, Nieves and
Zabat executed an agreement which formalized their earlier verbal
agreement. But, Santis and Nieves later discovered that Zabat engaged in the
same lending business. Hence, Zabat was expelled from the partnership. On
June 1987, Santos filed a complaint for recovery of sum of money and
damages against the respondents, alleging them as employees who
misappropriated the funds. Respondents assert they were partners and not
mere employees. Santos claimed that after discovery of Zabat's activities, he
ceased infusing funds thereby extinguishing the partnership.
Issue:
Whether or not the parties' relationship was one of partnership or of employer-
employee
Held:
Yes they were partners. 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. The "Articles of
Agreement" stipulated that the signatories shall share the profits of the
business in a 70-15-15 manner, with petitioner getting the lion's share. This
stipulation clearly proved the establishment of a partnership.
Indeed, the partnership was established to engage in a money-lending
business, despite the fact that it was formalized only after the Memorandum of
Agreement had been signed by petitioner and Gragera.
YULO vs. YANG CHIAO SENG106 Phil 111, G.R. No. L-12541, August 28,
1959, Labrador,
.:p
FACTS:
Yang Chiao Seng proposed to form a partnership with Rosario Yulo to run
andoperate a theatre on the premises occupied by Cine Oro, Plaza Sta.
Cruz, Manila, theprincipal conditions of the offer being (1) Yang guarantees
Yulo a monthly participationof P3,000 (2) partnership shall be for a period of
2 years and 6 months with thecondition that if the land is expropriated,
rendered impracticable for business, owner constructs a permanent building,
then Yulo‘s right to
lease and partnership even ifperiod agreed upon has not yet expired; (3)
Yulo is authorized to personally conductbusiness in the lobby of the building;
and (4) after Dec 31, 1947, all improvementsplaced by partnership shall
belong to Yulo but if partnership is terminated before lapseof 1 and ½ years,
Yang shall have right to remove improvements.
Parties established, ―Yang and Co. Ltd.‖,
to exist from July 1,1945 –Dec 31, 1947. InJune 1946, they executed a
supplementary agreement extending the partnership for 3years
beginning Jan.1, 1948 to Dec. 31, 1950. The land on which the theaterwas
constructed was leased by Yulo from owners, Emilia Carrion and Maria
CarrionSanta Marina for an indefinite period but that after 1 year, such lease
may be cancelledby either party upon 90-day notice. In Apr 1949, the owners
notified Yulo of their desireto cancel the lease contract come July. Yulo and
husband brought a civil action todeclare the lease for an indefinite period.
Owners brought their own civil actionfor ejectment upon Yulo and Yang.
CFI
: Two cases were heard jointly; Complaint of Yulo and Yang dismissed
declaringcontract of lease terminated.
CA
: Affirmed the judgment. In 1950, Yulo demanded from Yang her share in the
profitsof the business. Yang answered saying he had to suspend
payment becauseof pending ejectment suit. Yulo filed present action in 1954,
alleging the existence of apartnership between them and that Yang has
refused to pay her shares.
Defendant’s Position
: The real agreement between plaintiff and defendant was one oflease and
not of partnership; that the partnership was adopted as a subterfuge toget
around the prohibition contained in the contract of lease between the owners
andthe plaintiff against the sublease of the property.
Trial Court
: Dismissal. It is not true that a partnership was created between
thembecause defendant has not actually contributed the sum mentioned in
the Articles ofPartnership or any other amount. The agreement is a lease
because plaintiff
didn‘t
share either in the profits or in the losses of the business as required by Art
1769 (CC)
and because plaintiff was granted a ―guaranteed participation‖ in
the profits beliesthe supposed existence of a partnership.
ISSUE:
Was the agreement a contract a lease or a partnership?
HELD:
Dismissed. The agreement was a sublease not a partnership.The following
are the requisites of partnership: (1) two or more persons
who bindthemselves to contribute money, property or industry to a common
fund; (2) theintention on the part of the partners to divide the profits among
themselves (Article1761, CC). Plaintiff did not furnish the supposed P20,000
capital nor did she furnish anyhelp or intervention in the management of the
theatre. Neither has she demanded fromdefendant any accounting of the
expenses and earnings of the business. She was absolutely silent with
respect to any of the acts that a partner should have done; allshe did was to
receive her share of P3,000 a month which cannot be interpreted in
anymanner than a payment for the use of premises which she had leased
from the owners.
HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October
3, 2000
FACTS:
After the second World War, Tan EngKee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership engaged in the
business of selling lumber and hardware and construction supplies. They
named their enterprise "Benguet Lumber" which they jointly managed until Tan
EngKee's death. Petitioners herein averred that the business prospered due
to the hard work and thrift of the alleged partners. However, they claimed that
in 1981, Tan Eng Lay and his children caused the conversion of the
partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan EngKee
and his heirs of their rightful participation in the profits of the business.
Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the
net assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring
that Benguet Lumber is a joint venture which is akin to a particular partnership.
The Court of Appeals rendered the assailed decision reversing the judgment
of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint
adventurers and/or partners in a business venture and/or particular
partnership called Benguet Lumber and as such should share in the profits
and/or losses of the business venture or particular partnership
RULING:
There was no partnership whatsoever. Except for a firm name, there was no
firm account, no firm letterheads submitted as evidence, no certificate of
partnership, no agreement as to profits and losses, and no time fixed for the
duration of the partnership. There was even no attempt to submit an
accounting corresponding to the period after the war until Kee's death in 1984.
It had no business book, no written account nor any memorandum for that
matter and no license mentioning the existence of a partnership. Also, the trial
court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership
is distinguished from a joint adventure, to wit:(a) A joint adventure (an
American concept similar to our joint accounts) is a sort of informal partnership,
with no firm name and no legal personality. In a joint account, the participating
merchants can transact business under their own name, and can be
individually liable therefor. (b) Usually, but not necessarily a joint adventure is
limited to a SINGLE TRANSACTION, although the business of pursuing to a
successful termination maycontinue for a number of years; a partnership
generally relates to a continuing business of various transactions of a certain
kind. A joint venture "presupposes generally a parity of standing between the
joint co-ventures or partners, in which each party has an equal proprietary
interest in the capital or property contributed, and where each party exercises
equal rights in the conduct of the business. The evidence presented by
petitioners falls short of the quantum of proof required to establish a
partnership. In the absence of evidence, we cannot accept as an established
fact that Tan EngKee allegedly contributed his resources to a common fund
for the purpose of establishing a partnership. Besides, it is indeed odd, if not
unnatural, that despite the forty years the partnership was allegedly in
existence, Tan EngKee 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. A demand for
periodic accounting is evidence of a partnership. During his lifetime, Tan
EngKee appeared never to have made any such demand for accounting from
his brother, Tang Eng Lay. We conclude that Tan EngKee was only an
employee, not a partner since they did not present and offer evidence that
would show that Tan EngKee received amounts of money allegedly
representing his share in the profits of the enterprise. There being no
partnership, it follows that there is no dissolution, winding up or liquidation to
speak of.

Commissioner of Internal Revenue vs.
William j. Suter and the Court of Tax Appeals
G.R. No. L-25532, February 28, 1969
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was
formed on 30 Sep tember 1947 by William J. Suter as the general partner,
and Julia Spirig and Gustav Carlson, as the limited partners. The partners
contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the
partnership. On 1 October 1947, the limited partnership was registered with
the Securities and Exchange Commission. In 1948, general partner Suter
and limited partner Spirig got married and, thereafter, on 18 December 1948,
limited partner Carlson sold his share in the partnership to Suter and his wife.
The sale was duly recorded with the Securities and Exchange Commission
on 20 December 1948. The limited partnership had been filing its income tax
returns as a corporation, without objection by the Commissioner of Internal
Revenue, until in 1959 when the latter, in an assessment, consolidated the
income of the firm and the individual incomes of the partners-spouses Suter
and Spirig resulting in a determination of a deficiency income tax against
respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for
1955. Partner-Spouses Suter protested the assessment.
Issue:
Whether or not the partnership was dissolved after the marriage of the
partners, William J.
Suter and Julia Spirig Suter and the subsequent sale to them by the
remaining partner, Gustav Carlson?
Ruling:
William J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a
particular one
since the contributions of the partners were fixed sums of money,
P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one
of them was an industrial partner. It follows that the firm was not a
partnership that spouses were forbidden to enter by Article 1677 of the Civil
Code of 1889(now Article 1782 of the New Civil Code). Nor could the
subsequent marriage of the partners operate to dissolve it, such marriage not
being one of the causes provided for that purpose by law. The capital
contributions of partners William J. Suter and Julia Spirig were separately
owned and 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 13
Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA,
SEC and Joaquin Misa
G.R. No. 109248 July 3, 1995
Vitug, J.
Facts:
Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew
in said firm.
He filed with SEC a petition for dissolution and liquidation of partnership.
SEC en banc ruled that withdrawal of Misa from the firm had
dissolved the partnership.Reason: since it is partnership at will,
the law firm could be dissolved by any partner atanytime, such as by
withdrawal therefrom, regardless of good faith or bad faith, since nopartner
can be forced to continue in the partnership against his will.
Issue:
1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega &
Castillo)is a partnership at will; 2. WON the withdrawal of Misa dissolved the
partnership regardlessof his good or bad faith;
Held:
1. Yes. The partnership agreement of the firm provides that ”[t]he partnership
shallcontinue so long as mutually satisfactory and upon the death or legal
incapacity of one of the partners, shall be continued by the surviving
partners.”2 . Y e s . A n y o n e o f t h e p a r t n e r s m a y , a t h i s s o l e
p l e a s u r e , d i c t a t e a d i s s o l u t i o n o f t h e partnership at will (e.g. by
way of withdrawal of a partner). He must, however, act in goodfaith, not that
the attendance of bad faith can prevent the dissolution of the partnership
butthat it can result in a liability for damages
VITUG, J.:
The instant petition seeks a review of the decision rendered by the Court of
Appeals, dated 26 February 1993, in CA-G.R. SP No. 24638 and No. 24648
affirming in toto that of the Securities and Exchange Commission ("SEC") in
SEC AC 254.
The antecedents of the controversy, summarized by respondent Commission
and quoted at length by the appellate court in its decision, are hereunder
restated.
"The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly
registered in the Mercantile Registry on 4 January 1937 and reconstituted
with the Securities and Exchange Commission on 4 August 1948. The SEC
records show that there were several subsequent amendments to the articles
of partnership on 18 September 1958, to change the firm [name] to ROSS,
SELPH and CARRASCOSO; on 6 July 1965 x x x to ROSS, SELPH,
SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO,
DEL ROSARIO, BITO, MISA & LOZADA; on 4 December 1972 to
SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to
DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA &
LOZADA; on 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito
and Mariano M. Lozada associated themselves together, as senior partners
with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr.,
and Benjamin Bacorro, as junior partners.
"On February 17, 1988, petitioner-appellant wrote the respondents-appellees
a letter stating:
"`I am withdrawing and retiring from the firm of Bito, Misa and Lozada,
effective at the end of this month.
`I trust that the accountants will be instructed to make the proper liquidation
of my participation in the firm.'
"On the same day, petitioner-appellant wrote respondents-appellees another
letter stating:
"`Further to my letter to you today, I would like to have a meeting with all of
you with regard to the mechanics of liquidation, and more particularly, my
interest in the two floors of this building. I would like to have this resolved
soon because it has to do with my own plans.'
"On 19 February 1988, petitioner-appellant wrote respondents-appellees
another letter stating:
"`The partnership has ceased to be mutually satisfactory because of the
working conditions of our employees including the assistant attorneys. All
my efforts to ameliorate the below subsistence level of the pay scale of our
employees have been thwarted by the other partners. Not only have they
refused to give meaningful increases to the employees, even attorneys, are
dressed down publicly in a loud voice in a manner that deprived them of their
self-respect. The result of such policies is the formation of the union,
including the assistant attorneys.'
"On 30 June 1988, petitioner filed with this Commission's Securities
Investigation and Clearing Department (SICD) a petition for dissolution and
liquidation of partnership, docketed as SEC Case No. 3384 praying that the
Commission:
"`1. Decree the formal dissolution and order the immediate liquidation of (the
partnership of) Bito, Misa & Lozada;
`2. Order the respondents to deliver or pay for petitioner's share in the
partnership assets plus the profits, rent or interest attributable to the use of
his right in the assets of the dissolved partnership;
`3. Enjoin respondents from using the firm name of Bito, Misa & Lozada in
any of their correspondence, checks and pleadings and to pay petitioners
damages for the use thereof despite the dissolution of the partnership in the
amount of at least P50,000.00;
`4. Order respondents jointly and severally to pay petitioner attorney's fees
and expense of litigation in such amounts as maybe proven during the trial
and which the Commission may deem just and equitable under the premises
but in no case less than ten (10%) per cent of the value of the shares of
petitioner or P100,000.00;
`5. Order the respondents to pay petitioner moral damages with the amount
of P500,000.00 and exemplary damages in the amount of P200,000.00.
`Petitioner likewise prayed for such other and further reliefs that the
Commission may deem just and equitable under the premises.'
"On 13 July 1988, respondents-appellees filed their opposition to the petition.
"On 13 July 1988, petitioner filed his Reply to the Opposition.
"On 31 March 1989, the hearing officer rendered a decision ruling that:
"`[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not
dissolve the said law partnership. Accordingly, the petitioner and
respondents are hereby enjoined to abide by the provisions of the Agreement
relative to the matter governing the liquidation of the shares of any retiring or
withdrawing partner in the partnership interest.'"[1]
On appeal, the SEC en banc reversed the decision of the Hearing Officer
and held that the withdrawal of Attorney Joaquin L. Misa had dissolved the
partnership of "Bito, Misa & Lozada." The Commission ruled that, being a
partnership at will, the law firm could be dissolved by any partner at anytime,
such as by his withdrawal therefrom, regardless of good faith or bad faith,
since no partner can be forced to continue in the partnership against his
will. In its decision, dated 17 January 1990, the SEC held:
"WHEREFORE, premises considered the appealed order of 31 March 1989
is hereby REVERSED insofar as it concludes that the partnership of Bito,
Misa & Lozada has not been dissolved. The case is hereby REMANDED to
the Hearing Officer for determination of the respective rights and obligations
of the parties."[2]
The parties sought a reconsideration of the above decision. Attorney Misa,
in addition, asked for an appointment of a receiver to take over the assets of
the dissolved partnership and to take charge of the winding up of its
affairs. On 04 April 1991, respondent SEC issued an order denying
reconsideration, as well as rejecting the petition for receivership, and
reiterating the remand of the case to the Hearing Officer.
The parties filed with the appellate court separate appeals (docketed CA-
G.R. SP No. 24638 and CA-G.R. SP No. 24648).
During the pendency of the case with the Court of Appeals, Attorney Jesus
Bito and Attorney Mariano Lozada both died on, respectively, 05 September
1991 and 21 December 1991. The death of the two partners, as well as the
admission of new partners, in the law firm prompted Attorney Misa to renew
his application for receivership (in CA G.R. SP No. 24648). He expressed
concern over the need to preserve and care for the partnership assets. The
other partners opposed the prayer.
The Court of Appeals, finding no reversible error on the part of respondent
Commission, AFFIRMED in toto the SEC decision and order appealed
from. In fine, the appellate court held, per its decision of 26 February 1993,
(a) that Atty. Misa's withdrawal from the partnership had changed the relation
of the parties and inevitably caused the dissolution of the partnership; (b) that
such withdrawal was not in bad faith; (c) that the liquidation should be to the
extent of Attorney Misa's interest or participation in the partnership which
could be computed and paid in the manner stipulated in the partnership
agreement; (d) that the case should be remanded to the SEC Hearing Officer
for the corresponding determination of the value of Attorney Misa's share in
the partnership assets; and (e) that the appointment of a receiver was
unnecessary as no sufficient proof had been shown to indicate that the
partnership assets were in any such danger of being lost, removed or
materially impaired.
In this petition for review under Rule 45 of the Rules of Court, petitioners
confine themselves to the following issues:
1. Whether or not the Court of Appeals has erred in holding that the
partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a
partnership at will;
2. 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; and
3. Whether or not the Court of Appeals has erred in holding that private
respondent's demand for the dissolution of the partnership so that he can get
a physical partition of partnership was not made in bad faith;
to which matters we shall, accordingly, likewise limit ourselves.
A partnership that does not fix its term is a partnership at will. That the law
firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega and Castillo," is
indeed such a partnership need not be unduly belabored. We quote, with
approval, like did the appellate court, the findings and disquisition of
respondent SEC on this matter; viz:
"The partnership agreement (amended articles of 19 August 1948) does not
provide for a specified period or undertaking. The `DURATION' clause
simply states:
"`5. DURATION. The partnership shall continue so long as mutually
satisfactory and upon the death or legal incapacity of one of the partners,
shall be continued by the surviving partners.'
"The hearing officer however opined that the partnership is one for a specific
undertaking and hence not a partnership at will, citing paragraph 2 of the
Amended Articles of Partnership (19 August 1948):
"`2. Purpose. The purpose for which the partnership is formed, is to act as
legal adviser and representative of any individual, firm and corporation
engaged in commercial, industrial or other lawful businesses and
occupations; to counsel and advise such persons and entities with respect to
their legal and other affairs; and to appear for and represent their principals
and client in all courts of justice and government departments and offices in
the Philippines, and elsewhere when legally authorized to do so.'
"The `purpose' of the partnership is not the specific undertaking referred to in
the law. Otherwise, all partnerships, which necessarily must have a purpose,
would all be considered as partnerships for a definite undertaking. There
would therefore be no need to provide for articles on partnership at will as
none would so exist. Apparently what the law contemplates, is a specific
undertaking or `project' which has a definite or definable period of
completion."[3]
The birth and life of a partnership at will is predicated on the mutual desire
and consent of the partners. The right to choose with whom a person wishes
to associate himself is the very foundation and essence of that
partnership. Its continued existence is, in turn, dependent on the constancy
of that mutual resolve, along with each partner's capability to give it, and the
absence of a cause for dissolution provided by the law itself. Verily, any one
of the partners may, at his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the partnership [4] but
that it can result in a liability for damages.[5]
Senior Partners, P10,000.00 in the case of two (2) existing Junior Partners
and P5,000.00 in the case of the new Junior Partner."[11]
The term "retirement" must have been used in the articles, as we so hold, in
a generic sense to mean the dissociation by a partner, inclusive of
resignation or withdrawal, from the partnership that thereby dissolves it.

In passing, neither would the presence of a period for its specific duration or
the statement of a particular purpose for its creation prevent the dissolution
of any partnership by an act or will of a partner.[6] Among partners,[7] mutual
agency arises and the doctrine of delectus personae allows them to have
the power, although not necessarily the right, to dissolve the partnership. An
unjustified dissolution by the partner can subject him to a possible action for
damages.
The dissolution of a partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the carrying on, as might
be distinguished from the winding up of, the business.[8] Upon its dissolution,
the partnership continues and its legal personality is retained until the
complete winding up of its business culminating in its termination.[9]
The liquidation of the assets of the partnership following its dissolution is
governed by various provisions of the Civil Code;[10] however; an agreement
of the partners, like any other contract, is binding among them and normally
takes precedence to the extent applicable over the Code's general
provisions. We here take note of paragraph 8 of the "Amendment to Articles
of Partnership" reading thusly:
On the third and final issue, we accord due respect to the appellate court and
respondent Commission on their common factual finding, i.e., that Attorney
Misa did not act in bad faith. Public respondents viewed his withdrawal to
have been spurred by "interpersonal conflict" among the partners. It would
not be right, we agree, to let any of the partners remain in the partnership
under such an atmosphere of animosity; certainly, not against their
will.[12] Indeed, for as long as the reason for withdrawal of a partner is not
contrary to the dictates of justice and fairness, nor for the purpose of unduly
visiting harm and damage upon the partnership, bad faith cannot be said to
characterize the act. Bad faith, in the context here used, is no different from
its normal concept of a conscious and intentional design to do a wrongful act
for a dishonest purpose or moral obliquity.
WHEREFORE, the decision appealed from is AFFIRMED. No
pronouncement on costs.

"x x x In the event of the death or retirement of any partner, his interest in the
partnership shall be liquidated and paid in accordance with the existing
agreements and his partnership participation shall revert to the Senior
Partners for allocation as the Senior Partners may determine; provided,
however, that with respect to the two (2) floors of office condominium which
the partnership is now acquiring, consisting of the 5th and the 6th floors of
the Alpap Building, 140 Alfaro Street, Salcedo Village, Makati, Metro Manila,
their true value at the time of such death or retirement shall be determined by
two (2) independent appraisers, one to be appointed (by the partnership and
the other by the) retiring partner or the heirs of a deceased partner, as the
case may be. In the event of any disagreement between the said appraisers
a third appraiser will be appointed by them whose decision shall be
final. The share of the retiring or deceased partner in the aforementioned
two (2) floor office condominium shall be determined upon the basis of the
valuation above mentioned which shall be paid monthly within the first ten
(10) days of every month in installments of not less than P20,000.00 for the