LIM TONG LIM v. PHILIPPINE FISHING GEAR INDUSTRIES G.R. No. 136448. November 3, 1999 F !

"#$ Antonio Chua and Peter Yao entered into a contract for the purchase of fishing nets from the Philippine Fishing Gear Industries. They claimed that they were engeged in a business venture with petitioner im Tong im. The buyers however failed to pay for the nets and the floats. Private respondent filed a collection suit against Yao! Chua an im Tong im with preliminary attachment. Trial court rendered its decision in favor of Phil. Fishing Gear and that Chua! Yao and im! as general partners were "ointly liable to pay respondents. It based its decision on a compromise agreement wherein "oint liability was presumed from the e#ual distribution of the profit and loss. The Court of Appeals affirmed. $ence! this petition. I##%e$ %hether or not! by their acts! im! Chua and Yao could be deemed to have entered into a partnership. & &ES R "'o$ There is a partnership between im! Chua and Yao. Petitioner im re#uested Yao who was engaged in commercial fishing to "oin him! while Antonio Chua was already Yao's partner. The three verbally agreed to ac#uire two fishing boats! F( ourdes and F( )elson for the sum of *.*+ million. They also borrowed *.,+ million from -esus im! brother of petitioner im Tong im. They purchased the boats and later the nets and floats! which constituted the main asets of the partnership and they agreed to divide the proceeds from the sale and operation thereof. The sale of the boats as well as the division among the three of the balance remaining after the payment of their loans prove that F.( ourdes was not his own property but an asset of the partnership. Although the corporation was never legally formed for un/nown reasons! this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. 0nder the law on estoppel! those acting on behalf of a corporation and those benefited by it! /nowing it to be without valid e1istence! are held liable as general partners. $aving reaped the benefits of the contract entered into by persons with whom he previously had an e1isting relationship he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. TA(AO )S. (OURT OF APPEALS G.R. No. 1*+4,&. re#/S ."' 0o, 1.

F !"# %illiam (elo introduced )enita Anay to his girlfriend! 2ar"orie Tocao. The three agreed to form a "oint venture for the sale of coo/ing wares. (elo was to contribute P,.+ million3 Tocao also contributed some cash and she shall also act as president and general manager3 and Anay shall be in charge of mar/eting. (elo and Tocao specifically as/ed Anay because of her e1perience and connections as a mar/eter. They agreed further that Anay shall receive the following4 5. 567 share of annual net profits ,. 87 overriding commission for wee/ly sales *. *67 of sales Anay will ma/e herself 9. ,7 share for her demo services They operated under the name Geminesse :nterprise! this name was however registered as a sole proprietorship with the (ureau of ;omestic Trade under Tocao. The "oint venture agreement was not reduced to writing because Anay trusted (elo's assurances.The venture succeeded under Anay's mar/eting prowess.(ut then the relationship between Anay and Tocao soured. <ne day! Tocao advised one of the branch managers that Anay was no longer a part of the company. Anay then demanded that the company be audited and her shares be given to her. I##%e %hether or not there is a partnership He23 Yes! even though it was not reduced to writing! for a partnership can be instituted in any form. The fact that it was registered as a sole proprietorship is of no moment for such registration was only for the company's trade name. Anay was not even an employee because when they ventured into the agreement! they e1plicitly agreed to profit sharing this is even though Anay was receiving commissions because this is only incidental to her efforts as a head mar/eter. The =upreme Court also noted that a partner who is e1cluded wrongfully from a partnership is an innocent partner. $ence! the guilty partner must give him his due upon the dissolution of the partnership as well as damages or share in the profits >reali?ed from the appropriation of the partnership business and goodwill.@ An innocent partner thus possesses >pecuniary interest in every e1isting contract that was incomplete and in the trade name of the coApartnership and assets at the time he was wrongfully e1pelled.@

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HEIRS OF TAN ENG 4EE )S. (OURT OF APPEALS GR No. 1*6881 De Leo., 1r., 1.

(enguet umber has been around even before %orld %ar II but during the war! its stoc/s were confiscated by the -apanese. After the war! the brothers Tan :ng ay and Tan :ng Bee pooled their resources in order to revive the business. In 5CD5! Tan :ng ay caused the conversion of (enguet umber into a corporation called (enguet umber and $ardware Company! with him and his family as the incorporators. In 5CD*! Tan :ng Bee died. Thereafter! the heirs of Tan :ng Bee demanded for an accounting and the li#uidation of the partnership. They claim the e1istence of partnership from these set of circumstances4 that Tan :ng ay and Tan :ng Bee were commanding the employees3 that both were supervising the employees3 that both were the ones who determined the price at which the stoc/s were to be sold3 and that both placed orders to the suppliers of the (enguet umber Company. They also point out that both of their families lived at the (enguet umber Company compound! a privilege not e1tended to its ordinary employees. Tan :ng ay denied that there was a partnership between him and his brother. $e said that Tan :ng Bee was merely an employee of (enguet umber. $e showed evidence consisting of Tan :ng Bee's payroll3 his === as an employee and (enguet umber being the employer. I##%e %hether or not Tan :ng Bee and Tan :ng ay were partners in (enguet umber He23 )o. They were never partners. Tan :ng Bee! in his lifetime never e1ecuted any acts which would indicate that he was a partner. 5E $e never demanded for periodic accountings of the common fund! which would be e1pected of a real partner3 ,E $e never received any share in the profits of (enguet umber! he only received salary as evidenced by the payroll documents presented by Tan :ng ay3 *E The heirs were unable to prove that the brothers intended to divide the profits of the business between themselves. :ven if Tan :ng Bee was granted certain privileges not given to regular employees! the Court found that these privileges were a result of being related to the owner of the company as brother and not because he was a partner. Further! even a mere supervisor in the company gives orders and directions to his subordinates3 and any trusted employee over whom confidence is reposed by the owner! can order materials from the suppliers for and behalf of (enguet umber.

C$AF := F. %<<;$<0=:! plaintiffAappellant! vs. F<FT0)AT< F. $A I I! defendantAappellant. G.F. )o. A9D55 FACT= The Plaintiff entered into an agreement with the defendant for the establishment of a partnership for bottling and distribution of 2ission soft drin/s. (efore the partnership was actually established the defendant re#uired the plaintiff to secure an e1clusive franchise for the said venture. In behalf of the said partnership and upon obtaining the said e1clusive franchise the defendant stipulated to pay the plaintiff *67 of the profits. The plaintiff sought to obtain the said e1clusive franchise but was only given a temporary one! sub"ect only to *6 days. The parties then proceeded with the signing of the agreement. The partnership was still not initiated! only the agreement to wor/ with each other! with the plaintiff as manager and the defendant as financer! was established. Together the two parties went to the 0= to formally sign the contract of franchise with 2ission ;ry Corporation. The defendant then found out about the temporary franchise right given to the plaintiff! different from the e1clusive franchise rights they stipulated in their contract. %hen the operations of the business began he was paid P ,!666 and was allowed the use of a car. (ut in the ne1t month! the pay was decreased to P 5!666 and the car was withdrawn from him. The plaintiff demanded the e1ecution of the partnership! but the defendant e1cused himself! saying that there was no hurry to do so. The Court of First Instance ordered the defendant to render an accounting of the profits and to pay the plaintiff 5+7 of such -uly *5! 5C+*

amount. It also held that e1ecution of the contract of partnership cannot be enforced upon the defendant and that fraud as alleged by the defendant was also not proved. $ence the present action. I==0:= %hether $alili may be compelled to enter into a partnership with %oodhouse.

$: ; )o. The partnership was not a fait accompli from the time of the operation of the plant. It is evident from the very language of the agreement that the parties intended that the e1ecution of the agreement to form a partnership was to be carried out at a later date. The defendant may not be compelled against his will to carry out the agreement nor e1ecute the partnership. The defendant has an obligation to do. The law recogni?es the individual's freedom or liberty to do an act he has promised to do! or not to do it! as he pleases. It is a very personal act which the courts may not compel compliance. 2oreover! fraud was undoubtedly employed by the plaintiff to secure the consent of the defendant to enter into the contract with him by representing himself as holder of e1clusive franchise rights when in fact he only holds a temporary franchise right good for *6 days. The fraud employed was not such as to render the contract null and void but only such as to hold the plaintiff liable for damages. =uch fraud is merely incidental Gdolo incidentalE and not the causal fraud Gdolo causanteE that is detrimental to a contract. It does not invalidate thecontract since fraud was only employed to secure the *67 stipulated share from the partnership.

5e.6 m'. &% v. N "'o. 2 L bor Re2 "'o.# (omm'##'o. 7 1 3e Mo%." '. Pro3%!"# (o. L"3., 8'229 (o, R:o3or 5e.3 2, Le 5e.3 2, (:'% S:' . 1e.0 .3 (:e. Ho/F% G.F. )o. CH,5, -une *6! 5CC* Feliciano, J. F !"#$ Yu! the former assistant General 2anager of the marble #uarrying and e1port business operated by a registered partnership called -ade 2ountain Products Co. td. =aid partnership was originally organi?ed with (endals as general partners and Chin =hian -eng! Chen $oAFu and Yu Chang as limited partners3 partnership business consisted of e1ploiting a marble deposit in (ulacan. Yu had a monthly salary of 9666! however! actually received only half of his stipulated salary! since he had accepted the promise of the partners that the balance would be paid when the firm shall have secured additional operating funds from abroad.The operations and finances of the business had been managed by Yu and he had overall supervision of the wor/ers at the marble #uarry in (ulacan and too/ charge of the preparation of papers relating to the e1portation of the firm's products. (endals sold and transferred their interests in the partnership to Co and :mmanuel Iapanta. The partnership was constituted solely by Co and Iapanta3 it continued to use the old firm name of -ade 2ountain. Yu was dismissed by the new partners. I##%e#$ %<) the partnership which had hired Yu as Asst. Gen. 2anager had been e1tinguished and replaced by a new partnership composed of Co and Iapanta R "'o$ Yes. The changes in the membership of the partnership resulted in the dissolution of the old partnership which had hired Yu and the emergence of a new partnership composed of Co and Iapanta. Art. 5D,D provides that the dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. Art. 5D*6 provides that the ;issolution is caused4 G5E without violation of the agreement between the partners3 by the e1press will of any partner! who must act in good faith! when no definite term or particular underta/ing is specified3 G,E 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 e1press will of any partner at any time3 )o winding up of affairs in this case as contemplated in Art. 5D,C4 on dissolution the partnership is not terminated! but continues until the winding up of partnership affairs is completed. The new partnership simply too/ over the business enterprise owned by the old partnership! and continued using the old name of -ade 2ountain Products Company imited! without winding up the business affairs of the old partnership! paying off its debts! li#uidating and distributing its net assets! and then reAassembling the said assets or most of them and opening a new business enterprise

2oreover! the new partnership is liable for the debts of the old partnership. Yu is entitled to enforce his claim for unpaid salaries! as well as other claims relating to his employment with the previous partnership! against the new partnership. (ut Yu is not entitled to reinstatement because the new partnership was entitled to appoint and hire a new gen. or asst. gen. manager to run the affairs of the business enterprise ta/e over. An asst. gen. manager belongs to the most senior ran/s of management and a new partnership is entitled to appoint a top manager of its own choice and confidence. The nonAretention of Yu did not constitute unlawful termination. The new partnership had its own new General 2anager! Co! the principal new owner himself. Yu's old position thus became superfluous or redundant. $owever! Yu is entitled to separation pay at the rate of one month's pay for each year of service that he had rendered to the old partnership! a fraction of at least 8 months being considered as a whole year.

GATC$A IA) v. C< 8H Phil. 888 G5C*CE Facts4

:CT<F <F I)T:F)A F:J:)0:

Plaintiffs G5+ personsE! in order to enable them to purchase one sweepsta/es tic/et valued at two pesos GP,E! subscribed and paid each varied amounts aggregating , pesos. The said tic/et was registered in the name of -ose Gatchalian and Company . The aboveAmentioned tic/et bearing )o. 5HD8*H won one of the third pri?es in the amount of +6! 666. -ose Gatchalian was re#uired by income ta1 e1aminer Alfredo ;avid to file the corresponding income ta1 return covering the pri?e won by -ose Gatchalian K Company. The Collector of Internal Fevenue collected the ta1 under section 56 of Act )o. ,D**! as last amended by section , of Act )o. *H85! reading as follows4 L=:C. 56. GaE There shall be levied! assessed! collected! and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation! "ointAstoc/ company! partnership! "oint account Gcuenta en participaciMnE! association or insurance company! organi?ed in the Philippine Islands! no matter how created or organi?ed! but not including duly registered general copartnerships GcompaNias colectivasE! a ta1 of three per centum upon such income3 Issue4 %hether or not the plaintiffs formed a partnership! or merely a community of property without a personality of its own3 in the first case it is admitted that the partnership thus formed is liable for the payment of income ta1! whereas if there was merely a community of property! they are e1empt from such payment. Fuling4 There is no doubt that if the plaintiffs merely formed a community of property the latter is e1empt from the payment of income ta1 under the law. (ut according to the stipulated facts the plaintiffs organi?ed a partnership of a civil nature because each of them put up money to buy a sweepsta/es tic/et for the sole purpose of dividing e#ually the pri?e which they may win! as they did in fact in the amount of P+6!666 Garticle 588+! Civil CodeE. The partnership was not only formed! but upon the organi?ation thereof and the winning of the pri?e! -ose Gatchalian personally appeared in the office of the Philippine Charity =weepsta/es! in his capacity as coApartner! as such collected the pri?e! the office issued the chec/ for P+6!666 in favor of -ose Gatchalian and company! and the said partner! in the same capacity! collected the said chec/. All these circumstances repel the idea that the plaintiffs organi?ed and formed a community of property only. $aving organi?ed and constituted a partnership of a civil nature! the Osaid entity is the one bound to pay the income ta1 which the defendant collected.