G.R. No.

L-12164

May 22, 1959

BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants,

vs.
WORKMEN'S COMPENSATION COMMISSION, ET AL., respondents-appellees.
J. de Guia for appellants.
Estanislao R. Bayot for appellees.
ENDENCIA, J.:
Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply, a
commercial guard who while in line of duty, was skilled by criminal hands. His widow Ciriaca
Vda. de Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama,
in due time filed a claim for compensation with the Workmen's Compensation Commission,
which was granted in an award worded as follows:
WHEREFORE, the order of the referee under consideration should be, as it is hereby,
affirmed and respondents Benito Liwanag and Maria Liwanag Reyes, ordered.
1. To pay jointly and severally the amount of three thousand Four Hundred Ninety Four and
40/100 (P3,494.40) Pesos to the claimants in lump sum; and
To pay to the Workmen's Compensation Funds the sum of P4.00 (including P5.00 for this
review) as fees, pursuant to Section 55 of the Act.

In appealing the case to this Tribunal, appellants do not question the right of appellees to
compensation nor the amount awarded. They only claim that, under the Workmen's
Compensation Act, the compensation is divisible, hence the commission erred in ordering
appellants to pay jointly and severally the amount awarded. They argue that there is nothing in
the compensation Act which provides that the obligation of an employer arising from
compensable injury or death of an employee should be solidary obligation, the same should
have been specifically provided, and that, in absence of such clear provision, the responsibility
of appellants should not be solidary but merely joint.
At first blush appellants' contention would seem to be well, for ordinarily, the liability of the
partners in a partnership is not solidary; but the law governing the liability of partners is not
applicable to the case at bar wherein a claim for compensation by dependents of an employee
who died in line of duty is involved. And although the Workmen's Compensation Act does not
contain any provision expressly declaring solidary obligation of business partners like the herein
appellants, there are other provisions of law from which it could be gathered that their liability
must be solidary. Arts. 1711 and 1712 of the new Civil Code provide:
ART. 1711. Owners of enterprises and other employers are obliged to pay compensation for
the death of or injuries to their laborers, workmen, mechanics or other employees, even
though the event may have been purely accidental or entirely due to a fortuitous cause, if the
death or personal injury arose out of and in the course of the employment. . . . .
ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the
employer shall be solidarily liable for compensation. . . . .

And section 2 of the Workmen's Compensation Act, as amended reads in part as follows:
. . . The right to compensation as provided in this Act shall not be defeated or impaired on the
ground that the death, injury or disease was due to the negligence of a fellow servant or
employee, without prejudice to the right of the employer to proceed against the negligence
party.

The provisions of the new Civil Code above quoted taken together with those of Section 2 of the
Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of
business partners, like appellants, should be solidary; otherwise, the right of the employee may
be defeated, or at least crippled. If the responsibility of appellants were to be merely joint and
solidary, and one of them happens to be insolvent, the amount awarded to the appellees would
only be partially satisfied, which is evidently contrary to the intent and purposes of the Act. In the
previous cases we have already held that the Workmen's Compensation Act should be
construed fairly, reasonably and liberally in favor of and for the benefit of the employee and his
dependents; that all doubts as to the right of compensation resolved in his favor; and that it
should be interpreted to promote its purpose. Accordingly, the present controversy should be
decided in favor of the appellees.
Moreover, Art. 1207 of the new Civil Code provides:
. . . . There is solidary liability only when the obligation expressly so states, or when the law
or the nature of the obligation requires solidarity.

Since the Workmen's Compensation Act was enacted to give full protection to the employee,
reason demands that the nature of the obligation of the employers to pay compensation to the
heirs of their employee who died in line of duty, should be solidary; otherwise, the purpose of
the law could not be attained.
Wherefore, finding no error in the award appealed from, the same is hereby affirmed, with costs
against appellants.
Paras, C. J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, and Concepcion,
JJ., concur.

Separate Opinions
REYES, A., J., dissenting:
Whether the defendants herein be regarded as co-partners or as mere co-owners, their liability
for the indemnity due their deceased employee would not be solidary but only pro rata (Arts.
485 and 1815, new Civil Code). The Workmen's Compensation Act does not change the nature
of that liability either expressly or by intendment. To hold that it does, is to read into the Act
something that is not there. For this Court, therefore, to declare that under the said Act the
defendants herein are liable solidarily is to play the role of legislator.

The injustice of the rule sought to be established in the majority opinion may readily be made
obvious with an example. Suppose that one of two co-partners or co-owners owns 99 percent of
the business while his co-partner or co-owners own only 1 percent. To hold that in such case the
latter's liability may run up to 100 percent although his interest is only 1 percent would not only
be illogical but also inequitable.
For the foregoing reasons, I have no choice but to dissent.

G.R. No. L-39780 November 11, 1985

ELMO MUASQUE, petitioner,
vs.
COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON
PONS,respondents.
John T. Borromeo for petitioner.
Juan D. Astete for respondent C. Galan.
Paul Gornes for respondent R. Pons.
Viu Montecillo for respondent Tropical.
Paterno P. Natinga for Intervenor Blue Diamond Glass Palace.

GUTTIERREZ, JR., J.:

In this petition for certiorari, the petitioner seeks to annul and set added the decision of the Court of
Appeals affirming the existence of a partnership between petitioner and one of the respondents,
Celestino Galan and holding both of them liable to the two intervenors which extended credit to their
partnership. The petitioner wants to be excluded from the liabilities of the partnership.
Petitioner Elmo Muasque filed a complaint for payment of sum of money and damages against
respondents Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging
that the petitioner entered into a contract with respondent Tropical through its Cebu Branch Manager
Pons for remodelling a portion of its building without exchanging or expecting any consideration from
Galan although the latter was casually named as partner in the contract; that by virtue of his having
introduced the petitioner to the employing company (Tropical). Galan would receive some kind of
compensation in the form of some percentages or commission; that Tropical, under the terms of the
contract, agreed to give petitioner the amount of P7,000.00 soon after the construction began and
thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total
sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00
not to the plaintiff but to a stranger to the contract, Galan, who succeeded in getting petitioner's
indorsement on the same check persuading the latter that the same be deposited in a joint account;
that on January 26, 1967 when the second check for P6,000.00 was due, petitioner refused to

indorse said cheek presented to him by Galan but through later manipulations, respondent Pons
succeeded in changing the payee's name from Elmo Muasque to Galan and Associates, thus
enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial
Bank (PCIB) placing the petitioner in great financial difficulty in his construction business and
subjecting him to demands of creditors to pay' for construction materials, the payment of which
should have been made from the P13,000.00 received by Galan; that petitioner undertook the
construction at his own expense completing it prior to the March 16, 1967 deadline;that because of
the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to
Galan petitioner demanded that said amount be paid to him by respondents under the terms of the
written contract between the petitioner and respondent company.
The respondents answered the complaint by denying some and admitting some of the material
averments and setting up counterclaims.
During the pre-trial conference, the petitioners and respondents agreed that the issues to be
resolved are:
(1) Whether or not there existed a partners between Celestino Galan and Elmo
Muasque; and
(2) Whether or not there existed a justifiable cause on the part of respondent Tropical
to disburse money to respondent Galan.
The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were
allowed to intervene, both having legal interest in the matter in litigation.
After trial, the court rendered judgment, the dispositive portion of which states:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the
intervenors Cebu and Southern Hardware Company and Blue Diamond Glass
Palace the amount of P6,229.34 and P2,213.51, respectively;
(2) absolving the defendants Tropical Commercial Company and Ramon Pons from
any liability,
No damages awarded whatsoever.
The petitioner and intervenor Cebu Southern Company and its proprietor, Tan Siu filed motions for
reconsideration.
On January 15, 197 1, the trial court issued 'another order amending its judgment to make it read as
follows:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the
intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace the
amount of P6,229.34 and P2,213.51, respectively,

(2) ordering plaintiff and defendant Galan to pay Intervenor Cebu Southern Hardware
Company and Tan Siu jointly and severally interest at 12% per annum of the sum of
P6,229.34 until the amount is fully paid;
(3) ordering plaintiff and defendant Galan to pay P500.00 representing attorney's
fees jointly and severally to Intervenor Cebu Southern Hardware Company:
(4) absolving the defendants Tropical Commercial Company and Ramon Pons from
any liability,
No damages awarded whatsoever.
On appeal, the Court of Appeals affirmed the judgment of the trial court with the sole modification
that the liability imposed in the dispositive part of the decision on the credit of Cebu Southern
Hardware and Blue Diamond Glass Palace was changed from "jointly and severally" to "jointly."
Not satisfied, Mr. Muasque filed this petition.
The present controversy began when petitioner Muasque in behalf of the partnership of "Galan and
Muasque" as Contractor entered into a written contract with respondent Tropical for remodelling the
respondent's Cebu branch building. A total amount of P25,000.00 was to be paid under the contract
for the entire services of the Contractor. The terms of payment were as follows: thirty percent (30%)
of the whole amount upon the signing of the contract and the balance thereof divided into three
equal installments at the lute of Six Thousand Pesos (P6,000.00) every fifteen (15) working days.
The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the
name of the petitioner.Petitioner, however, indorsed the check in favor of respondent Galan to
enable the latter to deposit it in the bank and pay for the materials and labor used in the project.
Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when
the second check in the amount of P6,000.00 came and Galan asked the petitioner to indorse it
again, the petitioner refused.
The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that
there was a"misunderstanding" between him and petitioner, respondent Tropical changed the name
of the payee in the second check from Muasque to "Galan and Associates" which was the duly
registered name of the partnership between Galan and petitioner and under which name a permit to
do construction business was issued by the mayor of Cebu City. This enabled Galan to encash the
second check.
Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He
stated that he borrowed some P12,000.00 from his friend, Mr. Espina and although the expenses
had reached the amount of P29,000.00 because of the failure of Galan to pay what was partly due
the laborers and partly due for the materials, the construction work was finished ahead of schedule
with the total expenditure reaching P34,000.00.
The two remaining checks, each in the amount of P6,000.00,were subsequently given to the
petitioner alone with the last check being given pursuant to a court order.
As stated earlier, the petitioner filed a complaint for payment of sum of money and damages against
the respondents,seeking to recover the following: the amounts covered by the first and second

checks which fell into the hands of respondent Galan, the additional expenses that the petitioner
incurred in the construction, moral and exemplary damages, and attorney's fees.
Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager,
Pons, from any liability but they also held the petitioner together with respondent Galan, hable to the
intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace for the credit which
the intervenors extended to the partnership of petitioner and Galan
In this petition the legal questions raised by the petitioner are as follows: (1) Whether or not the
appellate court erred in holding that a partnership existed between petitioner and respondent Galan.
(2) Assuming that there was such a partnership, whether or not the court erred in not finding Galan
guilty of malversing the P13,000.00 covered by the first and second checks and therefore,
accountable to the petitioner for the said amount; and (3) Whether or not the court committed grave
abuse of discretion in holding that the payment made by Tropical through its manager Pons to Galan
was "good payment, "
Petitioner contends that the appellate court erred in holding that he and respondent Galan were
partners, the truth being that Galan was a sham and a perfidious partner who misappropriated the
amount of P13,000.00 due to the petitioner.Petitioner also contends that the appellate court
committed grave abuse of discretion in holding that the payment made by Tropical to Galan was
"good" payment when the same gave occasion for the latter to misappropriate the proceeds of such
payment.
The contentions are without merit.
The records will show that the petitioner entered into a con-tract with Tropical for the renovation of
the latter's building on behalf of the partnership of "Galan and Muasque." This is readily seen in the
first paragraph of the contract where it states:
This agreement made this 20th day of December in the year 1966 by Galan and
Muasque hereinafter called the Contractor, and Tropical Commercial Co., Inc.,
hereinafter called the owner do hereby for and in consideration agree on the
following: ... .
There is nothing in the records to indicate that the partner-ship organized by the two men was not a
genuine one. If there was a falling out or misunderstanding between the partners, such does not
convert the partnership into a sham organization.
Likewise, when Muasque received the first payment of Tropical in the amount of P7,000.00 with a
check made out in his name, he indorsed the check in favor of Galan. Respondent Tropical
therefore, had every right to presume that the petitioner and Galan were true partners. If they were
not partners as petitioner claims, then he has only himself to blame for making the relationship
appear otherwise, not only to Tropical but to their other creditors as well. The payments made to the
partnership were, therefore, valid payments.
In the case of Singsong v. Isabela Sawmill (88 SCRA 643),we ruled:
Although it may be presumed that Margarita G. Saldajeno had acted in good faith,
the appellees also acted in good faith in extending credit to the partnership. Where
one of two innocent persons must suffer, that person who gave occasion for the
damages to be caused must bear the consequences.

No error was committed by the appellate court in holding that the payment made by Tropical to
Galan was a good payment which binds both Galan and the petitioner. Since the two were partners
when the debts were incurred, they, are also both liable to third persons who extended credit to their
partnership. In the case of George Litton v. Hill and Ceron, et al, (67 Phil. 513, 514), we ruled:
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 vs. Riggle,112 Pan, 617).
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. (Le Roy vs. Johnson, 7 U.S. (Law. ed.),
391.)
Petitioner also maintains that the appellate court committed grave abuse of discretion in not holding
Galan liable for the amounts which he "malversed" to the prejudice of the petitioner. He adds that
although this was not one of the issues agreed upon by the parties during the pretrial, he,
nevertheless, alleged the same in his amended complaint which was, duly admitted by the court.
When the petitioner amended his complaint, it was only for the purpose of impleading Ramon Pons
in his personal capacity. Although the petitioner made allegations as to the alleged malversations of
Galan, these were the same allegations in his original complaint. The malversation by one partner
was not an issue actually raised in the amended complaint but the alleged connivance of Pons with
Galan as a means to serve the latter's personal purposes.
The petitioner, therefore, should be bound by the delimitation of the issues during the pre-trial
because he himself agreed to the same. In Permanent Concrete Products, Inc. v. Teodoro, (26
SCRA 336), we ruled:
xxx xxx xxx
... The appellant is bound by the delimitation of the issues contained in the trial
court's order issued on the very day the pre-trial conference was held. Such an order
controls the subsequent course of the action, unless modified before trial to prevent
manifest injustice.In the case at bar, modification of the pre-trial order was never
sought at the instance of any party.
Petitioner could have asked at least for a modification of the issues if he really wanted to include the
determination of Galan's personal liability to their partnership but he chose not to do so, as he
vehemently denied the existence of the partnership. At any rate, the issue raised in this petition is
the contention of Muasque that the amounts payable to the intervenors should be shouldered
exclusively by Galan. We note that the petitioner is not solely burdened by the obligations of their
illstarred partnership. The records show that there is an existing judgment against respondent Galan,
holding him liable for the total amount of P7,000.00 in favor of Eden Hardware which extended credit
to the partnership aside from the P2, 000. 00 he already paid to Universal Lumber.
We, however, take exception to the ruling of the appellate court that the trial court's ordering
petitioner and Galan to pay the credits of Blue Diamond and Cebu Southern Hardware"jointly and
severally" is plain error since the liability of partners under the law to third persons for contracts
executed inconnection with partnership business is only pro rata under Art. 1816, of the Civil Code.

While it is true that under Article 1816 of the Civil Code,"All partners, including industrial ones, shall
be liable prorate with all their property and after all the partnership assets have been exhausted, for
the contracts which may be entered into the name and fm the account cd the partnership, under its
signature and by a person authorized to act for the partner-ship. ...". this provision should be
construed together with Article 1824 which provides that: "All partners are liable solidarily with the
partnership for everything chargeable to the partnership under Articles 1822 and 1823." In short,
while the liability of the partners are merely joint in transactions entered into by the partnership, a
third person who transacted with said partnership can hold the partners solidarily liable for the whole
obligation if the case of the third person falls under Articles 1822 or 1823.
Articles 1822 and 1823 of the Civil Code provide:
Art. 1822. Where, by any wrongful act or omission of any partner acting in the
ordinary course of the business of the partner-ship or with the authority of his copartners, 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.
Art. 1823. The partnership is bound to make good:
(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 t he money or property so received is misapplied by any partner
while it is in the custody of the partnership.
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 Article 1824 of the Civil
Code all partners, whether innocent or guilty, as well as the legal entity which is the partnership, are
solidarily liable.
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
However. as between the partners Muasque and Galan,justice also dictates that Muasque be
reimbursed by Galan for the payments made by the former representing the liability of their
partnership to herein intervenors, as it was satisfactorily established that Galan acted in bad faith in
his dealings with Muasque as a partner.
WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the
liability of petitioner and respondent Galan to intervenors Blue Diamond Glass and Cebu Southern
Hardware is declared to be joint and solidary. Petitioner may recover from respondent Galan any
amount that he pays, in his capacity as a partner, to the above intervenors,

SO ORDERED.

Elmo Muasque vs CA
Facts:
Elmo Muasque, in behalf of Galan and Muasque partnership as Contractor,
entered into a written contract with Tropical Commercial Co., through its branch
manager Ramon Pons, for remodelling of Tropicals building in Cebu.
The
consideration for the entire services is P25,000 to be paid: 30% upon signing of
contract, and balance on 3 equal instalments of P6,000 every 15working days.
First payment of check worth P7,000 was payable to Muasque, who indorsed it to
Galan for purposes of depositing the amount and paying the materials already used.
But since Galan allegedly misappropriated P6,183.37 of the check for personal use,
Muasque refused to indorse the second check worth P6,000. Galan then informed
Tropical of the misunderstanding between him and Muasque and this prompted
Tropical to change the payee of the second check from Muasque to Galan and
Associates (the duly registered name of Galan and Muasque partnership).
Despite the misappropriation, Muasque alone was able to finish the project. The
two remaining checks were properly issued to Muasque.
Muasque filed a complaint for payment of sum of money plus damages against
Galan, Tropical and Pons for the amount covered by the first and second checks.
Cebu Southern Hardware Co and Blue Diamond Glass Palace were allowed as
intervenors having legal interest claiming against Muasue and Galan for materials
used.
TC:
- Muasque and Pons jointly and severally liable to intervenors
- Tropical and Pons absolved
CA affirmed with modification:
- Muasque and Pons jointly liable to intervenors
Issue:
1. W/N Muasque and Galan are partners?
2. W/N payment made by Tropical to Galan was good payment?
3. W/N Galan should shoulder exclusively the amounts payable to the
intervenors (granting he misappropriated the amount from the two checks)?
Held:
yes-yes-no!
1. YES. Tropical had every right to presume the existence of the partnership:
a. Contract states that agreement was entered into by Galan and
Muasque
b. The first check issue in the name of Muasque was indorsed to Galan
The relationship was made to appear as a partnership.

2. YES. Muasque and Galan were partners when the debts to the intervenors
were incurred, hence, they are also 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.
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
3. NO. Article 1816 BUT construed together with Article 1824.
Art. 1816. All partners, including industrial ones, shall be liable pro rata x x x
for the contracts which may be entered into the name and for the account of
the partnership, under its signature and by a person authorized x x x
Art. 1824. All partners are liable solidarily with the partnership for everything
chargeable to the partnership under Articles 1822 and 1823
Art. 1822. Where, by any wrongful act or omission of any partner acting in
the ordinary course of the business x x x or with the authority of his copartners, loss or injury is caused to any person x x x
Art. 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 x x x is misapplied by any partner
while it is in the custody of the partnership.
GR: In transactions entered into by the partnership, the liability of the
partners is merely joint
Exception: In transactions involving third persons falling under Articles 1822
and 1823, such third person may hold any partner solidarily liable for the
whole obligation with the partnership.
Reason for exception: the law protects him, who in good faith relied upon the
authority if a partner, whether real or apparent.
However, as between Muasque and Galan, justice also dictates
reimbursement in favour of Muasque as Galan was proven to be in bad faith
in his dealings with his partner.

G.R. No. 127405

September 20, 2001

MARJORIE TOCAO and WILLIAM T. BELO, petitioners,

vs.
COURT OF APPEALS and NENITA A. ANAY, respondent.
RESOLUTION
YNARES-SANTIAGO, J.:
The inherent powers of a Court to amend and control its processes and orders so as to make
them conformable to law and justice includes the right to reverse itself, especially when in its
honest opinion it has committed an error or mistake in judgment, and that to adhere to its
decision will cause injustice to a party litigant.1
On November 14, 2001, petitioners Marjorie Tocao and William T. Belo filed a Motion for
Reconsideration of our Decision dated October 4, 2000. They maintain that there was no
partnership between petitioner Belo, on the one hand, and respondent Nenita A. Anay, on the
other hand; and that the latter being merely an employee of petitioner Tocao.
After a careful review of the evidence presented, we are convinced that, indeed, petitioner Belo
acted merely as guarantor of Geminesse Enterprise. This was categorically affirmed by
respondent's own witness, Elizabeth Bantilan, during her cross-examination. Furthermore,
Bantilan testified that it was Peter Lo who was the company's financier. Thus:
Q - You mentioned a while ago the name William Belo. Now, what is the role of William
Belo with Geminesse Enterprise?
A - William Belo is the friend of Marjorie Tocao and he was the guarantor of the
company.
Q

What do you mean by guarantor?

A - He guarantees the stocks that she owes somebody who is Peter Lo and he acts as
guarantor for us. We can borrow money from him.
Q

You mentioned a certain Peter Lo. Who is this Peter Lo?

Peter Lo is based in Singapore.

What is the role of Peter Lo in the Geminesse Enterprise?

He is the one fixing our orders that open the L/C.

You mean Peter Lo is the financier?

Yes, he is the financier.

Q - And the defendant William Belo is merely the guarantor of Geminesse Enterprise,
am I correct?
A

Yes, sir2

The foregoing was neither refuted nor contradicted by respondent's evidence. It should be
recalled that the business relationship created between petitioner Tocao and respondent Anay
was an informal partnership, which was not even recorded with the Securities and Exchange
Commission. As such, it was understandable that Belo, who was after all petitioner Tocao's
good friend and confidante, would occasionally participate in the affairs of the business,
although never in a formal or official capacity.3 Again, respondent's witness, Elizabeth Bantilan,
confirmed that petitioner Belo's presence in Geminesse Enterprise's meetings was merely as
guarantor of the company and to help petitioner Tocao.4
Furthermore, no evidence was presented to show that petitioner Belo participated in the profits
of the business enterprise. Respondent herself professed lack of knowledge that petitioner Belo
received any share in the net income of the partnership.5 On the other hand, petitioner Tocao
declared that petitioner Belo was not entitled to any share in the profits of Geminesse
Enterprise.6 With no participation in the profits, petitioner Belo cannot be deemed a partner
since the essence of a partnership is that the partners share in the profits and losses.7
Consequently, inasmuch as petitioner Belo was not a partner in Geminesse Enterprise,
respondent had no cause of action against him and her complaint against him should
accordingly be dismissed.
As regards the award of damages, petitioners argue that respondent should be deemed in bad
faith for failing to account for stocks of Geminesse Enterprise amounting to P208,250.00 and
that, accordingly, her claim for damages should be barred to that extent. We do not agree.
Given the circumstances surrounding private respondent's sudden ouster from the partnership
by petitioner Tocao, her act of withholding whatever stocks were in her possession and control
was justified, if only to serve as security for her claims against the partnership. However, while
we do not agree that the same renders private respondent in bad faith and should bar her claim
for damages, we find that the said sum of P208,250.00 should be deducted from whatever
amount is finally adjudged in her favor on the basis of the formal account of the partnership
affairs to be submitted to the Regional Trial Court.
WHEREFORE, based on the foregoing, the Motion for Reconsideration of petitioners is
PARTIALLY GRANTED. The Regional Trial Court of Makati is hereby ordered to DISMISS the
complaint, docketed as Civil Case No. 88-509, as against petitioner William T. Belo only. The
sum of P208,250.00 shall be deducted from whatever amount petitioner Marjorie Tocao shall be
held liable to pay respondent after the normal accounting of the partnership affairs.
SO ORDERED.

TOCAO V. CA
G.R. No. 127405; October 4, 2000
Ponente: J. Ynares-Santiago

FACTS:

Private respondent Nenita A. Anay met petitioner William T. Belo, then the vicepresident for operations of Ultra Clean Water Purifier, through her former employer
in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her
desire to enter into a joint venture with her for the importation and local distribution
of kitchen cookwares

Under the joint venture, Belo acted as capitalist, Tocao as president and general
manager, and Anay as head of the marketing department and later, vice-president
for sales

The parties agreed that Belo's name should not appear in any documents relating to
their transactions with West Bend Company. Anay having secured the
distributorship of cookware products from the West Bend Company and organized
the administrative staff and the sales force, the cookware business took off
successfully. They operated under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocao's name.

The parties agreed further that Anay would be entitled to:

(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement was not
reduced to writing on the strength of Belo's assurances that he was sincere,
dependable and honest when it came to financial commitments.

On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed
to the Cubao sales office to the effect that she was no longer the vice-president of
Geminesse Enterprise.

Anay attempted to contact Belo. She wrote him twice to demand her overriding
commission for the period of January 8, 1988 to February 5, 1988 and the audit of
the company to determine her share in the net profits.

Anay still received her five percent (5%) overriding commission up to December
1987. The following year, 1988, she did not receive the same commission although
the company netted a gross sales of P 13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of
money with damages against Marjorie D. Tocao and William Belo before the
Regional Trial Court of Makati, Branch 140

The trial court held that there was indeed an "oral partnership agreement between
the plaintiff and the defendants. The Court of Appeals affirmed the lower courts
decision.

ISSUE:
Whether the parties formed a partnership

HELD:

Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a partnership

must fulfill these requisites:

(1) two or more persons bind themselves to contribute money, property or industry
to a common fund; and

(2) intention on the part of the partners to divide the profits among themselves. It
may be constituted in any form; a public instrument is necessary only where
immovable property or real rights are contributed thereto.

This implies that since a contract of partnership is consensual, an oral contract of

partnership is as good as a written one.

In the case at hand, Belo acted as capitalist while Tocao as president and general
manager, and Anay as head of the marketing department and later, vice-president
for sales. Furthermore, Anay was entitled to a percentage of the net profits of the
business.
Therefore, the parties formed a partnership.

G.R. No. L-28920

October 24, 1928

MAXIMO GUIDOTE, plaintiff-appellant,

vs.
ROMANA BORJA, as administratrix of the estate of Narciso Santos, deceased, defendantappellee.
Francisco, Lualhati and Lopez for appellant.
M. G. Goyena for appellee.

OSTRAND, J.:
On March 4, 1921, the plaintiff brought an action against the administratrix of the estate of
Narciso Santos, deceased, to recover the sum of P9,534.14, a part of which was alleged to be
the net profits due the plaintiff in a partnership business conducted under the name of "Taller
Sinukuan," in which the deceased was the capitalist partner and the plaintiff the industrial
partner, the rest of the sum consisting of advances alleged to have been made to said
partnership by the plaintiff. The defendant in her answer admitted the existence of the
partnership and in a cross-complaint and counter-claim prayed that the plaintiff be ordered to
render an accounting of the partnership business and to pay to the estate of the deceased the
sum of P25,000 as net profits, credits, and property pertaining to said deceased.
In the first trial of the case the plaintiff called several witnesses and introduced a so-called
accounting and a mass of documentary evidence consisting of books, bills, and alleged
vouchers, which documentary evidence was so hopelessly and inextricably confused that the
court, as stated in its decision, could not consider it of much probative value. It was, however,
fund as facts that the aforesaid partnership had been formed, on or about June 15, 1918; that

Narciso Santos died on April 6, 1920, leaving the plaintiff as the surviving partner; and that
plaintiff failed to liquidate the affairs of the partnership and to render an account thereof to the
administratrix of Santos' estate. The court, therefore, dismissed the plaintiff's complaint and
absolved the defendant therefrom, and ordered the plaintiff to render a full and complete
accounting, verified by vouchers, of the partnership business from June 15, 1918, until
September 1, 1922. To this decision and order the plaintiff duly excepted.
The plaintiff thereupon rendered an account prepared by one Tomas Alfonso, a public
accountant. Numerous objections to said account were presented by the defendant, and the
court, upon hearing, disapproved the account and ordered that the defendant submit to the
court an accounting of the partnership business from the date of the commencement of the
partnership, June 15, 1918, up to the time the business was closed.
1awph!l.net

On January 25, 1924, the defendant presented an account and liquidation prepared by a public
accountant, Santiago A. Lindaya, showing a balance of P29,088.95 in favor of the defendant.
The account was set down for hearing upon the question of its approval or disapproval by the
court, at which hearing the defendant introduced the public accountant Jose Turiano Santiago to
testify as to the results of an audit made by him of the accounts of the partnership. Santiago
testified that he had been a public accountant for over 20 years, having appeared in court as
such on several occasions; that he had examined the exhibits offered in evidence of the case by
both parties; that he had prepared a separate accounting or liquidation similar in results to that
prepared by Lindaya, but with a few differences in the sums total; and that according to his
examination, the financial status of the partnership was as follows:
Narciso Santos is a creditor of the Taller
Sinukuan in the sum of P26,020.89 consisting
as follows:

<br<
td=""></br<>

For his capital ..................................

P12,588.53

For his credit ...................................

10,348.30

For his share of the profits ............

3,068.06

Total ...................................................

26,020.89

Maximo Guidote is a debtor to the Taller

Sinukuan in the sum of P20,020.89, consisting
as follows:
For his debt (debito) .........................
Less his share of the profits ...........
Total balance ......................................

P29,088.95
3,068.06
26.020.89

In order to contradict the conclusions of Lindaya and Jose Turiano Santiago, the plaintiff
presented Tomas Alfonso and the bookkeeper, Pio Gaudier, as witnesses in his favor. In regard
to the character of the testimony of these witnesses, His Honor, the trial judge, says:
The testimony of these two witnesses is so unreliable that the court can place no reliance
thereon. Mr. Tomas Alfonso is the same public accountant who filed the liquidation Exhibit O

on behalf of the plaintiff, in relation to the partnership business, which liquidation was
disapproved by this court in its decision of August 20, 1923. It is also to be noted that Mr.
Alfonso would have this court believe the proposition that the plaintiff, a mere industrial
partner, notwithstanding his having received the sum of P21,649.61 on the various jobs and
contracts of the "Taller Sinukuan," had actually expended and paid out the sum of
P63,360.27, of P44,710.66 in excess of the gross receipts of the business. This proposition
is not only improbable on its face, but it materially contradicts the allegations of plaintiff's
complaint to the effect that the advances made by the plaintiff only the amount to P2,017.50.
Mr. Pio Gaudier is the same bookkeeper who prepared three entirely separate and distinct
liquidation for the same partnership business all of which were repeated by the court in its
decisions of September 1, 1922 and the court finds that the testimony given by him at the
last hearing is confusing, contradictory and unreliable.
1awph!l.net

As to the other witnesses for the plaintiff His Honor further says:
The testimony of the other witnesses for the plaintiff deserves but scant consideration as
evidence to overcome the testimony of Mr. Santiago, as a whole particularly that of the
witness Chua Chak, who, after identifying and testifying as to a certain exhibit shown him by
counsel for plaintiff, showed that he could neither read nor write English, Spanish, or
Tagalog, and that of the witness Mr. Claro Reyes, who, after positively assuring the court that
a certain exhibit tendered him for identification was an original document, was forced to
admit that it was but a mere copy.

The court therefore, found that the conclusions reached by Santiago A. Lindaya as modified by
Jose Turinao Santiago were just and correct and ordered the plaintiff to pay the defendant the
sum of P26,020.89, Philippine currency, with legal interest thereon from April 2, 1921, the date
of the defendant's answer, and to pay the costs. From this judgment the plaintiff appealed to this
court and presents the following assignments of error:
(1) That the court erred in dismissing the plaintiff's complaint and ordering him to present a
liquidation of the operations and accounts of the partnership formed with the deceased
Narciso Santos, from the beginning of the partnership until September 1, 1922.
(2) That the court erred in approving the liquidation made by the public accountant Santiago
A. Lindaya, with the modification introduced by the witness Jose Turiano Santiago.
(3) That the court erred in ordering the plaintiff and appellant to pay to the defendant and
appellee the sum of P26,020.89.

As to the first assignment of error there may be some merit in the appellant's contention that the
dismissal of his complaint was premature. The better practise would, perhaps, have been to let
the complaint stand until the result of the liquidation of the partnership affairs was known. But
under the circumstances of this case no harm was done by the dismissal of the complaint, and
the error, if any there be, is not reversible.
Under the same assignment of error the plaintiff argues that as the deceased up to the time of
his death generally took care of the payments and collections of the partnership, his legal
representatives were under the obligation to render accounts of the operations of the
partnership, notwithstanding the fact that the plaintiff was in charge of the business subsequent
to the death of Santos. This argument is without merit. In the case of Wahl vs. Donaldson Sim &

Co. (5 Phil., 11, 14), it was held that the death of one of the partners dissolves the partnership,
but that the liquidation of its affairs is by law intrusted, not to the executors of the deceased
partner, but to the surviving partners or the liquidators appointed by them (citing article 229 of
the Code of Commerce and secs. 664 and 665 of the Code of Civil Procedure). The same rule
is laid down by the Supreme Court of Spain in sentence of October 12, 1870.
The other assignments of error have reference only to questions of fact in regard to which the
findings of the court below seem to be as nearly correct as possible upon the evidence
presented. There may be errors in the interpretation of the accounts, and it is possible that the
amount of P26,020.89 charged against the plaintiff is excessive, but the evidence presented by
him is so confusing and unreliable as to be practically of no weight and cannot serve as a basis
for a readjustment of the accounts prepared by the accountant Lindaya and the apparently
reliable witness, Jose Turiano Santiago.
We should, perhaps, have been more inclined to question the conclusions of Lindaya and
Santiago if the plaintiff had shown a disposition to render an honest account of the business and
to effect a fair liquidation of the partnership but instead of doing so, he has by means of very
questionable, and apparently false, evidence sought to mulct his deceased partner's estate to
the extent of over P9,000. The rule for the conduct of a surviving partner is thus stated in 20 R.
C. L., 1003:
In equity surviving partners are treated as trustees of the representatives of the deceased
partner, in regard to the interest of the deceased partner in the firm. As a consequence of
this trusteeship, surviving partners are held in their dealings with the firm assets and the
representatives of the deceased to that nicety of dealing and that strictness of accountability
required of and incident to the position of one occupying a confidential relation. It is the duty
of surviving partners to render an account of the performance of their trust to the personal
representatives of the deceased partner, and to pay over to them the share of such
deceased member in the surplus of firm property, whether it consists of real or personal
assets.

The appellant has completely failed to observe the rule quoted, and he is not in position to
complain if his testimony and that of his witnesses is discredited.
The appealed judgment is affirmed with the costs against the appellant. So ordered.

MAXIMO GUIDOTE v. ROMANA BORJA (administratrix of the estate of Narciso Santos)

1928 / Ostrand

FACTS
Maximo Guidote and Narciso Santos formed in 1918 a partnership business under the name of Taller Sinukuan, in
which Santos was the capitalist partner and Guidote was the industrial partner. Santos died in 1920. Guidote failed
to liquidate the affairs of the partnership and to render an account thereof to Borja, the administratrix of Santos
estate.
Guidote brought an action against Borja to recover a sum of money [9k~], a part of which was
alleged to be the net profits from the business due Guidote, and the rest of the sum consisting of advances

allegedly made by Guidote. Borja admitted the partnerships existence and prayed that Guidote be
ordered to render an accounting and to pay the estate 25k as net profits, credits, and property
pertaining to Santos.
Guidote called several witnesses and introduced a so-called accounting and a mass of
documentary evidence, which was so hopelessly and inextricably confused that the court could not consider it of
much probative value. The court dismissed Guidotes complaint and absolved Borja. Guidote was ordered to
render a full and complete accounting, verified by vouchers, of the partnership business.
Guidote rendered an account prepared by one Tomas Alfonso, a public accountant. Numerous
objections were presented by Borja. The court disapproved the account and ordered that Borja submit an
accounting from the date of the commencement of the partnership up to the time the business was closed.
Borja presented an account and liquidation prepared by a public accountant, Santiago A.
Lindaya, showing a balance of P29k~ in Borjas [Santos estate] favor. At the hearing, Borja introduced the
public accountant Jose Turiano Santiago to testify as to the results of an audit made by him of the partnership
accounts. Santiago testified that he had prepared a separate accounting or liquidation similar in results to that
prepared by Lindaya, but with a few differences in the sums total. [Computation: Santos is a creditor of the Taller
Sinukuan in the sum of P26k. Guidote is a debtor to the Taller Sinukuan in the sum of P20k.]
In order to contradict the conclusions of the two public accountants, Guidote presented Tomas
Alfonso and the bookkeeper, Pio Gaudier, as witnesses. The trial court judge said that the testimonies
of these witnesses are unreliable.

Tomas Alfonso is the same public accountant who filed the liquidation Exhibit O on behalf of Guidote, in relation to
the partnership business, which liquidation was disapproved by this court in a decision. The judge did not believe
Alfonsos proposition that Guidote, a mere industrial partner, notwithstanding his having received 21k on the various
jobs and contracts of the business had actually expended and paid out 63k, of 44k in excess of the gross receipts of
the business. It materially contradicts Guidotes allegations to the effect that the advances that he [Guidote] made
amounted only to 2k.
Pio Gaudier is the same bookkeeper who prepared three entirely separate and distinct liquidation for the same
partnership business, and the court found that the testimony given by him at the last hearing is confusing,
contradictory and unreliable.

Other witnesses were given scant considerationChua Chak can neither read nor write English, Spanish, or

Tagalog; Claro Reyes was forced to admit that a certain exhibit was not the original.
The court gave credence to the conclusions reached by the public accountants presented by
Borja. Guidote was ordered to pay P26k to Borja, with legal interest, plus costs.

ISSUE & HOLDING

WON the trial court is correct in ordering Guidote to pay P26k to Borja. YES

RATIO
There may be some merit in Guidotes contention that the dismissal of his complaint was premature. The better
practice would been to let the complaint stand until the result of the liquidation of the partnership affairs was
known. But under the circumstances, no harm was done by the dismissal of Guidotes complaint.

GUIDOTES ARGUMENT
Since Santos, up to the time of his death, generally took care of the partnerships payments and collections, his
legal representatives were under the obligation to render accounts of the operations, notwithstanding the fact that
Guidote was in charge of the business subsequent to the death of Santos.

GUIDOTES ARGUMENT IS UNAVAILING

Wahl v. Donaldson Sim & Co.
The death of one of the partners dissolves the partnership, but that the liquidation of its affairs is by law entrusted,
not to the executors of the deceased partner, but to the surviving partners or the liquidators appointed by them.
The rule for the conduct of a surviving partner
In equity, surviving partners are treated as trustees of the representatives of the deceased partner, with regard to
the interest of the deceased partner in the firm. As a consequence of this trusteeship, surviving partners are held in
their dealings with the firm assets and the representatives of the deceased to that nicety of dealing and that
strictness of accountability required of and incident to the position of one occupying a confidential relation. It is the
duty of surviving partners to render an account of the performance of their trust to the personal representatives of
the deceased partner, and to pay over to them the share of such deceased member in the surplus of firm property,
whether it consists of real or personal assets.
Guidote failed to observe this rule, and he is not in position to complain if his testimony and that of his witnesses is
discredited.
The appealed judgment is AFFIRMED.

[G.R. No. 30616 : December 10, 1990.]

192 SCRA 110
EUFRACIO D. ROJAS, Plaintiff-Appellant, vs. CONSTANCIO B.
MAGLANA,Defendant-Appellee.
DECISION
PARAS, J.:
This is a direct appeal to this Court from a decision ** of the then Court of First Instance of
Davao, Seventh Judicial District, Branch III, in Civil Case No. 3518, dismissing appellant's
complaint.
As found by the trial court, the antecedent facts of the case are as follows:
On January 14, 1955, Maglana and Rojas executed their Articles of Co-Partnership (Exhibit
"A") called Eastcoast Development Enterprises (EDE) with only the two of them as partners.
The partnership EDE with an indefinite term of existence was duly registered on January 21,
1955 with the Securities and Exchange Commission.
One of the purposes of the duly-registered partnership was to "apply or secure timber
and/or minor forests products licenses and concessions over public and/or private forest
lands and to operate, develop and promote such forests rights and concessions." (Rollo, p.
114).
A duly registered Articles of Co-Partnership was filed together with an application for a
timber concession covering the area located at Cateel and Baganga, Davao with the Bureau
of Forestry which was approved and Timber License No. 35-56 was duly issued and became
the basis of subsequent renewals made for and in behalf of the duly registered partnership
EDE.

Under the said Articles of Co-Partnership, appellee Maglana shall manage the business
affairs of the partnership, including marketing and handling of cash and is authorized to sign
all papers and instruments relating to the partnership, while appellant Rojas shall be the
logging superintendent and shall manage the logging operations of the partnership. It is
also provided in the said articles of co-partnership that all profits and losses of the
partnership shall be divided share and share alike between the partners.
During the period from January 14, 1955 to April 30, 1956, there was no operation of said
partnership (Record on Appeal [R.A.] p. 946).
Because of the difficulties encountered, Rojas and Maglana decided to avail of the services
of Pahamotang as industrial partner.
On March 4, 1956, Maglana, Rojas and Agustin Pahamotang executed their Articles of CoPartnership (Exhibit "B" and Exhibit "C") under the firm name EASTCOAST DEVELOPMENT
ENTERPRISES (EDE). Aside from the slight difference in the purpose of the second
partnership which is to hold and secure renewal of timber license instead of to secure the
license as in the first partnership and the term of the second partnership is fixed to thirty
(30) years, everything else is the same.
The partnership formed by Maglana, Pahamotang and Rojas started operation on May 1,
1956, and was able to ship logs and realize profits. An income was derived from the
proceeds of the logs in the sum of P643,633.07 (Decision, R.A. 919).
On October 25, 1956, Pahamotang, Maglana and Rojas executed a document entitled
"CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP, EASTCOAST DEVELOPMENT
ENTERPRISE" (Exhibits "C" and "D") agreeing among themselves that Maglana and Rojas
shall purchase the interest, share and participation in the Partnership of Pahamotang
assessed in the amount of P31,501.12. It was also agreed in the said instrument that after
payment of the sum of P31,501.12 to Pahamotang including the amount of loan secured by
Pahamotang in favor of the partnership, the two (Maglana and Rojas) shall become the
owners of all equipment contributed by Pahamotang and the EASTCOAST DEVELOPMENT
ENTERPRISES, the name also given to the second partnership, be dissolved. Pahamotang
was paid in fun on August 31, 1957. No other rights and obligations accrued in the name of
the second partnership (R.A. 921).
After the withdrawal of Pahamotang, the partnership was continued by Maglana and Rojas
without the benefit of any written agreement or reconstitution of their written Articles of
Partnership (Decision, R.A. 948).
On January 28, 1957, Rojas entered into a management contract with another logging
enterprise, the CMS Estate, Inc. He left and abandoned the partnership (Decision, R.A.
947).
On February 4, 1957, Rojas withdrew his equipment from the partnership for use in the
newly acquired area (Decision, R.A. 948).
The equipment withdrawn were his supposed contributions to the first partnership and was
transferred to CMS Estate, Inc. by way of chattel mortgage (Decision, R.A. p. 948).
On March 17, 1957, Maglana wrote Rojas reminding the latter of his obligation to contribute,
either in cash or in equipment, to the capital investments of the partnership as well as his
obligation to perform his duties as logging superintendent.
Two weeks after March 17, 1957, Rojas told Maglana that he will not be able to comply with
the promised contributions and he will not work as logging superintendent. Maglana then
told Rojas that the latter's share will just be 20% of the net profits. Such was the sharing
from 1957 to 1959 without complaint or dispute (Decision, R.A. 949).
: nad

Meanwhile, Rojas took funds from the partnership more than his contribution. Thus, in a
letter dated February 21, 1961 (Exhibit "10") Maglana notified Rojas that he dissolved the
partnership (R.A. 949).
On April 7, 1961, Rojas filed an action before the Court of First Instance of Davao against
Maglana for the recovery of properties, accounting, receivership and damages, docketed as
Civil Case No. 3518 (Record on Appeal, pp. 1-26).
Rojas' petition for appointment of a receiver was denied (R.A. 894).
Upon motion of Rojas on May 23, 1961, Judge Romero appointed commissioners to examine
the long and voluminous accounts of the Eastcoast Development Enterprises (Ibid., pp. 894895).
The motion to dismiss the complaint filed by Maglana on June 21, 1961 (Ibid., pp. 102-114)
was denied by Judge Romero for want of merit (Ibid., p. 125). Judge Romero also required
the inclusion of the entire year 1961 in the report to be submitted by the commissioners
(Ibid., pp. 138-143). Accordingly, the commissioners started examining the records and
supporting papers of the partnership as well as the information furnished them by the
parties, which were compiled in three (3) volumes.
On May 11, 1964, Maglana filed his motion for leave of court to amend his answer with
counterclaim, attaching thereto the amended answer (Ibid., pp. 26-336), which was granted
on May 22, 1964 (Ibid., p. 336).
On May 27, 1964, Judge M.G. Reyes approved the submitted Commissioners' Report (Ibid.,
p. 337).
On June 29, 1965, Rojas filed his motion for reconsideration of the order dated May 27,
1964 approving the report of the commissioners which was opposed by the appellee.
On September 19, 1964, appellant's motion for reconsideration was denied (Ibid., pp. 446451).
A mandatory pre-trial was conducted on September 8 and 9, 1964 and the following issues
were agreed upon to be submitted to the trial court:
(a) The nature of partnership and the legal relations of Maglana and Rojas after the
dissolution of the second partnership;
(b) Their sharing basis: whether in proportion to their contribution or share and
share alike;
(c) The ownership of properties bought by Maglana in his wife's name;
(d) The damages suffered and who should be liable for them; and
(e) The legal effect of the letter dated February 23, 1961 of Maglana dissolving the
partnership (Decision, R.A. pp. 895-896).
- nad

After trial, the lower court rendered its decision on March 11, 1968, the dispositive portion
of which reads as follows:
"WHEREFORE, the above facts and issues duly considered, judgment is hereby
rendered by the Court declaring that:
"1. The nature of the partnership and the legal relations of Maglana and Rojas after
Pahamotang retired from the second partnership, that is, after August 31, 1957,
when Pahamotang was finally paid his share the partnership of the defendant and
the plaintiff is one of a de facto and at will;

"2. Whether the sharing of partnership profits should be on the basis of computation,
that is the ratio and proportion of their respective contributions, or on the basis of
share and share alike this covered by actual contributions of the plaintiff and the
defendant and by their verbal agreement; that the sharing of profits and losses is on
the basis of actual contributions; that from 1957 to 1959, the sharing is on the basis
of 80% for the defendant and 20% for the plaintiff of the profits, but from 1960 to
the date of dissolution, February 23, 1961, the plaintiff's share will be on the basis of
his actual contribution and, considering his indebtedness to the partnership, the
plaintiff is not entitled to any share in the profits of the said partnership;
"3. As to whether the properties which were bought by the defendant and placed in
his or in his wife's name were acquired with partnership funds or with funds of the
defendant and the Court declares that there is no evidence that these properties
were acquired by the partnership funds, and therefore the same should not belong to
the partnership;
"4. As to whether damages were suffered and, if so, how much, and who caused
them and who should be liable for them the Court declares that neither parties is
entitled to damages, for as already stated above it is not a wise policy to place a
price on the right of a person to litigate and/or to come to Court for the assertion of
the rights they believe they are entitled to;
"5. As to what is the legal effect of the letter of defendant to the plaintiff dated
February 23, 1961; did it dissolve the partnership or not the Court declares that
the letter of the defendant to the plaintiff dated February 23, 1961, in effect
dissolved the partnership;
"6. Further, the Court relative to the canteen, which sells foodstuffs, supplies, and
other merchandise to the laborers and employees of the Eastcoast Development
Enterprises, the COURT DECLARES THE SAME AS NOT BELONGING TO THE
PARTNERSHIP;
"7. That the alleged sale of forest concession Exhibit 9-B, executed by Pablo Angeles
David is VALID AND BINDING UPON THE PARTIES AND SHOULD BE CONSIDERED
AS PART OF MAGLANA'S CONTRIBUTION TO THE PARTNERSHIP;
"8. Further, the Court orders and directs plaintiff Rojas to pay or turn over to the
partnership the amount of P69,000.00 the profits he received from the CMS Estate,
Inc. operated by him;
"9. The claim that plaintiff Rojas should be ordered to pay the further sum of
P85,000.00 which according to him he is still entitled to receive from the CMS Estate,
Inc. is hereby denied considering that it has not yet been actually received, and
further the receipt is merely based upon an expectancy and/or still speculative;
"10. The Court also directs and orders plaintiff Rojas to pay the sum of P62,988.19
his personal account to the partnership;
"11. The Court also credits the defendant the amount of P85,000.00 the amount he
should have received as logging superintendent, and which was not paid to him, and
this should be considered as part of Maglana's contribution likewise to the
partnership; and
"12. The complaint is hereby dismissed with costs against the plaintiff.

: rd

"SO ORDERED." Decision, Record on Appeal, pp. 985-989).

Rojas interposed the instant appeal.

The main issue in this case is the nature of the partnership and legal relationship of the
Maglana-Rojas after Pahamotang retired from the second partnership.
The lower court is of the view that the second partnership superseded the first, so that
when the second partnership was dissolved there was no written contract of co-partnership;
there was no reconstitution as provided for in the Maglana, Rojas and Pahamotang
partnership contract. Hence, the partnership which was carried on by Rojas and Maglana
after the dissolution of the second partnership was a de facto partnership and at will. It was
considered as a partnership at will because there was no term, express or implied; no
period was fixed, expressly or impliedly (Decision, R.A. pp. 962-963).
On the other hand, Rojas insists that the registered partnership under the firm name of
Eastcoast Development Enterprises (EDE) evidenced by the Articles of Co-Partnership dated
January 14, 1955 (Exhibit "A") has not been novated, superseded and/or dissolved by the
unregistered articles of co-partnership among appellant Rojas, appellee Maglana and
Agustin Pahamotang, dated March 4, 1956 (Exhibit "C") and accordingly, the terms and
stipulations of said registered Articles of Co-Partnership (Exhibit "A") should govern the
relations between him and Maglana. Upon withdrawal of Agustin Pahamotang from the
unregistered partnership (Exhibit "C"), the legally constituted partnership EDE (Exhibit "A")
continues to govern the relations between them and it was legal error to consider a de facto
partnership between said two partners or a partnership at will. Hence, the letter of appellee
Maglana dated February 23, 1961, did not legally dissolve the registered partnership
between them, being in contravention of the partnership agreement agreed upon and
stipulated in their Articles of Co-Partnership (Exhibit "A"). Rather, appellant is entitled to the
rights enumerated in Article 1837 of the Civil Code and to the sharing profits between them
of "share and share alike" as stipulated in the registered Articles of Co-Partnership (Exhibit
"A").
After a careful study of the records as against the conflicting claims of Rojas and Maglana, it
appears evident that it was not the intention of the partners to dissolve the first partnership,
upon the constitution of the second one, which they unmistakably called an "Additional
Agreement" (Exhibit "9-B") (Brief for Defendant-Appellee, pp. 24-25). Except for the fact
that they took in one industrial partner; gave him an equal share in the profits and fixed the
term of the second partnership to thirty (30) years, everything else was the same. Thus,
they adopted the same name, EASTCOAST DEVELOPMENT ENTERPRISES, they pursued the
same purposes and the capital contributions of Rojas and Maglana as stipulated in both
partnerships call for the same amounts. Just as important is the fact that all subsequent
renewals of Timber License No. 35-36 were secured in favor of the First Partnership, the
original licensee. To all intents and purposes therefore, the First Articles of Partnership were
only amended, in the form of Supplementary Articles of Co-Partnership (Exhibit "C") which
was never registered (Brief for Plaintiff-Appellant, p. 5). Otherwise stated, even during the
existence of the second partnership, all business transactions were carried out under the
duly registered articles. As found by the trial court, it is an admitted fact that even up to
now, there are still subsisting obligations and contracts of the latter (Decision, R.A. pp. 950957). No rights and obligations accrued in the name of the second partnership except in
favor of Pahamotang which was fully paid by the duly registered partnership (Decision, R.A.,
pp. 919-921).
On the other hand, there is no dispute that the second partnership was dissolved by
common consent. Said dissolution did not affect the first partnership which continued to
exist. Significantly, Maglana and Rojas agreed to purchase the interest, share and
participation in the second partnership of Pahamotang and that thereafter, the two (Maglana
and Rojas) became the owners of equipment contributed by Pahamotang. Even more
convincing, is the fact that Maglana on March 17, 1957, wrote Rojas, reminding the latter of
his obligation to contribute either in cash or in equipment, to the capital investment of the

partnership as well as his obligation to perform his duties as logging superintendent. This
reminder cannot refer to any other but to the provisions of the duly registered Articles of
Co-Partnership. As earlier stated, Rojas replied that he will not be able to comply with the
promised contributions and he will not work as logging superintendent. By such statements,
it is obvious that Roxas understood what Maglana was referring to and left no room for
doubt that both considered themselves governed by the articles of the duly registered
partnership.
Under the circumstances, the relationship of Rojas and Maglana after the withdrawal of
Pahamotang can neither be considered as a De Facto Partnership, nor a Partnership at Will,
for as stressed, there is an existing partnership, duly registered.
As to the question of whether or not Maglana can unilaterally dissolve the partnership in the
case at bar, the answer is in the affirmative.
Hence, as there are only two parties when Maglana notified Rojas that he dissolved the
partnership, it is in effect a notice of withdrawal.
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.
But an accounting must first be made and which in fact was ordered by the trial court and
accomplished by the commissioners appointed for the purpose.
On the basis of the Commissioners' Report, the corresponding contribution of the partners
from 1956-1961 are as follows: Eufracio Rojas who should have contributed P158,158.00,
contributed only P18,750.00 while Maglana who should have contributed P160,984.00,
contributed P267,541.44 (Decision, R.A. p. 976). It is a settled rule that when a partner
who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of
the partnership for whatever he may have promised to contribute (Article 1786, Civil Code)
and for interests and damages from the time he should have complied with his obligation
(Article 1788, Civil Code) (Moran, Jr. v. Court of Appeals, 133 SCRA 94 [1984]). Being a
contract of partnership, each partner must share in the profits and losses of the venture.
That is the essence of a partnership (Ibid., p. 95).
Thus, as reported in the Commissioners' Report, Rojas is not entitled to any profits. In their
voluminous reports which was approved by the trial court, they showed that on 50-50%
basis, Rojas will be liable in the amount of P131,166.00; on 80-20%, he will be liable for
P40,092.96 and finally on the basis of actual capital contribution, he will be liable for
P52,040.31.
Consequently, except as to the legal relationship of the partners after the withdrawal of
Pahamotang which is unquestionably a continuation of the duly registered partnership and
the sharing of profits and losses which should be on the basis of share and share alike as
provided for in the duly registered Articles of Co-Partnership, no plausible reason could be
found to disturb the findings and conclusions of the trial court.
: nad

As to whether Maglana is liable for damages because of such withdrawal, it will be recalled
that after the withdrawal of Pahamotang, Rojas entered into a management contract with
another logging enterprise, the CMS Estate, Inc., a company engaged in the same business

as the partnership. He withdrew his equipment, refused to contribute either in cash or in

equipment to the capital investment and to perform his duties as logging superintendent, as
stipulated in their partnership agreement. The records also show that Rojas not only
abandoned the partnership but also took funds in an amount more than his contribution
(Decision, R.A., p. 949).
In the given situation Maglana cannot be said to be in bad faith nor can he be liable for
damages.
PREMISES CONSIDERED, the assailed decision of the Court of First Instance of Davao,
Branch III, is hereby MODIFIED in the sense that the duly registered partnership of
Eastcoast Development Enterprises continued to exist until liquidated and that the sharing
basis of the partners should be on share and share alike as provided for in its Articles of
Partnership, in accordance with the computation of the commissioners. We also hereby
AFFIRM the decision of the trial court in all other respects.
: nad

SO ORDERED.

ROJAS V. MAGLANA
December 10, 1990
Paras, C.J.
Raeses, Roberto Miguel
SUMMARY: Maglana and Rojas executed their articles of co-partnership called EDE. It had an
indefinite term, was registered with the SEC, and had a Timer License. Later, Agustin Pahamitang
became an industrial partner and another articles of co-partnership was executed. The term of the
second co-partnership was fixed to 30 years. After some time, the three executed a conditional sale
of interest in the partnership where Magalana and Rojas shall purchase the interest, share, and
participation of Pahamotang. It was agreed that, after payment of such including the loan secured by
Pahamotang, the two shall become owners of all equipment contributed by Pahamotang. The two
continued the partnership without any written agreement or reconstitution of the articles of
partnership. Subsequently, Rojas entered into a contarct with CMS Estate. Maglana reminded him of
his contribution to the capital investments and his duties to the partnership. Rojas said he would not
be able to comply. Maglana told Rojas that the latter is only entitled to 20% of the profits, which was
the sharing from 1957-1959 without dispute. Rojas took funds from the partnership which was more
than his share. Maglana notified Rojas that he had dissolved the partnership. Rojas filed an action
against Magallana. The CFI ruled that the partnership of the two after Pahamotang left was one de
facto and at will. The SC said that it was not, considering that the first partnership was never
dissolved. With regard to the issue of unilateral dissolution, the SC held that Maglana had the power
to do so.
DOCTRINE: 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.
FACTS: Maglana and Rojas executed their Articles of Co-partnership called Eastcoast Development
Enterpises (EDE) which had an indefinite term of existence and was registered with the SEC and had a
Timber License. One of the EDEs purposes was to apply or secure timber and/or private forest lands
and to operate, develop and promote such forests rights and concessions. Maglana shall manage the
business affairs while Rojas shall be the logging superintendent. All profits and losses shall be divided
share and share alike between them.

Later on, the two availed the services of Agustin Pahamotang as industrial partner and executed
another articles of co-partnership with the latter. The purpose of this second partnership was to hold
and secure renewal of timber license and the term of which was fixed to 30 years.
Still later on, the three executed a conditional sale of interest in the partnership wherein Maglana and
Rojas shall purchase the interest, share and participation in the partnership of Pahamotang. It was also
agreed that after payment of such including amount of loan secured by Pahamotang in favor of the
ipartnership, the two shall become owners of all equipment contributed by Pahamotang. After this, the
two continued the partnership without any written agreement or reconstitution of their articles of
partnership.
Subsequently, Rojas entered into a management contract with CMS Estate Inc. Maglana wrote him
regarding his contribution to the capital investments as well as his duties as logging superintendent.
Rojas replied that he will not be able to comply with both. Maglana then told Rojas that the latters
share will just be 20% of the net profits. Such was the sharing from 1957 to 1959 without complaint or
dispute. Rojas took funds from the partnership more than his contribution. Maglana notified Rojas that
he dissolved the partnership. Rojas filed an action against Maglana for the recovery of properties and
accounting of the partnership and damages.
CFI RULING:
1. The partnership of Maglana and Rojas after Pahamotang retired is one of de facto and at will;
the sharing of profits and losses is on the basis of actual contributions;
2. there is no evidence these properties were acquired by the partnership funds thus it should not
belong to it;
3. neither is entitled to damages; the letter of Maglana in effect dissolved the partnership;
4. sale of forest concession is valid and binding and should be considered as Maglanas
contribution;
5. Rojas must pay or turn over to the partnership the profits he received from CMS and pay his
personal account to the partnership;
6. Maglana must be paid 85k which he shouldve received but was not paid to him and must be
considered as his contribution
ACTION AND PRAYER: N/A
ISSUE:
1. WON the partnership carried on after the second partnership was a de facto partnership and at
will.
2. WON Magalana may unilaterally dissolve the partnership.
HELD:
1. No.
2. Yes.
RATIO:
1. There was no intention to dissolve the first partnership upon the constitution of the second as
everything else was the same except for the fact that they took in an industrial partner: they
pursued the same purposes, the capital contributions call for the same amounts, all
subsequent renewals of Timber License were secured in favor of the first partnership, all
businesses were carried out under the registered articles. To all intents and purposes therefore,
the First Articles of Partnership were only amended, in the form of Supplementary Articles of
Co-Partnership.
On the other hand, there is no dispute that the second partnership was dissolved by common
consent. Said dissolution did not affect the first partnership which continued to exist.
Significantly, Maglana and Rojas agreed to purchase the interest, share and participation in the
second partnership of Pahamotang and that thereafter, the two (Maglana and Rojas) became
the owners of equipment contributed by Pahamotang. Maglana even reminded Rojas of his
obligation to contribute either in cash or in equipment, to the capital investment of the
partnership as well as his obligation to perform his duties as logging superintendent. This
reminder cannot refer to any other but to the provisions of the duly registered Articles of Co-

Partnership.
2.

As there are only two parties when Maglana notified Rojas that he dissolved the partnership, it
is in effect a notice of withdrawal.
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.
But an accounting must first be made and which in fact was ordered by the trial court and
accomplished by the commissioners appointed for the purpose.
According to the Commissioners report, Rojas is not entitled to any profits as he failed to give
the amount he had undertaken to contribute thus, had become a debtor of the partnership.
Maglana cannot be liable for damages as Rojas abandoned the partnership thru his acts and
also took funds in an amount more than his contribution

DISPOSITIVE: PREMISES CONSIDERED, the assailed decision of the Court of First Instance of Davao,
Branch III, is hereby MODIFIED in the sense that the duly registered partnership of Eastcoast
Development Enterprises continued to exist until liquidated and that the sharing basis of the partners
should be on share and share alike as provided for in its Articles of Partnership, in accordance with the
computation of the commissioners. We also hereby AFFIRM the decision of the trial court in all other
respects.