PARTNERSHIP OUTLINE PT.
2
Obligations of the Partners among Themselves
Articles 1784 to 1809
1. MAURO LOZANA VS SERAFIN DEPAKAKIBO
Lozana entered into a partnership with Depakakibo wherein they
established a capital of P30,000, Lozana furnishing 60% and
Depakakibo, 40%, for the purpose of maintaining, operating and
distributing electric light and power in the Municipality of Dumangas,
under a franchise issued to Mrs. Piadosa Buenaflor. However, the
franchise or certificate of public necessity and convenience in favor of
Buenaflor was cancelled and revoked by the Public Service
Commission on May 15, 1955. But the decision of the Public Service
Commission was appealed to SC and a temporary certificate of public
convenience was issued in the name of Olimpia D. Decolongon.
Evidently because of the cancellation of the franchise in the name of
Buenaflor, Lozana sold a generator to Decolongon in 1955.
Depakakibo, on the other hand, sold one Crossly Diesel Engine, to the
spouses Felix Jimenea and Felina Harder in 1956.
Lozana brought an action against Serafin, alleging that he is the
owner of the Generator Buda (Diesel), valued at P8,000 and 70
wooden posts with the wires connecting the generator to the
different houses supplied by electric current in the municipality, and
that he is entitled to the possession thereof, but that Serafin has
wrongfully detained them as a consequence of which Lozana suffered
damages. He prayed that said properties be delivered back to him.
Judge Pelayo issued an order in said case authorizing the sheriff to
take possession of the generator and 70 wooden posts, upon
plaintiff's filing of a bond in favor of the defendant (for subsequent
delivery to the plaintiff).
Serafin denied that the generator and the equipment mentioned in
the complaint belong to the plaintiff and alleging that the same had
been contributed by the plaintiff to the partnership entered into
between them in the same manner that defendant had contributed
equipments also, and therefore that he is not unlawfully detaining
them. Defendant alleged that under the partnership agreement the
parties were to contribute equipments, plaintiff contributing the
generator and the defendant, the wires for the purpose of installing
the main and delivery lines; that the plaintiff sold his contribution to
the partnership, in violation of the terms of their agreement.
The judge entered a decision declaring plaintiff owner of the
equipment and entitled to the possession thereof, with costs against
defendant. It is against this judgment that the defendant has
appealed.
Issue: W/N Lozana violated the partnership agreement.
Held: Yes.
Ratio: As it appears that the plaintiff and the defendant entered into
the contract of partnership, plaintiff contributing the amount of
P18,000, and as it is not stated therein that there has been a
liquidation of the partnership assets at the time plaintiff sold the
Buda Diesel Engine on October 15, 1955, and since the court below
had found that the plaintiff had actually contributed one engine and
70 posts to the partnership, it necessarily follows that the Buda diesel
engine contributed by the plaintiff had become the property of the
partnership. As properties of the partnership, the same could not be
disposed of by the party contributing the same without the consent
or approval of the partnership or of the other partner.
The lower court declared that the contract of partnership was null
and void, because by the contract of partnership, the parties thereto
have become dummies of the owner of the franchise. The Anti-
Dummy law has not been violated as parties plaintiff and defendant
are not aliens but Filipinos.
Upon examining the contract of partnership, especially the provision
thereon wherein the parties agreed to maintain, operate and
distribute electric light and power under the franchise belonging to
Mrs. Buenaflor, we do not find the agreement to be illegal, or contrary
to law and public policy such as to make the contract of partnership,
null and void ab initio. The agreement could have been submitted to
the Public Service Commission if the rules of the latter require them
to be so presented. But the fact of furnishing the current to the holder
of the franchise alone, without the previous approval of the Public
Service Commission, does not per se make the contract of
partnership null and void from the beginning and render the
partnership entered into by the parties for the purpose also void and
non-existent. Under the circumstances, therefore, the court erred in
declaring that the contract was illegal from the beginning and that
parties to the partnership are not bound therefor, such that the
contribution of the plaintiff to the partnership did not pass to it as its
property. It also follows that the claim of the defendant in his
counterclaim that the partnership be dissolved and its assets
liquidated is the proper remedy, not for each contributing partner to
claim back what he had contributed.
2. MAXIMILIANO SANCHO VS SEVERIANO LIZARRAGA
The plaintiff brought an action for the rescission of a partnership
contract between himself and the defendant, the reimbursement by
the latter of his 50,000 peso investment therein, with interest at 12
per cent per annum from October 15, 1920.
The defendant denies generally and specifically all the allegations of
the complaint and asks for the dissolution of the partnership, and the
payment to him as its manager and administrator of P500 monthly
from October 15, 1920, until the final dissolution, with interest, one-
half of said amount to be charged to the plaintiff.
The CFI of Manila held that the defendant had not contributed all the
capital he had bound himself to invest, and that the plaintiff had
demanded that the defendant liquidate the partnership, declared it
dissolved on account of the expiration of the period for which it was
constituted, and ordered the defendant, as managing partner, to
proceed without delay to liquidate it, submitting to the court the
result of the liquidation.
Issue: W/N Sancho entitled to rescission of the partnership contract
and to the return of his investment.
Held: No
Ratio: Counsel for the appellee, says that the appeal is premature.
The point is based on the contention that inasmuch as the liquidation
ordered by the trial court, and the consequent accounts, have not
been made and submitted, the case cannot be deemed terminated in
said court and its ruling is not yet appealable.
This contention is well founded. Until the accounts have been
rendered as ordered by the trial court, and until they have been
either approved or disapproved, the litigation involved in this action
cannot be considered as completely decided.
But even going into the merits of the case, the affirmation of the
judgment appealed from is inevitable. Articles 1681 and 1682 have
been properly applied. Owing to the defendant's failure to pay to the
partnership the whole amount which he bound himself to pay, he
became indebted to it for the remainder, with interest and any
damages occasioned thereby, but the plaintiff did not thereby acquire
the right to demand rescission of the partnership contract according
to Article 1124 of the Code. This article cannot be applied to the case
in question, because it refers to the resolution of obligations in
general, whereas article 1681 and 1682 specifically refer to the
contract of partnership in particular. And it is a well-known principle
that special provisions prevail over general provisions.
3. WILLIAM UY vs. BARTOLOME PUZON, substituted by FRANCO
PUZON
FACTS: Bartolome Puzon had a contract with the Republic of the
Philippines for the construction of the Ganyangan Bato Section of
the Pagadian Zamboanga City Road, province of Zamboanga del
Sur and of five (5) bridges in the Malangas-Ganyangan Road.
Finding difficulty in accomplishing both projects, Bartolome Puzon
sought the financial assistance of the plaintiff, William Uy. It
resulted in the formation of the "U.P. Construction Company"
which was subsequently engaged as subcontractor of the
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 PARTNERSHIP OUTLINE PT. 2
construction projects.
The partners agreed that the capital of the partnership would be
P100,000.00 of which each partner shall contribute the amount of
P50,000.00 in cash. But, as heretofore stated, Puzon was short of
cash and he promised to contribute his share in the partnership
capital as soon as his application for a loan with the Philippine
National Bank in the amount of P150,000.00 shall have been
approved. However, before his loan application could be acted
upon, he had to clear his collaterals of its incumbrances first. For
this purpose, on October 24, 1956, William Uy gave Bartolome
Puzon the amount of P10,000.00 as advance contribution of his
share in the partnership to be organized between them under the
firm name U.P. CONSTRUCTION COMPANY which amount
mentioned above will be used by Puzon to pay his obligations with
the Philippine National Bank to effect the release of his mortgages
with the said Bank. On October 29, 1956, William Uy again gave
Puzon the amount of P30,000.00 as his partial contribution to the
proposed partnership and which the said Puzon was to use in
payment of his obligation to the Rehabilitation Finance
Corporation. Puzon promised William Uy that the amount of
P150,000.00 would be given to the partnership to be applied
thusly: P40,000.00, as reimbursement of the capital contribution of
William Uy which the said Uy had advanced to clear the title of
Puzon's property; P50,000.00, as Puzon's contribution to the
partnership; and the balance of P60,000.00 as Puzon's personal
loan to the partnership.
As time passed and the financial demands of the projects
increased, William Uy, who supervised the said projects, found
difficulty in obtaining the necessary funds with which to pursue the
construction projects. William Uy correspondingly called on
Bartolome Puzon to comply with his obligations under the terms of
their partnership agreement and to place, at lest, his capital
contribution at the disposal of the partnership. Despite several
promises, Puzon, however, failed to do so. Realizing that his verbal
demands were to no avail, William Uy consequently wrote
Bartolome Puzon formal letters of demand, to which Puzon replied
that he is unable to put in additional capital to continue with the
projects.
Failing to reach an agreement with William Uy, Bartolome Puzon,
as prime contractor of the construction projects, wrote the
subcontractor, U.P. Construction Company, on November 20,
1957, advising the partnership, of which he is also a partner, that
unless they presented an immediate solution and capacity to
prosecute the work effectively, he would be constrained to
consider the sub-contract terminated and, thereafter, to assume
all responsibilities in the construction of the projects in accordance
with his original contract with the Bureau of Public Highways. 20
On November 27, 1957, Bartolome Puzon again wrote the
U.P.Construction Company finally terminating their subcontract
agreement as of December 1, 1957.
ISSUE: W/N Puzon is liable to the partnership thus must
reimburse Uy. YES
HELD: The findings of the trial court that the appellant failed to
contribute his share in the capital of the partnership is clear
incontrovertible. The record shows that after the appellant's loan
the amount of P150,000.00 was approved by the Philippin National
Bank in November, 1956, he gave the amount P60,000.00 to the
appellee who was then managing the construction projects. Of this
amount, P40,000.00 was to be applied a reimbursement of the
appellee's contribution to the partnership which was used to clear
the title to the appellant's property, and th balance of P20,000.00,
as Puzon's contribution to the partnership. Thereafter, the
appellant failed to make any further contributions the partnership
funds as shown in his letters to the appellee wherein he confessed
his inability to put in additional capital to continue with the
projects.
Parenthetically, the claim of the appellant that the appellee is
equally guilty of not contributing his share in the partnership
capital inasmuch as the amount of P40,000.00, allegedly given to
him in October, 1956 as partial contribution of the appellee is
merely a personal loan of the appellant which he had paid to the
appellee, is plainly untenable. The terms of the receipts signed by
the appellant are clear and unequivocal that the sums of money
given by the appellee are appellee's partial contributions to the
partnership capital.
Thus, in the receipt for P10,000.00 dated October 24, 1956, 25
the appellant stated:
Received from Mr. William Uy the sum of TEN THOUSAND PESOS
(P10,000.00) in Check No. SC 423285 Equitable Banking
Corporation, dated October 24, 1956, as advance contribution of
the share of said William Uy in the partnership to be organized
between us under the firm name U.P. CONSTRUCTION COMPANY
which amount mentioned above will be used by the undersigned
to pay his obligations with the Philippine National Bank to effect
the release of his mortgages with the said bank. (Emphasis
supplied)
In the receipt for the amount of P30,000.00 dated October 29,
1956, 26 the appellant also said:
Received from William Uy the sum of THIRTY THOUSAND PESOS
(P30,000.00) in Check No. SC423287, of the Equitable Banking
Corporation, as partial contribution of the share of the said William
Uy to the U.P. CONSTRUCTION COMPANY for which the
undersigned will use the said amount in payment of his obligation
to the Rehabilitation Finance Corporation. (Emphasis supplied)
The findings of the trial court that the appellant misapplied
partnership funds is, likewise, sustained by competent evidence. It is
of record that the appellant assigned to the Philippine National
Bank all the payments to be received on account of the contracts
with the Bureau of Public Highways for the construction of the
aforementioned projects to guarantee the repayment of the bank.
By virtue of the said appellant's personal loan with the said bank
assignment, the Bureau of Public Highways paid the money due on
the partial accomplishments on the construction projects in
question to the Philippine National Bank who, in turn, applied
portions of it in payment of the appellant's loan.
That the assignment to the Philippine National Bank prejudicial to
the partnership cannot be denied. The record show that during the
period from March, 1957 to September, 1959, the appellant
Bartolome Puzon received from the Bureau of Public highways, in
payment of the work accomplished on the construction projects,
the amount of P1,047,181.01, which amount rightfully and legally
belongs to the partnership by virtue of the subcontract
agreements between the appellant and the U.P. Construction
Company. In view of the assignemt made by Puzon to the
Philippine National Bank, the latter withheld and applied the
amount of P332,539,60 in payment of the appellant's personal
loan with the said bank. The balance was deposited in Puzon's
current account and only the amount of P27,820.80 was deposited
in the current account of the partnership. For sure, if the appellant
gave to the partnership all that were earnd and due it under the
subcontract agreements, the money would have been used as a
safe reserve for the discharge of all obligations of the firm and the
partnership would have been able to successfully and profitably
prosecute the projects it subcontracted.
When did the appellant make the reimbursement claimed by him?
For the same period, the appellant actually disbursed for the
partnership, in connection with the construction projects, the
amount of P952,839.77. 31 Since the appellant received from the
Bureau of Public Highways the sum of P1,047,181.01, the
appellant has a deficit balance of P94,342.24. The appellant,
therefore, did not make complete restitution.
The findings of the trial court that the appellee has been ousted
from the management of the partnership is also based upon
persuasive evidence. The appellee testified that after he had
demanded from the appellant payment of the latter's contribution
to the partnership capital, the said appellant did not allow him to
hold office in the U.P. Construction Company and his authority to
deal with the Bureau of Public Highways was revoked by the
appellant.
Since the defendant appellant was at fault, the trial court properly
ordered him to reimburse the plaintiff-appellee whatever amount
latter had invested in or spent for the partnership on account of
construction projects.
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4. THE UNITED STATES vs. EUSEBIO CLARIN
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade
in mangoes and obtained P203 from the business, but did not comply
with the terms of the contract by delivering to Larin his half of the
profits; neither did they render him any account of the capital.
Larin charged them with the crime of estafa, but the provincial fiscal
filed an information only against Eusebio Clarin in which he accused
him of appropriating to himself not only the P172 but also the share
of the profits that belonged to Larin, amounting to P15.50.
When two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of
dividing the profits among themselves, a contract is formed which is
called partnership. (Art. 1665, Civil Code.)
When Larin put the P172 into the partnership which he formed with
Tarug, Clarin, and Guzman, he invested his capital in the risks or
benefits of the business of the purchase and sale of mangoes, and,
even though he had reserved the capital and conveyed only the
usufruct of his money, it would not devolve upon of his three
partners to return his capital to him, but upon the partnership of
which he himself formed part, or if it were to be done by one of the
three specifically, it would be Tarug, who, according to the evidence,
was the person who received the money directly from Larin.
The P172 having been received by the partnership, the business
commenced and profits accrued, the action that lies with the partner
who furnished the capital for the recovery of his money is not a
criminal action for estafa, but a civil one arising from the partnership
contract for a liquidation of the partnership and a levy on its assets if
there should be any.
For which it would be sufficient to argue that the partnership had
received the money under obligation to return it.
We therefore freely acquit Eusebio Clarin, with the costs de oficio.
The complaint for estafa is dismissed without prejudice to the
institution of a civil action.
5. PEOPLE VS. CAMPOS, [C.A.] 54 O.G. 681
FACTS: Leoncio Campos and Bonifacio Guzman entered into a
contract of partnership.
The contract states that Campos owns a bulldozer and will work the
fields in Barrio Cambabalo at the rate of Php 55.00 per hectare. The
two of them will share the expenses; Campos will pay for the
bulldozer while Guzman will pay for the oil (not more than 15
drums), they will share the cost of the seeds. Guzman leased from
Juan Alonzo for 75 cavans of palay.
February 25, 1955 Campos told Guzman that the harvested palay
was ready for threshing. Guzman sent his nephew, Manuel Mathias,
to observe the threshing with specific instructions to segregate the
their of the palay, the share of the tenants and the 75 cavans of palay
for rent woth Php 750.00.
Guzmans share is to be deposited at the warehouse
Payment for rent is to be delivered to Campos for delivery
to Alonzo.
o Mathias and Campos fetched Alonzos daughter,
Concepcion, and advised her to pick it up. She
cant make it today and promised to come back
the next day. But, when she came for the palay,
it was already missing and Campos begged her
not to tell Guzman.
o She told her father, who asked Guzman about it.
Guzman wrote Campos a letter, to which he
never replied to.
Guzman filed a complaint for estafa against Campos for
misappropriating and converting the goods received by him in trust
or commission or for administration.
Campos claims that overall, they havent liquidated their partnership
yet because they still have unsettled accounts.
Before the partnership formed, he already worked the land
and allegedly spent Php 2,000.00 with half being
shouldered by Guzman
o Guzman hired him to construct a dike for Php
1.20 per cubic meter for this particular land.
They had a similar partnership for the agricultural year of
1954-1955, leasing the land of Avelino Odollo
For the 2 previous jobs, Guzman made partial settlements
but still has an unpaid balance of Php 1,000.00
Trial Court found him guilty of Estafa, sentenced to imprisonment (1
month & 1 day to 1 year & 1 day) and to indemnify Guzman Php
750.00
ISSUE/HELD/RATIO
W/N there was material variance between the information and
the evidence? No.
Defense: Information states that the palay should have been
delivered to Guzman when Campos was under obligation to deliver it
to Alonzo. Campos should not be convicted for estafa with Guzman as
the offended party, it should have been Alonzo.
Court: If the palay was not delivered to Alonzo, Guzman will have to
pay him Php 750.00. Guzman is the offended party because his
indebtedness for the rent would still subsist of Campos did not
deliver the palay to Alonzo.
W/N Campos is guilty of estafa? Yes.
Defense: The partnership had not yet been liquidated.
No accounting had been made between them.
Guzman still havent fully paid for his share of under the
partnership
The expenses incurred still havent been deducted from
the 120 cavanes of harvested palay.
Mathias: Segregation of the harvests had already been made, thus
liquidating the partnership
Concepcion: Affirmed that Mathias and Campos went to her and
informed her that she can pick-up the palay for the rentals.
Court:
1. There had already been liquidation; 75 cavanes of palay
couldnt have been segregated without some sort
accounting.
2. Asking Concepcion not to report to Guzman reveals a
guilty conscience.
3. Even if the partnership had not yet been liquidated, the 75
cavanes of palay no longer belonged to the partnership. He
had a duty of deliver it to Alonzo in payment of their
rentals.
a. A partner is guilty of estafa if he fraudulently
appropriates partnership property delivered to
him with specific instructions to apply it to the
used of the partnership. (People v. Dela Cruz)
b. Campos converted and misappropriated the 75
cavanes of palay to his own personal use and
benefit, instead of performing his duty.
RULING: AFFIRMED, guilty of estafa beyond reasonable doubt.
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 PARTNERSHIP OUTLINE PT. 2
6. PEDRO MARTINEZ vs. ONG PONG CO & ONG LAY, ONG PONG CO With regard to the possible profits, the findings of the court below
are based on the statements of the defendant Ong Pong Co, to the
effect that "there were some profits, but not large ones." This court,
On the 12th of December, 1900, the plaintiff herein delivered P1,500
however, does not find that the amount thereof has been proven, nor
to the defendants who, in a private document, acknowledged that
deem it possible to estimate them to be a certain sum, and for a given
they had received the same with the agreement, as stated by them,
period of time; hence, it cannot admit the estimate, made in the
"that we are to invest the amount in a store, the profits or losses of
judgment, of 12 per cent per annum for the period of six months.
which we are to divide with the former, in equal shares."

Inasmuch as in this case nothing appears other than the failure to

The plaintiff filed a complaint on April 25, 1907, in order to compel
fulfill an obligation on the part of a partner who acted as agent in
the defendants to render him an accounting of the partnership as
receiving money for a given purpose, for which he has rendered no
agreed to, or else to refund him the P1,500 that he had given them for
accounting, such agent is responsible only for the losses which, by a
the said purpose. Ong Pong Co alone appeared to answer the
violation of the provisions of the law, he incurred. This being an
complaint; he admitted the fact of the agreement and the delivery to
obligation to pay in cash, there are no other losses than the legal
him and to Ong Lay of the P1,500 for the purpose aforesaid, but he
interest, which interest is not due except from the time of the judicial
alleged that Ong Lay, who was then deceased, was the one who had
demand, or, in the present case, from the filing of the complaint.
managed the business, and that nothing had resulted therefrom save
(Arts. 1108 and 1100, Civil Code.) We do not consider that Article
the loss of the capital of P1,500, to which loss the plaintiff agreed.
1688 is applicable in this case, in so far as it provides "that the
partnership is liable to every partner for the amounts he may have
The judge of the Court of First Instance of the city of Manila who tried disbursed on account of the same and for the proper interest," for the
the case ordered Ong Pong Co to return to the plaintiff one-half of the reason that no other money than that contributed as is involved.
said capital of P1,500 which, together with Ong Lay, he had received
from the plaintiff, to wit, P750, plus P90 as one-half of the profits,
As in the partnership there were two administrators or agents liable
calculated at the rate of 12 per cent per annum for the six months
for the above-named amount, article 1138 of the Civil Code has been
that the store was supposed to have been open, both sums in
invoked; this latter deals with debts of a partnership where the
Philippine currency, making a total of P840, with legal interest
obligation is not a joint one, as is likewise provided by Article 1723 of
thereon at the rate of 6 per cent per annum, from the 12th of June,
said code with respect to the liability of two or more agents with
1901, when the business terminated and on which date he ought to
respect to the return of the money that they received from their
have returned the said amount to the plaintiff, until the full payment
principal. Therefore, the other errors assigned have not been
thereof with costs.
committed.

From this judgment Ong Pong Co appealed to this court, and assigned
In view of the foregoing judgment appealed from is hereby affirmed,
the following errors:
provided, however, that the defendant Ong Pong Co shall only pay the
plaintiff the sum of P750 with the legal interest thereon at the rate of
1. For not having taken into consideration the fact that the 6 per cent per annum from the time of the filing of the complaint, and
reason for the closing of the store was the ejectment from the the costs, without special ruling as to the costs of this instance. So
premises occupied by it. ordered.
2. For not having considered the fact that there were losses.
3. For holding that there should have been profits.
4. For having applied article 1138 of the Civil Code.
5. and 6. For holding that the capital ought to have yielded
profits, and that the latter should be calculated 12 per cent per
annum; and
7. The findings of the ejectment.

As to the first assignment of error, the fact that the store was closed
by virtue of ejectment proceedings is of no importance for the effects
of the suit. The whole action is based upon the fact that the
defendants received certain capital from the plaintiff for the purpose
of organizing a company; they, according to the agreement, were to
handle the said money and invest it in a store which was the object of
the association; they, in the absence of a special agreement vesting in
one sole person the management of the business, were the actual
administrators thereof; as such administrators they were the agent of
the company and incurred the liabilities peculiar to every agent,
among which is that of rendering account to the principal of their
transactions, and paying him everything they may have received by
virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of
them has rendered such account nor proven the losses referred to by
Ong Pong Co; they are therefore obliged to refund the money that
they received for the purpose of establishing the said store the
object of the association. This was the principal pronouncement of
the judgment.

With regard to the second and third assignments of error, this court,
like the court below, finds no evidence that the entire capital or any
part thereof was lost. It is no evidence of such loss to aver, without
proof, that the effects of the store were ejected. Even though this was
proven, it could not be inferred therefrom that the ejectment was due
to the fact that no rents were paid, and that the rent was not paid on
account of the loss of the capital belonging to the enterprise.

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 PARTNERSHIP OUTLINE PT. 2
7. RAMNANI v. CA 1971 Constitutional Convention), with Moran actually supervising
the work; that Pecson would receive a commission of P1,000 a month
starting on April 15, 1971 up to December 15, 1971; that on
FACTS: Ishwar, Choithram and Navalrai, all surnamed Jethmal
December 15, 1971, a liquidation of the accounts in the distribution
Ramnani, are brothers of the full blood. Ishwar and his spouse Sonya
and printing of the 95,000 posters would be made, that Pecson gave
had their main business based in New York. Realizing the difficulty of
Moran P10,000 for which the latter issued a receipt; that only a few
managing their investments in the Philippines they executed a
posters were printed; that on or about May 28, 1971, Moran executed
general power of attorney on January 24, 1966 appointing Navalrai
in favor of Pecson a promissory note in the amount of P20,000
and Choithram as attorneys-in-fact, empowering them to manage and
payable in two equal installments (P10,000 payable on or before June
conduct their business concern in the Philippines
15, 1971 and P10,000 payable on or before June 30, 1971), the whole
sum becoming due upon default in the payment of the first
On February 1, 1966 and on May 16, 1966, Choithram entered into installment on the date due, complete with the costs of collection.
two agreements for the purchase of two parcels of land located in
Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership.
Pecson filed an action for the recovery of a sum of money (1) on the
A building was constructed thereon by Choithram in 1966. Three
alleged partnership agreement, the return of his contribution of
other buildings were built thereon by Choithram through a loan of
P10,000.00, payment of his share in the profits that the partnership
P100,000.00 obtained from the Merchants Bank as well as the
would have earned, and, payment of unpaid commission; (2) on the
income derived from the first building.
alleged promissory note, payment of the sum of P20,000.00; and, (3)
moral and exemplary damages and attorney's fees.
Sometime in 1970 Ishwar asked Choithram to account for the income
and expenses relative to these properties during the period 1967 to
After the trial, the CFI held that Moran return to plaintiff Pecson the
1970. Choithram failed and refused to render such accounting.
sum of P17,000.00, with interest at the legal rate.
Thereafter, Ishwar revoked the general power of attorney. Choithram
and Ortigas were duly notified of such revocation on April 1, 1971
and May 24, 1971, respectively. Said notice was also registered with From this decision, both parties appealed to the respondent Court of
the Securities and Exchange Commission on March 29, 1971 and was Appeals. The latter likewise rendered a decision against the
published in the April 2, 1971 issue of The Manila Times for the petitioner ordering him to pay Pecson:
information of the general public.
(a) Forty-seven thousand five hundred (P47,500) (the amount
Nevertheless, Choithram, transferred all rights and interests of that could have accrued to Pecson under their agreement);
Ishwar and Sonya in favor of his daughter-in-law, Nirmla Ramnani, (b) Eight thousand (P8,000), (the commission for eight months);
on February 19, 1973. On October 6, 1982, Ishwar and Sonya filed a (c) Seven thousand (P7,000) (as a return of Pecson's investment
complaint against Choitram and/or spouses Nirmla and Moti and for the Veteran's Project);
Ortigas for reconveyance of said properties or payment of its value (d) Legal interest
and damages.
Issue: W/N Pecson is entitled to the amounts stated above.
ISSUE: Whether Ishram can recover the entire properties subject in
the ligitation
Held:

HELD: No, Ishram cannot recover the entire properties subject.

The Supreme Court held that despite the fact that Choithram, et al.,
have committed acts which demonstrate their bad faith and scheme
to defraud spouses Ishwar and Sonya of their rightful share in the
properties in litigation, the Court cannot ignore the fact that
Choithram must have been motivated by a strong conviction that as
the industrial partner in the acquisition of said assets he has as much
claim to said properties as Ishwar, the capitalist partner in the joint
venture.
Ratio: The first question raised in this petition refers to the award of
P47,500.00 as the private respondent's share in the unrealized
profits of the partnership. The petitioner contends that the award is
highly speculative. The petitioner maintains that the respondent
court did not take into account the great risks involved in the
business undertaking.
We agree with the petitioner that the award of speculative damages
has no basis in fact and law.

There is no dispute over the nature of the agreement between the

Choithram in turn decided to invest in the real estate business. He
bought the two (2) parcels of land in question from Ortigas as
attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he
paid in installments and used the balance of the capital entrusted to
him, plus a loan, to build two buildings. Although the buildings were
burned later, Choithram was able to build two other buildings on the
property. He rented them out and collected the rentals. Through the
industry and genius of Choithram, Ishwar's property was developed
and improved into what it is now.
Justice and equity dictate that the two share equally the fruit of their
joint investment and efforts. Perhaps this Solomonic solution may
pave the way towards their reconciliation. Both would stand to gain.
No one would end up the loser. After all, blood is thicker than water.
8. ISABELO MORAN, JR. VS THE HON. COURT OF APPEALS and
MARIANO E. PECSON
Facts : On February 22, 1971 Pecson and Moran entered into an
agreement whereby both would contribute P15,000 each for the
purpose of printing 95,000 posters (featuring the delegates to the
petitioner and the private respondent. It is a contract of partnership.
The latter in his complaint alleged that he was induced by the
petitioner to enter into a partnership with him. The petitioner on the
other hand admitted in his answer the existence of the partnership.
The rule is, when a partner who has undertaken to contribute a sum
of money fails to do so, he becomes a debtor of the partnership for
whatever he may have promised to contribute (Art. 1786, Civil Code)
and for interests and damages from the time he should have
complied with his obligation (Art. 1788, Civil Code). Thus in Uy v.
Puzon (79 SCRA 598), which interpreted Art. 2200 of the Civil Code of
the Philippines, we allowed a total of P200,000.00 compensatory
damages in favor of the appellee because the appellant therein was
remiss in his obligations as a partner and as prime contractor of the
construction projects in question. We awarded compensatory
damages in the Uy case because there was a finding that the
constructing business is a profitable one and that the UP construction
company derived some profits from its contractors. In the instant
case, there is no evidence whatsoever that the partnership between
the petitioner and the private respondent would have been a
profitable venture. In fact, it was a failure doomed from the start.

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 PARTNERSHIP OUTLINE PT. 2
There is therefore no basis for the award of speculative damages in evidence indicates that the P20,000 was assigned by Moran to
favor of the private respondent. cover the following:

Furthermore, in the Uy case, only Puzon failed to give his full
contribution while Uy contributed much more than what was
expected of him. In this case, however, there was mutual breach.
Private respondent failed to give his entire contribution in the
amount of P15,000.00. He contributed only P10,000.00. The
petitioner likewise failed to give any of the amount expected of him.
He further failed to comply with the agreement to print 95,000 copies
of the posters. Instead, he printed only 2,000 copies.
(a) P 7,000 the amount of the PNB check given by Pecson to
Moran representing Pecson's investment in Moran's other
project (the publication and printing of the 'Voice of the
Veterans');
(b) P10,000 to cover the return of Pecson's contribution in
the project of the Posters;

(c) P3,000 representing Pecson's commission for three

Article 1797 of the Civil Code provides: The losses and profits shall
months (April, May, June, 1971).
be distributed in conformity with the agreement. If only the share of
each partner in the profits has been agreed upon, the share of each in
the losses shall be in the same proportion. Of said P20,000 Moran has to pay P7,000 (as a return of Pecson's
investment for the Veterans' project, for this project never left the
ground) ...
Being a contract of partnership, each partner must share in the
profits and losses of the venture. That is the essence of a partnership.
And even with an assurance made by one of the partners that they In this case, there is misapprehension of facts. The evidence of the
would earn a huge amount of profits, in the absence of fraud, the private respondent himself shows that his investment in the "Voice of
other partner cannot claim a right to recover the highly speculative Veterans" project amounted to only P3,000.00. The remaining
profits. It is a rare business venture guaranteed to give 100% profits. P4,000.00 was the amount of profit that the private respondent
In this case, on an investment of P15,000.00, the respondent was expected to receive.
supposed to earn a guaranteed P1,000.00 a month for eight months
and around P142,500.00 on 95,000 posters costing P2.00 each but
The records show the following exhibits-
2,000 of which were sold at P5.00 each.

E Xerox copy of PNB Manager's Check No. 234265 dated March

It does not follow however that the private respondent is not entitled
22, 1971 in favor of defendant. Defendant admitted the
to recover any amount from the petitioner. The records show that the
authenticity of this check and of his receipt of the proceeds
private respondent gave P10,000.00 to the petitioner. The latter used
thereof. This exhibit is being offered for the purpose of showing
this amount for the printing of 2,000 posters at a cost of P2.00 per
plaintiff's capital investment in the printing of the "Voice of the
poster or a total printing cost of P4,000.00. The records further show
Veterans" for which he was promised a fixed profit of P8,000. This
that the 2,000 copies were sold at P5.00 each. The gross income
investment of P6,000.00 and the promised profit of P8,000 are
therefore was P10,000.00. Deducting the printing costs of P4,000.00
covered by defendant's promissory note for P14,000 dated March
from the gross income of P10,000.00 and with no evidence on the
31, 1971 marked by defendant as Exhibit 2 and by plaintiff as
cost of distribution, the net profits amount to only P6,000.00. This net
Exhibit P. Later, defendant returned P3,000.00 of the P6,000.00
profit of P6,000.00 should be divided between the petitioner and the
investment thereby proportionately reducing the promised profit
private respondent. And since only P4,000.00 was undesirable by the
to P4,000. With the balance of P3,000 (capital) and P4,000
petitioner in printing the 2,000 copies, the remaining P6,000.00
(promised profit), defendant signed and executed the promissory
should therefore be returned to the private respondent.
note for P7,000 marked Exhibit 3 for the defendant and Exhibit M
for plaintiff. Of this P7,000, defendant paid P4,000 representing
Relative to the second alleged error, the petitioner submits that the full return of the capital investment and P1,000 partial payment of
award of P8,000.00 as Pecson's supposed commission has no the promised profit. The P3,000 balance of the promised profit
justifiable basis in law. was made part consideration of the P20,000 promissory note. It is,
therefore, being presented to show the consideration for the
P20,000 promissory note.
Again, we agree with the petitioner.

F Xerox copy of PNB Manager's check dated May 29, 1971 for
The partnership agreement stipulated that the petitioner would give
P7,000 in favor of defendant. The authenticity of the check and his
the private respondent a monthly commission of Pl,000.00 from April
receipt of the proceeds thereof were admitted by the defendant.
15, 1971 to December 15, 1971 for a total of eight (8) monthly
This P 7,000 is part consideration, and in cash, of the P20,000
commissions. The agreement does not state the basis of the
promissory note and it is being presented to show the
commission. The payment of the commission could only have been
consideration for the P20,000 note and the existence and validity
predicated on relatively extravagant profits. The parties could not
of the obligation.
have intended the giving of a commission inspite of loss or failure of
the venture. Since the venture was a failure, the private respondent is
not entitled to the P8,000.00 commission. L-Book entitled "Voice of the Veterans" which is being offered for
the purpose of showing the subject matter of the other partnership
agreement and in which plaintiff invested the P6,000 which,
Anent the third assigned error, the petitioner maintains that the
together with the promised profit of P8,000 made up for the
respondent Court of Appeals erred in holding him liable to the
consideration of the P14,000 promissory note. As explained in
private respondent in the sum of P7,000.00 as a supposed return of
connection with Exhibit E. the P3,000 balance of the promised
investment in a magazine venture.
profit was later made part consideration of the P20,000
promissory note.
In awarding P7,000.00 to the private respondent as his supposed
return of investment in the "Voice of the Veterans" magazine venture,
M-Promissory note for P7,000 dated March 30, 1971. This is also
the respondent court ruled that:
defendant's Exhibit E. This document is being offered for the
purpose of further showing the transaction as explained in
... Moran admittedly signed the promissory note of P20,000 in connection with Exhibits E and L.
favor of Pecson. Moran does not question the due execution of said
note. Must Moran therefore pay the amount of P20,000? The
N-Receipt of plaintiff dated March 30, 1971 for the return of his
P3,000 out of his capital investment of P6,000 in the P14,000

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 PARTNERSHIP OUTLINE PT. 2
promissory note. This is also defendant's Exhibit 4. This document
is being offered in support of plaintiff's explanation in connection
with Exhibits E, L, and M to show the transaction mentioned
therein.
P-Promissory note for P14,000.00. This is also defendant's Exhibit
2. It is being offered for the purpose of showing the transaction as
explained in connection with Exhibits E, L, M, and N above.
The respondent court erred when it concluded that the project never
left the ground because the project did take place. Only it failed. It
was the private respondent himself who presented a copy of the book
entitled "Voice of the Veterans" in the lower court. Therefore, it
would be error to state that the project never took place and on this
basis decree the return of the private respondent's investment.
As already mentioned, there are risks in any business venture and the
failure of the undertaking cannot entirely be blamed on the managing
partner alone, especially if the latter exercised his best business
judgment, which seems to be true in this case. In view of the
foregoing, there is no reason to pass upon the fourth and fifth
assignments of errors raised by the petitioner. We likewise find no
valid basis for the grant of the counterclaim.
WHEREFORE, the petition is GRANTED. The decision of the
respondent Court of Appeals (now Intermediate Appellate Court) is
hereby SET ASIDE and a new one is rendered ordering the petitioner
Isabelo Moran, Jr., to pay private respondent Mariano Pecson SIX
THOUSAND (P6,000.00) PESOS representing the amount of the
private respondent's contribution to the partnership but which
remained unused; and THREE THOUSAND (P3,000.00) PESOS
representing one half (1/2) of the net profits gained by the
partnership in the sale of the two thousand (2,000) copies of the
posters, with interests at the legal rate on both amounts from the
date the complaint was filed until full payment is made. SO
ORDERED.
9. NG YA VS. SUGBU COMMERCIAL CO., [C.A.] 50 O.G. 4913
Facts * Ng Ya, a Chinese merchant based in Surigao, Surigao ordered
from Sugbu Commercial (based in Cebu) 1,000 galvanized iron and
aluminium sheets. It was agreed that the goods would be delivered in
a weeks time, or on or before January 5, 1950. The amount of these
goods is P5,400, which appears to have been paid by Ng Ya in full.
* However, the said goods were not delivered on the said date. And as
Ng Ya kept on inquiring from Sugbu Commercial Co. about the status
of the goods, the latter failed to deliver the same but kept promising
that the said goods would be delivered at some future time.
* Sugbu Commercial later found out that Ng Ya is also in need of
cigarettes that she will sell on resale in Surigao. The former then
offered the latter cigarettes. Ng Ya was enticed by the offer and then
entered into another contract of sale with Sugbu.
* She paid the amount of the cigarettes worth P4,000 with the help of
Lana Bakery, with whom she had an understanding of splitting the
profits she hoped to realize from the buy and sell of cigarettes.
* However, after a couple of months, in July, neither the cigarettes nor
the galvanized iron and aluminium sheets reached Ng Ya.
Consequently, Tan Chun Pia of Lana Bakery, from whom she obtained
the P4,000 got angry with her and, for this reason, Ng Ya was forced
to reimburse him of the amount.
* She then kept coming back to Sugbu to demand either the delivery
of the goods she ordered or the payment of P 9,400. Unfortunately,
every time she dropped there, poor Ng Ya was challenged by Shih
Tiong Chu to file a complaint, and she had to seek the help of the
Chinese Chamber of Commerce for the settlement of her claim.
* Ng Ya finally filed a complaint with the CFI Cebu.
* Sugbu Commercial then filed a 3rd-party complaint against Pow Sun
Gee, alleging that the latter received the amounts of P5,400 and
P4,000 in his capacity as manager of Sugbu Commercial when he
was not authorized to issue official receipts and that only his co-
partner Shih Tiong Chu, who was most of the time in Manila, could do
so. In this regard, Sugbu Commercial prayed that Pow Sun gee be
ordered to indemnify Sugbu Commercial for whatever is adjudged
against the latter in favor of plaintiff Ng Ya.
* TC decided in favor of Ng Ya and sentenced Sugbu to pay plaintiff
the sum of P9,400 and condemning Pow Sun Gee to reimburse Sugbu
Commercial Company.
* Sugbu Commercial appealed.
Issue W/N Sugbu Commercial should not be held liable because Pow
Sun Gee, as the one who received the payments and issued receipts to
Ng Ya, is not authorized to do so.
Holding: No.
Ratio Decidendi: A manager of a partnership is presumed to
have all the incidental powers to carry out the object of the
partnership in the transaction of the business. There is of course
an exception to the general rule: when the powers of a manager are
specifically restricted, he could not exercise the powers expressly
limited of him. But when the articles of association do not specify
the powers of the manager, it is admitted on principle that a
manager has the powers of a general agent, and even more. When
the object of the company is determined, the manager has all the
powers necessary for the attainment of such object.
Reasoning: Sugbu Commercial was not able to present articles of co-
partnership that would show any limitation upon the powers of the
manager an indication that there was none. For this reason, we hold
and declare that the minor power of issuing official receipt is
included in the general powers of the manager.
Indeed, it would be quite queer that the manager of any juridical
entity would not be authorized to issue official receipts for amounts
delivered to that entity through said manager, and that only his co-
partner Shih Tiong Chu, who was most of the time in Manila, could do
so. This is not in keeping with the present day business dealings, for
it is slow and inconvenient to those who transact with the company.
10..M. TEAGUE vs. H. MARTIN, J. T. MADDY and L.H. GOLUCKE
Facts:
Plaintiff alleges that about December 23, 1926, he and the
defendants formed a partnership for the operation of a fish
business and similar commercial transactions, which by mutual
contest was called "Malangpaya Fish Co," with a capital of
P35,000, of which plaintiff paid P25,000, the defendant Martin
P5,000, P2,500, and Golucke P2,500. That as such partnership,
they agreed to share in the profits and losses of the business in
proportion to the amount of capital which each contributed.
That the plaintiff was named the general manager to take
charge of the business, with full power to do and perform all
acts necessary to carry out of the purposes of the partnership.
That there was no agreement as to the duration of the
partnership. That plaintiff wants to dissolve it, but that the
defendants refused to do so.
That the partnership purchased and now owns a lighter called
Lapu-Lapu, and a motorship called Barracuda, and other
properties. That the lighter and the motorship are in the
possession of the defendants who are making use of them, to the
damage and prejudice of the plaintiff, for any damage which
plaintiff may sustain.
"Plans for formation of a limited partnership,"
Captain Maddy would have charge of the Barracuda and its
navigation, with a salary of P300 per month
Martin would have charge of the southern station, cold
stores, commisary and procuring fish, with a salary of P300
per month,
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 PARTNERSHIP OUTLINE PT. 2
Teague (plaintiff) would have charge of selling fish in Manila
and purchasing supplies, without salary until such time as
the business is placed on a paying basis, when his salary
would be the same as that of Maddy and Martin, and that the
principal office of the partnership "shall keep books
showing plainly all transactions," which shall be available at
all time for inspection of any of the members.
CFI: dissolved the partnership and liquidated its assets
The barge Lapu-Lapu as well as the Ford truck No. T-3019 and
adding machine belong exclusively to the plaintiff, M. Teague,
but the said plaintiff must return to and reimburse the
partnership the sum of P14,032.26 taken from its funds for the
purchase and equipment of the said barge Lapu-Lapu; and also
to return the sum of P1,230 and P228 used for buying the Ford
truck and adding machine, respectively
Plaintiff appeals the ruling of the Trial Court
Plaintiff contends that he is managing partner of the
partnership and the three properties (Lapu-Lapu, Barracuda &
Ford truck) are properties of the partnership since they were
paid from the profits of the partnership thus do not belong to
him.
Issue:
1.) Whether the plaintiff is a managing partner of a partnership
(Thus can make purchases for the partnership without the
knowledge and/or consent of his copartners)
2.) Whether the three properties are owned by the partnership
Held/Ratio:
1.) YES. All three of the partners are general managers in their
particular part of business
It will thus be noted that the powers and duties of Maddy
Martin, and the plaintiff are specifically defined, and that each of
them was more or less the general manager in his particular
part of the business. That is to say, that Maddy's power and
duties are confined and limited to the charge of the Barracuda
and its navigation, and Martin's to the southern station, cold
stores, commissary and procuring fish, and that plaintiff's
powers and duties are confined and limited to "selling fish in
Manila and the purchase of supplies."
2.) NO.
The Lapu-Lapu, the Ford truck, and the adding machine were
purchased by the plaintiff and paid for out of the funds of the
partnership, and that by his own actions and conduct, and the
taking of the title in his own name, he is now estopped to claim
or assert that they are not his property or that they are the
property of the company.
The plaintiff's authority was confined and limited to the "selling
of fish in Manila and the purchase of supplies." It must be
conceded that, standing alone, the power to sell fish and
purchase supplies does not carry with it or imply the authority
to purchase the Lapu-Lapu, or the Ford truck, or the adding
machine. From which it must follow that he had no authority to
purchase the lighter Lapu-Lapu, the Ford truck, or the adding
machine, as neither of them can be construed as supplies for the
partnership business.
Plaintiff must be compensated for the partnership's use of the Lapu-
Lapu (a lighter; a type of flat-bottomed barge)
Court ruled he is entitled for P2,000
Decision: CFI ruling affirmed.
11. GAVINO SANTOS vs. CENON VILLANUEVA
Facts:
Santos filed a recission of the sale of a tailoring shop (named
Esquire) executed between defendants Emiliano del Rosario
(vendor) and Cenon Villanueva and/or Corazon del Rosario
(vendee)
Santos contends that the tailoring shop is owned in common by 3
partners, namely, himself, Luisito del Rosario, and defendant
Emiliano del Rosario; although the contract was not reduced in
writing because they were brothers but each partner contributed
P5,000 to the common fund, and Emiliano, being the one
managing the tailor shop, registered such business
Plaintiff also contends that and the sale made by Cenon
Villanueva and/or Corazon del Rosario was w/o the knowledge
and consent of the other partners hence void under Art. 143 of
the Code of Commerce which gives us that "no partner can
transfer to another person the interest he may have in the co-
partnership
Defense of Cenon Villanueva and Corazon del Rosario
The licenses awarded to the tailoring shop was under the name of
Emiliano del Rosario
At the office of SEC, they found no partnership operating as a
tailoring shop and registered under the name of Esquire
CFI ruled there is a partnership
Esquire is owned in common by the 3 partners hence the sale is
null and void for it was done without the consent & knowledge of
the other partner
Issue: 1.) Whether a partnership is formed
2.) Whether the defendants are buyers in good faith
Held/Ratio:
1.) YES.
In Emiliano's application for the registration of the firm name
"Esquire" in the Bureau of Commerce, wherein he not only
named his partners in the business but expressly stated there
shares in the partnership as well.
2.) NO.
At the time of the perfection of the contract of sale, the
defendants knew that Emiliano does not solely owns the tailor
shop by himself as evidenced by the registration of the firm
name "Esquire" in the Bureau of Commerce.
Decision: CFI ruling affirmed.
12. BACHRACH VS. LA PROTECTORA,
FACTS: In the year 1913, the individuals named as defendants in this
action formed a civil partnership, called "La Protectora," for the
purpose of engaging in the business of transporting passengers and
freight at Laoag, Ilocos Norte. In order to provide the enterprise with
means of transportation, Marcelo Barba, acting as manager, came to
Manila and upon June 23, 1913, negotiated the purchase of two
automobile trucks from the plaintiff, E. M. Bachrach, for the agree
price of P16,500. He paid the sum of 3,000 in cash, and for the
balance executed promissory notes representing the deferred
payments. These notes provided for the payment of interest from
June 23, 1913, the date of the notes, at the rate of 10 per cent per
annum. Provision was also made in the notes for the payment of 25
per cent of the amount due if it should be necessary to place the notes
in the hands of an attorney for collection. Three of these notes, for the
sum of P3,375 each, have been made the subject of the present action,
and there are exhibited with the complaint in the cause. One was
signed by Marcelo Barba in the following manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word "By"
omitted before the name of Marcelo Barba in the second line of the
signature. It is obvious that in thus signing the notes Marcelo Barba
intended to bind both the partnership and himself. In the body of the
note the word "I" (yo) instead of "we" (nosotros) is used before the
words "promise to pay" (prometemos) used in the printed form. It is
plain that the singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants
Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto
Serrano, upon June 12, 1913, executed in due form a document in
which they declared that they were members of the firm "La
Protectora" and that they had granted to its president full authority
"in the name and representation of said partnership to contract for
the purchase of two automobiles" (en nombre y representacion de la
mencionada sociedad contratante la compra de dos automoviles). This
document was apparently executed in obedience to the requirements
of subsection 2 of article 1697 of the Civil Code, for the purpose of
evidencing the authority of Marcelo Barba to bind the partnership by
the purchase. The document in question was delivered by him to
Bachrach at the time the automobiles were purchased.
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 PARTNERSHIP OUTLINE PT. 2
From time to time after this purchase was made, Marcelo Barba
purchased of the plaintiff various automobile effects and accessories
to be used in the business of "La Protectora." Upon May 21, 1914, the
indebtedness resulting from these additional purchases amounted to
the sum of P2,916.57
In May, 1914, the plaintiff foreclosed a chattel mortgage which he had
retained on the trucks in order to secure the purchase price. The
amount realized from this sale was P1,000. This was credited unpaid.
To recover this balance, together with the sum due for additional
purchases, the present action was instituted in the Court of First
Instance of the city of Manila, upon May 29, 1914, against "La
Protectora" and the five individuals Marcelo Barba, Nicolas Segundo,
Antonio Adiarte, Ignacio Flores, and Modesto Serrano. No question
has been made as to the propriety of impleading "La Protectora" as if
it were a legal entity. At the hearing, judgment was rendered against
all of the defendants. From this judgment no appeal was taken in
behalf either of "La Protectora" or Marcelo Barba; and their liability is
not here under consideration. The four individuals who signed the
document to which reference has been made, authorizing Barba to
purchase the two trucks have, however, appealed and assigned
errors. The question here to be determined is whether or not these
individuals are liable for the firm debts and if so to what extent.
The amount of indebtedness owing to the plaintiff is not in dispute, as
the principal of the debt is agreed to be P7,037. Of this amount it
must now be assumed, in view of the finding of the trial court, from
which no appeal has been taken by the plaintiff, that the unpaid
balance of the notes amounts to P4,121, while the remainder
(P2,916) represents the amount due for automobile supplies and
accessories.
ISSUE: WON Barba has the authority to bind the partnership?
HELD: The business conducted under the name of "La Protectora"
was evidently that of a civil partnership; and the liability of the
partners to this association must be determined under the provisions
of the Civil Code. The authority of Marcelo Barba to bind the
partnership, in the purchase of the trucks, is fully established by the
document executed by the four appellants upon June 12, 1913. The
transaction by which Barba secured these trucks was in conformity
with the tenor of this document. The promissory notes constitute the
obligation exclusively of "La Protectora" and of Marcelo Barba; and
they do not in any sense constitute an obligation directly binding on
the four appellants. Their liability is based on the fact that they are
members of the civil partnership and as such are liable for its debts. It
is true that article 1698 of the Civil Code declares that a member of a
civil partnership is not liable in solidum (solidariamente) with his
fellows for its entire indebtedness; but it results from this article, in
connection with article 1137 of the Civil Code, that each is liable with
the others (mancomunadamente) for his aliquot part of such
indebtedness. And so it has been held by this court. (Co-Pitco vs. Yulo,
8 Phil. Rep., 544.)
As to so much of the indebtedness as is based upon the claim for
automobile supplies and accessories, it is obvious that the document
of June 12, 1913, affords no authority for holding the appellants
liable. Their liability upon this account is, however, no less obvious
than upon the debt incurred by the purchase of the trucks; and such
liability is derived from the fact that the debt was lawfully incurred in
the prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if any,
was made with regard to the form of management. Under these
circumstances it is declared in article 1695 of the Civil Code that all
the partners are considered agents of the partnership. Barba
therefore must be held to have had authority to incur these expenses.
But in addition to this he is shown to have been in fact the president
or manager, and there can be no doubt that he had actual authority to
incur this obligation.
13. MACHUCA VS. CHUIDIAN
FACTS: CHUIDIAN, BUENAVENTURA & CO (defendants) is a regular
general partnership. The original partners were D. Telesforo
Chuidian, Doa Raymunda Chuidian, Doa Candelaria Chuidian, and
D. Mariano Buenaventura. The partners each contributed a certain
amount of money to the partnership.
Dona Raymunda retired from the partnership on November 1885.
The partnership subsequently went into liquidation (it does not
appear that the liquidation has been terminated when this action was
brought).
On January 1894, D. Mariano Buenaventura died, his estate passing
by will to his children, including D. Vicente Buenaventura. In 1898,
D. Vicente Buenaventura executed a public instrument in which for
a valuable consideration he assigns to D. Jose Gervasio Garcia . . . a
25 per cent share in all that may be obtained by whatever right in
whatever form from the liquidation of the partnership of Chuidian,
Buenaventura & Co., in the part pertaining to him in said partnership.
A subsequent assignment was made by Garcia in favor of Jose
Machuca (now plaintiff), which has been notified to the liquidator of
the partnership. The liquidator, however, declined to record in the
books of the partnership Machucas claim under the assignment as a
credit due to him. Hence, Machuca filed an action to compel such
record to be made, and he further asks that he be adjudicated to be a
creditor of the partnership in an amount equal to 25% of D. Vicente
Buenaventuras share (that he be immediately given the 25% share).
ISSUE: WON Machuca is entitled to 25% of D. Vicente Buenaventuras
share in the partnership NO
HELD: According to clause 19 of the partnership agreement: "upon
the dissolution of the company, the pending obligations in favor of
outside parties should be satisfied, the funds of the minors Jose and
Francisco Chuidian should be taken out, and afterwards the resulting
balance of the account-current of each one of those who had put in
money should be paid."
Our construction of this clause is that it establishes a a basis for the
final adjustment of the affairs of the partnership; that that basis is
that the liabilities to noncompartners are to be first discharged; that
the claims of the Chuidian minors are to be next satisfied; and that
what is due to the respective partners on account of their advances to
the firm is to be paid last of all, leaving the ultimate residue, of
course, if there be any, to be distributed, among the partners in the
proportions in which they may be entitled thereto.
Hence, it follows that D. Vicente Buenaventura, whose rights are
those of his father, is in no case entitled to receive any part of the
assets until the creditors, who are nonpartners, and the Chuidian
minors are paid. Whatever rights he had, he could only transfer
subject to this condition. It is clear, from the language of the
instrument under which plaintiff claims, that this conditional interest
was all that Vicente ever intended to transfer.
14. FUE LEUNG VS. INTERMEDIATE APPELLATE COURT
FACTS: The petitioner asks for the reversal of the decision of the then
Intermediate Appellate Court in AC-G.R. No. CV-00881 which
affirmed the decision of the then Court of First Instance of Manila,
Branch II in Civil Case No. 116725 declaring private respondent
Leung Yiu a partner of petitioner Dan Fue Leung in the business of
Sun Wah Panciteria and ordering the petitioner to pay to the private
respondent his share in the annual profits of the said restaurant.
This case originated from a complaint filed by respondent Leung Yiu
with the then Court of First Instance of Manila, Branch II to recover
the sum equivalent to twenty-two percent (22%) of the annual
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 PARTNERSHIP OUTLINE PT. 2
profits derived from the operation of Sun Wah Panciteria since Regarding the prescriptive period within which the private
October, 1955 from petitioner Dan Fue Leung. respondent may demand an accounting, Articles 1806, 1807, and
1809 show that the right to demand an accounting exists as long as
the partnership exists. Prescription begins to run only upon the
The Sun Wah Panciteria, a restaurant, located at Florentino Torres
dissolution of the partnership when the final accounting is done.
Street, Sta. Cruz, Manila, was established sometime in October, 1955.
It was registered as a single proprietorship and its licenses and
permits were issued to and in favor of petitioner Dan Fue Leung as Considering the facts of this case, the Court may decree a dissolution
the sole proprietor. Respondent Leung Yiu adduced evidence during of the partnership under Article 1831 of the Civil Code which, in part,
the trial of the case to show that Sun Wah Panciteria was actually a provides:
partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment.
Art. 1831. On application by or for a partner the court shall
decree a dissolution whenever: xxx xxx xxx
The private respondents evidence is summarized as follows:
(3) A partner has been guilty of such conduct as tends to affect
About the time the Sun Wah Panciteria started to become prejudicially the carrying on of the business;
operational, the private respondent gave P4,000.00 as his
contribution to the partnership. This is evidenced by a receipt
(4) A partner willfully or persistently commits a breach of the
wherein the petitioner acknowledged his acceptance of the P4,000.00
partnership agreement, or otherwise so conducts himself in
by affixing his signature thereto. Furthermore, the private
matters relating to the partnership business that it is not
respondent received from the petitioner the amount of P12,000.00
reasonably practicable to carry on the business in partnership
covered by the latter's Equitable Banking Corporation Check from the
with him; xxx xxx xxx
profits of the operation of the restaurant for the year 1974

(6) Other circumstances render a dissolution equitable.

The petitioner denied having received from the private respondent
the amount of P4,000.00. He contested and impugned the
genuineness of the receipt. His evidence is summarized as follows: There shall be a liquidation and winding up of partnership affairs,
return of capital, and other incidents of dissolution because the
continuation of the partnership has become inequitable.
The petitioner did not receive any contribution at the time he started
the Sun Wah Panciteria. He used his savings from his salaries as an
employee at Camp Stotsenberg in Clark Field and later as waiter at 15. SERGIO V. SISON vs. HELEN J. MCQUAID
the Toho Restaurant amounting to a little more than P2,000.00 as
capital in establishing Sun Wah Panciteria. Petitioner presented
Facts: During the year 1938 Helen borrowed from Sison various
various government licenses and permits showing the Sun Wah
sums of money, aggregating P2,210, to enable her to pay her
Panciteria was and still is a single proprietorship solely owned and
obligation to the Bureau of Forestry and to add to her capital in her
operated by himself alone. Fue Leung also flatly denied having issued
lumber business.
to the private respondent the receipt (Exhibit G) and the Equitable
Banking Corporation's Check No. 13389470 B in the amount of
P12,000.00 (Exhibit B). Helen was not able to pay the loan, as she had promised, she
proposed to take in Sison as a partner in her lumber business, Sison
to contribute to the partnership the said sum of P2,210 due him from
ISSUE: WON Private respondent is a partner of the petitioner in
Helen in addition to his personal services.
Sun Wah Panciteria?

Sison agreed to Helen's proposal and, as a result, a partnership was

HELD: The private respondent is a partner of the petitioner in Sun
formed in which they were to share 50-50 in the income or profits of
Wah Panciteria. The requisites of a partnership which are 1) two
the business.
or more persons bind themselves to contribute money, property, or
industry to a common fund; and 2) intention on the part of the
partners to divide the profits among themselves (Article 1767, Civil In accordance with said contract, plaintiff, together with defendant,
Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110)-have been rendered services to the partnership without compensation from
established. As stated by the respondent, a partner shares not only in June 15, 1938 to December, 1941.
profits but also in the losses of the firm. If excellent relations exist
among the partners at the start of business and all the partners are
Before the last World War, the partnership sold to the US Army
more interested in seeing the firm grow rather than get immediate
230,000 board feet of lumber for P13,800. When the claim was
returns, a deferment of sharing in the profits is perfectly plausible. It
"finally" approved and the full amount paid, defendant has
would be incorrect to state that if a partner does not assert his rights
persistently refused to deliver one-half of it, or P6,900, to plaintiff
anytime within ten years from the start of operations, such rights are
notwithstanding repeated demands, investing the whole sum of
irretrievably lost. The private respondent's cause of action is
P13,800 for her own benefit. Plaintiff, therefore, prays for judgment
premised upon the failure of the petitioner to give him the agreed
declaring the existence of the alleged partnership and requiring the
profits in the operation of Sun Wah Panciteria. In effect the private
defendant to pay him the said sum of P6,900, in addition to damages
respondent was asking for an accounting of his interests in the
and costs.
partnership.

Notified of the action, defendant filed a motion to dismiss on the

It is Article 1842 of the Civil Code in conjunction with Articles 1144
grounds that plaintiff's action had already prescribed, that plaintiff's
and 1155 which is applicable. Article 1842 states:
claim was not provable under the Statute of Frauds, and that the
complaint stated no cause of action. Sustaining the first ground, the
The right to an account of his interest shall accrue to any court dismissed the case.
partner, or his legal representative as against the winding up
partners or the surviving partners or the person or partnership
Issue: W/N Sison is entitled to one half of the proceeds from the sale
continuing the business, at the date of dissolution, in the
of board feet to the US Army.
absence or any agreement to the contrary.
Held: No.

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Ratio: It is not clear from the allegations of the complaint just when
plaintiff's cause of action accrued. Consequently, it cannot be
determined with certainty whether that action has already
prescribed or not. Such being the case, the defense of prescription
cannot be sustained on a mere motion to dismiss based on what
appears on the face of the complaint.
But though the reason given for the order of dismissal be untenable,
we find that the said order should be upheld on the ground that the
complaint states no cause of action.
Plaintiff seeks to recover from defendant one-half of the purchase
price of lumber sold by the partnership to the United States Army.
But his complaint does not show why he should be entitled to the
sum he claims. It does not allege that there has been a liquidation of
the partnership business and the said sum has been found to be due
him as his share of the profits. The proceeds from the sale of a certain
amount of lumber cannot be considered profits until costs and
expenses have been deducted. Moreover, the profits of the business
cannot be determined by taking into account the result of one
particular transaction instead of all the transactions had. Hence, the
need for a general liquidation before a member of a partnership may
claim a specific sum as his share of the profits.
16. ORNUM VS. LASALA
in the appealed decision from the failure of the respondents to
object to the statement and from their promise to sign the same
as soon as they received their shares as shown in said statement.
After such shares had been paid by the petitioners and accepted
by the respondents without any reservation, the approval of the
statement of accounts was virtually confirmed and its signing
thereby became a mere formality to be complied with by the
respondents exclusively.
Their refusal to sign, after receiving their shares, amounted to a
waiver to that formality in favor of the petitioners who has already
performed their obligation.
This approval precludes any right on the part of the respondents
to a further liquidation, unless the latter can show that there was
fraud, deceit, error or mistake in said approval.
In our opinion, the pronouncement that the evidence tends to
prove that there were mistakes in the petitioners' statements of
accounts, without specifying the mistakes, merely intimates as
suspicion and is not such a positive and unmistakable finding of
fact as to justify a revision, especially because the CA has relied on
the bare allegations of the parties.
SC reversed the CA decision decision on the legal ground that
the petitioners' final statement of accounts had been approved by
the respondents and no justifiable reason (fraud, deceit, error or
mistake) has been positively and unmistakably found by the CA so
as to warrant the liquidations sought by the respondents.

FACTS: Plaintiffs and defendants are natives of Taal, Batangas but

the defendants resided in Romblon.

In 1908, Pedro Lasala and Emerenciano Ornum formed a

partnership. Lasala, as capitalist, delivered P1,000 to Ornum, the

industrial partner. Ornum would conduct a business in Romblon.
In 1912, Ornum asked for the dissolution of the partnership and
suggested present petitioners, to become the new partners in his
place.
Pedro Lasala died and his children succeeded to the rights and
interest in the partnership. The partners never knew each other
personally and no formal partnership agreement was ever
executed.

Petitioners, as managing partners, received of the net gains,

while the other was divided between them and the Lasala
group in proportion to the capital put in by each group.
After 20 years, the business grew to the value of P44,618.67.
Subsequently, respondents announced their desire to dissolve
the partnership.
Respondents filed a CMP, praying for an accounting and final
liquidation of the assets of the partnership.
According to petitioners, they already remitted and paid to
respondents the total amount corresponding to them under the
last statement of accounts, which however, was not signed by
respondents.
According to petitioners, respondents tacitly approved and
accepted the final statement of accounts, thereby losing their right
to a further accounting, from the moment they accepted their
shares without objection.
CFI ruled in favor of petitioners. CA reversed on the ground that
the final statement of accounts was unsigned and stand
disapproved.

ISSUE:
WON respondents may request for further accounting and
liquidation in dissolving the partnership? NO.

HELD:
NO. respondents were already given the final statement of
accounts, which they tacitly approved.
We hold that the last and final statement of accounts, had been
approved by the respondents. This approval resulted, by virtue of
the letter of Father Mariano Lasala of July 19, 1932, quoted in part

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Property Rights of a Partner Articles 1810 - 1814
CLEMENTE VS. GALVAN, 67 Phil. 565. G.R. No. 45662. April 26, 1939.
Plaintiff and defendant organized a civil partnership which
they named "Galvan y Compaia" to engage in the
manufacture and sale of paper and other stationery.
Plaintiff ask for dissolution which the defendant confirm
but with a condition that having covered a deficit incurred
by the partnership amounting to P4,000 with his own
money, plaintiff reimburse him of one-half of said sum.
Juan D. Mencarini, assigned as receiver and liquidator.
Upon acting on his duty, the court ordered him to deliver
certain machines which were then at Nos. 705-707 Ylaya
Street.
But before he could take actual possession of said
machines, upon the strong opposition of defendant, the
court, on motion of the latter, suspended the effects of its
order
In the meantime the judgments rendered in cases Nos.
42794 and 43070 ordering Clemente to pay a sum of
money.
He mortgage the machines with his nephew, the
intervenor (plaintiff in the herein case.) For having expired
the terms in the mortgage the intervenor commenced case
No. 49629 to collect his mortgage credit.
Issue: W/N the mortgage between Clemente and his nephew
(intervenor, plaintiff in the case) is valid?
Rule: No. The machines in contention originally belonged to the
defendant and from him were transferred to the partnership Galvan y
Compania. This being the case, said machines belong to the
partnership and not to him, and shall belong to it until partition is
effected according to the result thereof after the liquidation. Also,
Clemente did not have actual possession of the machines, he could
not in any manner mortgage them
LEYTE-SAMAR SALES CO VS CFI MAY 20, 1953 GR NO L-5963
FACTS: LEYTE SAMAR SALES (LSS) and Raymond Tomassi are
claiming damages against Far Eastern Lumber (FELCO), Hall, Brown,
and Roxas.
CFI awarded P31.589.14+costs of damages to LSS and Tomassi, CA
confirmed this but removed the P2,000 Attys fees erroneously
included
The sheriff sold FLECO et. als buildings and properties to Dorfe and
Asturias forP8,100.
4 Jun 1951 Lastrilla filed a claim on the sold property because he
supposedly bought the shares and interests of Brown on 29 Sep1949
13Jun1951 Lastrillas claim was granted and the sheriff was required
to retain for him 17% of the money
14Aug1951 Lastrilla was declared entilted to the 17% share
ISSUES: Does Lastrilla have a claim on the proceeds of the sale? NO
RATIO: If he was a creditor of the FELCO, perhaps or maybe. But he
was no. The partner of a partnership is not a creditor of such
partnership for the amount of his shares.
So Lastrilla acquired no right to demand any part of the money paid
by Dorfe and Austrias to he sheriff any part of the money paid by
Dorfe and Austrias to the sheriff for the benefit of FELCO and
Tomassi, the plaintiffs in that case, for the reason that, as he says, his
shares (acquired from Brown) could not have been and were not
auctioned off to Dorfe and Austrias.
Wherefore, the orders of the court recognizing Lastrilla's right and
ordering payment to him of a part of the proceeds were patently
erroneous, because promulgated in excess or outside of its
jurisdiction. For this reason the respondents' argument resting on
plaintiffs' failure to appeal from the orders on time, although
ordinarily decisive, carries no persuasive force in this instance.
Obligations of the Partners to Third Persons Articles 1815 to
1827
PHIL. NATIONAL BANK VS. LO G.R. No. 26937. October 5, 1927.
In September 1916, Severo Eugenio Lo and Ling, together with Ping,
Hun, Lam and Peng formed a commercial partnership under the name
of Tai Sing and Co., with a capital of P40,000 contributed by said
partners. The firm name was registered in the mercantile registrar in
the Province of Iloilo. Ping, in the articles of partnership, was assigned
as the general manager. However, in 1917, he executed a special
power of attorney in favor of Lam to act in his behalf as the manager
of the firm. Subsequently, Lam obtained a loan from PNB the loan
was under the firms name. In the same year, Ping died in China. From
1918 to 1920, the firm, via GM Lam, incurred other loans from
PNB. The loans were not objected by any of the partners. Later, PNB
sued the firm for non-payment. Lo, in his defense, argued that he
cannot be liable as a partner because the partnership, according to
him, is void; that it is void because the firms name did not comply with
the requirement of the Code of Commerce that a firm name should
contain the names of all of the partners, of several of them, or only
one of them. Lo also argued that the acts of Lam after the death of Ping
is not binding upon the other partners because the special power of
attorney shall have already ceased.
ISSUE: Whether or not Lo is correct in both arguments.
HELD: No. The anomalous adoption of the firm name above noted
does not affect the liability of the general partners to third parties
under Article 127 of the Code of Commerce. The object of the Code of
Commerce in requiring a general partnership to transact business
under the name of all its members, of several of them, or of one only,
is to protect the public from imposition and fraud; it is for the
protection of the creditors rather than of the partners themselves. It is
unenforceable as between the partners and at the instance of the
violating party, but not in the sense of depriving innocent parties of
their rights who may have dealt with the offenders in ignorance of the
latter having violated the law; and that contracts entered into by a
partnership firm defectively organized are valid when voluntarily
executed by the parties, and the only question is whether or not they
complied with the agreement. Therefore, Lo cannot invoke in his
defense the anomaly in the firm name which they themselves adopted.
Lo was not able to prove his second argument. But even assuming
arguendo, his second contention does not deserve merit because (a)
Lam, in acting as a GM, is also a partner and his actions were never
objected to by the partners, and (b) it also appeared from the evidence
that Lo, Lam and the other partners authorized some of the loans.
NOTE: Under the New Civil Code, a firm name may or may not include
the name of one or more of the partners (Article 1815).
CO-PITCO VS. YULO G.R. No. L-3146. September 14, 1907.
The appellee makes the point in his brief in this court that although
the defendant excepted to the order of the court below denying his
motion for a new trial on the ground of the insufficiency of the
evidence, yet we can not review such evidence because it is not
properly certified. We think that this point is well taken. The
testimony of one witness is certified to by the stenographer, who says
that it is all the evidence which took during the trial. The testimony of
this witness is unimportant. There follow in the record several pages
of what purports to be evidence of different witnesses taken in
narrative form, but neither the judge, nor the clerk, nor the
stenographer certify in any way what these pages are or that they
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 PARTNERSHIP OUTLINE PT. 2
contain evidence taken during the trial of this case. For the purpose
of this review, therefore, we can only consider the facts admitted by
the pleadings and those stated in the decision of the court below. In
that decision the court makes the following finding of fact, among
others:
Before February, 1903, Florencio Yulo and Jaime Palacios
were partners in the operation of a sugar estate in
Victorias, Island of Negros, and had commercial dealings
with a Chinaman named Dy-Sianco, who furnished them
with money and goods, and used to buy their crop of sugar.
In February, 1903, the defendant, Pedro Yulo, father of the
said Florencio, took charge of the latter's interest in the
above-mentioned partnership, and he became a general
partner with the said Jaime Palacios in the same business,
and he continued as such partner until about the end of
1904, dealing with Dy-Sianco in the same manner as the
old partnership had dealt with the latter.
He then finds that the balance due from the firm Pedro Yulo and
Jaime Palacios was 1,638.40 pesos, Philippine currency, and orders
judgment against the defendant, Pedro Yulo, for the entire amount,
with interest.
The partnership of Yulo and Palacios was engaged in the operation of
a sugar estate in Negros. It was, therefore a civil partnership, as
distinguished from a mercantile partnership. Being a civil
partnership, by the express provisions of articles 1698 and 1137 of
the Civil Code, the partners are not liable each for the whole debt of
the partnership. The liability is pro rata and in this case Pedro Yulo is
responsible to plaintiff for only one-half of the debt. The fact that the
other partner, Jaime Palacios, had left the country can not increase
the liability of Pedro Yulo.
The judgment of the court below is reversed and judgment is ordered
in favor of the plaintiff and against the defendant, Pedro Yulo, for the
sum of P819.20 pesos, Philippine Currency, with interest thereon at
the rate of 6 per cent per annum from the 12th day of January, 1905,
and the costs of the Court of First Instance. No costs will be allowed
to either party in this court. So ordered.
ISLAND SALES, INC. VS. UNITED PIONEERS GEN. CONSTRUCTION
CO., 65 SCRA 544. G.R. No. L-22493. July 31, 1975.
Business Organization Partnership, Agency, Trust Liability of
Partners Pro-rata Condonation
United Pioneers General Construction Company is a general
partnership formed by Benjamin Daco, Daniel Guizona, Noel Sim,
Augusto Palisoc and Romulo Lumauig. In 1961, United Pioneers
purchased by installment a motor vehicle from Island Sales, Inc. United
Pioneers defaulted in its payment hence it was sued and the 5 partners
were impleaded as co-defendants.
Upon motion of Island Sales, Lumauig was removed as a defendant.
United Pioneers lost the civil case and the trial court rendered
judgment ordering United Pioneers to pay the outstanding balance
plus interest and costs. It further decreed that the remaining 4 co-
defendants shall pay Island Sales in case United Pioneers property will
not be enough to satisfy its indebtedness to Island Sales.
ISSUE: What is the extent of the liability of the partners considering
that one partner was removed as a co-defendant on motion of Island
Sales?
HELD: Their liability is pro-rata pursuant to Article 1816 of the Civil
Code. But is should be noted that since there were 5 partners when the
purchase was made in behalf of the partnership, the liability of each
partner should be 1/5th(of the companys obligation) each. The fact
that the complaint against Lumauig was dismissed, upon motion of the
Island Sales, does not unmake Lumauig as a general partner in the
company. In so moving to dismiss the complaint, Island Sales merely
condoned Lumauigs individual liability to them.
LA COMPANIA MARITIMA V. FRANCISCO MUNOZ ET AL (1907)
March, 1905 - Francisco Muoz, Emilio Muoz, and Rafael
Naval formed on ordinary general mercantile partnership
under the name of Francisco Muoz & Sons for the
purpose of carrying on a mercantile business in the
Province of Albay
Francisco Muoz was a capitalist partner and Emilio
Muoz and Rafael Naval were industrial partners
Against the partnership, La Compania Maritima is seeking
to recover the sum of P26,828.30
CFI Manila, acting on the complaint, ruled against the
defendant partnership, Francisco Muoz & Sons, and
Francisco Muoz de Bustillo, but acquitted Emilio Muoz
de Bustillo and Rafael Naval, discharging them from
liability
Issue:
WON ordinary general partnership was indeed formed
the nature of the involvement of Emilio and Rafael in the
partnership and their corresponding liability, if any, to the
plaintiff
Held/Ratio:
the articles of partnership, duly recorded in the mercantile
registry in Albay, evidenced the fact of formation by the
defendants of an ordinary general partnership; the claim
that no such partnership was formed is not supported by
any evidence
as to the participation of Emilio in the partnership, neither
the fact that he would receive his 1/8 share of the profits
after only five years nor the fact that he is excluded from
its management do not preclude his membership in the
said partnership (such set-up was as agreed upon by the
parties when they signed the articles of partnership, with
Emilio as one of its industrial partners); Emilio is, in fact, a
general partner
as to the liability of Emilio and Rafael, the Court
ratiocinated as follows:
Paragraph 12 of the articles of partnership
states:
Twelfth. All profits arising from mercantile transactions carried on,
as well as such as may be obtained from the sale of property and
other assets which constitute the corporate capital, shall be
distributed, on completion of the term of five years agreed to for the
continuation of the partnership, in the following manner: Three-
fourths thereof for the capitalist partner Francisco Muoz de Bustillo
and one-eighth thereof for the industrial partner Emilio Muoz de
Bustillo y Carpiso, and the remaining one-eighth thereof for the
partner Rafael Naval y Garcia. If, in lieu of profits, losses should result
in the winding up of the partnership, the same shall be for the sole
and exclusive account of the capitalist partner Francisco Muoz de
Bustillo, without either of the two industrial partners participating in
such losses.
On the other hand, Article 127 of the Code of Commerce is as follows:
All the members of the general copartnership, be they or be they not
managing partners of the same, are liable personally and in
solidum with all their property for the results of the transactions
made in the name and for the account of the partnership, under the
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signature of the latter, and by a person authorized to make use
thereof.
In a general partnership, all members are general partners.
The fact that some may be industrial and some capitalist
partners do not make a difference. Whether capitalist or
industrial, both retain the right to participate in the
management of the partnership, examine its books, use the
firm name and among others, be obligated to pay the
liabilities of the partnership with their private property
after exhaustion of the partnerships property.
To bolster the Courts position, and to disprove the
seeming conflict presented by the Articles aforequoted,
the Court notes that the Civil Code has distinct sections
treating of the obligations of the partners between
themselves and the liability of the partners as to third
persons. The partitioning of the burden of losses among
the partners and the responsibility of the partners toward
third persons are therefore distinct and different.
Also, if indeed it was intended by the law that industrial
partners be excluded from responsibility towards third
persons, what would happen then to the creditors of the
partnership if the partnership consisted of only industrial
partners?
Thus, neither on principle nor on authority can the
industrial partner be relieved from liability to third
persons for the debts of the partnership.
Thus, the judgment of the lower court is reversed and all the
defendants are ordered to pay the sum of P26,828.30, with interest
thereon at the rate of 8 per cent per annum. Following Article 237 of
the Code of Commerce, however, the execution of such judgment
shall not issue against the private property of the defendants
Francisco Muoz, Emilio Muoz, or Rafael Naval until the property of
the defendant Francisco Muoz & Sons is exhausted.
DIETRICH V. FREEMAN (1911)
George Dietrich employed by the Manila Steam Laundry
on 9 January, 1907, when the steam laundry was owned
and operated by Freeman and Pierce.
Pierce, on the 18th of January, 1907, sold all of his right,
title, and interest in the said laundry to Whitcomb, who,
together with Freeman, then became the owners of this
laundry and continued to operate the same as long as the
plaintiff was employed.
Dietrich is seeking to recover the sum of P952 alleged to
be the balance due to him for services performed during
the period from January 9, 1907, to December 31, 1908.
Lower court rendered judgment in favor of the plaintiff
and against Freeman and Whitcomb, jointly and severally,
for the sum of P752, with interest. The complaint as to
Pierce was dismissed, Whitcomb alone appealing.
Issue: WON Whitcomb liable to the plaintiff
Held/Ratio: It appears from the record that Whitcomb never knew
the plaintiff, never had anything to do with personally, and that the
plaintiff's contract was with Freeman, the managing partner of the
laundry. It further appears from the record that Pierce, after he sold
his interest in this laundry to Whitcomb, continued to look after
Whitcomb's interest by authority of the latter.
Also, Freeman and Whitcombs organization of the partnership were
not compliant with the provisions of the Code of Commerce*; that is,
no formal partnership was ever entered into by them,
notwithstanding the fact that they were engaged in the operation of
this laundry.
*(Art. 17. The record in the commercial registry shall be optional for
private merchants and compulsory for associations established in
accordance with this code or with special laws, and for vessels.
Art. 119. Every commercial association before beginning business
shall be obliged to record its establishment, agreements, and
conditions in a public instrument, which shall be presented for
record in the commercial registry, in accordance with the provisions
of article 17.)
The purpose for which this partnership was entered into by
Freeman and Whitcomb show clearly that such partnership was
not a commercial one; hence the provisions of the Civil Code and
not the Code of Commerce must govern in determining the
liability of the partners.
Moreover, although the partnership was not organized
according to the provisions of the Code Commerce, it could not
be deemed as a cuentas en participacion where because it is
constituted in such a manner that its existence is only known to
those who had an interest in the same, there being no mutual
agreement between the partners, and without a corporate name
indicating to the public in some way that there were other
people besides the one who ostensibly managed and conducted
the business right of action can only be taken against such
person in whose name the business is being conducted, and not
against other persons interested in the partnership. In fact, in
the case at bar, the plaintiff was employed by and performed
services for the Manila Steam Laundry and was not employed by
nor did he perform services for Freeman alone. The public did
not deal with Freeman and Whitcomb personally, but with the
Manila Steam Laundry.
By the express provisions of articles 1698 and 1137 of the Civil
Code the partners are not liable individually for the entire
amount due the plaintiff. The liability is pro rata and in this case
the appellant is responsible to the plaintiff for only one-half of
the debt
Judgment of the court below is reversed and judgment entered
in favor of the plaintiff and against the defendant Whitcomb for
the sum of P376, with interest as fixed by the court below.
SANTIAGO SYJUCO, INC. VS. CASTRO G.R. No. 70403. July 7, 1989.
Facts: The private respondents, Eugenio Lim, et al., borrowed from
petitioner Santiago Syjuco, Inc., the sum of P800,000.00. The loan was
given on the security of a first mortgage on property registered in the
names of said borrowers as owners in common under Transfer
Certificates of Title Numbered 75413 and 75415 of the Registry of
Deeds of Manila. Thereafter, additional loans on the same security
were obtained by the private respondents from Syjuco, so that as of
May 8, 1967, the aggregate of the loans stood at P2,460,000.00,
exclusive of interest, and the security had been augmented by
bringing into the mortgage other property, also registered as owned
pro indiviso by the private respondents under two titles: TCT Nos.
75416 and 75418 of the Manila Registry.
The private respondents failed to pay it despite demands therefore;
that Syjuco consequently caused extra-judicial proceedings for the
foreclosure of the mortgage to be commenced by the Sheriff of
Manila; and that the latter scheduled the auction sale of the
mortgaged property on December 27, 1968. The attempt to foreclose
triggered off a legal battle that has dragged on for more than twenty
years now, fought through five (5) cases in the trial courts, two (2) in
the Court of Appeals, and three (3) more in the Supreme Court.
One of the complaints filed by the private respondents was filed not
in their individual names, but in the name of a partnership of which
14
 PARTNERSHIP OUTLINE PT. 2
they themselves were the only partners: "Heirs of Hugo Lim." The
complaint advocated the theory that the mortgage which they,
together with their mother, had individually constituted (and
thereafter amended during the period from 1964 to 1967) over lands
standing in their names in the Property Registry as owners pro
indiviso, in fact no longer belonged to them at that time, having been
earlier deeded over by them to the partnership, "Heirs of Hugo Lim,"
more precisely, on March 30, 1959, hence, said mortgage was void
because executed by them without authority from the partnership.
Syjuco filed an instant petition for certiorari, prohibition and
mandamus. It prays in its petition that the default judgment rendered
against it by Judge Castro be annulled on the ground of, among
others, estoppel, res judicata, and Article 1819 of the Civil Code.
Issue: Whether or not the private respondents are estopped to avoid
the aforementioned mortgage.
Held: Yes. The Supreme Court ruled that the respondent partnership
was inescapably chargeable with knowledge of the mortgage
executed by all the partners thereof, its silence and failure to impugn
said mortgage within a reasonable time, let alone a space of more
than 17 years, brought into play the doctrine of estoppel to preclude
any attempt to avoid the mortgage as allegedly unauthorized. Equally
or even more preclusive of the respondent partnerships claim to the
mortgaged property is the last paragraph of Art. 1819 of the Civil
Code, which contemplates a situation similar to the case at bar. It
states that where the title to real property is in the names of all the
partners, a conveyance executed by the entire partners pass all their
rights in such property. Consequently, those members' acts,
declarations and omissions cannot be deemed to be simply the
individual acts of said members, but in fact and in law, those of the
partnership. Finally, the Supreme Court emphasizes that the right of
the private respondents to assert the existence of the partnership
could have been stressed at the time they instituted their first action,
considering that the actions involved property supposedly belonging
to it, and therefore, the partnership was the real party in interest.
What was done by them was to split their cause of action in violation
of the well-known rule that only one suit may be instituted for a
single cause of action.
LIWANAG AND REYES VS. WORKMENS COMPENSATION
COMMISSION
Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners
of Liwanag Auto Supply. A commercial guard who while in line of
duty, was killed by criminal hands. His widow and minor children, in
due time filed a claim for compensation with the Workmen's
Compensation Commission, which order appellants to pay jointly and
severally P3,494.40 to the claimants. Hence this appeal, arguing 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, and that, in absence of
such, the responsibility of appellants should not be solidary but
merely joint.
Issue: whether or not the appellants should pay jointly the amount
awarded to the widow and children?
Ruling: 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. 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. Wherefore, award appealed from is affirmed.
MCDONALD VS. NATIONAL CITY BANK OF NEW YORK, 99 PHIL.
156
PIONEER INSURANCE & SECURITY CORPORATION VS. CA
175 SCRA 668 Business Organization Corporation Law When De
Facto Partnership Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a single
proprietorship. In 1965, Lim convinced Constancio Maglana, Modesto
Cervantes, Francisco Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute funds and to buy
two aircrafts which would form part a corporation which will be the
expansion of Southern Air Lines. Maglana et al then contributed and
delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts,
Lim, without the knowledge of Maglana et al, made an agreement with
Pioneer Insurance for the latter to insure the two aircrafts which were
brought in installment from Japan Domestic Airlines (JDA) using said
aircrafts as security. So when Lim defaulted from paying JDA, the two
aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between
Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general
partners.
HELD: No. There was no de facto partnership. Ordinarily, when co-
investors agreed to do business through a corporation but failed to
incorporate, a de facto partnership would have been formed, and as
such, all must share in the losses and/or gains of the venture in
proportion to their contribution. But in this case, it was shown that
Lim did not have the intent to form a corporation with Maglana et al.
This can be inferred from acts of unilaterally taking out a surety from
Pioneer Insurance and not using the funds he got from Maglana et al.
The record shows that Lim was acting on his own and not in behalf of
his other would-be incorporators in transacting the sale of the
airplanes and spare parts.
VIUDA DE CHAN VS. PEN, 53 PHIL. 906
15
 PARTNERSHIP OUTLINE PT. 2
Dissolution and Winding Up Articles 1828 to 1842
YU VS. NATIONAL LABOR RELATIONS COMMISSION
FACTS: Petitioner Yu was hired as the Assistant General Manager of
Jade Mountain Products Company Limited primarily responsible for
the overall operations of marble quarrying and export business of
said partnership. He was hired by a virtue of a Partnership
Resolution in 1985 with a monthly salary of P4,000.00. Initially he
received only half of his stipulated monthly salary and was promised
by the partners that the balance would be paid upon securing
additional operating funds from abroad. However, in 1988 without
his knowledge the general partners as well as one of the limited
partners sold and transferred their interest to Willy Co and
Emmanuel Zapanta. Thus the new major partners decided to transfer
the firms main office but opted to continue the operation of the old
partnership under its old firm name and with all its employees and
workers except for the petitioner. Upon knowing of the changes in
the partnership, petitioner went to the new main office to meet the
new partners and demand the payment of his unpaid salaries, but the
latter refused to pay him and instead informed him that since he
bought the business from the original partners, it was for him to
decide whether or not he was responsible for the obligations of the
old partnership including petitioners unpaid salaries. Hence,
petitioner was dismissed from said partnership.
ISSUES:
1. Whether the partnership which had hired the petitioner as
Asst. General Manager had been extinguished and replaced by a new
partnership composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his
employment contract as against the new partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the
partnership was the dissolution of the old partnership which had hired
the petitioner in 1984 and the emergence of the new firm composed of
Willy Co and Emmanuel Zapanta in 1988. This is based on the
following provisions:
Art. 1828. The dissolution of partnership is the change in the relation
of the partners caused by any partner ceasing to be associated in the
carrying on as a distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good
faith, when no definite term or particular undertaking is specified.
2. in contravention of the agreement between the partners,
where the circumstances do not permit a dissolution under any other
provision of this article, by the express will of any partner at any time;
However, the legal consequence of dissolution of a partnership do not
automatically result in the termination of the legal personality of the
old partnership as according to Art. 1829, on dissolution of the
partnership is not terminated, but continues until the winding up of
the partnership affairs is completed. The new partnership simply
continued the operations of the old partnership under its old firm
name without winding up the business affairs of the old partnership.
2. Yes. Under Art. 1840, creditors of the old partnership are also
creditors of the new partnership which continued the business of
former without liquidation of the partnership affairs. Thus, creditor of
the old Jade Mountain, such as the petitioner is entitled to enforce his
claim for unpaid salaries, as well as other claims relating to his
employment with the old partnership against the new Jade Mountain.
TESTATE ESTATE OF MOTA VS. SERRA, 47 Phil. 464 [1926]
FACTS: On February 1, 1919, plaintiffs and defendant entered into a
contract of partner ship, for the construction and exploitation of a
railroad line from the "San Isidro" and "Palma" centrals to the place
known as "Nandong." The original capital stipulated was P150, 000. It
was covenanted that the parties should pay this amount in equal
parts and the plaintiffs were entrusted with the administration of the
partnership. The agreed capital of P150,000, however, did not prove
sufficient, as the expenses up to May 15, 1920, had reached the
amount of P226,092.92, presented by the administrator and O.K.'d by
the defendant.
January 29, 1920, the defendant entered into a contract of sale with
Venancio Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga,
whereby he sold to the latter the estate and central known as "Palma"
with its running business, as well as all the improvements,
machineries and buildings, real and personal properties, rights,
choices in action and interests, including the sugar plantation of the
harvest year of 1920 to 1921, covering all the property of the vendor.
This contract was executed before a notary public of Iloilo.
Before the delivery to the purchasers of the hacienda thus sold,
Eusebio R. de Luzuriaga renounced all his rights under the contract of
January 29, 1920, in favor of Messrs. Venancio Concepcion and Phil.
C. Whitaker. This gave rise to the fact that on July 17, 1920, Venancio
Concepcion and Phil. C. Whitaker and the herein defendant executed
before Mr. Antonio Sanz, a notary public in and for the City of Manila,
another deed of absolute sale of the said "Palma" Estate for the
amount of P1,695,961.90, of which the vendor received at the time of
executing the deed the amount of P945,861.90, and the balance was
payable by installments in the form and manner stipulated in the
contract. The purchasers guaranteed the unpaid balance of the
purchase price by a first and special mortgage in favor of the vendor
upon the hacienda and the central with all the improvements,
buildings, machineries, and appurtenances then existing on the said
hacienda.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C.
Whitaker bought from the plaintiffs the one-half of the railroad line
pertaining to the latter, executing therefore the document. The price
of this sale was P237,722.15, excluding any amount which the
defendant might be owing to the plaintiffs. Of the purchase price,
Venancio Concepcion and Phil. C. Whitaker paid the sum of
P47,544.43 only. In the Deed, the plaintiffs and Concepcion and
Whitaker agreed, among other things, that the partnership "Palma"
and "San Isidro," formed by the agreement of February 1, 1919,
between Serra, Lazaro Mota, now deceased, and Juan J. Vidaurrazaga
for himself and in behalf of his brother, Felix and Dionisio
Vidaurrazaga, should be dissolved upon the execution of this
contract, and that the said partnership agreement should be totally
cancelled and of no force and effect whatever.
Since the defendant Salvador Serra failed to pay one-half of the
amount expended by the plaintiffs upon the construction of the
railroad line, that is, P113,046.46, as well as Phil. C. Whitaker and
Venancio Concepcion, the plaintiffs instituted the present action
praying: 1) that the deed of February 1, 1919, be declared valid and
binding; 2) that after the execution of the said document the
defendant improved economically so as to be able to pay the
plaintiffs the amount owed, but that he refused to pay either in part
or in whole the said amount notwithstanding the several demands
made on him for the purpose; and 3) that the defendant be sentenced
to pay plaintiffs the aforesaid sum of
P113, 046.46, with the stipulated interest at 10 per cent per annum
beginning June 4, 1920, until full payment thereof, with the costs of
the present action.
Defendant set up three special defenses: 1) the novation of the
contract by the substitution of the debtor with the conformity of the
creditors; 2) the confusion of the rights of the creditor and debtor;
and 3) the extinguishment of the contract.
The court a quo in its decision held that there was a novation of the
contract by the substitution of the debtor, and therefore absolved the
defendant from the complaint with costs against the plaintiffs. With
regard to the prayer that the said contract be declared valid and
binding, the court held that there was no way of reviving the contract
which the parties themselves in interest had spontaneously and
voluntarily extinguished.
ISSUES: 1. Whether or not there was a novation of the contract by the
substitution of the debtor with the consent of the creditor, as
required by Article 1205 of the Civil Code; and
16
 PARTNERSHIP OUTLINE PT. 2
2. Whether or not there was a merger of rights of debtor and creditor
under Article 1192 of the Civil Code.
RULING:
1. NO, there was no novation of the contract. It should be noted that
in order to give novation its legal effect, the law requires that the
creditor should consent to the substitution of a new debtor. This
consent must be given expressly for the reason that, since novation
extinguishes the personality of the first debtor who is to be
substituted by new one, it implies on the part of the creditor a waiver
of the right that he had before the novation which waiver must be
express under the principle that renuntiatio non praesumitur,
recognized by the law in declaring that a waiver of right may not be
performed unless the will to waive is indisputably shown by him who
holds the right. The fact that Phil. C. Whitaker and Venancio
Concepcion were willing to assume the defendant's obligation to the
plaintiffs is of no avail, if the latter have not expressly consented to
the substitution of the first debtor. As has been said, in all contracts
of novation consisting in the change of the debtor, the consent of the
creditor is indispensable, pursuant to Article 1205 of the Civil Code
which reads as follows: Novation which consists in the substitution of
a new debtor in the place of the original one may be made without
the knowledge of the latter, but not without the consent of the
creditor.
2. NO, there was no merger of Rights. Another defense urged by the
defendant is the merger of the rights of debtor and creditor, whereby
under Article 1192 of the Civil Code, the obligation, the fulfillment of
which is demanded in the complaint, became extinguished. It is
maintained in appellee's brief that the debt of the defendant was
transferred to Phil. C. Whitaker and Venancio Concepcion by the
document. These in turn acquired the credit of the plaintiffs by virtue
of the debt; thus, the rights of the debtor and creditor were merged in
one person. The argument would at first seem to be incontrovertible,
but if we bear in mind that the rights and titles which the plaintiffs
sold to Phil. C. Whitaker and Venancio Concepcion refer only to one-
half of the railroad line in question, it will be seen that the credit
which they had against the defendant for the amount of one-half of
the cost of construction of the said line was not included in the sale.
That the plaintiffs sold their rights and titles over one-half of the line.
The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure
the payment of the price, executed a mortgage in favor of the
plaintiffs on the same rights and titles that they had bought and also
upon what they had purchased from Mr. Salvador Serra. In other
words, Phil. C. Whitaker and Venancio Concepcion mortgaged unto
the plaintiffs what they had bought from the plaintiffs and also what
they had bought from Salvador Serra. If Messrs. Phil. C. Whitaker and
Venancio Concepcion had purchased something from Mr. Salvador
Serra, the herein defendant, regarding the railroad line, it was
undoubtedly the one-half thereof pertaining to Mr. Salvador Serra.
This clearly shows that the rights and titles transferred by the
plaintiffs to Phil. C. Whitaker and Venancio Concepcion were only
those they had over the other half of the railroad line. Therefore, as
already stated, since there was no novation of the contract between
the plaintiffs and the defendant, as regards the obligation of the latter
to pay the former one-half of the cost of the construction of the said
railroad line, and since the plaintiffs did not include in the sale, the
credit that they had against the defendant, the allegation that the
obligation of the defendant became extinguished by the merger of the
rights of creditor and debtor by the purchase of Messrs. Phil. C.
Whitaker and Venancio Concepcion is wholly untenable.
BEARNEZA VS. DEQUILLA
Facts:
- In the year 1903, Balbino Dequilla, the herein defendant, and
Perpetua Bearneza formed a partnership for the purpose of
exploiting a fish pond with Perpetua obligating herself to
contribute to the payment of the expenses of the business,
which obligation she made good, and both agreeing to divide
the profits between themselves, which they had been doing
until the death of the said Perpetua in the year 1912
- The deceased left a will in one of the clauses of which she
appointed Domingo Bearnez, the herein plaintiff, as her heir to
succeed to all her rights and interests in the fish pond in
question
- Domingo Bearnez then instituted an action to recover a part of
the fish pond belonging to the decedent, including of the
profits received by the defendant from the years 1913-1919
- The defendant alleges that "the formation of the supposed
partnership between the plaintiff and the defendant for the
exploitation of the aforesaid fish pond was not carried into
effect, on account of the plaintiff having refused to defray the
expenses of reconstruction and exploitation of said fish pond."
and further averred that the right of the plaintiff had already
prescribed
- Judgment was then rendered declaring the plaintiff owner of
one-half of the fish pond but without may awarding him any
damages
- From this judgment the defendant appeals
Issue/Held: W/N the plaintiff has any right to maintain an action for
recovery of the said one-half of the fish pond / NONE
Ratio:
The partnership formed was a particular partnership, it having
had for its subject-matter a specified thing, the exploitation of
the aforementioned fish pond
- Although, as the trial court says in its decision, the defendant,
in his letters to Perpetua or her husband, makes reference to
the fish pond, calling it "our," or "your fish pond," this
reference cannot be held to include the land on which the said
fish pond was built
- It has not been proven that Bearneza participated in the
ownership of the said land
o Therefore, the land on which the fish pond was
constructed did not constitute part of the subject-matter
of the partnership
- This partnership was dissolved by the death of Perpetua
Bearneza
o Neither can it be maintained that the partnership
continued to exist after the death of Perpetua, inasmuch
as it does not appear that any stipulation to that effect
has ever been made by her and the defendant
- The partnership having been dissolved by the death of Perpetua
Bearneza, its subsequent legal status was that of a partnership
in liquidation, and the only rights inherited by her testamentary
heir, the herein plaintiff, were those resulting from the said
liquidation in favor of the deceased partner, and nothing more
- Before this liquidation is made, which up to the present has not
been effected, it is impossible to determine what rights or
interests, if any, the deceased had, the partnership bond having
been dissolved
- There is no sufficient ground for holding that a community of
property existed between the plaintiff and the defendant, it not
being known whether the deceased still had any interest in the
partnership property which could have been transmitted by will
to the plaintiff
- Furthermore, it cannot be said that the partnership continued
between the plaintiff and the defendant. It is true that the
latter's act in requiring the heirs of Perpetua to contribute to the
payment of the expenses of exploitation of the aforesaid fishing
industry was an attempt to continue the partnership, but it is
also true that neither the said heirs collectively, nor the plaintiff
individually, took any action in response to that requirement,
nor made any promise to that effect, and therefore no new
contract of partnership existed
- The decision is hereby REVERSED
17
 PARTNERSHIP OUTLINE PT. 2
LOTA VS. TOLENTINO, 90 Phil. 829
GOQUIOLAY VS. SYCIP, 108 Phil. 947
FACTS: Tan Sin An and Goquiolay entered into a general commercial
partnership under the partnership name "Tan Sin An and Antonio
Goquiolay" for the purpose of dealing in real estate.
The agreement lodged upon Tan Sin An the sole management of the
partnership affairs.
The lifetime of the partnership was fixed at ten years and the Articles
of Co-partnership stipulated that in the event of death of any of the
partners before the expiration of the term, the partnership will not be
dissolved but will be continued by the heirs or assigns of the
deceased partner. But the partnership could be dissolved upon
mutual agreement in writing of the partners.
Goquiolay executed a GPA in favor of Tan Sin An.
The plaintiff partnership purchased 3 parcels of land which was
mortgaged to "La Urbana" as payment of P25,000. Another 46 parcels
of land were purchased by Tan Sin An in his individual capacity
which he assumed payment of a mortgage debt for P35K. A
downpayment and the amortization were advanced by Yutivo and Co.
The two obligations were consolidated in an instrument executed by
the partnership and Tan Sin An, whereby the entire 49 lots were
mortgaged in favor of "Banco Hipotecario"?Tan Sin An died leaving
his widow, Kong Chai Pin and four minor children. The widow
subsequently became the administratrix of the estate.
Repeated demands were made by Banco Hipotecario on the
partnership and on Tan Sin An. ?Defendant Sing Yee, upon request of
defendant Yutivo Sons , paid the remaining balance of the mortgage
debt, the mortgage was cancelled
Yutivo Sons and Sing Yee filed their claim in the intestate proceedings
of Tan Sin An for advances, interest and taxes paid in amortizing and
discharging their obligations to "La Urbana" and "Banco Hipotecario"
Kong Chai Pin filed a petition with the probate court for authority to
sell all the 49 parcels of land. She then sold it to Sycip and Lee in
consideration of P37K and of the vendees assuming payment of the
claims filed by Yutivo Sons and Sing Yee.
Later, Sycip and Lee executed in favor of Insular Development a deed
of transfer covering the 49 parcels of land.?When Goquiolay learned
about the sale to Sycip and Lee, he filed a petition in the intestate
proceedings to set aside the order of the probate court approving the
sale in so far as his interest over the parcels of land sold was
concerned.
Probate court annulled the sale executed by the administratrix w/
respect to the 60% interest of Goquiolay over the properties
Administratrix appealed.? The decision of probate court was set aside
for failure to include the indispensable parties. New pleadings were
filed
The second amended complaint prays for the annulment of the sale in
favor of Sycip and Lee and their subsequent conveyance to Insular
Development. The complaint was dismissed by the lower court hence
this appeal.
PLAINTIFF'S ARGUMENTS: The plaintiffs in their complaint
challenged the authority of Kong Chai Pin to sell the partnership
properties on the ground that she had no authority to sell because
even granting that she became a partner upon the death of Tan Sin
An the power of attorney granted in favor of the latter expired after
his death.
DEFENDANT'S ARGUMENTS: The defendant's defended the validity
of the sale on the theory that she succeeded to all the rights and
prerogatives of Tan Sin An as managing partner.
DECISIONS OF -- LOWER COURT: The trial court sustained the
validity of the sale on the ground that under the provisions of the
articles of partnership allowing the heirs of the deceased partner to
represent him in the partnership after his death Kong Chai Pin
became a managing partner, this being the capacity held by Tan Sin
An when he died.
CA:
ISSUE/S: Whether or not a widow or substitute become also a
general partner or only a limited partner.
Whether or not the lower court err in holding that the widow
succeeded her husband Tan Sin An in the sole management of the
partnership upon Tan's death
Whether or not the consent of the other partners was necessary to
perfect the sale of the partnership properties to Sycip and Lee?
HELD: Kong Chai Pin became a mere general partner. By seeking
authority to manage partnership property, Tan Sin An's widow
showed that she desired to be considered a general partner. By
authorizing the widow to manage partnership property (which a
limited partner could not be authorized to do), Goqulay recognized
her as such partner, and is now in estoppel to deny her position as a
general partner, with authority to administer and alienate
partnership property.
The articles did not provide that the heirs of the deceased would be
merely limited partners; on the contrary, they expressly stipulated
that in case of death of either partner, "the co partnership will have to
be continued" with the heirs or assignees. It certainly could not be
continued if it were to be converted from a general partnership into a
limited partnership since the difference between the two kinds of
associations is fundamental, and specially because the conversion
into a limited association would leave the heirs of the deceased
partner without a share in the management. Hence, the contractual
stipulation actually contemplated that the heirs would become
general partners rather than limited ones.
Separate Opinion: Justice Angelo Bautista
The court affirmed the decision but on different grounds, among
which are: (1) there is no sufficient factual basis to conclude that
Kong Chai Pin executed acts of management to give her the character
of general manager of the partnership, or to serve as basis for
estoppel that may benefit the purchasers of the partnership
properties; (2) the alleged acts of management, even if proven, could
not give Kong Chai Pin the character of general manager for the same
is contrary to law and well- known authorities; (3) even if Kong Chai
Pin acted as general manager she has no authority to sell the
partnership properties as to make it legal and valid; and (4) Kong
Chai Pin had no necessity to sell the properties to pay the obligation
of the partnership and if she did so it was merely to favor the
purchasers who were close relatives to the prejudice of Goquiolay.
The sale of the partnership properties by Kong Chai Pin cannot be
upheld on the ground of estoppel, first, because the alleged acts of
management have not been clearly proven. Moreover, mere
acceptance of the inheritance does not make the heir of a general
partner a general partner himself. He emphasized that heir must
declare that he is entering the partnership as a general partner unless
the deceased partner has made it an express condition in his will that
the heir accepts the condition of entering the partnership as a
prerequisite of inheritance, in which case acceptance of the
inheritance is enough. But here Tan Sin An died intestate.
Kong Chai Pin cannot be deemed to have declared her intention to
become a general partner by exercising acts of management because
as a general rule the heirs of a deceased partner succeed as limited
partners only by operation of law, it is obvious that the heir, upon
entering the partnership, must make a declaration of his character,
otherwise he should be deemed as having succeeded as limited
partner by the mere acceptance of the inheritance. And here Kong
Chai Pin did not make such declaration. Being then a limited partner
upon the death of Tan Sin An by operation of law, the peremptory
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 PARTNERSHIP OUTLINE PT. 2
prohibition contained in Article 148 of the Code of Commerce became
binding upon her and as a result she could not change her status by
violating its provisions not only under the general principle that
prohibited acts cannot produce any legal effect, but also because
under the provisions of Article 147 of the same Code she was
precluded from acquiring more rights than those pertaining to her as
a limited partner. The alleged acts of management, therefore, did not
give Kong Chai Pin the character of general manager to authorize her
to bind the partnership.
Kong Chain Pin could not sell the partnership properties without
authority from the other partners. the relationship between a
managing partner and the partnership is substantially the same as
that of the agent and his principal, the extent of the power of Kong
Chai Pin must, therefore, be determined under the general principles
governing agency. And, on this point, the law says that an agency
created in general terms includes only acts of administration, but
with regard to the power to compromise, sell mortgage, and other
acts of strict ownership, an express power of attorney is required.
Here Kong Chai Pin did not have such power when she told the
properties of the partnership.
Since Kong Chai Pin sold the partnership properties not in line with
the business of the partnership but to pay its obligation without first
obtaining the consent of the other partners the sale is invalid being in
excess of her authority.
Upon the strength of the foregoing considerations, the court grant the
motion for reconsideration
GOQUIOLAY VS. SYCIP, 9 SCRA 663, Resolution of Motion for
Reconsideration
NG CHO CIO VS. NG DIONG, 1 SCRA 275
LICHAUCO VS. LICHAUCO
In 1901, F. Lichauco Hermanos partnership was formed. It was
provided, among others, in the partnership agreement that Faustino
Lichauco will be the managing partner; and that the firm cannot be
dissolved except upon the 2/3 vote of all the partners. In 1904, the firm
wasnt performing well and was unprofitable and so its machineries
were dismantled. In 1905, Eugenia and one other partner demanded
Faustino to make an accounting of the firms assets but Faustino
refused to do so. Belatedly in 1912, Eugenia et al filed a civil suit
against Faustino to compel the latter to perform ac accounting.
Faustino, in his defense, argued that the firm was not dissolved
pursuant to the partnership agreement there being no 2/3 vote from
all the members (Faustino et al are only 1/5 of the firm).
ISSUE: Whether or not Eugenia et al can demand an accounting.
HELD: Yes. The firm was already dissolved in 1904 when its
machineries were dismantled this was a sign that the firm
abandoned and concluded the purpose for it was formed (rice cleaning
business). Upon said dissolution, it was the duty of Faustino to
liquidate the assets and inform his partners. The provision which
requires a 2/3 votes of all the partners to dissolve the firm cannot be
given effect because the same denied the right of a less number of
partners to effect the dissolution especially where the firm has already
sustained huge losses. It would be absurd and unreasonable to hold
that such an association could never be dissolved and liquidated
without the consent and agreement of two-thirds of its partners,
notwithstanding that it had lost all its capital, or had become bankrupt,
or that the enterprise for which it had been organized had been
concluded or utterly abandoned.
SONCUYA VS. DE LUNA, 67 PHIL. 646
Facts: Petitioner filed a complaint against respondent for damages as
a result of the fraudulent administration of the partnership, Centro
Escolar de Senoritas of which petitioner and the deceased Avelino
Librada were members. For the purpose of adjudicating to plaintiff
damages which he alleges to have suffered as a partner, it is
necessary that a liquidation of the business be made that the end
profits and losses maybe known and the causes of the latter and the
responsibility of the defendant as well as the damages in which each
partner may have suffered, maybe determined.
Issue: Whether the petitioner is entitled to damages.
Ruling: According to the Supreme Court the complaint is not
sufficient to constitute a cause of action on the part of the plaintiff as
member of the partnership to collect damages from defendant as
managing partner thereof, without previous liquidation. Thus, for a
partner to be able to claim from another partner who manages the
general co-partnership, allegedly suffered by him by reason of the
fraudulent administration of the latter, a previous liquidation of said
partnership is necessary.
SINGSONG VS. ISABELA SAWMILL, 88 SCRA 623
Facts: In 1951, defendants entered into a contract of partnership
under the firm name Isabela Sawmill. In 1956 the plaintiff sold to
the partnership a motor truck and two tractors. The partnership was
not able to pay their whole balance even after demand was made.
One of the partners withdrew from the partnership but instead of
terminating the said partnership it was continued by the two
remaining partners under the same firm name. Plaintiffs also seek the
annulment of the assignment of right with chattel mortgage entered
into by the withdrawing partner and the remaining partners. The
appellants contend that the chattel mortgage may no longer be
nullified because it had been judicially approved and said chattel
mortgage had been judicially foreclosed.
Issue: Whether the withdrawal of one of the partners dissolved the
partnership.
Ruling: It does not appear that the withdrawal of the partner was not
published in the newspapers. The appellees and the public in general
had a right to expect that whatever, credit they extended to the
remaining partners could be enforced against the properties of the
partnership. The withdrawing partner cannot be relieved from her
liability to the creditor of the partnership due to her own fault by not
insisting on the liquidation of the partnership. Though she 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. Technically, the partnership was dissolved by
the withdrawal of one of the partners. Through her acts of entering
into a memorandum with the remaining partners misled the
creditors that they were doing business with the partnership. Hence,
from the order of the lower court ordering the withdrawing partner
to pay the plaintiffs, she is thus entitled for reimbursement from the
remaining partners.
PO YENG CHEO VS. LIM KA YAN, 44 Phil. 172
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 PARTNERSHIP OUTLINE PT. 2
LAGUNA TRANSPORTATION CO., INC. VS. SOCIAL SECURITY
SYSTEM
FACTS
SSS required Petitioner to register as a member and to
remit the premiums and contributions due from all the
employees.
Bian Transportation Co., sold part of the lines and
equipment it operates to Mercado et al.
After the sale, the vendees formed an unregistered
partnership under the name of Laguna Transportation
Company which continued to operate the lines and
equipment bought from Bian Transpo in addition to the
new lines it was able to secure from Public Service
Commission.
The original partners with 2 new members organized
Laguna Transport Company. They requested to be
exempted from coverage by the System on the ground that
it started operation only on June 20, 1956 and registered w
the SEC on Nov 11, 1957.
Petitioner filed a petition praying that an order be issued
declaring that it is not bound to register as a member of
SSS and therefore, not required to pay the contributions
required under the Social Security Act.
SSS filed an answer praying for its dismissal due to
petitioners failure to exhaust administrative remedies and
for a declaration that petitioner is covered by the said act
since the petitioners business has been in operation for at
least 2 years prior to Sept 1, 1957
Trial Court declared that the petitioner was an employer
had been in actual operation for at least 2 years, and hence,
subject to compulsory coverage under the law.
ISSUE: WON Petitioner is covered by the SS Law YES.
DISPOSITIVE: Judgment is hereby Affirmed.
RATIO:
Although a corporation once formed is conferred a
juridical personality separate and distinct from the
persons composing it, it is but a legal fiction introduced for
purposes of convenience and to subserve the ends of
justice. The concept cannot be extended to a point beyond
its reasons and policy, and when invoked in support of an
end subversive of this policy, will be disregarded by the
courts.
The weight of authority supports the view that where a
corporation was formed by, and consisted of members of a
partnership whose business and property was conveyed
and transferred to the corporation for the purpose of
continuing its business, in payment for which corporate
capital stock was issued, such corporation is presumed to
have assumed partnership debts, and is prima facie liable
therefor.
The reason for the rule is that the members of the
partnership may be said to have simply put on a new coat,
or taken on a corporate cloak, and the corporation is a
mere continuation of the partnership.
SISON VS. MCQUAID
Principle: Liquidation shall happen before a partner may claim his
share of profit from the partnership.
Facts: Plaintiff brought an action in the CFI against defendant.
Defendant borrowed from him money (P 2,210) to enable her to pay
her obligations and to add to her capital in her lumber business. She
could not pay so she proposed to take plaintiff as a partner in her
business, plaintiff to contribute the P 2,210 due him from defendant.
Before the last World War, the partnership sold
230,000board ft. of lumber to the US Army for P 13,800.00.
Defendant refused to deliver of it (P 6,900.00) to plaintiff despite
his repeated demands. Plaintiff filed an action to compel defendant to
pay him his half of the profit from the partnership. The case was
dismissed upon the ground of prescription.
Issue: Whether or not plaintiff is entitled to the sum he claims
Held: NO. Order of dismissal was affirmed, but on the ground that the
complaint states no cause of action.
Ratio: It is not clear from the complaint just when the cause of action
accrued. Thus, the dismissal of the case is erroneous. However, order
should be retained on the ground that the complaint has no cause of
action. Plaintiff seeks to recover from defendant one-half of the
purchase price of lumber sold by the partnership to the United States
Army. But his complaint does not show why he should be entitled to
the sum he claims. It does not allege that there has been a liquidation
of the partnership business and the said sum has been found to be
due him as his share of the profits. The proceeds from the sale of a
certain amount of lumber cannot be considered profits until costs
and expenses have been deducted. Moreover, the profits of the
business cannot be determined by taking into account the result of
one particular transaction instead of all the transactions had. Hence,
the need for a general liquidation before a member of a partnership
may claim a specific sum as his share of the profits.
DE LA ROSA VS. ORTEGA GO-COTAY, 48 Phil. 605 Art. 1818
Chinamen Go-Lio and Vicente Go-Sengco formed a society for the
purchase and sale of articles of commerce, and they opened a store for
this purpose. Later Go-Lio went to China. Vicenyte Go-Sengco died and
his son Enrique Ortega Go-Cotay took charge of the businesses. Go-Lio
died in China in October, 1916, Ildefonso de la Rosa was administrator
by the CFI for the intestate estate of his deceased father.
de la Rosa requested Go-Cotay to wind up the business and
to deliver to him the portion corresponding to the deceased Go-Lio.
Go-Cotay denied the petition, alleging that the business was his
exclusively. In view of this denial, de la Rosa filed with the CFI a
complaint against Co-Cotay in which he prayed that the defendant be
sentenced to deliver to the plaintiff one-half of all the property of the
partnership. The assets of the partnership, as well as the value of its
property, could not be determined when making the liquidation
because there was no inventory and for this reason it was not possible
to determine the capital of the partnership. The plaintiff, however,
seems to be agreeable to considering the initial partnership capital as
the capital at the time of the winding up of the business.
ISSUE: Should the partnership bear the losses incurred under the
management of defendant?
RULING: NO. Go-Cotay assumed complete responsibility for the
business by objecting to the appointment of a receiver as prayed for
by plaintiff, and giving a bond therefor. Until that date his acts were
those of a managing partner, binding against the partnership; but
thereafter his acts were those of a receiver whose authority is
contained in section 175 of the Code of Civil Procedure.
A receiver has no right to carry on and conduct a business unless he is
authorized or directed by the court to do some, and such authority is
not derived from an order of appointment to take and preserve the
property. It does not appear that the defendant as a receiver was
authorized by the court to continue the business of the partnership in
liquidation. This being so, he is personally liable for the losses that the
business may have sustained. The partnership must not, therefore, be
liable for the acts of the defendant in connection with the management
of the business until August 3, 1918, the date when he ceased to be a
member and manager in order to become receiver.
NOTES:
PARTNERSHIPS; LIQUIDATION OF THEIR BUSINESS; DETERMINING
PROFITSWhen in liquidating a partnership the profits for a given
period of time cannot be exactly determined for lack of evidence, but
the profits for certain periods prior and subsequent thereto are
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 PARTNERSHIP OUTLINE PT. 2
known, the profits corresponding to the said given time may be
determined by finding the average of those profits already known and
multiplying it by the length of the time included between said periods.
MANAGING PARTNER; His AUTHORITY; RECEIVER.When to
prevent a receiver from taking charge of a business in dissolution, the
managing partner gives a bond and continues the business, he ceases
to be managing partner from that time in order to become receiver;
and while before that date the property was liable for his acts, yet that
is not the case with his subsequent acts, which are regulated by the
provisions of section 175 of the Code of Civil Procedure, and without
express judicial authority he cannot continue the business of the
partnership, being personally liable for the losses should he do so. (34
Cyc., 296.)
MAGDUSA VS. ALBARAN
The main argument of appellant is that the appellees' action can not
be entertained, because in the distribution of all or part of a
partnership's assets, all the partners have no interest and are
indispensable parties without whose intervention no decree of
distribution can be validly entered. This argument was considered
and answered by the Court of Appeals in the following words:
We now come to the last issue involved. While finding that
some amounts are due the plaintiffs, the lower court withheld
an award in their favor, reasoning that a judgment ordering the
defendant to pay might affect the rights of other partners who
were not made parties in this case. The reason cited by the
lower court does not constitute a legal impediment to a
judgment for the plaintiffs in this case. This is not an action for
a dissolution of a partnership and winding up of its affairs or
liquidation of its assets in which the interest of other partners
who are not brought into the case may be affected. The action
of the plaintiffs is one for the recovery of a sum of money with
Gregorio Magdusa as the principal defendant. The partnership,
with Gregorio Magdusa as managing partner, was brought into
the case as an alternative defendant only. Plaintiffs' action was
based on the allegation, substantiated in evidence, that
Gregorio Magdusa, having taken delivery of their shares, failed
and refused and still fails and refuses to pay them their claims.
The liability, therefore, is personal to Gregorio Magdusa, and
the judgment should be against his sole interest, not against
the partnership's although the judgment creditors may satisfy
the judgment against the interest of Gregorio Magdusa in the
partnership subject to the condition imposed by Article 1814
of the Civil Code.
We do not find the preceding reasoning tenable. A partner's share
can not be returned without first dissolving and liquidating the
partnership (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 177), for the
return is dependent on the discharge of the creditors, whose claims
enjoy preference over those of the partners; and it is self-evident that
all members of the partnership are interested in his assets and
business, and are entitled to be heard in the matter of the firm's
liquidation and the distribution of its property. The liquidation
Exhibit "C" is not signed by the other members of the partnership
besides appellees and appellant; it does not appear that they have
approved, authorized, or ratified the same, and, therefore, it is not
binding upon them. At the very least, they are entitled to be heard
upon its correctness.
In addition, unless a proper accounting and liquidation of the
partnership affairs is first had, the capital shares of the appellees, as
retiring partners, can not be repaid, for the firm's outside creditors
have preference over the assets of the enterprise (Civ. Code, Art.
1839), and the firm's property can not be diminished to their
prejudice. Finally, the appellant can not be held liable in his personal
capacity for the payment of partners' shares for he does not hold
them except as manager of, or trustee for, the partnership. It is the
latter that must refund their shares to the retiring partners. Since not
all the members of the partnership have been impleaded, no
judgment for refund can be rendered, and the action should have
been dismissed.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is
reversed and the action ordered dismissed, without prejudice to a
proper proceeding for the dissolution and liquidation of the common
enterprise. Costs against appellees.
LIM TANHU VS. REMOLETE
FACTS: Tan alleged that she is the widow of Tee Hoon Lim Po Chuan,
who was a partner in the commercial partnership, Glory Commercial
Company with Antonio Lim Tanhu and Alfonso Ng Sua". Defendant
Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and
Eng Chong Leonardo, through fraud and machination, took actual and
active management of the partnership and although Tee Hoon Lim Po
Chuan was the manager of Glory Commercial Company, defendants
managed to use the funds of the partnership to purchase lands and
buildings in the cities of Cebu, Lapulapu, Mandaue, and the
municipalities of Talisay and Minglanilla.
She alleged in her complaint that after the death of Tee Hoon Lim Po
Chuan, the defendants, without liquidation, continued the business of
Glory Commercial Company, by purportedly organizing a corporation
known as the Glory Commercial Company, Incorporated and
sometime in the month of November, 1967, defendants, particularly
Antonio Lim Tanhu, by means of fraud deceit, and
misrepresentations did then and there, induce and convince her to
execute a quitclaim of all her rights and interests, in the assets of the
partnership of Glory Commercial Company.
Thereafter, in the year 1968-69, the defendants who had earlier
promised to liquidate the aforesaid properties and assets in favor,
among others of plaintiff and until the middle of the year 1970 when
the plaintiff formally demanded from the defendants the accounting
of real and personal properties of the Glory Commercial Company,
defendants refused and stated that they would not give the share of
the plaintiff.
ISSUE: Whether Tan has a right over the liquidated properties of the
partnership
HELD: No, Tan has no right over the liquidated properties of the
partnership
The Supreme Court held that there is no alternative but to hold that
plaintiff Tan Put's allegation that she is the widow of Tee Hoon Lim
Po Chuan has not been satisfactorily established and that, on the
contrary, the evidence on record convincingly shows that her relation
with said deceased was that of a common-law wife.
Moreover, the Supreme Court said that the lower courts committed
an error by awarding 1/3 of the partnership properties to Tan
because there has been no liquidation proceedings yet. And if there
has not yet been any liquidation of the partnership, the only right
plaintiff could have would be to what might result after much
liquidation to belong to the deceased partner (her alleged husband)
and before this is finished, it is impossible to determine, what rights
or interest, if any the deceased had. In other words, no specific
amounts or properties may be adjudicated to the heir or legal
representative of the deceased partner without the liquidation being
first terminated.
BONNEVIE S. HERNANDEZ
Complaint to recover P115,312.50 with interests as their alleged
share in the profits of partnership
Plaintiffs with other associates formed a secret partnership for
the purpose of acquiring the plants and other properties
of Meralco.
No formal articles were drawn for it was the purpose of the
members to incorporate once the deal had been consummated.
Negotiations for the purchase was commenced, but the results
were not good.
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 PARTNERSHIP OUTLINE PT. 2
Defendant was taken in as a member of the partnership so that A settlement was agreed upon on the very day the partnership was
he could push the deal through, and to that end he was given the dissolved.
necessary power of attorney. When plaintiffs and Judge Jaime Reyes withdrew from the partnership,
Using partnership funds, defendant was able to buy the the only condition was that they were to be repaid their
Meralco properties for P122,000. P40,000 was paid as initial contributions or investments within three days from said date.
investment. The remaining P82,000 will be paid in two installments on Condition was fulfilled when on the following day they were
July 31, 1947 and Jan 31, 1948 reimbursed the respective amounts due them pursuant to the
A penal clause was included that in case of default the initial agreement.
payment will be forfeited in favor of Meralco. SC: acceptance by the withdrawing partners of their investment was
They formed a corporation named Bicol Electric Company. understood and intended by all the parties as a final settlement of
Before the incorporation Judge Reyes (not a party) and the their rights or claim the withdrawing partners might have in the
plaintiffs withdrew from the partnership. The withdrawing dissolved partnership. Such being the case they are now precluded
partners were given their original investments right after. from claiming any share in the alleged profits, should there be any, at
the time of the dissolution.
Following the dissolution of the partnership, the members who
preferred to remain in the business went ahead with the formation of
the corporation, taking in new associates as stockholders.
Limited Partnership Articles 1843 to 1867
Hernandez, in fulfillment of his trust, made a formal assignment
of the Meralco properties to the treasurer of the corporation, giving
them a book value of P365,000, in return for which the corporation
issued, to the various subscribers to its capital stock, shares of stock
of the total face value of P225,000 and assumed the obligation of
paying what was still due the Meralco on the purchase price.
On its first year, the company was losing money but the business
became profitable eventually.
Two years from their withdrawal from the partnership,
plaintiffs brought the present suit against Jaime Hernandez,
claiming a share in the profit the latter is supposed to have made from
the assignment of the Meralco properties to the corporation,
estimated by plaintiffs to be P225,000 and their share of it to be
P115,312.50.
Defendant's answer denies that he has made any profit out of
the assignment in question and alleges that in any event plaintiffs,
after their withdrawal from the partnership, ceased to have any
further interest in the subsequent transactions of the remaining
members.

Issues: WON the partnership had realized profit out of the Meralco
properties made by the defendant to the corporation. No.
If there was indeed a profit, WON the plaintiffs are entitled for their
share out of such profit. No.

Held:
1. It is true that the value set for those properties in the deed of
assignment was P365,000 when the acquisition price was only
P122,000.
The difference between the two sums was really made out of
the transaction, for the assignment was not made for cash but in
payment for subscriptions to shares of stock in the assignee, and
while those shares had a total face value of P225,000 this is not
necessarily their real worth.

2. Assuming that the assignment actually brought profit to the

partnership, it plaintiffs were still not entitled to receive from the
profit.
Plaintiffs maintain that the latter should be held liable for
damages caused to them, consisting of the loss of their share of the
profits, due to defendant's failure to perform his duty as a
liquidator of the dissolved partnership
On the theory that as managing partner, it was defendant's duty
to liquidate its affairs upon its dissolutions.
Plaintiffs never asked for liquidation during the dissolution.
No liquidation was called for because when plaintiffs withdrew from
the partnership the understanding was that after they had been
reimbursed their investment, they were no longer to have any further
interest in the partnership or its assets and liabilities.
As a general rule, when a partner retires from the firm, he is
entitled to the payment of what may be due him after
liquidation. But certainly no liquidation is necessary where there is
already a settlement or an agreement as to what the retiring
partner shall receive.

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