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Torres v.

Court of Appeals (320 SCRA 428) without its designation and description, they cannot
II. TOPIC: Article 1773 be subject to inscription in the Registry of Property,
and their contribution cannot prejudice third
III. FACTS:
persons. This will result in fraud to those who
Petitioners, sisters Antonia Torres and contract with the partnership in the belief in the
Emeteria Baring, entered into a "joint venture efficacy of the guaranty in which the immovables
agreement" with Respondent Manuel Torres for the may consist. Thus, the contract is declared void by
development of a parcel of land into a the law when no such inventory is made. The case
subdivision. Pursuant to the contract, they executed at bar does not involve third parties who may be
a Deed of Sale covering the said parcel of land in prejudiced. Also, petitioners themselves invoke the
favor of respondent, who then had it registered in allegedly void contract as basis for their claim that
his name. By mortgaging the property, respondent respondent should pay them 60 percent of the
obtained from Equitable Bank a loan which, under value of the property; they cannot in one breath
the Joint Venture Agreement, was to be used for deny the contract and in another recognize it,
the development of the subdivision. All three of depending on what momentarily suits their purpose.
them also agreed to share the proceeds from the In short, the alleged nullity of the partnership will
sale of the subdivided lots. The project did not push not prevent courts from considering the Joint
through, and the land was subsequently foreclosed Venture Agreement an ordinary contract from which
by the bank. Petitioners alleged that the project the parties rights and obligations to each other may
failed because of respondents lack of funds or be inferred and enforced.
means and skills. They add that respondent used
the loan in furtherance of his own company. On the
other hand, respondent alleged that he used the
loan to implement the Agreement. With the said
amount, he was able to effect the survey and the
subdivision of the lots, secured the Lapu Lapu City
Councils approval of the subdivision project which
he advertised in a local newspaper and caused the
construction of roads, curbs and gutters. Also, he
entered into a contract with an engineering firm for
the building of sixty low-cost housing units and
actually even set up a model house on one of the
subdivision lots.
Respondent claimed that the subdivision
project failed, however, because petitioners and
their relatives had separately caused the
annotations of adverse claims on the title to the
land, which eventually scared away prospective
buyers. Despite his requests, petitioners refused to
cause the clearing of the claims, thereby forcing
him to give up on the project.
Subsequently, petitioners filed a criminal
case for estafa against respondent and his wife,
who were however acquitted. Thereafter, they filed
the present civil case which, upon respondent's
motion, was later dismissed by the trial court. In
affirming the trial court, the Court of Appeals held
that petitioners and respondent had formed a
partnership.
Petitioners argue that the Joint Venture
Agreement is void under Article 1773 of the Civil
Code. They contend that since the parties did not
make, sign or attach to the public instrument an
inventory of the real property contributed, the
partnership is void.
IV. ISSUE/S: Whether or not the Partnership
Agreement is void under Article 1773 of the Civil
Code
V. RULING:
NO. Article 1773 was intended primarily to
protect third persons. Thus, Arturo M. Tolentino
states that under the provision which is a
complement of Article 1771, the execution of a
public instrument would be useless if there is no
inventory of the property contributed, because
8. Banatin, Alyssa Monique T. Also, the father of the defendants, was the
I. TITLE: Smith v. Lopez (5 Phil 78) administrator of the property; that having been
II. TOPIC: Article 1775 notified of an order of the Board of Health he took
the necessary steps to comply with the same,
III. FACTS:
calling upon one of the plaintiffs to do the work
Plaintiffs Messrs. Smith and Reyes, as required, and that he made certain payments on
proprietors of the Philippine Gas Light Company, account. Nicasio Lopez did all this as a voluntary
brought this action against the defendant sisters, agent of the actual owners of the house, and,
Jacinta and Ignacia Lopez de Pineda, to recover although there is no proof of an express power of
from them the sum of 3,270 pesos, Mexican attorney, it cannot be denied that there was an
currency, for work performed in connection with the implied power, because the defendants did not
installation of a water system, urinals, closets, object to the work being done on the house, which
shower baths, and drain pipes in their house at the was really benefited and improved by such work.
district of Santa Cruz, the same being the property For this reason it is evidently just that the owners
of the defendants. The plaintiffs alleged that they be held liable for the cost of the work and the value
had complied with the agreement made with the of the material used therein. They cannot now
father, Nicasio Lopez, of the defendants, the allege that there was no contract and that they did
administrator of the property, and that the labor not agree to pay for such labor and material. There
performed and the material used were reasonably was a quasi-contract which created certain
worth the sum of 4,020 pesos, Mexican currency, of reciprocal obligations between them and the
which sum they acknowledged having received 750 plaintiffs. The defendants never objected to the
pesos, and prayed that judgment be entered performance of the necessary work. It therefore
against the defendants and in favor of the plaintiffs must be presumed that they, the defendants,
for the sum of 3,270 pesos, together with accrued approved of the work done upon the house and
interest and costs of proceedings, defendants ratified the action of their father in the premises as
having refused to pay the same as agreed. though he acted under an express power from
Attorney Gregorio Pineda appeared in them. But, even assuming that the defendants did
behalf of the defendants, denied all the facts set out not expressly ratify or approve the action of their
in the complaint, and alleged that it did not appear father, the fact remains that the house was
from the pleadings that plaintiffs had ever entered improved by said work, and, for this reason, the
into a mercantile partnership under the aforesaid owners of the premises are liable for the obligations
name and style, or that any such partnership legally incurred by their agent, Lopez, for their benefit and
existed; that Nicasio Lopez was not the advantage.
administrator nor was he empowered by the As to the error relating to the price of the
defendants to make any contract for repairs and work fixed by the court in the judgment, it should be
improvements to and in the said house; that there noticed that when no price has been expressly
was no allegation as to the extent and importance stipulated in a contract of this nature, it is
of the work performed on the premises nor as to understood that the contracting parties have
the quality or quantity of the materials used; that impliedly agreed to pay and receive the usual and
the work was not reasonably worth 4,020 pesos; reasonable value of the services rendered.
and that, assuming that plaintiffs had performed Otherwise it must be presumed that the parties
work in the said house pursuant to an agreement intended that the price be fixed by experts in case
with Nicasio Lopez, without defendants authority, they fail to agree as to the same. Further, a
the defendants set up a counterclaim for 600 contract for services or work to be performed exists
pesos, Mexican currency, for damages caused to not only where a certain and definite compensation
the house as a result of said work. has been expressly agreed upon, but also where
The court entered judgment against the the same can be ascertained from the customs and
defendants and in favor of the complainants. usages of the place in which such services were
rendered.
IV. ISSUE/S: Whether or not the court below erred
in recognizing plaintiffs capacity to sue as a
partnership, there being evidence to show that they
were legally organized as such.
V. RULING:
NO, there was no such error. Messrs. Smith
and Reyes executed the contract in their own
individual capacity and not in the name of any
partnership. They acted as co-owners of the
Philippine Gas Light Company. In their complaint
they sought to enforce a legitime right which they
had as such co-owners. The plaintiffs were not
seeking to enforce a right pertaining to a legal
entity. They were not obliged to register in the
Mercantile Registry. They were merely merchants
having a common interest in the business. They
were under no obligation to register.
9. Banatin, Alyssa Monique T. might be induced to come in with him and supply
I. TITLE: Lyons v. Rosenstock (56 Phil 632) part of the means necessary to carry the enterprise
II. TOPIC: Article 1776-1783 through. It will be remembered that, when Elser
obtained the loan of P50,000 to complete the
III. FACTS:
amount needed for the first payment on the San
Prior to his death, Henry W. Elser had been Juan Estate, the lender, Uy Siuliong, insisted that
a resident of the City of Manila where he was he should procure the signature of the Fidelity &
engaged during the years with which we are here Surety Co. on the note to be given for said loan.
concerned in buying, selling, and administering real But before signing the note with Elser and his
estate. In several ventures which he had made in associates, the Fidelity & Surety Co. insisted upon
buying and selling property of this kind the plaintiff, having security for the liability thus assumed by it.
E. S. Lyons, had joined with him, the profits being To meet this requirements Elser mortgaged to the
shared by the two in equal parts. Lyons, whose Fidelity & Surety Co. the equity of redemption in the
regular vocation was that of a missionary, or property owned by himself and Lyons on Carriedo
missionary agent, of the Methodist Episcopal Street. This mortgage was executed, at which time
Church, went on leave to the United States and Elser expected that Lyons would come in on the
was gone for nearly a year and a half. On the eve purchase of the San Juan Estate. But when he
of his departure Elser made a written statements learned from the letter from Lyons that the latter
showing that Lyons was, at that time, half owner had determined not to come into this deal, Elser
with Elser of three particular pieces of real property. began to cast around for means to relieve the
Concurrently with this act Lyons execute in favor of Carriedo property of the encumbrance. For this
Elser a general power of attorney empowering him purpose, he addressed a letter to the Fidelity &
to manage and dispose of said properties at will Surety Co., asking it to permit him to substitute a
and to represent Lyons fully and amply, to the property owned by himself and 1,000 shares of the
mutual advantage of both. During the absence of J. K. Pickering & Company, in lieu of the Carriedo
Lyons two of the pieces of property above referred property, as security. The Fidelity & Surety Co.
to were sold by Elser, leaving in his hands a single agreed to the proposition. Fidelity & Surety Co.
piece of property located at 616-618 Carriedo thereupon executed a cancellation of the mortgage
Street, in the City of Manila. on the Carriedo property and delivered it to Elser.
The attention of Elser was drawn to a piece But notwithstanding the fact that these documents
of land near the City of Manila, and he discerned were executed and delivered, the new mortgage
therein a fine opportunity for the promotion and and the release of the old were never registered;
development of a suburban improvement. This and, thereafter, Elser returned the cancellation of
property, which will be herein referred to as the San the mortgage on the Carriedo property and took
Juan Estate. To afford a little time for maturing his back from the Fidelity & Surety Co. the new
plans, Elser purchased an option on this property mortgage on the M. H. del Pilar property, together
and when this option was about to expire, he paid with the 1,000 shares of the J. K. Pickering &
P15,000 more for an extension of the option, with Company which he had delivered to it.
the understanding in both cases that, in case the As the development of the San Juan Estate
option should be exercised, the amounts thus paid was a success from the start, Elser paid the note of
should be credited as part of the first payment. The P50,000 to Uy Siuliong, although it was not due
amounts paid for this option and its extension were until more than five months later. It will thus be
supplied by Elser entirely from his own funds. In the seen that the mortgaging of the Carriedo property
end he was able from his own means, and with the never resulted in damage to Lyons. It is also plain
assistance which he obtained from others, to that no money actually deriving from this mortgage
acquire said estate. The amount required for the was ever applied to the purchase of the San Juan
first payment was P150,000, and it was necessary Estate. What really happened was the Elser merely
to raise the remainder by obtaining a loan for subjected the property to a contingent liability, and
P50,000. This amount was finally obtained from a no actual liability ever resulted therefrom.
Chinese merchant of the city named Uy Siuliong.
The case for the plaintiff supposes that,
This loan was secured through Uy Cho Yee, a son
when Elser placed a mortgage for P50,000 upon
of the lender; and in order to get the money it was
the equity of redemption in the Carriedo property,
necessary for Elser not only to give a personal note
Lyons, as half owner of said property, became, as it
signed by himself and his two associates in the
were, involuntarily the owner of an undivided
projected enterprise, but also by the Fidelity &
interest in the property acquired partly by that
Surety Company. The money thus raised was
money; and it is insisted for him that, in
delivered to Elser by Uy Siuliong. With this money
consideration of this fact, he is entitled to the four
and what he already had in bank Elser purchased
hundred forty-six and two-thirds shares of J. K.
the San Juan Estate. For the purpose of the further
Pickering & Company, with the earnings thereon,
development of the property a limited partnership
as claimed in his complaint.
had, about this time, been organized by Elser and
three associates, under the name of J. K. Pickering IV. ISSUE/S: Whether or not there was a general
& Company; and when the transfer of the property relation of partnership
was effected the deed was made directly to this
V. RULING:
company.
NO, there was clearly no general relation of
While these negotiations were coming to a
partnership, under Article 1678 of the Civil Code. It
head, Elser contemplated and hoped that Lyons
is clear that Elser, in buying the San Juan Estate, 1. Brito, John Patrick T.
was not acting for any partnership composed of I. TITLE: Ortega v CA (245 SCRA 529)
himself and Lyons, and the law cannot be distorted II. TOPIC: Article 1784
into a proposition which would make Lyons a
participant in this deal contrary to his express III. FACTS:
determination. If Elser had used any money
actually belonging to Lyons in this deal, he would The law firm of ROSS, LAWRENCE,
under Article 1724 of the Civil Code and Article 264 SELPH and CARRASCOSO was duly registered in
of the Code of Commerce, be obligated to pay the Mercantile Registry and reconstituted with the
interest upon the money so applied to his own use. Securities and Exchange Commission. The SEC
Under the law prevailing in this jurisdiction a trust records show that there were several subsequent
does not ordinarily attach with respect to property amendments changing the name of the firm
acquired by a person who uses money belonging to eventually leading up to BITO, MISA & LOZADA.
another. Of course, if an actual relation of Partner Misa decided to withdraw and retire from
partnership had existed in the money used, the the firm stating in a letter to the company that "The
case might be different; and much emphasis is laid partnership has ceased to be mutually satisfactory
in the appellant's brief upon the relation of because of the working conditions of our
partnership which, it is claimed, existed. employees including the assistant attorneys.

It seems to be supposed that the doctrines Misa filed with the Securities Investigation
of equity worked out in the jurisprudence of and Clearing Department (SICD) a petition for
England and the United States with reference to dissolution and liquidation of partnership which was
trust supply a basis for this action. The doctrines ruled in favor of respondents stating that Misas
referred to operate, however, only where money withdrawal did not dissolve the partnership. The
belonging to one person is used by another for the said ruling was overturned by SEC upon appeal.
acquisition of property which should belong to both;
and it takes but little discernment to see that the being a partnership at will, the law firm could be
situation here involved is not one for the application dissolved by any partner at any time, such as by his
of that doctrine, for no money belonging to Lyons or withdrawal therefrom, regardless of good faith or
any partnership composed of Elser and Lyons was bad faith, since no partner can be forced to
in fact used by Elser in the purchase of the San continue in the partnership against his will.
Juan Estate. Of course, if any damage had been
The death of the two partners, as well as
caused to Lyons by the placing of the mortgage
the admission of new partners, during the
upon the equity of redemption in the Carriedo
pendency of the case with the CA prompted Misa to
property, Elser's estate would be liable for such
renew his application for receivership which was
damage. But it is evident that Lyons was not
again denied by CA as there was no showing that
prejudice by that act.
the assets of the partnership were in danger of
being lost, removed or materially impaired. CA
affirmed the decision of SEC.

IV. ISSUE/S:
a) Whether or not the partnership is a
partnership at will.
b) Whether or not the withdrawal of private
respondent dissolved the partnership regardless of
his good or bad faith

V. RULING:

a) YES. A partnership that does not fix its


term is a partnership at will. The birth and life of a
partnership at will is predicated on the mutual
desire and consent of the partners. Furthermore,
what the law contemplates as Purpose is a
specific undertaking or "project" which has a
definite or definable period of completion.

b) YES. The doctrine of delectus


personae allows them to have the power, although
not necessarily the right, to dissolve the
partnership. Any one of the partners may, at his
sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good
faith, not that the attendance of bad faith can
prevent the dissolution of the partnership but that it
can result in a liability for damages.
2. Brito, John Patrick T. V. RULING:
I. TITLE: Uy v Puzon (79 SCRA 598)
II. TOPIC: Article 1786 a.) YES. There was failure on the part of
Puzon to contribute capital to the partnership.
III. FACTS: When his load with PNB was approved, he only
gave P60, 000 to Uy; P40, 000 was for
Puzon had a contract with the Republic of reimbursement to the payments made by Uy and
the Philippines for the construction of the the other P20, 000 was for the capital contribution.
Ganyangan Bato Section of the Pagadian Thereafter, Puzon never made additional
Zamboanga City Road and five (5) other bridges in contribution. (Art 1788)
Malangas-Ganyangan Road. Puzon sought the
financial assistance of Uy and proposed the Also, it was found by the SC that Puzon
creation of a partnership where the profits will be misapplied partnership funds by assigning all
divided equally between them. Uy agreed, resulting payments for the projects to PNB. Such assignment
to the creation of U.P. Construction Company was prejudicial to the partnership since the
engaged as subcontractor of the construction partnership only received a small share from the
projects. total payments made by the Bureau of Public
Highways. As a result, the partnership was unable
The capital of the partnership would be to discharge its obligations. Here, the Court ordered
P100, 000.00 where they will each contribute P50, Puzon to reimburse whatever amount Uy had
000.00. However, since Puzon was short in cash invested in or spent for the partnership on account
they agreed that Uy would first advance his of construction projects. The amount P200, 000 as
contribution to the partnership in the amount of compensatory damages was also awarded in favor
40,000 which will be used by Puzon to clear his of Uy.
collaterals from encumbrances for his application of
loan with the PNB, for the amount of 150,000, to be b) YES. The award of P200, 000 as his
approved. Upon the approval of his loan Puzon share in the unrealized profits of the partnership is
gave P40, 000.00 for the reimbursement of Uy's proper. Under Article 2200 of the Civil Code,
contribution to the partnership which was used to indemnification for damages shall comprehend not
clear the title to Puzon's property, and the P20, only the value of the loss suffered, but also that of
000.00 as Puzon's contribution to the partnership the profits which the obligee failed to obtain. In
capital. other words lucrum cessans is also a basis for
indemnification. There is no doubt Uy failed to
To guarantee the repayment of the loan, make profits because of Puzon's breach of
Puzon, without the knowledge and consent of contract. The partnership showed some profits
Uy, assigned to the PNB all the payments to be even though the profit and loss statement showed
received on account of the contracts with the net loss; it may be due to error in accounting.
Bureau of Public Highways for the construction of
the projects. Had the appellant not been remiss in his
As time passed and the financial demands obligations as partner and as prime contractor of
of the projects increased, Uy found difficulty in the construction projects in question as he was
obtaining the necessary funds to pursue the bound to perform pursuant to the partnership and
construction projects. William Uy correspondingly subcontract agreements, and considering the fact
called on Puzon to comply with his obligations that the total contract amount of these two projects
under the terms of their partnership agreement and is P2, 327,335.76, it is reasonable to expect that
to place, at lest, his capital contribution at the the partnership would have earned much more than
disposal of the partnership. For failure to reach an the P334, 255.61 We have hereinabove indicated.
agreement, Puzon, decided to terminate the sub- The award, therefore, made by the trial court of the
contract and assume all responsibilities in the amount of P200, 000, as compensatory damages,
construction as the prime contractor. Thus, Uy is not speculative, but based on reasonable
instituted an action against Puzon seeking the estimate.
dissolution of the partnership.

Trial court ruled in favor of the plaintiff.


During the pendency of the case on appeal with the
CA, Puzon died, and was substituted by Franco
Puzon.

IV. ISSUE/S:
a) Whether or not appellant is guilty of
breach of contract
b) Whether or not the amount ordered by
trial court for the failure to contribute his share in
the capital of the partnership is proper
3. Brito, John Patrick T. 4. Brito, John Patrick T.
I. TITLE: Liwanag v. CA (281 SCRA 1225) I. TITLE: US v Clarin (17 Phil. 84)
II. TOPIC: Article 1778 II. TOPIC: Article 1788

III. FACTS: III. FACTS:

Liwanag with a certain Thelma Tabligan Larin delivered to Tarug, Clarin and De
went to Rosales and asked her to join them in the Guzman, P172, and made an agreement to buy
business of buying and selling cigarettes. Under and sell mangoes with the four of them dividing
their agreement, Rosales would give the money equally the profits. Tarug, Clarin, and De Guzman
needed to buy the cigarettes while Liwanag and did in fact trade in mangoes and obtained P203
Tabligan would act as her agents. During the first from the business, but did not comply with the
two months, Liwanag and Tabligan made periodic terms of the contract by delivering to Larin his half
visits to Rosales to report on the progress of the of the profits; neither did they render him any
transactions. The visits, however, suddenly account of the capital.
stopped, and all efforts by Rosales to obtain
information regarding their business proved futile. Larin charged them with the crime of estafa,
Alarmed by this development and believing but the provincial fiscal filed an information only
that the amounts she advanced were being against Clarin in which he accused him of
misappropriated, Rosales filed a case of estafa appropriating to himself not only the P172 but also
against Liwanag. the share of the profits that belonged to Larin,
amounting to P15.50.
The trial court was affirmed by the CA in
finding Liwanag guilty as charged and imposing IV. ISSUE/S: Whether or not estafa is the proper
upon her the penalty of prision correccional and action
was ordered to pay sum of P526, 650 to reimburse
the plaintiff. V. RULING:

IV. ISSUE/S: Whether or not the contract that exist NO. The agreement entered into is a
simple loan or partnership or joint venture thereby contract of partnership. The P172 having been
making the non-return of the money of the plaintiff received by the partnership, the action that lies with
purely civil in nature and not criminal. the partner who furnished the capital for the
recovery of his money is not a criminal action
V. RULING: for estafa, but a civil one arising from the
partnership contract for a liquidation of the
NO. Estafa is a crime committed by a partnership and a levy on its assets if there should
person who defrauds another causing him to suffer be any.
damages, by means of unfaithfulness or abuse of
confidence, or of false pretenses of fraudulent acts. Clarin was acquitted. The complaint of
estafa is dismissed without prejudice to the
The elements of estafa are present: institution of a civil action.
(1) that the accused defrauded another by
abuse of confidence or deceit; and (2) that damage
or prejudice capable of pecuniary estimation is
caused to the offended party or third party, and it is
essential that there be a fiduciary relation between
them either in the form of a trust, commission or
administration.

The language of the receipt could not be


any clearer. That in the event the cigarettes cannot
be sold, the money must be returned to Rosales.

Thus, even assuming that a contract of


partnership was indeed entered into by and
between the parties, we have ruled that when
money or property have been received by a partner
for a specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such
partner is guilty of estafa.

Neither can it be considered a Loan


because being the borrower, Liwanag, could not
dispose of the money as she pleased it was only
delivered to her for a single purpose.
I. TITLE: Evangelista & Co. v Abad Santos (51 why did it take petitioners so many years before
SCRA 416) excluding her from said company? Furthermore,
II. TOPIC: Article 1789 the act of exclusion is premised on the ground that
respondent has always been a partner, an
III. FACTS: industrial partner. In addition, the Court further held
that with the consideration of Article 1767 that By a
On October 9, 1954, a co-partnership with contract of partnership two or more persons bind
herein petitioners as capitalist partners was formed themselves, to contribute money, property, or
under the name Evangelista & Co. The Articles industry to a common fund, with the intention of
of Co-partnership was, however, amended on dividing profits among themselves, the services
June 7, 1955 so as to include herein respondent, rendered by respondent may legitimately be
Estrella Abad Santos, as an industrial partner. considered the respondents contribution to the
common fund.
Consequently, on December 17, 1963,
Abad Santos filed suit against the three (3)
capitalist partners, alleging that the partnership,
which was also made a party-defendant, had been
paying dividends to the partners except to her. It
was further alleged that despite her requests that
she be allowed to examine partnership books, to
give her information regarding the partnership
affairs and to receive her share in the dividends
declared by the partnership, the petitioners refused
and continued to refuse. She therefore prayed that
the petitioners be ordered to render an accounting
of the partnership business and to pay her the
corresponding share in the dividends.

IV. ISSUE/S: Whether or not the Articles of Co-


partnership shall be considered as a conclusive
evidence of respondents status as a limited
partner?

V. RULING:

NO. The Court held that despite the


genuineness of the Articles of Co-partnership the
same did not express the true intent and agreement
of the parties, however, as the subsequent events
and testimonial evidences indicate otherwise, the
Court upheld that respondent is an industrial
partner of the company.

Article 1789 provides that An industrial


partner cannot engage in business for himself,
unless the partnership expressly permits him to do
so; and if he should do so, the capitalist partners
may either exclude him from the firm or avail
themselves of the benefits which he may have
obtained in violation of this provision, with a right to
damages in either case. Since 1954 and until after
the promulgation of the decision of the appellate
court, Abad Santos has served as a judge of the
City Court of Manila and had been paid for services
rendered allegedly contributed by her to the
partnership. Though being a judge of the City Court
of Manila cannot be characterized a business
and/or may be considered an antagonistic business
to the partnership, the petitioners, subsequent of
petitioners answer to the complaint, petitioners
reached the decision that respondent be excluded
from and deprived of her alleged share in the
interest or participation as an alleged industrial
partner in the net profits or income of the
partnership.

Having always known the respondent is a


City Judge even before she joined the partnership,
6. Brito, John Patrick T. 7. Brito, John Patrick T.
I. TITLE: Soncuya v De Luna (67 Phil. 646) I. TITLE: Martinez v Ong Pong Co. (14 Phil. 726)
II. TOPIC: Article 1794 II. TOPIC: Article 1796

III. FACTS: III. FACTS:

Josue Soncuya filed a case with the court of Martinez delivered P1500 as his
first instance of Manila and prayed that De Luna be contribution to the partnership with Ong Pong Co
sentenced to pay damages in the amount of P700, and Ong Lay to invest in a store. Martinez filed a
432 which he alleges to have suffered as a partner complaint to compel the defendants to render him
by reason of the supposed fraudulent management an accounting of the partnership or to refund him
of the partnership, Centro Escolar de Seoritas. It the P1, 500. Ong Pong Co admitted the fact of the
is not alleged in the complaint that a liquidation has agreement and the delivery of the money, but
been effected nor is it prayed that it be made. alleged that Ong Lay, who was then deceased, was
the one who had managed the business, and that
IV. ISSUE/S: Whether or not Soncuya may claim nothing had resulted therefrom save the loss of the
damages from De Luna. capital to which loss the plaintiff agreed. CFI
ordered Ong Pong to pay half the capital and half of
V. RULING: the projected profit.
NO. For a partner to be able to claim from IV. ISSUE/S: Whether or not the defendants should
another partner who manages the general co- be liable for the loss suffered by the partnership
partnership, damages allegedly suffered by him by
reason of the fraudulent administration of the latter, V. RULING:
a previous liquidation of said partnership is
necessary. YES. Inasmuch as in this case nothing
appears other than the failure to fulfill an obligation
on the part of a partner who acted as agent in
receiving money for a given purpose, for which he
has rendered no accounting, such agent is
responsible only for the losses which, by a violation
of the provisions of the law, he incurred.
8. Brito, John Patrick T. 9. Brito, John Patrick T.
I. TITLE: Agustin Et.al. v Inocencio (9 Phil. 134) I. TITLE: Ramnani v CA (196 SCRA 731)
II. TOPIC: Article 1796 II. TOPIC: Article 1797]

III. FACTS: III. FACTS:


The parties are involved in a partnership as Spouses Ishwar and Sonya Jethmal
industrial partners without capital. They contributed from Ramnani, citizens of America, invested in a
its profits a fund toward the construction of a casco, to business venture in the Philippines. Since they
which they added P3,500, borrowed from Maria del could not personally manage their investments,
Rosario, the wife of the defendant, Bartolome Inocencio,
they appointed two of Ishwars brothers, Choithram
he being the managing partner.
Jethmal Ramnani and Navalrai Jethmal Ramnani,
In the progress of the work the defendant found as their attorneys-in-fact.
that it called for additional funds, which he advanced to
the amount of P2, 024.49. It is satisfactorily appears Choithram decided to invest in the real
from the evidence that this amount is necessary in order estate business and through his genius the
to complete the work undertaken. Although it would property was improved into a valuable assets worth
seem that he failed to notify his partners of the various millions. However, he started to betray the trust
items from time to time going to make up this sum, it is reposed upon him by appropriating his brothers
shown that the books were at all times open to their property as his. Upon payment of Ishwars lot from
inspection, and that, being asked to examine them, they Ortigas he caused the latter to execute the
omitted to do so, and that the plaintiff Juan Agustin,
corresponding deeds of sale in favor of his
representing all the partners, was also present at the
construction of the casco, in charge of the practical work daughter-in-law. He also donated shares of stock in
and cognizant of its needs and its progress. a garment corporation to his children. He also
fraudulently mortgaged $3,000,000.00 worth of the
IV. ISSUE/S: Whether or not Inocencio, in spouses property to Overseas Holding Co.
borrowing money and advancing funds, was acting
within the scope of his authority as a managing Spouses Ishwar learned what Choithram
partner was doing. Hence, they asked him to render an
accounting, but there was none forthcoming. They
V. RULING: then revoked Choithrams general power of
attorney.
YES. The work done in the casco having
been within the scope of the association and The Spouses filed with CFI of Rizal a
necessary to carry out its express object, the complaint for reconveyance and damages but the
borrowing of the money required to carry it on, with court dismissed the case and recognized
the acquiescence if not with the affirmative consent Choithrams full ownership. CA reversed the
of his associates, was not outside the powers of the decision.
managing partner and constitutes a debt for which
all the associates are liable. SC initially applied a Solomonic solution by
dividing equally between spouses Ishwar and the
The note passed into the hands of the Choithram family the two parcels of land. The court
defendant by reason of the successive deaths of later declared the disputed as solely owned by the
his wife and of their only child, each without debts, spouses and MR was denied with finality.
and for the amount thereof he became a creditor,
subject, however, to the deduction therefrom of his Because of the Choithram familys
proportionate part of the indebtedness. continuing delaying tactics and evasive moves
against the execution of the Courts Decision and
The trial courts decision of treating his due to the desire of spouses Ishwar to quickly
claim on this note as an addition to his capital in the obtain the fruits of their many years of court battle,
firm, rather than as a loan, is not a ground of error. the latter were constrained to agree to a
If it be considered as a loan, this sum would place compromise agreement which was denominated as
the defendant as a creditor in a stronger position as Tripartite Agreement.
against his associates than if regarded as a mere
IV. ISSUE/S: Whether or not Ishram can recover
contribution to capital. The error, if it be an error, is
the entire properties subject in the litigation
not, therefore, prejudicial to the plaintiff, but is
rather beneficial to him. The respondent did not V. RULING:
except to it.
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, 1. Dalanon, Ma. Xyza Zyra F.
the capitalist partner in the joint venture. I. TITLE: Garcia Ron vs. Campaia de Minas de
Batan (12 Phil. 130)
Choithram in turn decided to invest in the
real estate business. He bought the two (2) parcels II. TOPIC: Article 1800
of land in question from Ortigas as attorney-in-fact
of Ishwar. Instead of paying for the lots in cash, he III. FACTS:
paid in installments and used the balance of the
capital entrusted to him, plus a loan, to build two Jose Garcia Ron was employed as foreman
buildings. Although the buildings were burned later, or capataz by one Genaro Ansuategui, the local
Choithram was able to build two other buildings on manager of certain mines of the La Compania de
the property. He rented them out and collected the Minas de Batan, situated on the Islands of Bataan.
rentals. Through the industry and genius of His employment continued from November 1, 1903
Choithram, Ishwar's property was developed and until August 4, 1904; upon the termination of his
improved into what it is now. contract of work, Jose Garcia Ron argued that he is
entitled to reasonable compensation for the
Justice and equity dictate that the two share services rendered which were fixed at P5 per day,
equally the fruit of their joint investment and efforts. or P150 per month, since he worked for the
Perhaps this Solomonic solution may pave the way defendant company as foreman or capataz and
towards their reconciliation. Both would stand to received compensation. On the contrary, it was
gain. No one would end up the loser. After all, alleged by the La Compania that they did not
blood is thicker than water. employ Jose Garcia, and granting that they did, the
company is still not indebted to the plaintiff for his
service, because the local manager at the mines
was not authorized to enter into the alleged
contract of employment, such authority not having
been granted to him under his letter of instructions.

IV. ISSUE/S: Whether or not Genaro Ansuategui


was authorized by the terms of the letter of
instruction to enter into the alleged contract of
employment.

V. RULING:

YES, Genaro Ansuategui was fully and


expressly authorized by the terms of this letter of
instructions to enter into the alleged contract of
employment with the plaintiff on behalf of the
defendant company. The evidence of record
established the fact that he did and that the plaintiff
worked for the company for the period of November
1, 1903 until August 4, 1904.

Furthermore, taking into consideration the


fact that the mines of the defendant company are
located upon an island some two days' distance by
steamer from the office of the company at Manila,
the only communication therewith was by mail a
few times per month, and by the very nature of the
enterprise, it was necessary, in order that the local
manager might successfully perform his duties, to
confer upon him the athority and wide scope in the
employment and discharge of labor.
2. Dalanon, Ma. Xyza Zyra F.
I. TITLE: Tai Tong Chuache & Co., vs. Insurance The Insurance Commission and Travellers
Commission (158 SCRA 366) Multi-Indemnity Corporation argues however, that if
the civil case really stemmed from the loan granted
II. TOPIC: Article 1800 to Azucena Palomo by petitioner the same should
have been brought by Tai Tong Chuache or by its
III. FACTS: representative in its own behalf. From the above
premise respondent concluded that the obligation
Tai Tong Chuache & Co., acquired from a secured by the insured property must have been
certain Rolando Gonzales a parcel of land and a paid.
building located at San Rafael Village, Davao City.
Complainants assumed the mortgage of the IV. ISSUE/S: Whether or not a managing partner
building in favor of S.S.S., which building was of the partnership may execute all acts of
insured with respondent S.S.S. Accredited Group of administration.
Insurers for P25,000.00.
V. RULING:
On April 19, 1975, Azucena Palomo
obtained a loan from Tai Tong Chuache Inc. in the YES, a managing partner of the partnership
amount of P100,000.00. To secure the payment of may execute all acts of administration.
the loan, a mortgage was executed over the land
and the building in favor of Tai Tong Chuache & Tai Tong Chuache & Co. being a
Co. On April 25, 1975, Arsenio Chua, partnership may sue and be sued in its name or by
representative of Thai Tong Chuache & Co. insured its duly authorized representative. Arsenio Lopez
the latter's interest with Travellers Multi-Indemnity Chua is the representative of petitioner is not
Corporation for P100,000.00 (P70,000.00 for the questioned; Arsenio acts as the managing partner
building and P30,000.00 for the contents thereof). of the partnership was corroborated by respondent
insurance company. Thus, Chua as the managing
On June 11, 1975, Pedro Palomo secured a partner of the partnership may execute all acts of
Fire Insurance Policy No. F- 02500, covering the administration including the right to sue debtors of
building for P50,000.00 with respondent Zenith the partnership in case of their failure to pay their
Insurance Corporation. On July 16, 1975, another obligations when it became due and demandable.
Fire Insurance Policy No. 8459 was procured from Or at the very least, Chua being a partner of
respondent Philippine British Assurance Company, petitioner Tai Tong Chuache & Company is an
covering the same building for P50,000.00 and the agent of the partnership. Being an agent, it is
contents thereof for P70,000.00. understood that he acted for and in behalf of the
firm. Public respondent's allegation that the civil
On July 31, 1975, the building and the case flied by Arsenio Chua was in his capacity as
contents were totally razed by fire. personal creditor of spouses Palomo has no basis.

Based on the computation of the loss, The respondent insurance company having
including the Travellers Multi- Indemnity, issued a policy in favor of herein petitioner which
respondents, Zenith Insurance, Phil. British policy was of legal force and effect at the time of
Assurance and S.S.S. Accredited Group of the fire, it is bound by its terms and conditions.
Insurers, paid their corresponding shares of the Upon its failure to prove the allegation of lack of
loss. Complainants were paid the following: insurable interest on the part of the petitioner,
P41,546.79 by Philippine British Assurance Co., respondent insurance company is and must be held
P11,877.14 by Zenith Insurance Corporation, and liable.
P5,936.57 by S.S.S. Group of Accredited Insurers.
Demand was made from respondent Travellers
Multi-Indemnity for its share in the loss but the
same was refused. Hence, complainants
demanded from the other three (3) respondents the
balance of each share in the loss based on the
computation of the Adjustment Standards Report
excluding Travellers Multi-Indemnity in the amount
of P30,894.31 (P5,732.79-Zenith Insurance:
P22,294.62, Phil. British: and P2,866.90, SSS
Accredited) but the same was refused, hence an
action was filed.

Likewise, Public respondent argues


however, that if the civil case really stemmed from
the loan granted to Azucena Palomo by petitioner
the same should have been brought by Tai Tong
Chuache or by its representative in its own behalf.
From the above premise respondent concluded that
the obligation secured by the insured property must
have been paid.
3. Dalanon, Ma. Xyza Zyra F. was, to determine what the profits of the business
I. TITLE: Fortis vs. Gutierrez Hermanos (6 Phil. were, after paying all of the expenses except his,
100) but that determination was not the final
II. TOPIC: Article 1800 determination of the net profits of the business. It
was made for the purpose of fixing the basis upon
III. FACTS: which his compensation should be determined.
John Fortis, an employee of Gutierrez
Hermanos during the years 1900, 1901, and 1902,
brought this action to recover a balance due him as
salary for the year 1902. Fortis alleged that he was
entitled, as salary, to 5 per cent of the net profits of
the business of the defendants for said year. The
complaint also contained a cause of action for the
sum of 600 pesos, money expended by plaintiff for
the defendants during the year 1903.

Likewise, it was claimed that the contract


alleged in the complaint made the plaintiff a
copartner of the defendants in the business which
they were carrying on.

The court then found that the contract had


been made as claimed by the plaintiff; that 5 per
cent of the net profits of the business for the year
1902 amounted to 26,378.68 pesos, Mexican
currency; that the plaintiff had received on account
of such salary 12,811.75 pesos, Mexican currency,
and ordered judgment against the defendants for
the sum 13,566.93 pesos, Mexican currency, with
interest thereon from December 31, 1904. The
court also ordered judgment against the defendants
for the 600 pesos mentioned in the complaint, and
interest thereon. The total judgment rendered
against the defendants in favor of the plaintiff,
reduced to Philippine currency, amounted to
P13,025.40. The defendants moved for a new trial,
which was denied, and they have brought the case
here by bill of exceptions.

IV. ISSUE/S: Whether or not the contract made


John Fortis a copartner in the business.

V. RULING:

NO. The contract did not made John Fortis


as a copartner in the business.

The contract was a mere contract of


employment. The plaintiff had no voice nor vote in
the management of the affairs of the company. The
fact that the compensation received by him was to
be determined with reference to the profits made by
the defendants in their business did not in any
sense make by a partner therein. The articles of
partnership between the defendants provided that
the profits should be divided among the partners
named in a certain proportion. The contract made
between the plaintiff and the then manager of the
defendant partnership did not in any way vary or
modify this provision of the articles of partnership.
The profits of the business could not be determined
until all of the expenses had been paid. A part of
the expenses to be paid for the year 1902 was the
salary of the plaintiff. That salary had to be
deducted before the net profits of the business,
which were to be divided among the partners, could
be ascertained. It was undoubtedly necessary in
order to determine what the salary of the plaintiff
4. Dalanon, Ma. Xyza Zyra F. NO, the partners cannot be held personally
I. TITLE: Fortis vs. Gutierrez Hermanos (6 Phil. obligated by the document securing the firms debt,
100) no member of the partnership can bind the others
by a personal act if they have not given him
II. TOPIC: Article 1803 authority to do so; their liability rests upon the
general principles underlying partnership liability.
III. FACTS:
The document referred to was intended
In the year 1913, the individuals in this merely as an authority to enable Barba to bind the
action formed a civil partnership, called "La partnership and that the parties to that instrument
Protectora," for the purpose of engaging in the did not intend thereby to confer upon Barba an
business of transporting passengers and freight at authority to bind them personally. It is obvious that
Laoag, Ilocos Norte. In order to provide the the contract which Barba in fact executed in
enterprise with means of transportation, Marcelo pursuance of that authority did not by its terms
Barba, acting as manager, came to Manila and profess to bind the appellants personally at all, but
upon June 23, 1913, negotiated the purchase of only the partnership and himself.
two automobile trucks from the plaintiff, E. M.
Bachrach, for the agree price of P16,500. He paid The business conducted under the name of
the sum of 3,000 in cash, and for the balance "La Protectora" was evidently that of a civil
executed promissory notes representing the partnership; and the liability of the partners to this
deferred payments. These notes provided for the association must be determined under the
payment of interest from June 23, 1913, the date of provisions of the Civil Code. The authority of
the notes, at the rate of 10 per cent per annum. Marcelo Barba to bind the partnership, in the
Provision was also made in the notes for the purchase of the trucks, is fully established by the
payment of 25 per cent of the amount due if it document executed by the four appellants upon
should be necessary to place the notes in the June 12, 1913. The transaction by which Barba
hands of an attorney for collection. Three of these secured these trucks was in conformity with the
notes, for the sum of P3,375 each, have been tenor of this document. The promissory notes
made the subject of the present action, and there constitute the obligation exclusively of "La
are exhibited with the complaint in the cause. Protectora" and of Marcelo Barba; and they do not
in any sense constitute an obligation directly
It is obvious that in thus signing the notes binding on the four appellants. Their liability is
Marcelo Barba intended to bind both the based on the fact that they are members of the civil
partnership and himself. In the body of the note the partnership and as such are liable for its debts. It is
word "I" (yo) instead of "we" (nosotros) is used true that article 1698 of the Civil Code declares that
before the words "promise to pay" (prometemos) a member of a civil partnership is not liable in
used in the printed form. It is plain that the singular solidum (solidariamente) with his fellows for its
pronoun here has all the force of the plural. entire indebtedness; but it results from this article,
in connection with article 1137 of the Civil Code,
As preliminary to the purchase of these that each is liable with the others
trucks, the defendants Nicolas Segundo, Antonio (mancomunadamente) for his aliquot part of such
Adiarte, Ignacio Flores, and Modesto Serrano, indebtedness.
upon June 12, 1913, executed in due form a
document in which they declared that they were As to so much of the indebtedness as is
members of the firm "La Protectora" and that they based upon the claim for automobile supplies and
had granted to its president full authority "in the accessories, it is obvious that the document of June
name and representation of said partnership to 12, 1913, affords no authority for holding the
contract for the purchase of two automobiles". This appellants liable. Their liability upon this account is,
document was apparently executed in obedience to however, no less obvious than upon the debt
the requirements of subsection 2 of article 1697 of incurred by the purchase of the trucks; and such
the Civil Code, for the purpose of evidencing the liability is derived from the fact that the debt was
authority of Marcelo Barba to bind the partnership lawfully incurred in the prosecution of the
by the purchase. The document in question was partnership enterprise.
delivered by him to Bachrach at the time the
automobiles were purchased. There is no proof in the record showing
what the agreement, if any, was made with regard
Afterwards, the said partnership had to the form of management. Under these
additional purchases from the said transaction and circumstances it is declared in article 1695 of the
was therefore failed to pay the balance which Civil Code that all the partners are considered
resulted to the institution of this action. agents of the partnership. Barba therefore must be
held to have had authority to incur these expenses.
IV. ISSUE/S: Whether or not the partners cannot But in addition to this he is shown to have been in
be held personally obligated by the document fact the president or manager, and there can be no
securing the firms debt. doubt that he had actual authority to incur this
obligation.
V. RULING:
5. Dalanon, Ma. Xyza Zyra F. case at bar, the articles of the Veteran Army of the
I. TITLE: Council of Red Men vs. Veterman Army Philippines do so provide. It is true that an express
(7 Phil. 685) disposition to that effect is not found therein, but
one may be fairly deduced from the contents of
those articles. They declare what the duties of the
II. TOPIC: Article 1803 several officers are. In these various provisions
there is nothing said about the power of making
III. FACTS: contracts, and that faculty is not expressly given to
The Veteran Army of the Philippines was any officer.
established as an association with the primary No contract, such as the one in question, is
objective of perpetuating the spirit of patriotism and binding on the Veteran Army of the Philippines
fraternity among the members. As stated in the unless it was authorized at a meeting of the
Constitution of the Veteran Army of the Philippines department. No evidence was offered to show that
constitution, the association shall be composed of a the department had never taken any such action. In
department and two more posts, their respective fact, the proof shows that the transaction in
duties and powers provided thereto. question was entirely between Apache Tribe, No. 1,
Among these posts organized is and the Lawton Post, and there is nothing to show
the General Henry W. Lawton Post, No. 1. On the that any member of the department ever knew
1st day of March, 1903, a contract of lease of parts anything about it, or had anything to do with it.
of a certain buildings in the city of Manila was
signed by W.W. Lewis, E.C. Stovall, and V.O.,
Hayes, as trustees of the Apache Tribe, No. 1,
Improved Order of Red Men, as lessors, and Albert
E. McCabe, citing for and on behalf of Lawton Post,
Veteran Army of the Philippines as lessee. The
lease was for the term of two years. The Lawton
Post occupied the said premises for thirteen
months and was then abandoned for the remaining
months of the lease. The action herein to recover
the rent for the unexpired term against McCabe but
the judgment was rendered in favor of him,
acquitting the same. Thereafter, the judgment was
rendered against the Veteran Army of the
Philippines to pay the rent for the unexpired term.

The appellant claimed that the action cannot


be maintained against the Veteran Army of the
Philippines because it never contradicted, either
with the plaintiff or with Apache Tribe, No. 1, and
never authorized anyone to so contract in its name.

IV. ISSUE/S: Whether or not the Veteran Army of


the Philippines be held liable for the payment of the
unexpired term of the lease

V. RULING:

NO, the Veteran Army of the Philippines


cannot be held liable for the payment of the
unexpired term of the lease.

Article 1695 of the Civil Code provides as


follows:

Should no agreement have been made with


regard to the form of management, the following
rules shall be observed:

All the partners shall be considered as


agents, and whatever any one of them may do by
himself shall bind the partnership; but each one
may oppose the act of the others before they may
have produced any legal effect.

One partner, therefore, is empowered to


contract in the name of the partnership only when
the articles of partnership make no provision for the
management of the partnership business. In the
6. Dalanon, Ma. Xyza Zyra F. own name, and as a part owner, by virtue of this
I. TITLE: Machucha vs. Chuidian (2 Phil. 210) assignment in the assets of the partnership,
II. TOPIC: Article 1804 whatever things may be necessary for the purpose
of accelerating the liquidation, and of obtaining on
III. FACTS: judicially or extrajudicially the payment of the
deposits account-current pertaining to the assignor,
Chuidian, Buenaventurea and Co., are a it being understood that D. Jose Gervasio Garcia is
regular general partnership, organized in Manila, to receive the 25 per cent assigned to him, in the
December 29, 1882, as a continuation of a prior same form in which it may be obtained from said
partnership of the same name. The original partnership, whether in cash, credits, goods,
partners constituting the partnership of 1882 were movables or immovables, and on the date when
D. Telesforo Chuidian, Doa Raymunda Chuidian, Messrs. Chuidian, Buenaventura & Co., in
Doa Candelaria Chuidian, and D. Mariano liquidation, shall have effected the operations
Buenaventura. The capital was fixed in the necessary in order to satisfy the credits and the
partnership agreement at 16,000 pesos, of which share in the partnership capital hereinbefore
the first three partners named contributed 50,000 mentioned."
pesos each, and the last named 10,000 pesos, and
it was stipulated that the liability of the partners IV. ISSUE/S: Whether or not the plaintiff has
should be "limited to the amounts brought in by acquired rights under the assignment over the
them to form the partnership stock." partnership representing the share of D. Vicente
Buenaventura.
In addition to the amounts contributed by
the partners to the capital, it appears from the V. RULING:
partnership agreement that each one of them had
advanced money to the preexisting partnership, NO, the plaintiff has not acquired rights
which advances were assumed or accounts-current under the assignment over the partnership
aggregated something over 665,000 pesos, of representing the share of D. Vicente Buenaventura.
which sum about 569,000 pesos represented the
The question in the case at bar relates to
advances from the Chuidians and the balance that
the construction of clause 19 of the partnership
balance that from D. Mariano Buenaventura.
agreement, by which it was stipulated that upon
the dissolution of the company, the pending
Doa Raymunda Chuidian retired from the obligations in favor of outside parties should be
partnership November 4, 1885. On January 1, satisfied, the funds of the minors Jose and
1888, the partnership went into liquidation, and it Francisco Chuidian should be taken out, and
does not appear that the liquidation had been afterwards the resulting balance of the account-
terminated when this action was brought. current of each one of those who had put in money
(imponentes) should be paid.
Down to the time the partnership went into
liquidation the accounts-current of D. Telesforo The courts construction of this clause is
Chuidian and Doa Candelaria Chuidian had been that it establishes a basis for the final adjustment of
diminished in an amount aggregating about the affairs of the partnership; that basis is that the
288,000 pesos, while that of D. Mariano liabilities to noncompartners are to be first
Buenaventura had been increased about 51,000 discharged; the claims of the Chuidian minors are
pesos. During the period from the commencement to be next satisfied; and what is due to the
of the liquidation down to January 1, 1896, the respective partners on account of their advances to
account-current of each of the Chuidians had been the firm is to be paid last of all, leaving the ultimate
still further decreased, while that of D. Mariano residue, of course, if there be any, to be distributed,
Buenaventura had been still further increased. among the partners in the proportions in which they
may be entitled thereto.
On January 1, 1894, D. Mariano
Buenaventura died, his estate passing by will to his With respect to the claims of the Chuidian
children, among whom was D. Vicente minors, the suggestion of counsel is that the clause
Buenaventura. Upon the partition of the estate the in question means that their accounts are to be
amount of the interest of D. Vicente Buenaventura adjusted before those of the partners but not paid
in his father's account-current and in the capital first. Such a provision would have been of no
was ascertained and recorded in the books of the practical utility, and the language used that the
firm. funds should be (se dedujeran) does not admit of
such a construction.
On December 15, 1898, D. Vicente Such being the basis upon which by
Buenaventura executed a public instrument in agreement of the partners the assets of the
which for a valuable consideration he "assigns to D. partnership are to be applied to the discharge of the
Jose Gervasio Garcia . . . a 25 per cent share in all various classes of the firms liabilities, it follows that
that may be obtained by whatever right in whatever D. Vicente Buenaventura, whose rights are those of
form from the liquidation of the partnership of his father, is in no case entitled to receive any part
Chuidian, Buenaventura & Co., in the part of the until the creditors who are nonpartners and
pertaining to him in said partnership, . . . the the Chuidian minors are paid. Whatever rights
assignee, being expressly empowered to do in his
assets he had either as creditor or partner, he could
only transfer subject to this condition.

And it is clear, from the language of the


instrument under which the plaintiff claims, that this
conditional interest was all that D. Vicente
Buenaventura ever intended to transfer. By that
instrument he undertakes to assign to Garcia not a
present interest in the assets of the partnership but
an interest in whatever may be obtained from the
liquidation of the partnership; which Garcia is to
receive in the same form in which it may be
obtained from said partnership, and & on the date
when Messrs. Chuidian, Buenaventura & Co.,
in liquidation, shall have effected the operations
necessary in order to satisfy; the claims of D.
Vicente Buenaventura.

The assignment by its terms is not to take


effect until all the liabilities of the partnership have
been discharged and nothing remains to be done
except to distribute the assets, if there should be
any, among the partners.

Meanwhile the assignor, Buenaventura, is


to continue in the enjoyment of the rights and is to
remain subject to the liabilities of a partner as
though no assignment had been made. In other
words, the assignment does not purport to transfer
an interest in the partnership, but only a future
contingent right to 25 per cent of such portion of the
ultimate residue of the partnership property as the
assignor may become entitled to receive by virtue
of his proportionate interest in the capital.

There is nothing in the case to show either


that the nonpartner creditors of the partnership
have been paid or that the claims of the Chuidian
minors have been satisfied. Such rights as the
plaintiff has acquired against the partnership under
the assignment still remain, therefore, subject to the
condition which attached to them in their origin, a
condition wholly uncertain of realization, since it
may be that the entire assets of the partnership will
be exhausted in the payment of the creditors
entitled to preference under the partnership
agreement, thus extinguishing the plaintiffs right to
receive anything from the liquidation.

The plaintiff having acquired no rights under


the assignment which are now enforceable against
the defendant, this action cannot be maintained.
The liquidator of the defendant having been notified
of the assignment, the plaintiff will be entitled to
receive from the assets of the partnership, if any
remain, at the termination of the liquidation, 25 per
cent of D. Vicentes resulting interest, both as
partner and creditor.
7. Dalanon, Ma. Xyza Zyra F. 8. Dalanon, Ma. Xyza Zyra F.
I. TITLE: Pardo vs. Hercules Lumber Co. and I. TITLE: Pang Lim and Galvez vs. Lo Seng (42 Phil.
Ferrer (47 Phil. 964) 282)

II. TOPIC: Article 1806


II. TOPIC: Article 1805
III. FACTS:
III. FACTS:
Antonio Pardo is a stockholder in the Hercules Lo Seng and Pang Lim were partners, under the
Lumber Company, Inc., and Ignacio Ferrer, is the acting firm name of Lo Seng and Co., in the business of
secretary of the said company, who refused to permit the running a distillery. The land on which said distillery is
Pardo or his agent to inspect the records and business located as well as the buildings and improvements
transactions of the said Hercules Lumber Company, Inc., originally used in the business were the property of Lo
at times desired by Pardo. Yao, who leased it to Lo Seng and Co. for the term of
three years.
The main ground upon which the defense is
rested has reference to the time, or times, within which Upon the expiration of this lease, a new written
the right of inspection may be exercised. In this contract became effective whereby the lease was
connection the answer asserts that in article 10 of the extended for fifteen years. The reason for the long
By-laws of the respondent corporation it is declared that duration of the extension was due to the requirement of
Every shareholder may examine the books of the the Bureau of Internal Revenue to make sundry
company and other documents pertaining to the same expensive improvements in the distillery and these
upon the days which the board of directors shall annually improvements should be effected at the expense of the
fix. It is further averred that at the directors meeting of lessees.
the respondent corporation held on February 16, 1924,
the board passed a resolution to the following effect: In conformity thousands of pesos were
expended by Lo Seng and Co., and later by Lo Seng
The board also resolved to call the usual general alone. Neither the original contract of lease nor the
(meeting of shareholders) for March 30 of the present agreement extending the same was inscribed in the
year, with notice to the shareholders that the books of property registry. Pang Lim sold all his interest in the
the company are at their disposition from the 15th to distillery making Lo Seng the sole owner.
25th of the same month for examination, in appropriate
hours. Lo Yao through his attorney in fact executed a
deed purporting to convey to Pang Lim and Benito
IV. ISSUE/S: Whether or not the statutory right of Galvez, the entire distillery plant including the land used
inspection is affected by the adoption by-law in connection therewith. Lim and Galvez demanded
created by the board of directors. possession from Lo Seng, but the latter refused to yield
thus, the present action of unlawful detainer.
V. RULING:
IV. ISSUE/S: Whether or not the as purchasers of the
estate, are at liberty to terminate the lease.
NO, the statutory right of inspection is not
affected by the adoption by-law created by the V. RULING:
board of directors.
NO, the purchasers of the estate are not at
The general right given by the statute may liberty to terminate the lease.
not be lawfully abridged to the extent attempted in
the boards resolution. It may be admitted that the Lim cannot be permitted, in the guise of a
officials in charge of a corporation may deny purchaser of the estate, to destroy an interest derived
inspection when sought at unusual hours or under from him, and for which he has received full value. There
other improper conditions; but neither the executive is bad faith.
officers nor the board of directors have the power to
Partners are required to exhibit towards each
deprive a stockholder of the right altogether. A by- other the highest degree of good faith. One partner
law unduly restricting the right of inspection is cannot, to the detriment of another, apply exclusively to
undoubtedly invalid. his own benefit the results of the knowledge and
information gained in the character of partner.
Under a statute has been held that the
statutory right of inspection is not affected by the Under section 80 of the Code of Civil Procedure,
adoption by the board of directors of a resolution the only question that can be adjudicated is the right to
providing for the closing of transfer books thirty possession; and in order to maintain the action, in the
days before an election. form in which it is here presented, the proof must show
that occupant's possession is unlawful. One tenant in
common cannot maintain a possessory action against
It will be noted that our statute declares that his cotenant, since one is as much entitled to have
the right of inspection can be exercised during possession as the other
reasonable hours. This means at reasonable It follows that as Lo Seng is vested with the
hours on business days throughout the year, and possessory right as against Pang Lim, he cannot be
not merely during some arbitrary period of a few ousted either by Pang Lim or Benito Galvez. Having
days chosen by the directors. lawful possession as against one cotenant, he is entitled
to retain it against both.
1. Del Prado, Darren Joseph M.
9. Dalanon, Ma. Xyza Zyra F. I. TITLE: Hanlon vs. Haussermann and Beam
I. TITLE: Catalan vs. Gatchalian (105 Phil. 1270) (40 Phil. 796)

II. TOPIC: Article 1806 II. TOPIC: Accounting of shares in the profits of the
partnership
III. FACTS:
III. FACTS:
Catalan and Gatchalian are partners. They
mortgaged two lots to Dr. Marave together with the An action was instituted by Hanlon to
improvements thereon to secure a credit from the compel Haussermann and Beam to account for the
latter. The partnership failed to pay the obligation. share in profits gained in rehabilitating the plant of
The properties were sold to Dr. Marave at a public Benguet Mining and compel them to surrender to
auction. Catalan redeemed the property and he the plaintiff 50000 shares of stock of said company
contends that title should be cancelled and a new with dividends paid thereon. Later, Sellner was
one must be issued in his name. permitted to intervene in like interest with Hanlon
and case was conducted as if Hanlon and Sellner
IV. ISSUE/S: Whether or not Catalans redemption were co-plaintiffs.
of the properties make him the absolute owner of
the lands Beam and Hausermann were shareholders
in said mining company and members of the board
V. RULING: of directors. The contract entered into a contract
with Hanlon. It is known to the parties that Hanlon
NO, Catalans redemption of the properties was personally without the financial resources
did not make him the absolute owner of the lands. necessary to enable him to contribute P75,000
towards the project indicated in the contract and he
The right of redemption pertains to the was compelled to seek the assistance of others.
owner of the property; as it was the partnership Haussermann and Beam, agreed to find P25,000 of
which owned the property, in this case, it was only the necessary capital, and for the remainder the
the partnership which could properly exercise the plaintiff relied upon G. C. Sellner, a business man
right of redemption. of the city of Manila, who, upon being approached,
agreed to advance P50,000. A verbal
Under Article 1807 of the New Civil Code understanding with reference to his matter had
provides that every partner becomes a trustee for been attained by the four parties to this litigation
his co-partner with regard to any benefits or profits before the contract Exhibit B between Hanlon and
derived from his act as a partner. Consequently, the mining company had been formally executed,
when Catalan redeemed the properties in question, and this agreement was in fact reduced to writing
he became a trustee and held the same in trust for and signed on November 5, 1913, one day prior to
his co-partner Gatchalian, subject to his right to the execution of the contract between Hanlon and
demand from the latter his contribution to the the mining company.
amount of redemption.
IV. ISSUE/S: WON Hanlon is entitled to an
accounting for his share in the profits of the
company

V. RULING:

Under the equitable doctrine, if the


contracting parties have treated time as of the
essence of the contract, the delinquency will not be
excused and specific performance will not be
granted; but on the other hand, if it appears that
time has not been made of the essence of the
contract, equity will relieve from the delinquency
and specific performance may be granted, due
compensation being made for the damage caused
by the delay.

Time is of the essence of the contract for


the sale of an option on mining property, or a
contract for the sale thereof, even though there is
no express stipulation to that effect. The same idea
is clearly applicable to a contract like that now
under consideration which provides for the
rehabilitation of a mining plant with funds to be
supplied by the contractor within a limited period.
I. TITLE: Fue Leung vs. Intermediate Appellate 3. Del Prado, Darren Joseph M.
Court (169 SCRA 756) I. TITLE: Sison vs. H. McQuiad (94 Phil. 201)

II. TOPIC: Importance of liquidation before claiming


II. TOPIC: Requisites of a partnership share in profits
III. FACTS: III. FACTS:
When Sun Wah Panciteria started, the
private respondent gave P4,000.00 as his Plaintiff brought an action against defendant
contribution to the partnership which is evidenced alleging that the latter borrowed from him carious
by a receipt wherein the petitioner acknowledged sums of money aggregating P2210 to enable her to
his acceptance of the P4,000.00 by affixing his pay obligations with the Bureau of Forestry and as
signature thereto. The private respondent identified additonal on her capital in the lumber business.
the signature on the receipt as that of the petitioner
because it was affixed by the latter in his presence. Defendant was not able to pay the loan in
Witnesses So Sia and Antonio Ah Heng 1938 so she proposed to take in plaintiff as a
corroborated the private respondents testimony to partner in her lumber business, plaintiff to
the effect that they were both present when the contribute to the partnership the said sum of
receipt was signed by the petitioner. So Sia further P2,210 due him from defendant in addition to his
testified that he himself received from the petitioner personal services to which plaintiff agreed.
a similar receipt evidencing delivery of his own The partnership sold to the US Army
investment in another amount of P4,000.00 An 230000 board feet of lumber for P13800, however
examination was conducted by the PC Crime defendant persistently presumed refused to deliver
Laboratory on orders of the trial court granting the one-half of it.
private respondents motion for examination of
certain documentary exhibits. The signatures in IV. ISSUE: WON plaintiff is entitled to recover
when compared to the signature of the petitioner P6900
appearing in the pay envelopes of employees of the
restaurant, namely Ah Heng and Maria Wong V. RULING:
showed that the signatures in the two receipts were
indeed the signatures of the petitioner. NO. Plaintiff seeks to recover from
defendant one-half of the purchase price of lumber
Furthermore, the private respondent sold by the partnership to the United States Army.
received from the petitioner the amount of But his complaint does not show why he should be
P12,000.00 from the profits of the operation of the entitled to the sum he claims. It does not allege that
restaurant for the year 1974. there has been a liquidation of the partnership
business and the said sum has been found to be
IV. ISSUE/S: WON Private respondent is a partner due him as his share of the profits. The proceeds
of the petitioner in Sun Wah Panciteria? from the sale of a certain amount of lumber cannot
be considered profits until costs and expenses
V. RULING: have been deducted. Moreover, the profits of the
The private respondent is a partner of the business cannot be determined by taking into
petitioner in Sun Wah Panciteria. The requisites of account the result of one particular transaction
a partnership which are: instead of all the transactions had. Hence, the need
for a general liquidation before a member of a
1) Two or more persons bind themselves to partnership may claim a specific sum as his share
contribute money, property, or industry to a of the profits.
common fund; and

2) Intention on the part of the partners to divide the


profits among themselves have been established.

As stated by the respondent, a partner


shares not only in 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 more interested in seeing the firm grow rather
than get immediate returns, a deferment of sharing
in the profits is perfectly plausible. It would be
incorrect to state that if a partner does not assert
his rights anytime within ten years from the start of
operations, such rights are irretrievably lost. The
private respondent's cause of action is premised
upon the failure of the petitioner to give him the
agreed profits in the operation of Sun Wah
Panciteria. In effect the private respondent was
asking for an accounting of his interests in the
partnership.
4. Del Prado, Darren Joseph M. done by purchasing them separately, and that they
I. TITLE: Fernandez vs. De la Rosa (1 Phil. 671) had no ulterior object except to effect a division of
the common property when once they had acquired
it, the affectio societatis would be lacking and the
II. TOPIC: When partnership exists parties would have become joint tenants only; but,
as nothing of this sort appears in the case, we must
III. FACTS: assume that the object of the purchase was active
Plaintiff entered into a verbal agreement use and profit and not mere passive ownership in
with defendant to form a partnership for the common.
purchase of cascoes and the carrying on of the It is thus apparent that a complete and
business of letting the same for hire in Manila. The perfect contract of partnership was entered into by
defendant was to buy the cascoes and each the parties. This contract, it is true, might have
partner was to furnish as much money as he could been subject to a suspensive condition, postponing
and the profits are to be divided proportionately. its operation until an agreement was reached as to
Fernandez furnished Dela Rosa with money to the respective participation of the partners in the
purchase and repair cascoes, with Dela Rosa profits, the character of the partnership as collective
taking the same in his own name. The parties or en comandita, and other details, but although it
decided to make up the articles of partnership but is asserted by counsel for the defendant that such
defendant prepared a draft different from that was the case, there is little or nothing in the record
agreed upon by the parties and thus they were not to support this claim, and that fact that the
able to to reach an agreement. The same resulted defendant did actually go on and purchase the
in the defendant having the control and boat, as it would seem, before any attempt had
management of the cascoes. Plaintiff then been made to formulate partnership articles,
demanded an accounting to which defendant strongly discountenances the theory.
refused.

IV. ISSUE/S: WON a partnership existed

V. RULING:

"Partnership is a contract by which 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." (Civil Code, art. 1665.)

The essential points upon which the minds


of the parties must meet in a contract of partnership
are, therefore, (1) mutual contribution to a common
stock, and (2) a joint interest in the profits. If the
contract contains these two elements the
partnership relation results, and the law itself fixes
the incidents of this relation if the parties fail to do
so. (Civil Code, secs. 1689, 1695.)

The money that was furnished by the


plaintiff and received by the defendant with the
understanding that it was to be used for the
purchase of the cascoes in question. This
establishes the first element of the contract,
namely, mutual contribution to a common stock.
The second element, namely, the intention to share
profits, appears to be an unavoidable deduction
from the fact of the purchase of the cascoes in
common, in the absence of any other explanation
of the object of the parties in making the purchase
in that form, and, it may be added, in view of the
admitted fact that prior to the purchase of the first
casco the formation of a partnership had been a
subject of negotiation between them.

Under other circumstances the relation of


joint ownership, a relation distinct though perhaps
not essentially different in its practical consequence
from that of partnership, might have been the result
of the joint purchase. If, for instance, it were shown
that the object of the parties in purchasing in
company had been to make a more favorable
bargain for the two cascoes that they could have
5. Del Prado, Darren Joseph M. 6. Del Prado, Darren Joseph M.
I. TITLE: Garrido vs. Ascencio (10 Phil. 691)
I. TITLE: Ornum vs. Lasala (74 Phil. 242)
II. TOPIC: Statement of accounts of the partnership
II. TOPIC: Statement of account of the partnership
III. FACTS:
III. FACTS:
Parties were partners in doing business under
the name Asencio y Cia. The partnership did not prosper
and it was dissolved by mutual agreement of the Lasala the father of respondents and Ornum
members. The plaintiff brought this action to recover the formed a partnership whereby the former
amount of capital which he had invested in the business delievered the sum of P1000 to the latter who is an
from defendant who was in charge of the books and industrila partner. They were to conduct a business
funds. Defendant argued that there were considerable in Romblon. When the partnership assets consisted
losses in the business and denied anything was due to of outstanding accounts and old stocks of
the plaintiff and filed a cross complaint wherein he merchandise, Ornum asked for the dissolution of
prayed for a judgment against the plaintiff for a certain the partnership. Ornum then looked for someone
amount which he alleged to be due by the plaintiff under who could take his place and suggested the name
the articles of partnership on account of plaintiff's share
of the petitioners who became partners. After death
of these losses. The trial court found that the evidence
substantially sustains the claim of the defendant as to of Lasala his children became the new partners to
the alleged losses in the business of the partnership and the business with petitioners. After twenty years of
gave judgment in his favor. business, their assets reached P44618.67.
Dissolution of the partnership was then decided.
IV. ISSUE/S: WON the evidence he trial court based its Pursuant to the letter written by Lasala, the
findings as to the status of the accounts of the company petitioners remitted and paid to the respondents the
was correct total amount corresponding to them under the
V. RULING: above-quoted statement of accounts which,
however, was not signed by the latter.
YES. The record by mutual agreement the
defendant had general charge and supervision of the A complaint was filed by the respondents,
books and funds of the firm, but it appears that these praying for an accounting and final liquidation of the
books were at all times open to the inspection of the assets of the partnership. The Court of First
plaintiff, and there is evidence which tends to show that Instance of Manila held that the last and final
the plaintiff himself made entries in these books touching statement of accounts prepared by the petitioners
particular transactions in which he happened to be
was tacitly approved and accepted by the
interested; so that while it is clear that the defendant was
more especially burdened with the care of the books and respondents who, by virtue of the above-quoted
accounts of the partnership, it would appear that the letter of Father Mariano Lasala, lost their right to a
plaintiff had equal rights with the defendant in this further accounting from the moment they received
regard, and that during the existence of the partnership and accepted their shares as itemized in said
they were equally responsible for the mode in which the statement. This judgment was reversed by the
books were kept and that the entries made by one had Court of Appeals principally on the ground that as
the same effect as if they had been made by the other. the final statement of accounts remains unsigned
by the respondents, the same stands disapproved.
At the trial the principal question at issue was
the amount of the profits or losses of the business of the
partnership during the period of its operation. The IV. ISSUE/S: WON the last and final statement of
plaintiff made no allegation as to profits, but denied accounts were approved by respondent.
defendant's allegation as to the losses. The defendant in
support of his allegations offered in evidence the estado V. RULING:
de cuentas (general statement of accounts) of the
partnership, supported by a number of vouchers, and by The last and final statement of accounts had
his own testimony under oath as to the accuracy and been approved by the respondents. This approval
correctness of the items set out therein. resulted, by virtue of the letter of Father Mariano
It appears from the record that the statement of Lasala of July 19, 1932, quoted in part in the
account, the vouchers, and the books of the company appealed decision from the failure of the
were placed at the disposition of the plaintiff for more respondents to object to the statement and from
than six weeks prior to the trial, and that during the trial their promise to sign the same as soon as they
he was given every opportunity to indicate any received their shares as shown in said statement.
erroneous or fraudulent items appearing in the account, After such shares had been paid by the petitioners
yet he was unable, or in any event he declined to specify and accepted by the respondents without any
such items, contenting himself with a general statement reservation, the approval of the statement of
to the effect that there must be some mistake, as he did accounts was virtually confirmed and its signing
not and could not believe that the business had been
thereby became a mere formality to be complied
conducted at a loss.
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.
7. Del Prado, Darren Joseph M. by the approval of his application and the award to
I. TITLE: Deluao vs. Casteel (29 SCRA 350) him of the fishpond.

II. TOPIC: Dissolution of the partnership The approval was an event which made it
unlawful for the members to carry it on in
III. FACTS: partnership. Moreover, subsequent events likewise
reveal the intent of both parties to terminate the
Casteel unsuccessfully registered a partnership because each refused to share the
fishpond in a big tract of swampy land, Padada, fishpond with the other.
Davao for 3 consecutive times because the Bureau
of Fisheries did not act upon his previous
applications.

Despite being rejected, casteel did not lose


interest.The threat by the other applicants who
entered upon and spread themselves within the
area, he urgently realized the urgent necessity of
expanding his occupation thereof by constructing
dikes and cultivating marketable fishes. However
he lacked financial resources at that time, so he
sought financial aid from his uncle Felipe Deluao.

The Director of Fisheries nevertheless still


rejected Casteel's application and required him to
remove all the improvements which he had
introduced on the land, and ordered that the land
be leased through public auction

The wife of Felipe Deluaoas party of the first


part, and Nicanor Casteel as party of the second
part, executed a contract denominated as a
"contract of service". On the same date the above
contract was entered into, Inocencia Deluao
executed a special power of attorney in favor of
Jesus Donesa.

The Secretary of Agriculture and Natural


Resources rendered a decision ordering Casteel to
be reinstated in the area and that he shall pay for
the improvement made thereupon.
Sometime in January 1951 Nicanor Casteel
forbade Inocencia Deluao from further
administering the fishpond, and ejected the latter's
representative, Jesus Donesa, from the premises.

IV. ISSUE/S: Whether the reinstatement of Casteel


over the subject land constitute a dissolution of the
partnership between him and Deluao

V. RULING:
YES, the reinstatement of Casteel dissolved
his partnership with Deluao.

The Supreme Court ruled that the


arrangement under the so-called "contract of
service" continued until the decision both dated
Sept. 15, 1950 were issued by the Secretary of
Agriculture and Natural Resources in DANR Cases
353 and 353-B.

This development, by itself, brought about


the dissolution of the partnership. Since the
partnership had for its object the division into two
equal parts of the fishpond between the appellees
and the appellant after it shall have been awarded
to the latter, and therefore it envisaged the
unauthorized transfer of one half thereof to parties
other than the applicant Casteel, it was dissolved
8. Del Prado, Darren Joseph M. 9. Del Prado, Darren Joseph M.
I. TITLE: The Leyte-Samar Sales and Tomassi I. TITLE: In the Matter of the Petition for
vs. Suplicio V. Cea and Lastrilla (93 Phil. 100) Authority to Continue Use of the Firm name
Ozaeta, Romulo, etc. (92 SCRA 1)
II. TOPIC: Recovery of interest by a creditor of a
partner II. TOPIC: Using the name of a deceased partner

III. FACTS: III. FACTS:

This is a suit for damages by LESSCO and The surviving parters of Atty. Herminio
Raymond Tomassi against FELCO, Arnold Hall, Ozaeta filed a petition praying that they be allowed
Fred Brown and Jean Roxas, whereby judgment to continue using, in the name of their firm, the
against defendants jointly and severally for the names of their partner who passed away. One of
amount of P31,589.14 plus costs was rendered. the petitioners arguments stated that no local
The Court of Appeals confirmed the award in custom prohibits the continued use of a deceased
November 1950, minus P2,000 representing partners name in a professional firms name in so
attorney's fees mistakenly included. far as Greater Manila Area is concerned. No
custom exists which recognizes that the name of a
The decision having become final, the law firm necessarily identifies the individual
sheriff sold at auction on June 9, 1951 to Dorfe and members of the firm. They also stated that the
Asturias "all the rights, interests, titles and continued use of a deceased partners name in the
participation" of the defendants in certain buildings firm name of law partnerships has been
and properties described in the certificate, for a consistently allowed by U.S. Courts and is an
total price of eight thousand and one hundred accepted practice in the legal profession of most
pesos. countries in the world.

But on June 4, 1951, Lastrilla filed in the IV. ISSUE/S: Whether or not the law firm Ozaeta,
case a motion, wherein he claimed to be the owner Romulo, De Leon, Mabanta & Reyes is allowed to
by purchase on September 29, 1949, of all the sustain the name of their deceased partner,
"shares and interests" of defendant Fred Brown in
the FELCO, and requested "under the law of V. RULING:
preference of credits" that the sheriff be required to
retain in his possession so much of the deeds of NO. Inasmuch as "Sycip, Salazar, Feliciano,
the auction sale as may be necessary "to pay his Hernandez and Castillo" and "Ozaeta, Romulo, De
right". Over the plaintiffs' objection the judge in his Leon, Mabanta and Reyes" are partnerships, the
order of June 13, 1951, granted Lastrilla's motion use in their partnership names of the names of
by requiring the sheriff to retain 17 per cent of the deceased partners will run counter to Article 1815
money "for delivery to the assignee, administrator of the Civil Code which provides:
or receiver" of the FELCO.
Art. 1815. Every partnership shall
IV. ISSUE/S: WON Lastrilla may recover the operate under a firm name, which may or may not
shares and interest of Fred Brown. include the name of one or more of the partners.
V. RULING: Those who, not being members of the
partnership, include their names in the firm name,
NO, since he was not a creditor of FELCO. shall be subject to the liability, of a partner. It is
That is too elementary to need elaboration. The clearly tacit in the above provision that names in a
properties sold at auction actually belonged to the firm name of a partnership must either be those of
FELCO partnership and the partners. When the living partners and. in the case of non-partners,
sale was effected of the properties of FELCO to should be living persons who can be subjected to
Roberto Dorfe and Pepito Asturias, Lastilla was liability. In fact, Article 1825 of the Civil Code
already a partner of FELCO. Now, does Lastrilla prohibits a third person from including his name in
have any proper claim to the proceeds of the sale? the firm name under pain of assuming the liability of
If he was a creditor of the FELCO, perhaps or a partner. The heirs of a deceased partner in a law
maybe. But he was no. The partner of a partnership firm cannot be held liable as the old members to
is not a creditor of such partnership for the amount the creditors of a firm particularly where they are
of his shares. That is too elementary to need non-lawyers. Thus, Canon 34 of the Canons of
elaboration. Professional Ethics "prohibits an agreement for the
payment to the widow and heirs of a deceased
lawyer of a percentage, either gross or net, of the
fees received from the future business of the
deceased lawyer's clients, both because the
recipients of such division are not lawyers and
because such payments will not represent service
or responsibility on the part of the recipient. "
Accordingly, neither the widow nor the heirs can be
held liable for transactions entered into after the
death of their lawyer-predecessor. There being no Garcia, Charlotte Yris C.
benefits accruing, there ran be no corresponding I. TITLE: Teck Seing and Co., Ltd. (petitioner-
liability. Prescinding the law, there could be appellee) Santiago Jo Chung Cang et al.
practical objections to allowing the use by law firms (partners) vs. Pacific Commercial Company, et
of the names of deceased partners. The public al. (creditors-appellants) (45 Phil. 142)
relations value of the use of an old firm name can
tend to create undue advantages and II. TOPIC: Limited Partnership (Article 1815)
disadvantages in the practice of the profession. An
able lawyer without connections will have to make a III. FACTS:
name for himself starting from scratch. Another
able lawyer, who can join an old firm, can initially In the insolvency proceedings of Sociedad
ride on that old firm's reputation established by Mercantil, Teck Seing & Co., Ltd. creditors Pacific
deceased partners. Commercial Company, Piol & Company, Riu
Hermanos, and W.H. Anderson & Company filed a
motion praying for the following:

a. Declare the individual partners as parties to the


proceedings;
b. Require each partners to file an inventory of his
property in the manner required by Sec. 51 of Act No.
1956; and
c. That each partner be adjudicated insolvent debtors
in the proceeding.

The trial court first granted the motion but


subsequently denied it. An appeal was taken in
accordance with Sec. 82 of the Insolvency Law.

IV. ISSUE/S: Whether or not Teck Seing & Co., Ltd. is


a limited partnership.

V. RULING:

To establish a limited partnership there


must be, at least, one general partner and the name of
the least one of the general partners must appear in
the firm name. But neither of these requirements has
been fulfilled. The general rule is that those who seek
to avail themselves of the protection of laws permitting
the creation of limited partnerships must show a
substantially full compliance with such laws. A limited
partnership that has not complied with the law of its
creation is not considered a limited partnership at all,
but a general partnership in which all the members are
liable.

The legal intention deducible from the acts


of the parties controls in determining the existence of a
partnership. If they intend to do a thing which in law
constitutes a partnership, they are partners, although
their purpose was to avoid the creation of such relation.
Here, the intention of the persons making up Teck
Seing & Co., Ltd. was to establish a partnership which
they erroneously denominated a limited partnership.

The contract of partnership entered into by


the parties established a general partnership. The
order appealed from is reversed.
Garcia, Charlotte Yris C. contracted in the name of the partnership, without any
I. TITLE: Philippine National Bank vs. Severo objection of the other partners; and (2) because it
Eugenio Lo, et al. (defendants) Severio appears in the record that the appellant-partners
Eugenio, Ng Khey Ling and Yep Seng Severo Eugenio Lo, Ng Khey Ling and Yap Seng,
(appellants) (50 Phil. 802) appointed Sy Tit as manager, and he obtained from the
II. TOPIC: General Partnership (Article 1815) plaintiff bank the credit in current account, the debit
balance of which is sought to be recovered in this
III. FACTS: action.
In 1916, appellants Severo Eugenio Lo and
Ng Khey Ling, together with J.A. Say Lian Ping
(general manager), Ko Tiao Hun, On Yem Ke Lam and
Co Sieng Peng formed a commercial partnership under
the name of "Tai Sing and Co." with a capital of
P40,000 contributed by said partners. The articles of
copartnership state that the partnership is to last for 5
years from date of its organization for the purchase and
sale of native, Chinese and Japanese products.

J.A. Say Lian Ping executed a power of


attorney in favor of A.Y. Ke Lam authorizing him to act
as stead manager and administrator of "Tai Sing and
Co. Lam obtained a loan of P8,000 from plaintiff bank.
As security for the loan he mortgaged certain personal
property of the partnership. Twice, Ke Lam also
executed chattel mortgage in favor of PNB as security
for a loan of P20,000 with interest.

Sy Tit, authorized by a power of attorney,


obtained a credit of P20,000 from PNB, executing a
chattel mortgage on personal property of the firm.

Defendants had been using this commercial


credit in a current account with PNB from 1918 to 1922
with a debit balance of P16,518.74 debt.

Defendant Lo asserts that "Tai Sing & Co.


was not a general partnership, and that the commercial
credit in current account which "Tai Sing & Co.
obtained from the plaintiff bank had not been
authorized by the board of directors of the company,
nor was the person who subscribed said contract
authorized to make the same, under the article of
copartnership.

The trial court decided in favor of PNB.

IV. ISSUE/S: Whether or not Tai Sing and Co. is a


general partnership.

V. RULING:

The defendant association formed by the


defendants is a general partnership, as defined in
article 126 of the Code Commerce. This partnership
was registered in the mercantile register of the
Province of Iloilo. The only anomaly noted in its
organization is that instead of adopting for their firm
name the names of all of the partners, of several of
them, or only one of them, to be followed in the last two
cases, by the words "and to be followed in the last two
cases, by the words "and company" the partners
agreed upon "Tai Sing & Co." as the firm name.

As to the alleged death of the manager of the


company, Say Lian Ping the trial court did not find this
fact proven at the hearing. But even supposing that the
court had erred, such an error would not justify the
reversal of the judgment, for two reasons at least: (1)
Because Ou Yong Kelam was a partner who
Garcia, Charlotte Yris C. altered. If this is true, the plaintiffs have juridical
I. TITLE: Sharruf & Co., known also as Sharruf & personality to bring this action.
Eskenazi, Salomon Sharruf and Elias Eskenazi,
(plaintiffs-appellees) vs. Balooise Fire This court is of the opinion and so holds: (1)
Insurance Co., Sun Insurance Office, Ltd. and that when the partners of a general partnership
Springfield Insurance Co., represented by doing business under the firm name of "Sharruf &
Kuenzle & Streiff, Inc. (defendants-appellants) Co." obtain insurance policies issued to said firm
(64 Phil. 258) and the latter is afterwards changed to "Sharruf &
II. TOPIC: Personality to Sue of Partnerships (Article Eskenazi", which are the names of the same and
1815) only partners of said firm "Sharruf & Co.",
continuing the same business, the new firm
III. FACTS: acquires the rights of the former under the same
policies; (2) that when the evidence relative to the
Plaintiffs Salomon Sharruf and Elias cause of a fire and the author thereof is so vague and
Eskenazi were doing business under Sharruf & Co. doubtful, the insured cannot be attributed incendiary
They applied to defendant companies for insurance of intervention therein for the mere fact that he had the
the merchandise in stock. Defendant insurance keys to the unoccupied building in his possession; (3)
companies issued them insurance policies in the total that a person who presents a claim for damages
amount of P40,000 in the name of Sharruf & Co. caused by fire to articles and goods not existing at the
time of the fire does so fraudulently and his claim is
Plaintiffs executed a contract of partnership fraudulent, and (4) that when immediately after a fire
substituting Sharruf & Eskenazi as the firm name as that broke out inside a completely locked building,
Elias Ezkenazi. The total value of the merchandise lasting scarcely 27 minutes, only about ten or eleven
contributed by both partners amounted to P50,505.04. partly burned and scorched cases, some containing
Part of said merchandise, most of which were textiles, textiles and wrapping paper and others, statutes of
was sold for P8,000, leaving goods worth P43,000. In saints, have been found without any trace of the
all there were from 60 to 70 bolts of silk. All the goods, destruction of other cases by said fire, it can neither
most of which were aluminum kitchen utensils, various logically nor reasonably be inferred that 40 of said
porcelain and glass wares, and other articles of stucco, cases were inside the building when the fire broke out.
were contained in about 39 or 40 cases. A fire broke
out in the building destroying the merchandise.

Plaintiffs filed their claims against defendant


insurance companies but the latter refused. The Court
of First Instance decided in favor of the plaintiffs.

IV. ISSUE/S: Whether or not plaintiffs, as a


partnership, had personality to sue.

V. RULING:

In the case of Lim Cuan Sy vs. Northern


Assurance Co. (55 Phil. 248), this court said:

A policy insuring merchandise against fire


is not invalidated by the fact that the name of the
insured in the policy is incorrectly written "Lim Cuan
Sy" instead of "Lim Cuan Sy & Co.", the latter being the
proper legal designation of the firm, where it appears
that the designation "Lim Cuan Sy" was commonly
used as the name of the firm in its business dealings
and that the error in the designation of the insured in
the policy was not due to any fraudulent intent on the
part of the latter and did not mislead the insurer as to
the extent of the liability assumed.

While it is true that at the beginning the


plaintiffs had been doing business in said name of
"Sharruf & Co.", insuring their business in said name,
and upon executing the contract of partnership, they
changed the title thereof to "Sharruf & Eskenazi," the
membership of the partnership in question remained
unchanged, the same and only members of the former,
Salomon Sharruf and Elias Eskenazi, being the ones
composing the latter, and it does not appear that in
changing the title of the partnership they had the
intention of defrauding the herein defendant insurance
companies. Therefore, under the above-cited doctrine
the responsibility of said defendants to the plaintiffs by
virtue of the respective insurance policies has not been
Garcia, Charlotte Yris C. that there is not enough property in the partnership to
I. TITLE: La Compaia Maritima (plaintiff- pay him, then the capitalist partners must pay him.
appellant) vs. Francisco Muoz, et al.
(defendants-appellees) (9 Phil. 326) `If industrial partners in commercial
II. TOPIC: Liability of Industrial Partners (Article 1816) partnerships are not responsible to third persons for the
debts of the firm, then industrial partners in civil
III. FACTS: partnerships are not. Waiving the question as to
whether there can be a commercial partnership
Defendants Francisco Muoz, Emilio
composed entirely of industrial partners, it seems clear
Muoz, and Rafael Naval formed an ordinary general
that there can be such civil partnership, for article 1678
mercantile partnership under the name of Francisco
of the Civil Code provides as follows:
Muoz & Sons for the purpose of carrying on the
mercantile business in the Province of Albay. Francisco
Muoz was a capitalist partner and Emilio Muoz and A particular partnership has for its object
Rafael Naval were industrial partners. specified things only, their use of profits, or a specified
undertaking, or the exercise of a profession or art.
In the articles of partnership, it was agreed
upon by the three that for profits, Francisco shall have It might very easily happen, therefore, that a
a three-fourth shares while the other two would have civil partnership could be composed entirely of
one-eighth shares each. For the losses, only Francisco industrial partners. If it were, according to the claim of
shall bear it. the appellees, there would be no personal
responsibility whatever for the debts of the partnership.
La Compaia brought an action in the Court
of First Instance of Manila against the partnership of
Franciso Muoz & Sons, and against Francisco
Muoz, Emilio Muoz, and Rafael Naval to recover the
sum of P26,828.30, with interest and costs. The CFI
ordered the defendant partnership to pay the plaintiff;
that in case it cannot pay the ordered sum all the
partners shall be liable for it in accordance with Article
127 of the Code of Commerce. Francisco avers, as
capitalist partner, that industrial partners should not be
liable.

IV. ISSUE/S: Whether or not industrial partners are


equally liable as capitalist partners.

V. RULING:

Yes. Article 127 of the Code of Commerce


states that:

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 signature of the latter, and
by a person authorized to make use thereof.

There is no injustice in imposing this liability


upon the industrial partners. They have a voice in the
management of the business, if no manager has been
named in the articles; they share in the profits and as to
third persons it is no more than right that they should
share in the obligations. It is admitted that if in this case
there had been a capitalist partner who had contributed
only P100 he would be liable for this entire debt of
P26,000.

Our construction of the article is that it


relates exclusively to the settlement of the partnership
affairs among the partners themselves and has nothing
to do with the liability of the partners to third persons;
that each one of the industrial partners is liable to third
persons for the debts of the firm; that if he has paid
such debts out of his private property during the life of
the partnership, when its affairs are settled he is
entitled to credit for the amount so paid, and if it results
Garcia, Charlotte Yris C. Pacific Commercial Company (plaintiff-appellee)
I. TITLE: Teodoro de los Reyes (plaintiff- vs. Aboitiz & Martinez
appellee) vs. Vicente Lukban (defendant-
appellant) and Esperidion Borja (defendant) (35 II. TOPIC: Liability of an Industrial Partner (Article
Phil. 757) 1816)
II. TOPIC: Liability of an Industrial Partner (Article
1816) III. FACTS:
Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose
III. FACTS: Martinez formed a "regular, collective, mercantile
partnership" with a capital of P40,000 of which each of the
Plaintiff Teodoro brought a suit against
partners Aboitiz and De Silva furnished one-third. Jose
Lukban & Borja to recover P1,086.65 owing for Martinez was an industrial partner; it was provided in the
merchandise bought on credit from the ship supply partnership article that he was to receive 30% of the profits
store known by the name of La Industria. Defendant and that his responsibility for losses should not exceed the
was ordered to pay such amount by the court. Plaintiff amount of the profits received by him.
brought another suit in the CFI against Lukban and
Borja to recover individually the sum of P853 which is The partnership through its representative, Aboitiz,
the balance of the P1,086.65. Defendant Lukban executed a promissory note in favor of plaintiff for
contends that he is not liable because he was merely P23,168.71 with interest. As security, the partnership
an industrial partner. executed a chattel mortgage in favor of plaintiff on
certain personal property.
The lower court ordered defendants to
jointly and severally pay the plaintiff since the For failure to pay the debt the chattel mortgage was
partnership has already been dissolved and has no foreclosed, sold for P2,000 and paid to the plaintiff. An
more remaining property. action was filed by plaintiff for the unpaid balance
wherein the trial court decided in favor of the plaintiff.
IV. ISSUE/S: Whether or not plaintiff may collect
individually from the partners the amount owed by the The judgment further provided that execution should
partnership before its dissolution. first issue against the property of the partnership
should first issue against the insolvency of the
V. RULING: partnership, it might issue against the property of the
partners De Silva and Aboitiz and in the event of their
YES. Under Article 127 of the Code of insolvency, then against the property of the industrial
Commerce, All the member of the general co- partner Jose Martinez. From this judgment Martinez
partnership, be they or be they not managing partners appealed to this court and here maintains that under
of the same, are personally and severally liable with all article 141 of the Code of Commerce he, as a mere
their property for the results of the transactions made in industrial partner, cannot be held responsible for the
the name and for the account of the partnership, under partnership's debt.
the signature of the latter, and by a person authorized
to make use thereof. IV. ISSUE: Whether or not an industrial partner is liable
for the partnerships debt.
The creditor, who has not succeeded
judicially in recovering a debt owing him by a general V. RULING:
copartnership, on account of its insolvency, has a right
to sue the partners thereof in the manner provided by YES. Article 127 of the Code of Commerce reads as
the abovementioned article, inasmuch as each and all follows, All the members of the general co-partnership,
of the copartners are personally and severally liable be they or be they not managing partners of the same
with all their property for the result of the transactions are liable personally and in solidum with all their
made in the name and for the account of the property for the results of the transaction made in the
partnership, under the signature of the latter, and by a name and for the account of the partnership, under the
person authorized to make use thereof. signature of the later, and by a person authorized to
make use thereof.

The language of this article is clear and specific that all


the members of a general co-partnership are liable with
all their property for the results of the duly authorized
transactions made in the name and for the account of
the partnership. On the other hand, Article 141, upon
which the appellants relies and which provides that
"losses shall be computed in the same proportion
among the capitalist partners without including the
industrial partners, unless by special agreement the
latter have been constituted as participants therein," is
susceptible of two different interpretations of which that
given it in the La Compaia Maritima case, i.e., that it
relates merely to the distribution of losses among the
partners themselves in the settlement of the
partnership affairs and has no reference to partnership
obligations to third parties, appears to us to be the
more logical.
I. TITLE: Island Sales, Inc. (plaintiff-appellee) vs. Garcia, Charlotte Yris C.
United Pioneers General Construction I. TITLE: Elmo Muasque (petitioner) vs. Court
Company, et al. (defendants) Benjamin C. Daco of Appeals, Celestino Galan Tropical Company
(defendant-appellant) (65 Phil. 544) and Ramon Pons (respondents) (139 SCRA 533)
II. TOPIC: Extent of Partners Liability Where the II. TOPIC: Liability of a Partner (Article 1816
Complaint Against One is Dismissed (Article 1816)
III. FACTS:
III. FACTS:
Petitioner Muasque, in behalf of Galan &
Defendant company, a general partnership Muasque, entered into a contract with respondent
duly registered under the laws of the Philippines, Tropical through branch manager Pons for the
purchased from the plaintiff a motor vehicle on the remodeling of a portion of private respondent Tropicals
installment basis and for this purpose executed a building without exchanging or expecting any
promissory note for P9,440.00, payable in 12 equal consideration from Galan although the latter was
monthly installments of P786.63. casually named as partner in the contract. Galan would
receive some kind of compensation in the form of some
For failure to pay, plaintiff sued the percentages or commission.
defendant company for an unpaid balance of
P7,199.07. Private respondent Tropical agreed to give
petitioner the amount of P7,000 soon after the
The complaint against defendant Lumauig construction began and thereafter, the amount of
was dismissed and the trial court rendered a decision P6,000.00 every 15 days during the construction to
ordering the defendant company to pay the plaintiff. make a total sum of P25,000.
And the partners shall be liable in case the defendant
company has no more leviable properties to satisfy the The first payment was a check for
judgment. P7,000.00 but it was not given to the plaintiff but to a
stranger to the contract, Galan, who succeeded in
Defendants Daco and Sim moved for getting petitioner's indorsement on the same
reconsideration claiming that since there are five persuading the latter that the check be deposited in a
general partners the joint and subsidiary liability of joint account. Galan allegedly misappropriated the
each partner should not exceed one-fifth of the P6,183.37 for his personal use.
obligations of the defendant company. The trial court
denied such motion for reconsideration. Muasque refused to indorse the second
check worth P6,000 but through later manipulations,
IV. ISSUE: Whether or not the liability of the partners respondent Pons succeeded in changing the payee's
are increased due to the dismissal of the complaint name from Elmo Muasque to Galan and Associates,
against one of the partners. thus enabling Galan to encash the same
V. RULING: Petitioner undertook the construction at his
own expense. Because of the unauthorized
NO. Under article 1816 of the Civil Code, all disbursement by respondents Tropical and Pons of the
partners including industrial ones, shall be liable pro sum of P13,000.00 to Galan petitioner demanded that
rata with all their property and after all the partnership said amount be paid to him by respondents under the
assets have been exhausted, for the contracts which terms of the written contract between the petitioner and
may be entered into in the name and for the account of respondent company.
the partnership, under its signature and by a person
authorized to act for the partnership. However, any Petitioner filed a complaint for payment of
partner may enter into a separate obligation to perform sum of money and damages against respondents.
a partnership contract.

There were five general partners when the IV. ISSUE/S: Whether or not Muasque is solidarily
promissory note was executed for and in behalf of the liable with respondent Galan.
partnership. Since the liability of the partners is pro
rata, the liability of appellant Daco shall be limited to V. RULING:
only one-fifth of the obligations of the defendant
company. The fact that the complaint against Lumauig YES. While it is true that under Article 1816
was dismissed, upon motion of the Island Sales, does of the Civil Code, "All partners, including industrial
not unmake Lumauig as a general partner in the ones, shall be liable prorate with all their property and
company. In so moving to dismiss the complaint, Island after all the partnership assets have been exhausted,
Sales merely condoned Lumauigs individual liability to for the contracts which may be entered into the name
them. and for the account of the partnership, under its
signature and by a person authorized to act for the
partnership..." this provision should be construed
together with Article 1824 which provides that: "All
partners are liable solidarily with the partnership for
everything chargeable to the partnership under Articles
1822 and 1823." In short, while the liability of the
partners are merely joint in transactions entered into by
the partnership, a third person who transacted with said
partnership can hold the partners solidarily liable for the Garcia, Charlotte Yris C.
whole obligation if the case of the third person falls I. TITLE: Ildefonso de la Rosa, administrator of
under Articles 1822 or 1823. the intestate estate of the deceased Go-Lio
(plaintiff-appellant) vs. Enrique Ortega Go-
The respondent Tropical had every reason Cotay (defendant-appellant) (48 Phil. 605)
to believe that a partnership existed between the II. TOPIC: Liability of the Partnership (Article 1818)
petitioner and Galan and no fault or error can be
imputed against it for making payments to "Galan and III. FACTS:
Associates" and delivering the same to Galan because
as far as it was concerned, Galan was a true partner Go-Lio and Go-Sengco formed a society for
with real authority to transact on behalf of the the purchase and sale of articles of commerce, and for
partnership with which it was dealing. this purpose they opened a store in the town of San
Isidro, Nueva Ecija. Defendant-appellant took charge of
Justice also dictates that Muasque be the business when his father, Go-Sengco, died and
reimbursed by Galan for the payments made by the Go-Lio went to China.
former representing the liability of their partnership to
herein intervenors, as it was satisfactorily established Go-Lio died and one of his children went to
that Galan acted in bad faith in his dealings with the Philippines to file a petition for appointment of
Muasque as a partner. plaintiff as administrator which was granted by the CFI.
Plaintiff de la Rosa requested Enrique to wind up the
business and to deliver to him the portion
corresponding Go-Lio, which Enrique denied alleging
that the business is his exclusively.

De la Rosa filed with the CFI a complaint


prying that defendant be ordered to deliver one-half of
all the property of the partnership, and that plaintiff be
appointed the receiver for the property of the
partnership. Defendant alleged that more than 10 years
had elapsed before the filing of the complaint.

The court appointed three commissioners to


make an inventory and liquidate all of the partnerships
property. In order to prevent Justo Cabo-Chan from
assuming the office of receiver, defendant filed a bond.
The partnership incurred losses in the amount of
P89,099.22. Since there was no profit, plaintiff has
nothing to recover.

IV. ISSUE: Whether or not the partnership should bear


the loss.

V. RULING:

NO. Defendant assumed complete


responsibility on August 3, 1918 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.
1. Landayan, Mary Mercedita R. be understood in law as effected by Hill & Ceron
I. TITLE: Litton v. Hill (67 Phil. 509) and binding upon it.

There is a general presumption that each


II. TOPIC: Article 1818 individual partner is an authorized agent for the firm
(Partners relationships with third and that he has authority to bind the firm in carrying
persons/ Presumption of authority on the partnership transactions. The presumption is
in transactions entered into in the sufficient to permit third persons to hold the firm
name of the partnership) liable on transactions entered into by one of
members of the firm acting apparently in its behalf
III. FACTS: and within the scope of his authority.

The plaintiff, George Litton, sold and Robert Hill insists that Litton had not
delivered to Carlos Ceron, one of the managing established that Carlos Ceron had his (Hill) consent
partners of Hill & Ceron, a certain number of mining to enter with the appellant into the contract whose
claims. By virtue of said transaction, the defendant breach gave rise to the complaint. It is argued that,
Carlos Ceron delivered to the plaintiff a document it being is stipulated in the articles of partnership
providing that Ceron received from Litton three (3) that either Hill or Ceron may contract and sign for
share certificates with a total of 17, 000 shares of the partnership with the consent of the other; the
Big Wedge Mining Company for P1,870.00, with consent therefore of Hill was necessary for the
Hill & Ceron indicated therein before the signature validity of the contract.
of Carlos Ceron. The document reads as follows:
The stipulation in the articles of partnership
"Feb. 14, 1934 that any of the two managing partners may contract
and sign in the name of the partnership with the
"Received from Mr. George Litton share consent of the other, undoubtedly creates an
certificates Nos. 4428, 4429 and 6699 for obligation between the two partners, which consists
5,000, 5,000 and 7,000 shares respectively in asking the other's consent before contracting for
total 17,000 shares of Big Wedge Mining the partnership. This obligation of course is not
Company, which we have sold at P0.11 imposed upon a third person who contracts with the
(eleven centavos) per share or P1,870.00 partnership. Neither is it necessary for the third
less 1/2 per cent brokerage. person to ascertain if the managing partner with
whom he contracts has previously obtained the
"Hill & Ceron consent of the other. A third person may and has a
right to presume that the partner with whom he
"By: (Sgd.) Carlos Ceron" contracts has, in the ordinary and natural course of
business, the consent of his copartner; for
Ceron paid to the plaintiff the sum of P1,150 otherwise he would not enter into the contract.
leaving an unpaid balance of P720, and unable to
collect this sum either from Hill & Ceron or from its Wherefore, unless the contrary is shown,
surety Visayan Surety & Insurance Corporation, namely, that one of the partners did not consent to
Litton filed a complaint in the CFI Manila against his copartner entering into a contract with a third
the said defendants for the recovery of the said person, and that the latter with knowledge thereof
balance. entered into said contract, the aforesaid
presumption with all its force and legal effects
The court, after trial, ordered Carlos Ceron should be taken into account.
personally to pay the amount claimed and absolved
the partnership Hill & Ceron, Robert Hill and the There is nothing in the case at bar which
Visayan Surety & Insurance Corporation. On destroys this presumption; the only thing appearing
appeal to the Court of Appeals, the latter affirmed in the findings of fact of the Court of Appeals is that
the decision of the court, having reached the the plaintiff "has failed to prove that Hill had
conclusion that Ceron did not intend to represent consented to such contract". Defendants are
and did not act for the firm Hill & Ceron in the ordered to pay to the plaintiff, jointly and severally
transaction. the sum of P720 with legal interest.

IV. ISSUE/S: WON the consent of the other


partner was necessary to bind the partnership
where the articles stipulate that either may contract
and sign for the partnership with the consent of the
other.

WON the transaction with Litton was entered into


by Ceron, in his individual capacity, or by Hill &
Ceron.

V. RULING:
The Supreme Court held that the
transaction made by Ceron with the plaintiff should
2. Landayan, Mary Mercedita R. absolved respondents Tropical and its Cebu
I. TITLE: Muasque vs. CA (139 SCRA 533) Manager, Pons, from any liability but they also held
the petitioner together with respondent Galan, liable
II. TOPIC: Article 1818 to the intervenors Cebu Southern Hardware
(Existence of partnership despite Company and Blue Diamond Glass Palace for the
feud between the partners) credit which the intervenors extended to the
partnership of petitioner and Galan.
III. FACTS:
IV. ISSUES:
Petitioner Muasque in behalf of the
partnership of "Galan and Muasque" as (1) Whether or not the appellate court erred in
Contractor entered into a written contract with holding that a partnership existed between
respondent Tropical for remodelling the petitioner and respondent Galan;
respondent's Cebu branch building. A total amount
of P25,000.00 was to be paid under the contract for (2) Assuming that there was such a
the entire services of the Contractor. The terms of partnership, whether or not the court erred
payment were as follows: thirty percent (30%) of in not finding Galan accountable to the
the whole amount upon the signing of the contract petitioner for the P13,000.00 covered by the
and the balance thereof divided into three equal first and second checks; and
installments at the lute of Six Thousand Pesos
(P6,000.00) every fifteen (15) working days. (3) Whether or not the court committed grave
abuse of discretion in holding that the
The first payment made by respondent payment made by Tropical through its
Tropical was in the form of a check for P7,000.00 in manager Pons to Galan was "good
the name of the petitioner. Petitioner, however, payment "
indorsed the check in favor of respondent Galan to
enable the latter to deposit it in the bank and pay V. RULING:
for the materials and labor used in the project.
Petitioner alleged that Galan spent P6,183.37 out There is nothing in the records to indicate
of the P7,000.00 for his personal use so that when that the partnership organized by the two men was
the second check in the amount of P6,000.00 came not a genuine one. If there was a falling out or
and Galan asked the petitioner to indorse it again, misunderstanding between the partners, such does
the petitioner refused. The check was withheld from not convert the partnership into a sham
the petitioner. organization.

Since Galan informed the Cebu branch of Likewise, when Muasque received the first
Tropical that there was a "misunderstanding" payment of Tropical in the amount of P7,000.00
between him and petitioner, respondent Tropical with a check made out in his name, he indorsed the
changed the name of the payee in the second check in favor of Galan. Respondent Tropical
check from Muasque to "Galan and Associates" therefore, had every right to presume that the
which was the duly registered name of the petitioner and Galan were true partners. If they
partnership between Galan and petitioner and were not partners as petitioner claims, then he has
under which name a permit to do construction only himself to blame for making the relationship
business was issued by the mayor of Cebu City. appear otherwise, not only to Tropical but to their
This enabled Galan to encash the second check. other creditors as well. The payments made to the
partnership were, therefore, valid payments.
Meanwhile, as alleged by the petitioner, the
construction continued through his sole efforts and Since the two were partners when the debts
although Galan failed to pay what was partly due were incurred, they are also both liable to third
the laborers and partly due for the materials, the persons who extended credit to their partnership.
construction work was finished ahead of schedule
with the total expenditure reaching P34,000.00. While the liability of partners are merely joint
in transactions entered into by the partnership, the
The two remaining checks, each in the parties are liable to third persons solidarily for the
amount of P6,000.00, were subsequently given to whole obligation if the case involves loss or injury
the petitioner alone with the last check being given caused to any person not a partner in the
pursuant to a court order. partnership, and misapplication of money or
property of a third person received by a partner of
The petitioner filed a complaint for payment the partnership. The reason is that the law protects
of sum of money and damages against the him, who in good faith relied upon the authority of a
respondents, seeking to recover the following: the partner, whether such authority is real or apparent.
amounts covered by the first and second checks
which fell into the hands of respondent Galan, the In the case at bar, the respondent Tropical
additional expenses that the petitioner incurred in had every reason to believe that a partnership
the construction, moral and exemplary damages, existed between the petitioner and Galan and no
and attorney's fees. fault or error can be imputed against it for making
payments to "Galan and Associates" and delivering
Both the trial and appellate courts not only the same to Galan because as far as it was
concerned, Galan was a true partner with real
authority to transact on behalf of the partnership
with which it was dealing. This is even more true in
the cases of Cebu Southern Hardware and Blue
Diamond Glass Palace who supplied materials on
credit to the partnership. Thus, it is but fair that the
consequences of any wrongful act committed by
any of the partners therein should be answered
solidarily by all the partners and the partnership as
a whole.

However, as between the partners


Muasque and Galan,justice also dictates that
Muasque be reimbursed by Galan for the
payments made by the former representing the
liability of their partnership to herein intervenors, as
it was satisfactorily established that Galan acted in
bad faith in his dealings with Muasque as a
partner.

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