Partnership Digest Compilation Group B

ATTY. GREGORIO GERRY F.
FERNANDEZ
PARTNERSHIP AGENCY &

TRUST
3C - SYLLABUS DIGEST
GROUP B
9/8/2017
Table of Contents
I. TITLE: CIR vs. Suter & CTA ( 27 SCRA 152 ) ......................................................................... 4

I. TITLE: Wood House vs. Halili (93 Phil. 526) ............................................................................ 5
I. TITLE: Ortega v. Court of Appeals (245 SCRA 259) ................................................................ 7
I. TITLE: Aurbach vs. Sanitary Wares Mfg. Corp. ( 186 SCRA 130 ) .......................................... 8
I. TITLE: Lim Tong Lim vs. Phil. Fishing Gear Industries, Inc. (317 SCRA 728 ) .................... 10
I. TITLE: Aguila, Jr. vs. Court of Appeals ( 319 SCRA 246 ) ..................................................... 11
I. TITLE: Ang Pue Co., vs. Secretary of Commerce and Industry (5 SCRA 645 ) ...................... 13
I. TITLE: Heirs of Tan Eng Kee vs. Court of Appeals (341 SCRA 740 ) .................................... 14
I. TITLE: Pascual vs. Commissioner of Internal Revenue (166 SCRA 560 ) .............................. 16
I. TITLE: Sardene v. Court of Appeals (167 SCRA 524) ............................................................ 18
I. TITLE: Afisco Insurance Corporation v. Court of Appeals (302 SCRA 1) .............................. 20
I. TITLE: Deluao v. Casteel (26 SCRA 475)................................................................................ 22
I. TITLE: Agad v. Mabato (23 SCRA 1223) ................................................................................ 24
I. TITLE: CIR v. Ledesma (31 SCRA 95) .................................................................................... 26
I. TITLE: Solis v. Barroso (53 Phil 912) ...................................................................................... 27
I. TITLE: Torres v. Court of Appeals (320 SCRA 428) ............................................................... 29
I. TITLE: Smith v. Lopez (5 Phil 78) ........................................................................................... 31
I. TITLE: Lyons v. Rosenstock (56 Phil 632) .............................................................................. 33
I. TITLE: Ortega v CA (245 SCRA 529) ..................................................................................... 36
I. TITLE: Uy v Puzon (79 SCRA 598) ......................................................................................... 38
I. TITLE: Liwanag v. CA (281 SCRA 1225) ............................................................................... 40
I. TITLE: US v Clarin (17 Phil. 84) .............................................................................................. 42
I. TITLE: Evangelista & Co. v Abad Santos (51 SCRA 416) ...................................................... 43
I. TITLE: Soncuya v De Luna (67 Phil. 646) ............................................................................... 45
I. TITLE: Martinez v Ong Pong Co. (14 Phil. 726) ...................................................................... 46
I. TITLE: Agustin Et.al. v Inocencio (9 Phil. 134) ....................................................................... 47
I. TITLE: Ramnani v CA (196 SCRA 731) .................................................................................. 48
I. TITLE: Garcia Ron vs. Campañia de Minas de Batan (12 Phil. 130) ....................................... 50
I. TITLE: Tai Tong Chuache & Co., vs. Insurance Commission (158 SCRA 366) ..................... 51
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I. TITLE: Fortis vs. Gutierrez Hermanos (6 Phil. 100) ................................................................ 53
I. TITLE: Fortis vs. Gutierrez Hermanos (6 Phil. 100) ................................................................ 55
I. TITLE: Council of Red Men vs. Veterman Army (7 Phil. 685) ............................................... 57
I. TITLE: Machucha vs. Chuidian (2 Phil. 210) ........................................................................... 59
I. TITLE: Pardo vs. Hercules Lumber Co. and Ferrer (47 Phil. 964) ........................................... 62
I. TITLE: Pang Lim and Galvez vs. Lo Seng (42 Phil. 282) ........................................................ 63
I. TITLE: Catalan vs. Gatchalian (105 Phil. 1270) ....................................................................... 65
I. TITLE: Hanlon vs. Haussermann and Beam (40 Phil. 796) ...................................................... 66
I. TITLE: Fue Leung vs. Intermediate Appellate Court (169 SCRA 756) ................................... 67
I. TITLE: Sison vs. H. McQuiad (94 Phil. 201) ........................................................................... 68
I. TITLE: Fernandez vs. De la Rosa (1 Phil. 671) ........................................................................ 69
I. TITLE: Garrido vs. Ascencio (10 Phil. 691) ............................................................................. 71
I. TITLE: Ornum vs. Lasala (74 Phil. 242)................................................................................... 72
I. TITLE: Deluao vs. Casteel (29 SCRA 350) .............................................................................. 73
I. TITLE: The Leyte-Samar Sales and Tomassi vs. Suplicio V. Cea and Lastrilla (93 Phil. 100) 75
I. TITLE: In the Matter of the Petition for Authority to Continue Use of the Firm name “Ozaeta,
Romulo, etc.” (92 SCRA 1) .......................................................................................................... 76
I. TITLE: Teck Seing and Co., Ltd. (petitioner-appellee) Santiago Jo Chung Cang et al.
(partners) vs. Pacific Commercial Company, et al. (creditors-appellants) (45 Phil. 142) ............ 78
I. TITLE: Philippine National Bank vs. Severo Eugenio Lo, et al. (defendants) Severio Eugenio,
Ng Khey Ling and Yep Seng (appellants) (50 Phil. 802) ............................................................. 79
I. TITLE: Sharruf & Co., known also as Sharruf & Eskenazi, Salomon Sharruf and Elias
Eskenazi, (plaintiffs-appellees) vs. Balooise Fire Insurance Co., Sun Insurance Office, Ltd. and
Springfield Insurance Co., represented by Kuenzle & Streiff, Inc. (defendants-appellants) (64
Phil. 258) ....................................................................................................................................... 81
I. TITLE: La Compañia Maritima (plaintiff-appellant) vs. Francisco Muñoz, et al. (defendants-
appellees) (9 Phil. 326) ................................................................................................................. 83
I. TITLE: Teodoro de los Reyes (plaintiff-appellee) vs. Vicente Lukban (defendant-appellant)
and Esperidion Borja (defendant) (35 Phil. 757) .......................................................................... 85
I. TITLE: Pacific Commercial Company (plaintiff-appellee) vs. Aboitiz & Martinez, et al.
(defendants) Jose Martinez (defendant-appellant) (48 Phil. 841) ................................................. 86
I. TITLE: Island Sales, Inc. (plaintiff-appellee) vs. United Pioneers General Construction
Company, et al. (defendants) Benjamin C. Daco (defendant-appellant) (65 Phil. 544) ............... 88
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I. TITLE: Elmo Muñasque (petitioner) vs. Court of Appeals, Celestino Galan Tropical Company
and Ramon Pons (respondents) (139 SCRA 533)......................................................................... 89
I. TITLE: Ildefonso de la Rosa, administrator of the intestate estate of the deceased Go-Lio
(plaintiff-appellant) vs. Enrique Ortega Go-Cotay (defendant-appellant) (48 Phil. 605)............. 91
I. TITLE: Litton v. Hill (67 Phil. 509) .......................................................................................... 93
I. TITLE: Muñasque vs. CA (139 SCRA 533) ............................................................................. 95
I. TITLE: Santiago Syjuco, Inc. v. Castro (175 SCRA 533) ........................................................ 98
I. TITLE: Aguila, Jr. v. CA (316 SCRA 246)............................................................................. 100
I. TITLE: Ormachea Tin-Congco vs. Trillana (13 Phil. 194) ..................................................... 102
I. TITLE: Liwanag and Reyes vs. Workmen’s Compensation Commission (105 Phil. 741)..... 104
I. TITLE: Marisol vs. Municipality of Albay (43 Phil. 610) ...................................................... 106
I. TITLE: Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc. (317 SCRA 728) .......... 108
I. TITLE: Pioneer Insurance vs. Court of Appeals (175 SCRA 668) ......................................... 110
I. TITLE: Viuda de Chan Diaco vs. Peng (53 Phil. 906) ............................................................ 112
I. TITLE: Yu vs. National Labor Relations Commission (223 SCRA 75) ................................. 114
I. TITLE: Idos vs. Court of Appeals (296 SCRA 194) ............................................................... 117
I. TITLE: Testate Estate of Mota vs. Serra (47 Phil. 464) .......................................................... 119
I. TITLE: Sy vs. Court of Appeals (313 SCRA 328).................................................................. 121
I. TITLE: Bearneza vs. Dequilla (43 Phil. 237) .......................................................................... 123
I. TITLE: Goquiolay vs. Sycip (9 SCRA 663) ........................................................................... 125
I. TITLE: Ortega vs. Court of Appeals (245 SCRA 529) ........................................................... 127
I. TITLE: Deluao vs. Casteel (26 SCRA 475) ............................................................................ 129
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1. Alcoy, Maria Fatima O.
I. TITLE: CIR vs. Suter & CTA ( 27 SCRA 152 )
II. TOPIC: Article 1767 – Concept of partnership: The partnership has a juridical personality
of its own, distinct and separate from that of its partners.
III. FACTS:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed William
J. Suter (Petitioner) as the general partner, and Julia Spirig and Gustav Carlson, as the limited
partners. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the
partnership. It had an office and held itself out as a limited partnership, handling and carrying
merchandise, using invoices, bills and letterheads bearing its trade-name, maintaining its own
books of accounts and bank accounts, and had a quota allocation with the Central Bank.
In 1948, however, general partner Suter and limited partner Spirig got married. Limited
partner Carlson sold his share in the partnership to Suter and his wife. The sale was duly
recorded with the Securities and Exchange Commission.
The limited partnership had been filing its income tax returns as a corporation without
objection until the Commissioner of Internal Revenue (Respondent) consolidated the income of
the firm and the individual incomes of the partners-spouses Suter and Spirig resulting in a
determination of a deficiency income tax against respondent Suter. According to respondent, the
marriage of Suter and Spirig and their subsequent acquisition of the interests of remaining
partner Carlson in the partnership dissolved the limited partnership, and if they did not, the
fiction of juridical personality of the partnership should be disregarded for income tax purposes
because the spouses have exclusive ownership and control of the business. Petitioner protested
the assessment, and requested its cancellation and withdrawal, as not in accordance with law, but
his request was denied. The petitioner appealed to the Court of Tax Appeals which court
reversed the decision of the respondent.
IV. ISSUE/S: Whether or not the limited partnership is dissolved and became a single
proprietorship.
V. RULING:
NO. The subsequent marriage of the partners does not operate to dissolve it, such
marriage not being one of the causes provided for that purpose under the law.
The capital contributions of partners Suter and Spirig were separately owned and
contributed by them before their marriage; and after they were joined in wedlock, such
contributions remained their respective separate property.
The partnership has a juridical personality of its own, distinct and separate from that of
its partners. The limited partnership's separate individuality makes it impossible to equate its
income with that of the component members.
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I. TITLE: Wood House vs. Halili (93 Phil. 526)
II. TOPIC: Article 1767 – Requisites of a valid contract of partnership: Consent
III. FACTS:
Wood house (Plaintiff) informed the Mission Dry Corporation of Los Angeles,
California, U.S.A., manufacturers of the bases and ingridients of the beverages bearing its name,
that he had interested a prominent financier named Halili (Defendant) in the business, who was
willing to invest half a million dollars in the bottling and distribution of the said beverages, and
requested, in order that he may close the deal with him, that the right to bottle and distribute be
granted him for a limited time under the condition that it will finally be transferred to the
corporation. Pursuant for this request, plaintiff was given "a thirty-days" option on exclusive
bottling and distribution rights for the Philippines". Formal negotiations between plaintiff and
defendant began at a meeting on November 27, 1947. On November 29, 1947, the plaintiff
entered on a written agreement with the defendant, the most important provisions of which are
(1) that they shall organize a partnership for the bottling and distribution of Mision soft drinks,
plaintiff to act as industrial partner or manager, and the defendant as a capitalist, furnishing the
capital necessary therefor; plaintiff and defendant went to the United States, and on December
10, 1947, a franchise agreement (Exhibit V) was entered into the Mission Dry Corporation and
Fortunato F. Halili and/or Charles F. Woodhouse, granted defendant the exclusive right, license,
and authority to produce, bottle, distribute, and sell Mision beverages in the Philippines. When
the bottling plant was already on operation, plaintiff demanded of defendant that the partnership
papers be executed. At first defendant executed himself, saying there was no hurry. Then he
promised to do so after the sales of the product had been increased to P50,000. As nothing
definite was forthcoming, after this condition was attained, and as defendant refused to give
further allowances to plaintiff, the latter caused his attorneys to take up the matter with the
defendant with a view to a possible settlement. as none could be arrived at, the present action
was instituted.
When the bottling plant was already on operation, plaintiff demanded of defendant that
the partnership papers be executed. At first defendant executed himself, saying there was no
hurry. Then he promised to do so after the sales of the product had been increased to P50,000. As
nothing definite was forthcoming, after this condition was attained, and as defendant refused to
give further allowances to plaintiff, the latter caused his attorneys to take up the matter with the
defendant with a view to a possible settlement. as none could be arrived at, the present action
was instituted. In his complaint plaintiff asks for the execution of the contract of partnership. On
the other hand, as his defense, the defendant claims that his consent to the agreement was
secured by representation of plaintiff that he was the owner of an exclusive bottling franchise
which representation was false, and plaintiff did not secure the franchise but was given to the
defendant himself.
IV. ISSUE/S: Whether or not defendant can be compelled against his will to carry out the
agreement or execute the partnership papers
V. RULING: NO. The defendant may not be compelled against his will to carry out the
agreement nor execute the partnership papers. Under the Spanish Civil Code, the defendant has
an obligation to do, not to give. The law recognizes the individual's freedom or liberty to do an
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act he has promised to do, or not to do it, as he pleases. It falls within what Spanish
commentators call a very personal act (acto personalismo), of which courts may not compel
compliance, as it is considered an act of violence to do so.
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I. TITLE: Ortega v. Court of Appeals (245 SCRA 259)
II. TOPIC: Article 1767 – Partnership relation fiduciary in nature: Power to dissolve
partnership.
III. FACTS:
In 1988, Ortega, then a junior partner in the law firm Bito, Misa, and Lozada wrote a
letter of withdrawal and retirement from the firm. He filed with Commission’s Securities
Investigation and Clearing Department (SICD) a petition for dissolution and liquidation of
partnership. The senior partners opposed to this. The hearing officer ruled that the withdrawal
did not dissolve the law partnership. On the other hand, SEC en banc ruled that the withdrawal
of Misa from the firm had dissolved the partnership since it is partnership at will, the law firm
could be dissolved by any partner at anytime, such as by withdrawal therefrom, regardless of
good faith or bad faith, since no partner can be forced to continue in the partnership against his
will.
IV. ISSUE/S: Whether or not the withdrawal dissolve the partnership.
V. RULING:
YES. Any one of the partners may, at his sole pleasure, dictate a dissolution of the
partnership at will (e.g. by way of withdrawal of a partner). 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 damage.
Among partners, mutual agency arises and the doctrine of delectus personae allows them
to have the power, although not necessarily the right, to dissolve the partnership. An unjustified
dissolution by the partner can subject him to a possible action for damages.
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I. TITLE: Aurbach vs. Sanitary Wares Mfg. Corp. ( 186 SCRA 130 )
II. TOPIC: Article 1767 – A joint venture is a form of partnership and should thus be governed
by the law of partnerships.
III. FACTS:
Saniwares, a domestic corporation was incorporated for the primary purpose of

manufacturing and marketing sanitary wares. One of the incorporators, Mr. Baldwin Young
went abroad to look for foreign partners, European or American who could help in its expansion
plans. ASI, a foreign corporation domiciled in Delaware, United States entered into an
Agreement with Saniwares. The agreement contained provisions relevant to the nomination and
election of the board of directors including:
Sec. 3 (a) –The Articles of Incorporation of the Corporation shall be substantially in the
form annexed hereto as Exhibit A and, insofar as permitted under Philippine law, shall
specifically provide for: (1) Cumulative voting for directors.
Sec. 5 (a) – Management: (a) The management of the Corporation shall be vested in a
Board of Directors, which shall consist of nine individuals. As long as American-Standard
shall own at least 30% of the outstanding stock of the Corporation, three of the nine
directors shall be designated by American-Standard, and the other six shall be designated
by the other stockholders of the Corporation.
A dispute ensued when ASI invoked their right to cumulative voting and nominated
another candidate.
IV. ISSUE/S: Whether or not the ASI Group may vote their additional candidate during
elections of Saniwares' board of directors.
V. RULING:
NO. Considering the actual intention of the agreement between ASI and Sanwares, they
formed a joint venture. As in other joint venture companies, the extent of ASI's participation in
the management of the corporation is spelled out in the Agreement. However, the cumulative
voting rights may be voluntarily waived by stockholders who enter into special relationships
with each other to pursue and implement specific purposes, as in joint venture relationships
between foreign and local stockholders, so long as such agreements do not adversely affect third
parties.
The partnership contemplates a general business with some degree of continuity, while
the joint venture is formed for the execution of a single transaction, and is thus of a temporary
nature. However, this observation is not entirely accurate in this jurisdiction, since under the
Civil Code, a partnership may be particular or universal, and a particular partnership may have
for its object a specific undertaking. (Art. 1783, Civil Code). It would seem therefore that under
Philippine law, a joint venture is a form of partnership and should thus be governed by the law of
partnerships. The Supreme Court has however recognized a distinction between these two
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business forms, and has held that although a corporation cannot enter into a partnership contract,
it may however engage in a joint venture with others.
To allow the ASI Group to vote their additional equity to help elect even a Filipino
director who would be beholden to them would obliterate their minority status as agreed upon by
the parties.
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I. TITLE: Lim Tong Lim vs. Phil. Fishing Gear Industries, Inc. (317 SCRA 728 )
II. TOPIC: Article 1767 - The contribution to common fund need not be cash or fixed assets: it
could be an intangible like credit or industry.
III. FACTS:
Lim Tong Lim requested Peter Yao to engage in commercial fishing with him and one
Antonio Chua. The three agreed to purchase two fishing boats but since they do not have the
money they borrowed from one Jesus Lim (brother of Lim Tong Lim). They again borrowed
money and they agreed to purchase fishing nets and other fishing equipments.
Yao and Chua represented themselves as acting in behalf of “Ocean Quest Fishing
Corporation” (OQFC) they contracted with Philippine Fishing Gear Industries (PFGI) for the
purchase of fishing nets amounting to more than P500k. They were however unable to pay PFGI
and so they were sued in their own names because apparently OQFC is a non-existent
corporation. Chua admitted liability and asked for some time to pay. Yao waived his rights. Lim
Tong Lim however argued that he is not a partner but a mere lessor. There is no direct
participation by him. Thus, should not be liable.
IV. ISSUE/S: Whether or not Lim Tong Lim is liable.
V. RULING:
YES. Under Article 1767 of the New Civil Code, there is a contract of partnership when
two or more persons bind themselves to contribute money, property or industry to a common
fund with the intention of dividing the profits among themselves. In this case, Antonio Chua and
Peter Yao, including Lim Tong Lim undertook a partnership for a specific undertaking, that is
for commercial fishing and the ultimate undertaking was to divide the profits among themselves
which is what a partnership essentially is.
These boats, the purchase and the repair of which were financed with borrowed money,
fell under the term common fund under Article 1767. The contribution to such fund need not be
cash or fixed assets; it could be an intangible like credit or industry.
10 | P a g e
I. TITLE: Aguila, Jr. vs. Court of Appeals ( 319 SCRA 246 )
II. TOPIC: Article 1768 - A partnership has a juridical personality separate and distinct
from that of each of the partners.
III. FACTS:
Alfredo N. Aguilar, Jr. (petitioner) is the manager of A.C. Aguila & Sons, Co., a
partnership engaged in lending activities. Felicidad S. Vda. de Abrogar (private
respondent) and her late husband, Ruben M. Abrogar, were the registered owners of a house and
lot.On April 18, 1991, private respondent, with the consent of her late husband, and A.C.
Aguila & Sons, Co., represented by petitioner, entered into a Memorandum of Agreement
which provided that A.C. Aguila & Sons, Co. shall buy the property from private
respondent for P200,000 subject to an option to repurchase for P230,000 (valid for 90 days).
On the same day, the parties likewise executed a deed of absolute sale, dated June 11,
1991, wherein private respondent, with the consent of her late husband, sold the subject
property to A.C. Aguila & Sons, Co., represented by petitioner, for P200,000,00. In a
special power of attorney dated the same day, April 18, 1991, private respondent
authorized petitioner to cause the cancellation of TCT No. 195101 and the issuance of a new
certificate of title in the name of A.C. Aguila and Sons, Co., in the event she failed to
redeem the subject property as provided in the Memorandum of Agreement. Private
respondent failed to redeem the property. Pursuant to the special power of attorney mentioned
above, petitioner caused the cancellation of TCT No. 195101 and the issuance of a new
certificate of title in the name of A.C. Aguila and Sons, Co. Private respondent then
received a letter dated August 10, 1991 from Atty. Lamberto C. Nanquil, counsel for A.C.
Aguila & Sons, Co., demanding that she vacate the premises within 15 days after receipt
of the letter and surrender its possession peacefully to A.C. Aguila & Sons, Co. Otherwise, the
latter would bring the appropriate action in court. Upon the refusal of private respondent
to vacate the subject premises, A.C. Aguila & Sons, Co. filed an ejectment case against her.
Private respondent then filed a petition for declaration of nullity of a deed of sale filed
by Felicidad S. Vda. de Abrogar against Alfredo N. Aguila, Jr. She alleged that the
signature of her husband on the deed of sale was a forgery because he was already dead
when the deed was supposed to have been executed on June 11, 1991.
Petitioner contends that he is not the real party in interest but A.C. Aguila & Co.,
against which this case should have been brought.
IV. ISSUE/S: Whether or not A.C. Aguila & Co. is the real party in interest.
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V. RULING:
YES. Under Art. 1768 of the Civil Code, a partnership has a juridical personality
separate and distinct from that of each of the partners. The partners cannot be held liable for
the obligations of the partnership unless it is shown that the legal fiction of a different juridical
personality is being used for fraudulent, unfair, or illegal purposes. In this case, private
respondent has not shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being
used for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the
name of A.C. Aguila & Sons, Co. and the Memorandum of Agreement was executed between
private respondent, with the consent of her late husband, and A.C. Aguila & Sons, Co.,
represented by petitioner. Hence, it is the partnership, not its officers or agents, which should
be impleaded in any litigation involving property registered in its name.
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I. TITLE: Ang Pue Co., vs. Secretary of Commerce and Industry (5 SCRA 645 )
II. TOPIC: Article. 1768 – To organize a partnership is not an absolute right.
III. FACTS:
On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the
partnership Ang Pue & Company for a term of five years from May 1, 1953, extendible by their
mutual consent. The corresponding articles of partnership were registered in the Office of the
Securities & Exchange Commission. On June 19, 1954, Republic Act No. 1180 was enacted to
regulate the retail business. It provided, among other things, that after its enactment, a
partnership not wholly formed by Filipinos could continue to engage in the retail business until
the expiration of its term. On April 15, 1958, prior to the expiration of the five-year term but
after the enactment of the Republic Act 1180, the partners already mentioned amended the
original articles of part ownership so as to extend the term of life of the partnership to another
five years. When the amended articles were presented for registration in the Office of the
Securities & Exchange Commission on April 16, 1958, registration was refused upon the ground
that the extension was in violation of the aforesaid Act.
IV. ISSUE/S: Whether or not Ang Pue & Co. can extend its term of partnership.
V. RULING:
NO. To organize a corporation or a partnership that could claim a juridical personality of

its own and transact business as such, is not a matter of absolute right but a privilege which may
be enjoyed only under such terms as the State may deem necessary to impose. That the State,
through Congress, and in the manner provided by law, had the right to enact Republic Act No.
1180 and to provide therein that only Filipinos and concerns wholly owned by Filipinos may
engage in the retail business cannot be seriously disputed. That this provision was clearly
intended to apply to partnership already existing at the time of the enactment of the law is clearly
showing by its provision giving them the right to continue engaging in their retail business until
the expiration of their term or life.
The agreement contain therein must be deemed subject to the law existing at the time
when the partners came to agree regarding the extension. In the present case, as already stated,
when the partners amended the articles of partnership, the provisions of Republic Act 1180 were
already in force, and there can be not the slightest doubt that the right claimed by appellants to
extend the original term of their partnership to another five years would be in violation of the
clear intent and purpose of the law aforesaid.
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I. TITLE: Heirs of Tan Eng Kee vs. Court of Appeals (341 SCRA 740 )
II. TOPIC: Article 1769 – The receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner in the business, but no such inference shall be drawn if
such profits were received in payment as a debt by installment or otherwise.
III. FACTS:
After the world war II, the brothers Tan Eng Lay and Tan Eng Kee pooled their resources
in order to revive the business. In 1983, Tan Eng Kee died. Following the death of Tan Eng Kee,
Matilde Abubo, the common-law spouse of the decedent, joined by their children Teresita, Nena,
Clarita, Carlos, Corazon and Elpidio (petitioners) filed a suit against the decedents brother Tan
Eng Lay for accounting, liquidation and winding up of the alleged partnership formed between
Tan Eng Kee and Tan Eng Lay.
Tan Eng Lay denied that there was a partnership between him and his brother. He said
that Tan Eng Kee was merely an employee of Benguet Lumber. He showed evidence consisting
of Tan Eng Kee’s payroll and his SSS as an employee which were claimed by the petitioners to
be fabricated.
IV. ISSUE/S: Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.
V. RULING:
NO. There was no certificate of partnership between the brothers. The petitioners were
not able to show what was the agreement between the brothers as to the sharing of profits. It is
obvious that there was no partnership whatsoever. Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence, no certificate of partnership, no agreement as
to profits and losses, and no time fixed for the duration of the partnership. There was even no
attempt to submit an accounting corresponding to the period after the war until Kee’s death in
1984. It had no business book, no written account nor any memorandum for that matter and no
license mentioning the existence of a partnership.
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole
proprietorship; that Tan Eng Kee was just an employee based on the latter’s payroll and SSS
coverage, and other records indicating Tan Eng Lay as the proprietor.
For 40 years, Tan Eng Kee never asked for an accounting. The essence of a partnership is
that the partners share in the profits and losses. Each has the right to demand an accounting as
long as the partnership exists. A person is presumed to take ordinary care of his concerns. A
demand for periodic accounting is evidence of a partnership which Tan Eng Kee never did.
Article 1769 of the Civil Code provides that in determining whether a partnership exists,
these rules shall apply:
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4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is
a partner in the business, but no such inference shall be drawn if such profits were received in
payment:
(a) As a debt by installment or otherwise;
xxx
Thus, in the light of the above legal provision, Tan Eng Kee was only an employee, not a
partner.
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I. TITLE: Pascual vs. Commissioner of Internal Revenue (166 SCRA 560 )
II. TOPIC: Article 1769 - Co-ownership or co-possession does not itself establish a
partnership, whether such co-owners or co-possessors do or do not share any profits made by
the use of the property; The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or interest in any property
from which the returns are derived;
III. FACTS:
On June 22, 1965, Mariano P. Pascual and Renato P. Dragon (petitioners) bought two (2)
parcels of land from Santiago Bernardino, et al. and another three (3) parcels of land from Juan
Roque. In 1968, the first two parcels of land were sold by petitioners to Marenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria
Samson in 1970. Petitioners realized a net profit in the amount of P165,224.70 and P60,000.00,
respectively. The capital gains taxes were paid by availing of the tax amnesties granted.
However, BIR Commissioner Efren I. Plana (Commissioner) assessed and required to pay the
petitioners a total amount of P107,101.70 as alleged deficiency corporate income taxes.
According to the Commissioner, petitioners as co-owners in the real estate transactions formed
an unregistered partnership or joint venture taxable as a corporation and its income was subject
to the taxes. The unregistered partnership was subject to corporate income tax as distinguished
from profits derived from the partnership by them which is subject to individual income tax and
that the availment of tax amnesty relieved petitioners of their individual income tax liabilities but
did not relieve them from the tax liability of the unregistered partnership. Hence, the petitioners
were required to pay the deficiency income tax assessed.
IV. ISSUE/S: Whether or not the petitioners formed a partnership.
V. RULING:
NO. There is no evidence that petitioners entered into an agreement to contribute money,
property or industry to a common fund, and that they intended to divide the profits among
themselves. The commissioner and/ or his representative just assumed these conditions to be
present on the basis of the fact that petitioners purchased certain parcels of land and became co-
owners thereof.
Article 1769 of the new Civil Code lays down the rule for determining when a
transaction should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3,
provides;
(2) Co-ownership or co-possession does not itself establish a partnership, whether such co-
owners or co-possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property from which the
returns are derived;
In this case, there is clear evidence of co-ownership between the petitioners. There is no
adequate basis to support the proposition that they thereby formed an unregistered partnership.
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The two isolated transactions whereby they purchased properties and sold the same a few years
thereafter did not thereby make them partners. They shared in the gross profits as co- owners and
paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. Under
the circumstances, they cannot be considered to have formed an unregistered partnership which
is thereby liable for corporate income tax, as the respondent commissioner proposes.
17 | P a g e
1. Banatin, Alyssa Monique T.
I. TITLE: Sardene v. Court of Appeals (167 SCRA 524)
II. TOPIC: Article 1769
III. FACTS:
Petitioner demanded the payment of the total amount of P5,217.25 from private
respondent Nobio Sardane. Petitioner brought an action for collection of a sum of P5,217.25
based on promissory notes executed by the herein private respondent Nobio Sardane in favor of
the herein petitioner. The failure of the private respondent to pay the said amount prompted the
petitioner to seek the services of lawyer who made a letter formally demanding the return of the
sum loaned. Because of the failure of the private respondent to heed the demands extrajudicially
made by the petitioner, the latter was constrained to bring an action for collection of sum of
money.
After the trial on the merits, the court rendered its judgement in favor of the plaintiff and
against the defendant. Therein defendant Sardane appealed to the Court of First Instance which
reversed the decision of the lower court by dismissing the complaint.
IV. ISSUE/S: Whether or not a partnership existed between private respondent Sardane and
petitioner Acojedo
V. RULING:
NO, partnership did not exist between Sardane and Acojedo. Even if evidence aliunde
other than the promissory notes may be admitted to alter the meaning conveyed thereby, still the
evidence is insufficient to prove that a partnership existed between the private parties hereto.
As manager of the basnig Sarcado naturally some degree of control over the operations
and maintenance thereof had to be exercised by herein petitioner. The fact that he had received
50% of the net profits does not conclusively establish that he was a partner of the private
respondent herein. Article 1769(4) of the Civil Code is explicit that while the receipt by a person
of a share of the profits of a business is prima facie evidence that he is a partner in the business,
no such inference shall be drawn if such profits were received in payment as wages of an
employee. Furthermore, herein petitioner had no voice in the management of the affairs of the
basnig.
The trial court concluded that the promissory notes involved were merely receipts for the
contributions to said partnership and, therefore, upheld the claim that there was ambiguity in the
promissory notes, hence parol evidence was allowable to vary or contradict the terms of the
represented loan contract. As correctly pointed out by the respondent Court the exceptions to the
rule do not apply in this case as there is no ambiguity in the writings in question, thus:
The printed promissory notes containing a promise to pay a sum certain in money,
payable on demand and the promise to bear the costs of litigation in the event of the
private respondent's failure to pay the amount loaned when demanded extrajudicially.
18 | P a g e
Likewise, the vales denote that the private respondent is obliged to return the sum loaned
to him by the petitioner. On their face, nothing appears to be vague or ambigous, for the
terms of the promissory notes clearly show that it was incumbent upon the private
respondent to pay the amount involved in the promissory notes if and when the petitioner
demands the same. It was clearly the intent of the parties to enter into a contract of loan
for how could an educated man like the private respondent be deceived to sign a
promissory note yet intending to make such a writing to be mere receipts of the
petitioner's supposed contribution to the alleged partnership existing between the parties?
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I. TITLE: Afisco Insurance Corporation v. Court of Appeals (302 SCRA 1)

III. FACTS:
Petitioners, non-life insurance firms, entered into a Quota Share Reinsurance Treaty and a
Surplus Reinsurance Treaty with Munich , a non-resident foreign insurance corporation. In 1976,
the BIR assessed the deficiency corporate taxes in the amount of P1,843,273.60, and withholding
taxes in the amount of P1,768,799.39 and P89,438.68 on dividends paid to Munich and to the
petitioners. Hence, they filed a protest in the Commissioner of Internal Revenue alleging that the
pool they have formed and its remittances to the member companies and to its foreign firm are
not taxable. They point out that the reinsurance policies were written by them individually and
separately, and that their liability was limited to the extent of their allocated share in the original
risks thus reinsured. They alleged that there is no partnership because there is no common fund,
members are not solidarily liable, the executive board does not act as board of directors, the pool
does not engage collectively as an insurance company.
The Secretary of the Internal Revenue denied the protest and it was subsequently upheld
by the Court of Tax Appeals and further sustained by the Court of Appeals.
IV. ISSUE/S:
Whether or not the pool formed by the local insurance firms can be considered as an
informal partnership, hence, taxable as a corporation under the NIRC
V. RULING:
YES. The pool falls on the definition of corporation provided for by Section 22 of NIRC
which provides that the term corporation shall include partnerships, no matter how created or
organized, and general professional partnerships are partnerships formed by persons for the sole
purpose of exercising their common profession, no part of the income of which is derived from
engaging in any trade or business.
Further, the basis of the petitioners to belie the existence of partnership is unmeritorious.
The following unmistakably indicates a partnership or an association covered by Section 24 of
the NIRC:
(1) The pool has a common fund, consisting of money and other valuables that are deposited in
the name and credit of the pool. This common fund pays for the administration and operation
expenses of the pool.
(2) The pool functions through an executive board, which resembles the board of directors of a
corporation, composed of one representative for each of the ceding companies.
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(3) True, the pool itself is not a reinsurer and does not issue any insurance policy; however, its
work is indispensable, beneficial and economically useful to the business of the ceding
companies and Munich.
According to the Supreme Court, The fact that the pool does not retain any profit or income does
not obliterate an antecedent fact that of the pool being used in the transaction of business for
profit. Parties themselves admitted that the pool is necessary and indispensable to their business.
Hence, it can be concluded that though the profit was apportioned among the members, this is
only a matter of consequence, as it implies that profit actually resulted.
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I. TITLE: Deluao v. Casteel (26 SCRA 475)
III. FACTS:
In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy

land, 178.76 hectares, in the then sitio of Malalag, municipality of Padada, Davao for 3
consecutive times because the Bureau of Fisheries did not act upon his previous applications.
Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon his
position by the other applicants who entered upon and spread themselves within the area, Casteel
realized the urgent necessity of expanding his occupation thereof by constructing dikes and
cultivating marketable fishes. But lacking financial resources at that time, he sought financial aid
from his uncle Felipe Deluao. Moreover, upon learning that portions of the area applied for by
him were already occupied by rival applicants, Casteel immediately filed a protest.
Consequently, two administrative cases ensued involving the area in question. However, despite
the finding made in the investigation of the above administrative cases, the Director of Fisheries
nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the
improvements which he had introduced on the land, and ordered that the land be leased through
public auction.
On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first
part, and Nicanor Casteel as party of the second part, executed a contract — denominated 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.
On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe
Deluao on November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the
same area in the two administrative cases and asked for reinvestigation of the application of
Nicanor Casteel over the subject fishpond.
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 (encargado), 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.
22 | P a g e
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 by the approval of his application and the award to him of the fishpond.
The approval was an event which made it unlawful for the members to carry it on in partnership.
Moreover, subsequent events likewise reveal the intent of both parties to terminate the
partnership because each refused to share the fishpond with the other.
23 | P a g e
I. TITLE: Agad v. Mabato (23 SCRA 1223)
III. FACTS:
Petitioner Mauricio Agad claims that he and defendant Severino Mabato are partners in a
fishpond business pursuant to a pubic instrument dated August 29, 1952 wherein the parties
agreed to contribute P1, 000 each as capital for the said business.
Mabato handled the partnership funds and rendered accounts of the operations of the
partnership from 1952 up to 1956. However, despite repeated demands by Agad to render
account for the years 1957 to 1963, Mabato failed and refused to do so. This prompted Agad to
file a complaint on 1964 and he prayed that judgment be rendered sentencing Mabato and
Mabato & Agad Company to pay him the sum of P14, 000, as his share in the profits of the
partnership for the period from 1957 to 1963, in addition to P1,000 as attorney's fees, and
ordering the dissolution of the partnership, as well as the winding up of its affairs by a receiver to
be appointed therefor.
Mabato admitted the formal allegations of the complaint and denied the existence of said
partnership, upon the ground that the contract therefor had not been perfected because Agad had
allegedly failed to give his P1,000 contribution to the partnership capital. Mabato prayed,
therefore, that the complaint be dismissed and the partnership declared void ab initio.
Subsequently, Mabato filed a motion to dismiss, upon the ground that the complaint states no
cause of action and that the lower court had no jurisdiction over the subject matter of the case,
because it involves principally the determination of rights over public lands.
IV. ISSUE/S: Whether or Not immovable property or real rights have been contributed to the
partnership under consideration.
V. RULING:
NO. Articles 1771 and 1773 of said Code provide:
Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be
necessary.
Art. 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if inventory of said property is not made, signed by the parties; and attached to
the public instrument.
It should be noted that, as stated in the public instrument dated August 29, 1952, the
partnership was established "to operate a fishpond", not to "engage in a fishpond business".
Moreover, none of the partners contributed either a fishpond or a real right to any fishpond. Their
contributions were limited to the sum of P1,000 each. Indeed, Paragraph 4 of the public
instrument provides:
24 | P a g e
“That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine
Currency, of which One Thousand (P1,000.00) pesos has been contributed by Severino
Mabato and One Thousand (P1,000.00) Pesos has been contributed by Mauricio Agad.”
The operation of the fishpond mentioned was the purpose of the partnership. Neither said
fishpond nor a real right thereto was contributed to the partnership or became part of the capital
thereof, even if a fishpond or a real right thereto could become part of its assets.
25 | P a g e
I. TITLE: CIR v. Ledesma (31 SCRA 95)
III. FACTS:
On July 11 1949, Carlos Ledesma, Julieta Ledesma and the spouses Amparo Ledesma
and Vicente Gustilo, Jr. organized themselves into a general co-partnership under the firm name
“Hacienda Fortuna” Such partnership was registered and approved on July 14, 1949.
The Commissioner assessed against the partnership a corporate income tax for the
calendar year 1949, under Section 24 of the National Internal Revenue Code. However, the
respondents contested the assessment upon the ground that the "Hacienda Fortuna" was a
registered general co-partnership and should be exempted from such income tax payment
pursuant to Section 26 of the NIRC.
The Commissioner affirmed the contention of the respondents however pointed out that
the said general partnership has only been approved on July 14, 1949 therefore a payment of
income tax dating to January 1, 1949 to July 13,1949 must be made.
The respondents appealed the decision on the Court of Tax Appeals with the contention
that they were operating the sugar plantation on a system of co-ownership, and not as a
partnership and that even assuming that they were operating the sugar plantation as a partnership
the registration of the articles of general co-partnership on July 14, 1949 had operated to exempt
said partnership from corporate income tax on its net income during the entire taxable year, from
January 1 to December 31, 1949.
The Court of Tax Appeals ruled had actually operated the "Hacienda Fortuna" as a
general partnership from January 1, 1949, and that when its articles of general partnership were
registered on July 14, 1949 that registration had the effect of giving the partnership the status of a
registered co-partnership which places it under the purview of Section 24 of the Tax Code as
exempt from the payment of corporate income tax during the entire taxable year of 1949
IV. ISSUE/S: Whether or not Hacienda Fortuna is exempted from the payment of income tax for
the entire taxable year of 1949
V. RULING:
YES. The Court of Tax Appeals, in its decision, has pointed out that as early as 1924 the
Bureau of Internal Revenue had applied the "status-at-the-end-of-the-taxable-year" rule in
determining the income tax liability of a partnership, such that a partnership is considered a
registered partnership for the entire taxable year even if its articles of co-partnership are
registered only at the middle of the taxable year, or in the last month of the taxable year.
Applying such, Hacienda Fortuna is a general co-partnership on the entire taxable year of 1949,
thus exempted from the income tax.
26 | P a g e
I. TITLE: Solis v. Barroso (53 Phil 912)
III. FACTS:
The spouses Juan Lambino and Maria A. Barroso made a donation of propter nuptias of
the lands described in the complaint in favor of their son Alejo Lambino and Fortunata Solis in a
private document in consideration of the marriage which the latter were about to enter into. One
of the conditions of this donation is that in case of the death of one of the donees, one-half of
these lands thus donated would revert to the donors while the surviving donee would retain the
other half. Alejo Lambino and Fortunata Solis were married and immediately thereafter the
donors delivered the possession of the donated lands to them. However, donee Alejo Lambino
died and in the same year donor Juan Lambino also died. After the latter's death, Juan’s wife
recovered possession of the donated lands.
The surviving donee Fortunata Solis filed the action, which is the subject matter of this
appeal, against the surviving donors and heirs of the deceased donor Juan Lambino, with their
respective husbands, demanding of the defendants the execution of the proper deed of donation
according to law. The court rendered judgment based upon Article 1279 of the Civil Code in
favor of plaintiff.
IV. ISSUE/S: Whether or not Article 1279 of the Civil Code is applicable
V. RULING:
NO, Article 1279 of the Civil Code, relating to contracts, is not applicable to the present
case. The case at bar is a donation propter nuptias which is not valid and did not create any right,
since it was not made in a public instrument. Article 633 provides that in order that a donation of
real property may be valid, it must be made in a public instrument. This is the article applicable
to donation propter nuptias in so far as its formal validity is concerned. Hence, Article 1279 of
the Civil Code which the lower court applied is not applicable thereto. The last named article
provides that, should the law require the execution of an instrument or any other special form in
order to make the obligations of a contract effective, the contracting parties may compel each
other to comply with such formality from the moment that consent has been given, and the other
requirements for the validity of the contract exist. Suffice it to state that this article refers to
contracts and is inapplicable to the donation in question which must be governed by the rules on
donations. It may further be noted, at first sight, that this article presupposes the existence of a
valid contract and cannot possibly refer to the form required in order to make it valid, which it
already has, but rather to that required simply to make it effective, and for this reason, it would,
at all events, be inapplicable to the donation in question, wherein the form is required precisely
to make it valid.
Moreover, in donations propter nuptias, the marriage is really a consideration, but not in
the sense of being necessary to give birth to the obligation. This may be clearly inferred from
27 | P a g e
Article 1333, which makes the fact that the marriage did not take place a cause for the revocation
of such donations, thus taking it for granted that there may be a valid donation propter nuptias,
even without marriage, since that which has not existed cannot be revoked. And such a valid
donation would be forever valid, even if the marriage never took place, if the proper action for
revocation were not instituted, or if it were instituted after the lapse of the statutory period of
prescription. This is, so because the marriage in a donation propter nuptias is rather a resolutory
condition which, as such, presupposes the existence of the obligation which may be resolved or
revoked, and it is not a condition necessary for the birth of the obligation.
28 | P a g e
I. TITLE: Torres v. Court of Appeals (320 SCRA 428)
III. FACTS:
Petitioners, sisters Antonia Torres and Emeteria Baring, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of
land in favor of respondent, who then had it registered in his name. By mortgaging the property,
respondent obtained from Equitable Bank a loan which, under the Joint Venture Agreement, was
to be used for the development of the subdivision. All three of them also agreed to share the
proceeds from the sale of the subdivided lots. The project did not push through, and the land was
subsequently foreclosed by the bank. Petitioners alleged that the project failed because of
respondent’s lack of funds or 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
without its designation and description, they cannot be subject to inscription in the Registry of
Property, and their contribution cannot prejudice third persons. This will result in fraud to those
29 | P a g e
who contract with the partnership in the belief in the efficacy of the guaranty in which the
immovables may consist. Thus, the contract is declared void by the law when no such inventory
is made. The case at bar does not involve third parties who may be prejudiced. Also, petitioners
themselves invoke the allegedly void contract as basis for their claim that respondent should pay
them 60 percent of the value of the property; they cannot in one breath deny the contract and in
another recognize it, depending on what momentarily suits their purpose. In short, the alleged
nullity of the partnership will not prevent courts from considering the Joint Venture Agreement
an ordinary contract from which the parties’ rights and obligations to each other may be inferred
and enforced.
30 | P a g e
I. TITLE: Smith v. Lopez (5 Phil 78)

III. FACTS:
Plaintiffs Messrs. Smith and Reyes, as proprietors of the Philippine Gas Light Company,
brought this action against the defendant sisters, Jacinta and Ignacia Lopez de Pineda, to recover
from them the sum of 3,270 pesos, Mexican currency, for work performed in connection with the
installation of a water system, urinals, closets, shower baths, and drain pipes in their house at the
district of Santa Cruz, the same being the property of the defendants. The plaintiffs alleged that
they had complied with the agreement made with the father, Nicasio Lopez, of the defendants,
the administrator of the property, and that the labor performed and the material used were
reasonably worth the sum of 4,020 pesos, Mexican currency, of which sum they acknowledged
having received 750 pesos, and prayed that judgment be entered against the defendants and in
favor of the plaintiffs for the sum of 3,270 pesos, together with accrued interest and costs of
proceedings, defendants having refused to pay the same as agreed.
Attorney Gregorio Pineda appeared in behalf of the defendants, denied all the facts set
out in the complaint, and alleged that it did not appear from the pleadings that plaintiffs had ever
entered into a mercantile partnership under the aforesaid name and style, or that any such
partnership legally existed; that Nicasio Lopez was not the administrator nor was he empowered
by the defendants to make any contract for repairs and improvements to and in the said house;
that there was no allegation as to the extent and importance of the work performed on the
premises nor as to the quality or quantity of the materials used; that the work was not reasonably
worth 4,020 pesos; and that, assuming that plaintiffs had performed work in the said house
pursuant to an agreement with Nicasio Lopez, without defendants’ authority, the defendants set
up a counterclaim for 600 pesos, Mexican currency, for damages caused to the house as a result
of said work.
The court entered judgment against the defendants and in favor of the complainants.
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.
31 | P a g e
Also, the father of the defendants, was the administrator of the property; that having been
notified of an order of the Board of Health he took the necessary steps to comply with the same,
calling upon one of the plaintiffs to do the work required, and that he made certain payments on
account. Nicasio Lopez did all this as a voluntary agent of the actual owners of the house, and,
although there is no proof of an express power of attorney, it cannot be denied that there was an
implied power, because the defendants did not object to the work being done on the house, which
was really benefited and improved by such work. For this reason it is evidently just that the
owners be held liable for the cost of the work and the value of the material used therein. They
cannot now allege that there was no contract and that they did not agree to pay for such labor and
material. There was a quasi-contract which created certain reciprocal obligations between them
and the plaintiffs. The defendants never objected to the performance of the necessary work. It
therefore must be presumed that they, the defendants, approved of the work done upon the house
and ratified the action of their father in the premises as though he acted under an express power
from them. But, even assuming that the defendants did not expressly ratify or approve the action
of their father, the fact remains that the house was improved by said work, and, for this reason,
the owners of the premises are liable for the obligations incurred by their agent, Lopez, for their
benefit and advantage.
As to the error relating to the price of the work fixed by the court in the judgment, it
should be noticed that when no price has been expressly stipulated in a contract of this nature, it
is understood that the contracting parties have impliedly agreed to pay and receive the usual and
reasonable value of the services rendered. Otherwise it must be presumed that the parties
intended that the price be fixed by experts in case they fail to agree as to the same. Further, a
contract for services or work to be performed exists not only where a certain and definite
compensation has been expressly agreed upon, but also where the same can be ascertained from
the customs and usages of the place in which such services were rendered.
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I. TITLE: Lyons v. Rosenstock (56 Phil 632)

II. TOPIC: Article 1776-1783
III. FACTS:
Prior to his death, Henry W. Elser had been a resident of the City of Manila where he was
engaged during the years with which we are here concerned in buying, selling, and administering
real estate. In several ventures which he had made in buying and selling property of this kind the
plaintiff, E. S. Lyons, had joined with him, the profits being shared by the two in equal parts.
Lyons, whose regular vocation was that of a missionary, or missionary agent, of the Methodist
Episcopal Church, went on leave to the United States and was gone for nearly a year and a half.
On the eve of his departure Elser made a written statements showing that Lyons was, at that
time, half owner with Elser of three particular pieces of real property. Concurrently with this act
Lyons execute in favor of Elser a general power of attorney empowering him to manage and
dispose of said properties at will and to represent Lyons fully and amply, to the mutual
advantage of both. During the absence of Lyons two of the pieces of property above referred to
were sold by Elser, leaving in his hands a single piece of property located at 616-618 Carriedo
Street, in the City of Manila.
The attention of Elser was drawn to a piece of land near the City of Manila, and he
discerned therein a fine opportunity for the promotion and development of a suburban
improvement. This property, which will be herein referred to as the San Juan Estate. To afford a
little time for maturing his plans, Elser purchased an option on this property and when this option
was about to expire, he paid P15,000 more for an extension of the option, with the understanding
in both cases that, in case the option should be exercised, the amounts thus paid should be
credited as part of the first payment. The amounts paid for this option and its extension were
supplied by Elser entirely from his own funds. In the end he was able from his own means, and
with the assistance which he obtained from others, to acquire said estate. The amount required
for the first payment was P150,000, and it was necessary to raise the remainder by obtaining a
loan for P50,000. This amount was finally obtained from a Chinese merchant of the city named
Uy Siuliong. This loan was secured through Uy Cho Yee, a son of the lender; and in order to get
the money it was necessary for Elser not only to give a personal note signed by himself and his
two associates in the projected enterprise, but also by the Fidelity & Surety Company. The
money thus raised was delivered to Elser by Uy Siuliong. With this money and what he already
had in bank Elser purchased the San Juan Estate. For the purpose of the further development of
the property a limited partnership had, about this time, been organized by Elser and three
associates, under the name of J. K. Pickering & Company; and when the transfer of the property
was effected the deed was made directly to this company.
While these negotiations were coming to a head, Elser contemplated and hoped that
Lyons might be induced to come in with him and supply part of the means necessary to carry the
enterprise through. It will be remembered that, when Elser obtained the loan of P50,000 to
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complete the amount needed for the first payment on the San Juan Estate, the lender, Uy
Siuliong, insisted that he should procure the signature of the Fidelity & Surety Co. on the note to
be given for said loan. But before signing the note with Elser and his associates, the Fidelity &
Surety Co. insisted upon having security for the liability thus assumed by it. To meet this
requirements Elser mortgaged to the Fidelity & Surety Co. the equity of redemption in the
property owned by himself and Lyons on Carriedo Street. This mortgage was executed, at which
time Elser expected that Lyons would come in on the purchase of the San Juan Estate. But when
he learned from the letter from Lyons that the latter had determined not to come into this deal,
Elser began to cast around for means to relieve the Carriedo property of the encumbrance. For
this purpose, he addressed a letter to the Fidelity & Surety Co., asking it to permit him to
substitute a property owned by himself and 1,000 shares of the J. K. Pickering & Company, in
lieu of the Carriedo property, as security. The Fidelity & Surety Co. agreed to the proposition.
Fidelity & Surety Co. thereupon executed a cancellation of the mortgage on the Carriedo
property and delivered it to Elser. But notwithstanding the fact that these documents were
executed and delivered, the new mortgage and the release of the old were never registered; and,
thereafter, Elser returned the cancellation of the mortgage on the Carriedo property and took
back from the Fidelity & Surety Co. the new mortgage on the M. H. del Pilar property, together
with the 1,000 shares of the J. K. Pickering & Company which he had delivered to it.
As the development of the San Juan Estate was a success from the start, Elser paid the
note of P50,000 to Uy Siuliong, although it was not due until more than five months later. It will
thus be seen that the mortgaging of the Carriedo property never resulted in damage to Lyons. It is
also plain that no money actually deriving from this mortgage was ever applied to the purchase
of the San Juan Estate. What really happened was the Elser merely subjected the property to a
contingent liability, and no actual liability ever resulted therefrom.
The case for the plaintiff supposes that, when Elser placed a mortgage for P50,000 upon
the equity of redemption in the Carriedo property, Lyons, as half owner of said property,
became, as it were, involuntarily the owner of an undivided interest in the property acquired
partly by that money; and it is insisted for him that, in consideration of this fact, he is entitled to
the four hundred forty-six and two-thirds shares of J. K. Pickering & Company, with the earnings
thereon, as claimed in his complaint.
IV. ISSUE/S: Whether or not there was a general relation of partnership
V. RULING:
NO, there was clearly no general relation of partnership, under Article 1678 of the Civil
Code. It is clear that Elser, in buying the San Juan Estate, was not acting for any partnership
composed of himself and Lyons, and the law cannot be distorted into a proposition which would
make Lyons a participant in this deal contrary to his express determination. If Elser had used any
money actually belonging to Lyons in this deal, he would under Article 1724 of the Civil Code
and Article 264 of the Code of Commerce, be obligated to pay interest upon the money so
applied to his own use. Under the law prevailing in this jurisdiction a trust does not ordinarily
34 | P a g e
attach with respect to property acquired by a person who uses money belonging to another. Of
course, if an actual relation of partnership had existed in the money used, the case might be
different; and much emphasis is laid in the appellant's brief upon the relation of partnership
which, it is claimed, existed.
It seems to be supposed that the doctrines of equity worked out in the jurisprudence of
England and the United States with reference to trust supply a basis for this action. The doctrines
referred to operate, however, only where money belonging to one person is used by another for
the acquisition of property which should belong to both; and it takes but little discernment to see
that the situation here involved is not one for the application of that doctrine, for no money
belonging to Lyons or any partnership composed of Elser and Lyons was in fact used by Elser in
the purchase of the San Juan Estate. Of course, if any damage had been caused to Lyons by the
placing of the mortgage upon the equity of redemption in the Carriedo property, Elser's estate
would be liable for such damage. But it is evident that Lyons was not prejudice by that act.
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1. Brito, John Patrick T.
I. TITLE: Ortega v CA (245 SCRA 529)
III. FACTS:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered
in the Mercantile Registry and reconstituted with the Securities and Exchange Commission. The
SEC records show that there were several subsequent amendments changing the name of the firm
eventually leading up to BITO, MISA & LOZADA. Partner Misa decided to withdraw and retire
from the firm stating in a letter to the company that “"The partnership has ceased to be mutually
satisfactory because of the working conditions of our employees including the assistant
attorneys.”
Misa filed with the Securities Investigation and Clearing Department (SICD) a petition
for dissolution and liquidation of partnership which was ruled in favor of respondents stating that
Misa’s withdrawal did not dissolve the partnership. The said ruling was overturned by SEC upon
appeal.
“…being a partnership at will, the law firm could be dissolved by any partner at any time, such
as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can be
forced to continue in the partnership against his will.”
The death of the two partners, as well as the admission of new partners, during the
pendency of the case with the CA prompted Misa to renew his application for receivership which
was again denied by CA as there was no showing that 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
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in a liability for damages.
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I. TITLE: Uy v Puzon (79 SCRA 598)
III. FACTS:
Puzon had a contract with the Republic of the Philippines for the construction of the
Ganyangan Bato Section of the Pagadian Zamboanga City Road and five (5) other bridges in
Malangas-Ganyangan Road. Puzon sought the financial assistance of Uy and proposed the
creation of a partnership where the profits will be divided equally between them. Uy agreed,
resulting to the creation of “U.P. Construction Company” engaged as subcontractor of the
construction projects.
The capital of the partnership would be P100, 000.00 where they will each contribute
P50, 000.00. However, since Puzon was short in cash they agreed that Uy would first advance
his contribution to the partnership in the amount of 40,000 which will be used by Puzon to clear
his collaterals from encumbrances for his application of loan with the PNB, for the amount of
150,000, to be approved. Upon the approval of his loan Puzon gave P40, 000.00 for the
reimbursement of Uy's contribution to the partnership which was used to clear the title to Puzon's
property, and the P20, 000.00 as Puzon's contribution to the partnership capital.
To guarantee the repayment of the loan, Puzon, without the knowledge and consent of
Uy, assigned to the PNB all the payments to be received on account of the contracts with the
Bureau of Public Highways for the construction of the projects.
As time passed and the financial demands of the projects increased, Uy found difficulty
in obtaining the necessary funds to pursue the construction projects. William Uy correspondingly
called on Puzon to comply with his obligations under the terms of their partnership agreement
and to place, at lest, his capital contribution at the disposal of the partnership. For failure to reach
an agreement, Puzon, decided to terminate the sub-contract and assume all responsibilities in the
construction as the prime contractor. Thus, Uy instituted an action against Puzon seeking the
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
V. RULING:
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a.) YES. There was failure on the part of Puzon to contribute capital to the partnership.
When his load with PNB was approved, he only gave P60, 000 to Uy; P40, 000 was for
reimbursement to the payments made by Uy and the other P20, 000 was for the capital
contribution. Thereafter, Puzon never made additional contribution. (Art 1788)
Also, it was found by the SC that Puzon misapplied partnership funds by assigning all
payments for the projects to PNB. Such assignment was prejudicial to the partnership since the
partnership only received a small share from the total payments made by the Bureau of Public
Highways. As a result, the partnership was unable to discharge its obligations. Here, the Court
ordered Puzon to reimburse whatever amount Uy had invested in or spent for the partnership on
account of construction projects. The amount P200, 000 as compensatory damages was also
awarded in favor of Uy.
b) YES. The award of P200, 000 as his share in the unrealized profits of the partnership is
proper. Under Article 2200 of the Civil Code, indemnification for damages shall comprehend not
only the value of the loss suffered, but also that of the profits which the obligee failed to obtain.
In other words lucrum cessans is also a basis for indemnification. There is no doubt Uy failed to
make profits because of Puzon's breach of contract. The partnership showed some profits even
though the profit and loss statement showed net loss; it may be due to error in accounting.
Had the appellant not been remiss in his obligations as partner and as prime contractor of
the construction projects in question as he was bound to perform pursuant to the partnership and
subcontract agreements, and considering the fact that the total contract amount of these two
projects is P2, 327,335.76, it is reasonable to expect that the partnership would have earned
much more than the P334, 255.61 We have hereinabove indicated. The award, therefore, made
by the trial court of the amount of P200, 000, as compensatory damages, is not speculative, but
based on reasonable estimate.
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I. TITLE: Liwanag v. CA (281 SCRA 1225)
III. FACTS:
Liwanag with a certain Thelma Tabligan went to Rosales and asked her to join them in
the business of buying and selling cigarettes. Under their agreement, Rosales would give the
money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents. During
the first two months, Liwanag and Tabligan made periodic visits to Rosales to report on the
progress of the transactions. The visits, however, suddenly stopped, and all efforts by Rosales to
obtain information regarding their business proved futile.
Alarmed by this development and believing that the amounts she advanced were being
misappropriated, Rosales filed a case of estafa against Liwanag.
The trial court was affirmed by the CA in finding Liwanag guilty as charged and
imposing upon her the penalty of prision correccional and was ordered to pay sum of P526, 650
to reimburse the plaintiff.
IV. ISSUE/S: Whether or not the contract that exist simple loan or partnership or joint venture
thereby making the non-return of the money of the plaintiff purely civil in nature and not
criminal.
V. RULING:
NO. Estafa is a crime committed by a person who defrauds another causing him to suffer
damages, by means of unfaithfulness or abuse of confidence, or of false pretenses of fraudulent
acts.
The elements of estafa are present:
(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.
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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.
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I. TITLE: US v Clarin (17 Phil. 84)
III. FACTS:
Larin delivered to Tarug, Clarin and De Guzman, P172, and made an agreement to buy
and sell mangoes with the four of them dividing equally the profits. Tarug, Clarin, and De
Guzman did in fact trade in mangoes and obtained P203 from the business, but did not comply
with the terms of the contract by delivering to Larin his half of the profits; neither did they render
him any account of the capital.
Larin charged them with the crime of estafa, but the provincial fiscal filed an information
only against Clarin in which he accused him of appropriating to himself not only the P172 but
also the share of the profits that belonged to Larin, amounting to P15.50.
IV. ISSUE/S: Whether or not estafa is the proper action
V. RULING:
NO. The agreement entered into is a contract of partnership. The P172 having been
received by the partnership, the action that lies with the partner who furnished the capital for the
recovery of his money is not a criminal action for estafa, but a civil one arising from the
partnership contract for a liquidation of the partnership and a levy on its assets if there should be
any.
Clarin was acquitted. The complaint of estafa is dismissed without prejudice to the
institution of a civil action.
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I. TITLE: Evangelista & Co. v Abad Santos (51 SCRA 416)
III. FACTS:
On October 9, 1954, a co-partnership with herein petitioners as capitalist partners was

formed under the name “Evangelista & Co.” The Articles of Co-partnership was, however,
amended on June 7, 1955 so as to include herein respondent, Estrella Abad Santos, as an
industrial partner.
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 respondent’s 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.
43 | P a g e
Having always known the respondent is a City Judge even before she joined the
partnership, why did it take petitioners so many years before excluding her from said company?
Furthermore, the act of exclusion is premised on the ground that respondent has always been a
partner, an industrial partner. In addition, the Court further held that with the consideration of
Article 1767 that ‘By a contract of partnership two or more persons bind themselves, to
contribute money, property, or industry to a common fund, with the intention of dividing profits
among themselves’, the services rendered by respondent may legitimately be considered the
respondent’s contribution to the common fund.
44 | P a g e
I. TITLE: Soncuya v De Luna (67 Phil. 646)
III. FACTS:
Josue Soncuya filed a case with the court of first instance of Manila and prayed that De
Luna be sentenced to pay damages in the amount of P700, 432 which he alleges to have suffered
as a partner by reason of the supposed fraudulent management of the partnership, “Centro
Escolar de Señoritas”. It is not alleged in the complaint that a liquidation has been effected nor is
it prayed that it be made.
IV. ISSUE/S: Whether or not Soncuya may claim damages from De Luna.
V. RULING:
NO. For a partner to be able to claim from another partner who manages the general co-
partnership, damages allegedly suffered by him by reason of the fraudulent administration of the
latter, a previous liquidation of said partnership is necessary.
45 | P a g e
I. TITLE: Martinez v Ong Pong Co. (14 Phil. 726)
III. FACTS:
Martinez delivered P1500 as his contribution to the partnership with Ong Pong Co and
Ong Lay to invest in a store. Martinez filed a complaint to compel the defendants to render him
an accounting of the partnership or to refund him the P1, 500. Ong Pong Co admitted the fact of
the agreement and the delivery of the money, but alleged that Ong Lay, who was then deceased,
was the one who had managed the business, and that nothing had resulted therefrom save the loss
of the capital to which loss the plaintiff agreed. CFI ordered Ong Pong to pay half the capital and
half of the projected profit.
IV. ISSUE/S: Whether or not the defendants should be liable for the loss suffered by the
partnership
V. RULING:
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.
46 | P a g e
I. TITLE: Agustin Et.al. v Inocencio (9 Phil. 134)
III. FACTS:
The parties are involved in a partnership as industrial partners without capital. They
contributed from its profits a fund toward the construction of a casco, to which they added
P3,500, borrowed from Maria del Rosario, the wife of the defendant, Bartolome Inocencio, he
being the managing partner.
In the progress of the work the defendant found that it called for additional funds, which
he advanced to the amount of P2, 024.49. It is satisfactorily appears from the evidence that this
amount is necessary in order to complete the work undertaken. Although it would seem that he
failed to notify his partners of the various items from time to time going to make up this sum, it
is shown that the books were at all times open to their inspection, and that, being asked to
examine them, they omitted to do so, and that the plaintiff Juan Agustin, representing all the
partners, was also present at the construction of the casco, in charge of the practical work and
cognizant of its needs and its progress.
IV. ISSUE/S: Whether or not Inocencio, in borrowing money and advancing funds, was acting
within the scope of his authority as a managing partner
V. RULING:
YES. The work done in the casco having been within the scope of the association and
necessary to carry out its express object, the borrowing of the money required to carry it on, with
the acquiescence if not with the affirmative consent of his associates, was not outside the powers
of the managing partner and constitutes a debt for which all the associates are liable.
The note passed into the hands of the defendant by reason of the successive deaths of his
wife and of their only child, each without debts, and for the amount thereof he became a creditor,
subject, however, to the deduction therefrom of his proportionate part of the indebtedness.
The trial court’s decision of treating his claim on this note as an addition to his capital in
the firm, rather than as a loan, is not a ground of error. If it be considered as a loan, this sum
would place the defendant as a creditor in a stronger position as against his associates than if
regarded as a mere contribution to capital. The error, if it be an error, is not, therefore, prejudicial
to the plaintiff, but is rather beneficial to him. The respondent did not except to it.
47 | P a g e
I. TITLE: Ramnani v CA (196 SCRA 731)
II. TOPIC: Article 1797]
III. FACTS:
Spouses Ishwar and Sonya Jethmal Ramnani, citizens of America, invested in a business
venture in the Philippines. Since they could not personally manage their investments, they
appointed two of Ishwars brothers, Choithram Jethmal Ramnani and Navalrai Jethmal Ramnani,
as their attorneys-in-fact.
Choithram decided to invest in the real estate business and through his genius the
property was improved into a valuable assets worth millions. However, he started to betray the
trust reposed upon him by appropriating his brother’s property as his. Upon payment of Ishwar’s
lot from Ortigas he caused the latter to execute the corresponding deeds of sale in favor of his
daughter-in-law. He also donated shares of stock in a garment corporation to his children. He
also fraudulently mortgaged $3,000,000.00 worth of the spouses’ property to Overseas Holding
Co.
Spouses Ishwar learned what Choithram was doing. Hence, they asked him to render an
accounting, but there was none forthcoming. They then revoked Choithram’s general power of
attorney.
The Spouses filed with CFI of Rizal a complaint for reconveyance and damages but the
court dismissed the case and recognized Choithram’s full ownership. CA reversed the decision.
SC initially applied a Solomonic solution by dividing equally between spouses Ishwar

and the Choithram family the two parcels of land. The court later declared the disputed as solely
owned by the spouses and MR was denied with finality.
Because of the Choithram family’s continuing delaying tactics and evasive moves against
the execution of the Court’s Decision and due to the desire of spouses Ishwar to quickly obtain
the fruits of their many years of court battle, the latter were constrained to agree to a compromise
agreement which was denominated as Tripartite Agreement.
IV. ISSUE/S: Whether or not Ishram can recover the entire properties subject in the litigation
V. RULING:
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
48 | P a g e
assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint
venture.
Choithram in turn decided to invest in the real estate business. He bought the two (2)
parcels of land in question from Ortigas as attorney-in-fact of Ishwar. Instead of paying for the
lots in cash, he paid in installments and used the balance of the capital entrusted to him, plus a
loan, to build two buildings. Although the buildings were burned later, Choithram was able to
build two other buildings on the property. He rented them out and collected the rentals. Through
the industry and genius of Choithram, Ishwar's property was developed and improved into what
it is now.
Justice and equity dictate that the two share equally the fruit of their joint investment and
efforts. Perhaps this Solomonic solution may pave the way towards their reconciliation. Both
would stand to gain. No one would end up the loser. After all, blood is thicker than water.
49 | P a g e
1. Dalanon, Ma. Xyza Zyra F.
I. TITLE: Garcia Ron vs. Campañia de Minas de Batan (12 Phil. 130)
III. FACTS:
Jose Garcia Ron was employed as foreman or capataz by one Genaro Ansuategui, the
local manager of certain mines of the La Compania de Minas de Batan, situated on the Islands of
Bataan. His employment continued from November 1, 1903 until August 4, 1904; upon the
termination of his contract of work, Jose Garcia Ron argued that he is entitled to reasonable
compensation for the services rendered which were fixed at P5 per day, or P150 per month, since
he worked for the defendant company as foreman or capataz and received compensation. On the
contrary, it was alleged by the La Compania that they did not 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.
50 | P a g e
I. TITLE: Tai Tong Chuache & Co., vs. Insurance Commission (158 SCRA 366)
III. FACTS:
Tai Tong Chuache & Co., acquired from a certain Rolando Gonzales a parcel of land and
a building located at San Rafael Village, Davao City. Complainants assumed the mortgage of the
building in favor of S.S.S., which building was insured with respondent S.S.S. Accredited Group
of Insurers for P25,000.00.
On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the
amount of P100,000.00. To secure the payment of the loan, a mortgage was executed over the
land and the building in favor of Tai Tong Chuache & Co. On April 25, 1975, Arsenio Chua,
representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-
Indemnity Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the
contents thereof).
On June 11, 1975, Pedro Palomo secured a Fire Insurance Policy No. F- 02500, covering
the building for P50,000.00 with respondent Zenith Insurance Corporation. On July 16, 1975,
another Fire Insurance Policy No. 8459 was procured from respondent Philippine British
Assurance Company, covering the same building for P50,000.00 and the contents thereof for
P70,000.00.
On July 31, 1975, the building and the contents were totally razed by fire.
Based on the computation of the loss, including the Travellers Multi- Indemnity,
respondents, Zenith Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers,
paid their corresponding shares of the loss. Complainants were paid the following: P41,546.79
by Philippine British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and
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.
The Insurance Commission and Travellers Multi-Indemnity Corporation 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.
51 | P a g e
From the above premise respondent concluded that the obligation secured by the insured
property must have been paid.
IV. ISSUE/S: Whether or not a managing partner of the partnership may execute all acts of
administration.
V. RULING:
YES, a managing partner of the partnership may execute all acts of administration.
Tai Tong Chuache & Co. being a partnership may sue and be sued in its name or by its
duly authorized representative. Arsenio Lopez Chua is the representative of petitioner is not
questioned; Arsenio acts as the managing partner of the partnership was corroborated by
respondent insurance company. Thus, Chua as the managing partner of the partnership may
execute all acts of administration including the right to sue debtors of the partnership in case of
their failure to pay their obligations when it became due and demandable. Or at the very least,
Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership.
Being an agent, it is understood that he acted for and in behalf of the firm. Public respondent's
allegation that the civil case flied by Arsenio Chua was in his capacity as personal creditor of
spouses Palomo has no basis.
The respondent insurance company having issued a policy in favor of herein petitioner
which policy was of legal force and effect at the time of the fire, it is bound by its terms and
conditions. Upon its failure to prove the allegation of lack of insurable interest on the part of the
petitioner, respondent insurance company is and must be held liable.
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I. TITLE: Fortis vs. Gutierrez Hermanos (6 Phil. 100)
III. FACTS:
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
was, to determine what the profits of the business were, after paying all of the expenses except
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his, but that determination was not the final determination of the net profits of the business. It
was made for the purpose of fixing the basis upon which his compensation should be determined.
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I. TITLE: Fortis vs. Gutierrez Hermanos (6 Phil. 100)
III. FACTS:
In the year 1913, the individuals in this action formed a civil partnership, called "La
Protectora," for the purpose of engaging in the business of transporting passengers and freight at
Laoag, Ilocos Norte. In order to provide the enterprise with means of transportation, Marcelo
Barba, acting as manager, came to Manila and upon June 23, 1913, negotiated the purchase of
two automobile trucks from the plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid
the sum of 3,000 in cash, and for the balance executed promissory notes representing the
deferred payments. These notes provided for the payment of interest from June 23, 1913, the date
of the notes, at the rate of 10 per cent per annum. Provision was also made in the notes for the
payment of 25 per cent of the amount due if it should be necessary to place the notes in the hands
of an attorney for collection. Three of these notes, for the sum of P3,375 each, have been made
the subject of the present action, and there are exhibited with the complaint in the cause.
It is obvious that in thus signing the notes Marcelo Barba intended to bind both the
partnership and himself. In the body of the note the word "I" (yo) instead of "we" (nosotros) is
used before the words "promise to pay" (prometemos) used in the printed form. It is plain that
the singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio
Adiarte, Ignacio Flores, and Modesto Serrano, upon June 12, 1913, executed in due form a
document in which they declared that they were members of the firm "La Protectora" and that
they had granted to its president full authority "in the name and representation of said partnership
to contract for the purchase of two automobiles". This document was apparently executed in
obedience to the requirements of subsection 2 of article 1697 of the Civil Code, for the purpose
of evidencing the authority of Marcelo Barba to bind the partnership by the purchase. The
document in question was delivered by him to Bachrach at the time the automobiles were
purchased.
Afterwards, the said partnership had additional purchases from the said transaction and
was therefore failed to pay the balance which resulted to the institution of this action.
IV. ISSUE/S: Whether or not the partners cannot be held personally obligated by the document
securing the firm’s debt.
V. RULING:
NO, the partners cannot be held personally obligated by the document securing the firm’s
debt, no member of the partnership can bind the others by a personal act if they have not given
him authority to do so; their liability rests upon the general principles underlying partnership
liability.
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The document referred to was intended merely as an authority to enable Barba to bind the
partnership and that the parties to that instrument did not intend thereby to confer upon Barba an
authority to bind them personally. It is obvious that the contract which Barba in fact executed in
pursuance of that authority did not by its terms profess to bind the appellants personally at all,
but only the partnership and himself.
The business conducted under the name of "La Protectora" was evidently that of a civil
partnership; and the liability of the partners to this association must be determined under the
provisions of the Civil Code. The authority of Marcelo Barba to bind the partnership, in the
purchase of the trucks, is fully established by the document executed by the four appellants upon
June 12, 1913. The transaction by which Barba secured these trucks was in conformity with the
tenor of this document. The promissory notes constitute the obligation exclusively of "La
Protectora" and of Marcelo Barba; and they do not in any sense constitute an obligation directly
binding on the four appellants. Their liability is based on the fact that they are members of the
civil partnership and as such are liable for its debts. It is true that article 1698 of the Civil Code
declares that a member of a civil partnership is not liable in solidum (solidariamente) with his
fellows for its entire indebtedness; but it results from this article, in connection with article 1137
of the Civil Code, that each is liable with the others (mancomunadamente) for his aliquot part of
such indebtedness.
As to so much of the indebtedness as is based upon the claim for automobile supplies and
accessories, it is obvious that the document of June 12, 1913, affords no authority for holding the
appellants liable. Their liability upon this account is, however, no less obvious than upon the
debt incurred by the purchase of the trucks; and such liability is derived from the fact that the
debt was lawfully incurred in the prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if any, was made with
regard to the form of management. Under these circumstances it is declared in article 1695 of the
Civil Code that all the partners are considered agents of the partnership. Barba therefore must be
held to have had authority to incur these expenses. But in addition to this he is shown to have
been in fact the president or manager, and there can be no doubt that he had actual authority to
incur this obligation.
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I. TITLE: Council of Red Men vs. Veterman Army (7 Phil. 685)
III. FACTS:
The Veteran Army of the Philippines was established as an association with the primary
objective of perpetuating the spirit of patriotism and fraternity among the members. As stated in
the Constitution of the Veteran Army of the Philippines constitution, the association shall be
composed of a department and two more posts, their respective duties and powers provided
thereto.
Among these posts organized is the General Henry W. Lawton Post, No. 1. On the 1st
day of March, 1903, a contract of lease of parts 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.
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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 case at bar, the articles of the Veteran Army of the Philippines do so provide. It
is true that an express 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 several officers
are. In these various provisions there is nothing said about the power of making contracts, and
that faculty is not expressly given to any officer.
No contract, such as the one in question, is binding on the Veteran Army of the
Philippines unless it was authorized at a meeting of the department. No evidence was offered to
show that the department had never taken any such action. In fact, the proof shows that the
transaction in question was entirely between Apache Tribe, No. 1, and the Lawton Post, and
there is nothing to show that any member of the department ever knew anything about it, or had
anything to do with it.
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I. TITLE: Machucha vs. Chuidian (2 Phil. 210)
III. FACTS:
Chuidian, Buenaventurea and Co., are a regular general partnership, organized in Manila,
December 29, 1882, as a continuation of a prior partnership of the same name. The original
partners constituting the partnership of 1882 were D. Telesforo Chuidian, Doña Raymunda
Chuidian, Doña Candelaria Chuidian, and D. Mariano Buenaventura. The capital was fixed in
the partnership agreement at 16,000 pesos, of which the first three partners named contributed
50,000 pesos each, and the last named 10,000 pesos, and it was stipulated that the liability of the
partners should be "limited to the amounts brought in by them to form the partnership stock."
In addition to the amounts contributed by the partners to the capital, it appears from the
partnership agreement that each one of them had advanced money to the preexisting partnership,
which advances were assumed or accounts-current aggregated something over 665,000 pesos, of
which sum about 569,000 pesos represented the advances from the Chuidians and the balance
that balance that from D. Mariano Buenaventura.
Doña Raymunda Chuidian retired from the partnership November 4, 1885. On January 1,
1888, the partnership went into liquidation, and it does not appear that the liquidation had been
terminated when this action was brought.
Down to the time the partnership went into liquidation the accounts-current of D.
Telesforo Chuidian and Doña Candelaria Chuidian had been diminished in an amount
aggregating about 288,000 pesos, while that of D. Mariano Buenaventura had been increased
about 51,000 pesos. During the period from the commencement of the liquidation down to
January 1, 1896, the account-current of each of the Chuidians had been still further decreased,
while that of D. Mariano Buenaventura had been still further increased.
On January 1, 1894, D. Mariano Buenaventura died, his estate passing by will to his
children, among whom was D. Vicente Buenaventura. Upon the partition of the estate the
amount of the interest of D. Vicente Buenaventura in his father's account-current and in the
capital was ascertained and recorded in the books of the firm.
On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which

for a valuable consideration he "assigns to D. Jose Gervasio Garcia . . . a 25 per cent share in all
that may be obtained by whatever right in whatever form from the liquidation of the partnership
of Chuidian, Buenaventura & Co., in the part pertaining to him in said partnership, . . . the
assignee, being expressly empowered to do in his own name, and as a part owner, by virtue of
this assignment in the assets of the partnership, whatever things may be necessary for the
purpose of accelerating the liquidation, and of obtaining on judicially or extrajudicially the
payment of the deposits account-current pertaining to the assignor, it being understood that D.
Jose Gervasio Garcia is to receive the 25 per cent assigned to him, in the same form in which it
may be obtained from said partnership, whether in cash, credits, goods, movables or
immovables, and on the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall
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have effected the operations necessary in order to satisfy the credits and the share in the
partnership capital hereinbefore mentioned."
IV. ISSUE/S: Whether or not the plaintiff has acquired rights under the assignment over the
partnership representing the share of D. Vicente Buenaventura.
V. RULING:
NO, the plaintiff has not acquired rights under the assignment over the partnership
representing the share of D. Vicente Buenaventura.
The question in the case at bar relates to the construction of clause 19 of the partnership
agreement, by which it was stipulated that “upon the dissolution of the company, the pending
obligations in favor of outside parties should be satisfied, the funds of the minors Jose and
Francisco Chuidian should be taken out, and afterwards the resulting balance of the account-
current of each one of those who had put in money (imponentes) should be paid.”
The court’s construction of this clause is that it establishes a basis for the final adjustment
of the affairs of the partnership; that basis is that the liabilities to noncompartners are to be first
discharged; the claims of the Chuidian minors are to be next satisfied; and what is due to the
respective partners on account of their advances to the firm is to be paid last of all, leaving the
ultimate residue, of course, if there be any, to be distributed, among the partners in the
proportions in which they may be entitled thereto.
With respect to the claims of the Chuidian minors, the suggestion of counsel is that the
clause in question means that their accounts are to be adjusted before those of the partners but
not paid first. Such a provision would have been of no practical utility, and the language used —
that the funds should be “(se dedujeran)” does not admit of such a construction.
Such being the basis upon which by agreement of the partners the assets of the
partnership are to be applied to the discharge of the various classes of the firm’s liabilities, it
follows that D. Vicente Buenaventura, whose rights are those of his father, is in no case entitled
to receive any part of the until the creditors who are nonpartners and the Chuidian minors are
paid. Whatever rights 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.
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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 plaintiff’s 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. Vicente’s
resulting interest, both as partner and creditor.
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I. TITLE: Pardo vs. Hercules Lumber Co. and Ferrer (47 Phil. 964)
III. FACTS:
Antonio Pardo is a stockholder in the Hercules Lumber Company, Inc., and Ignacio
Ferrer, is the acting secretary of the said company, who refused to permit the Pardo or his agent
to inspect the records and business transactions of the said Hercules Lumber Company, Inc., at
times desired by Pardo.
The main ground upon which the defense is rested has reference to the time, or times,
within which the right of inspection may be exercised. In this connection the answer asserts that
in article 10 of the By-laws of the respondent corporation it is declared that “Every shareholder
may examine the books of the company and other documents pertaining to the same upon the
days which the board of directors shall annually fix”. It is further averred that at the directors’
meeting of the respondent corporation held on February 16, 1924, the board passed a resolution
to the following effect:
The board also resolved to call the usual general (meeting of shareholders) for March 30
of the present year, with notice to the shareholders that the books of the company are at their
disposition from the 15th to 25th of the same month for examination, in appropriate hours.
IV. ISSUE/S: Whether or not the statutory right of inspection is affected by the adoption by-law
created by the board of directors.
V. RULING:
NO, the statutory right of inspection is not affected by the adoption by-law created by the
board of directors.
The general right given by the statute may not be lawfully abridged to the extent
attempted in the board’s resolution. It may be admitted that the officials in charge of a
corporation may deny inspection when sought at unusual hours or under other improper
conditions; but neither the executive officers nor the board of directors have the power to deprive
a stockholder of the right altogether. A by-law unduly restricting the right of inspection is
undoubtedly invalid.
Under a statute has been held that the statutory right of inspection is not affected by the
adoption by the board of directors of a resolution providing for the closing of transfer books
thirty days before an election.
It will be noted that our statute declares that the right of inspection can be exercised
during “reasonable hours”. This means at reasonable hours on business days throughout the year,
and not merely during some arbitrary period of a few days chosen by the directors.
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I. TITLE: Pang Lim and Galvez vs. Lo Seng (42 Phil. 282)
III. FACTS:
Lo Seng and Pang Lim were partners, under the firm name of Lo Seng and Co., in the
business of running a distillery. The land on which said distillery is located as well as the
buildings and improvements originally used in the business were the property of Lo Yao, who
leased it to Lo Seng and Co. for the term of three years.
Upon the expiration of this lease, a new written contract became effective whereby the
lease was extended for fifteen years. The reason for the long duration of the extension was due to
the requirement of the Bureau of Internal Revenue to make sundry expensive improvements in
the distillery and these improvements should be effected at the expense of the lessees.
In conformity thousands of pesos were expended by Lo Seng and Co., and later by Lo
Seng alone. Neither the original contract of lease nor the agreement extending the same was
inscribed in the property registry. Pang Lim sold all his interest in the distillery making Lo Seng
the sole owner.
Lo Yao through his attorney in fact executed a deed purporting to convey to Pang Lim
and Benito Galvez, the entire distillery plant including the land used in connection therewith.
Lim and Galvez demanded possession from Lo Seng, but the latter refused to yield thus, the
present action of unlawful detainer.
IV. ISSUE/S: Whether or not the as purchasers of the estate, are at liberty to terminate the lease.
V. RULING:
NO, the purchasers of the estate are not at liberty to terminate the lease.
Lim cannot be permitted, in the guise of a purchaser of the estate, to destroy an interest
derived from him, and for which he has received full value. There is bad faith.
Partners are required to exhibit towards each other the highest degree of good faith. One
partner cannot, to the detriment of another, apply exclusively to his own benefit the results of the
knowledge and information gained in the character of partner.
Under section 80 of the Code of Civil Procedure, the only question that can be
adjudicated is the right to possession; and in order to maintain the action, in the 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 his cotenant, since one is as much entitled
to have possession as the other
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It follows that as Lo Seng is vested with the possessory right as against Pang Lim, he
cannot be ousted either by Pang Lim or Benito Galvez. Having lawful possession as against one
cotenant, he is entitled to retain it against both.
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I. TITLE: Catalan vs. Gatchalian (105 Phil. 1270)
III. FACTS:
Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together
with the improvements thereon to secure a credit from the latter. The partnership failed to pay
the obligation. The properties were sold to Dr. Marave at a public auction. Catalan redeemed the
property and he contends that title should be cancelled and a new one must be issued in his
name.
IV. ISSUE/S: Whether or not Catalan’s redemption of the properties make him the absolute
owner of the lands
V. RULING:
NO, Catalan’s redemption of the properties did not make him the absolute owner of the
lands.
The right of redemption pertains to the owner of the property; as it was the partnership
which owned the property, in this case, it was only the partnership which could properly exercise
the right of redemption.
Under Article 1807 of the New Civil Code provides that every partner becomes a trustee
for his co-partner with regard to any benefits or profits derived from his act as a partner.
Consequently, when Catalan redeemed the properties in question, he became a trustee and held
the same in trust for his co-partner Gatchalian, subject to his right to demand from the latter his
contribution to the amount of redemption.
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1. Del Prado, Darren Joseph M.
I. TITLE: Hanlon vs. Haussermann and Beam (40 Phil. 796)
II. TOPIC: Accounting of shares in the profits of the partnership
III. FACTS:
An action was instituted by Hanlon to compel Haussermann and Beam to account for the
share in profits gained in rehabilitating the plant of Benguet Mining and compel them to
surrender to the plaintiff 50000 shares of stock of said company with dividends paid thereon.
Later, Sellner was permitted to intervene in like interest with Hanlon and case was conducted as
if Hanlon and Sellner were co-plaintiffs.
Beam and Hausermann were shareholders in said mining company and members of the
board of directors. The contract entered into a contract with Hanlon. It is known to the parties
that Hanlon was personally without the financial resources necessary to enable him to contribute
P75,000 towards the project indicated in the contract and he was compelled to seek the assistance
of others. Haussermann and Beam, agreed to find P25,000 of the necessary capital, and for the
remainder the plaintiff relied upon G. C. Sellner, a business man of the city of Manila, who, upon
being approached, agreed to advance P50,000. A verbal understanding with reference to his
matter had been attained by the four parties to this litigation before the contract Exhibit B
between Hanlon and the mining company had been formally executed, and this agreement was in
fact reduced to writing and signed on November 5, 1913, one day prior to the execution of the
contract between Hanlon and the mining company.
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.
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I. TITLE: Fue Leung vs. Intermediate Appellate Court (169 SCRA 756)
II. TOPIC: Requisites of a partnership
III. FACTS:
When Sun Wah Panciteria started, the private respondent gave P4,000.00 as his
contribution to the partnership which is evidenced by a receipt wherein the petitioner
acknowledged his acceptance of the P4,000.00 by affixing his signature thereto. The private
respondent identified the signature on the receipt as that of the petitioner because it was affixed
by the latter in his presence. Witnesses So Sia and Antonio Ah Heng corroborated the private
respondents testimony to the effect that they were both present when the receipt was signed by
the petitioner. So Sia further testified that he himself received from the petitioner a similar
receipt evidencing delivery of his own investment in another amount of P4,000.00 An
examination was conducted by the PC Crime Laboratory on orders of the trial court granting the
private respondents motion for examination of certain documentary exhibits. The signatures in
when compared to the signature of the petitioner appearing in the pay envelopes of employees of
the restaurant, namely Ah Heng and Maria Wong showed that the signatures in the two receipts
were indeed the signatures of the petitioner.
Furthermore, the private respondent received from the petitioner the amount of
P12,000.00 from the profits of the operation of the restaurant for the year 1974.
IV. ISSUE/S: WON Private respondent is a partner of the petitioner in Sun Wah Panciteria?
V. RULING:
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites
of a partnership which are:
1) Two or more persons bind themselves to contribute money, property, or industry to a
common fund; and
2) Intention on the part of the partners to divide the profits among themselves 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.
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I. TITLE: Sison vs. H. McQuiad (94 Phil. 201)
II. TOPIC: Importance of liquidation before claiming share in profits
III. FACTS:
Plaintiff brought an action against defendant alleging that the latter borrowed from him
carious sums of money aggregating P2210 to enable her to pay obligations with the Bureau of
Forestry and as additonal on her capital in the lumber business.
Defendant was not able to pay the loan in 1938 so she proposed to take in plaintiff as a
partner in her lumber business, plaintiff to contribute to the partnership the said sum of P2,210
due him from defendant in addition to his personal services to which plaintiff agreed.
The partnership sold to the US Army 230000 board feet of lumber for P13800, however
defendant persistently presumed refused to deliver one-half of it.
IV. ISSUE: WON plaintiff is entitled to recover P6900
V. RULING:
NO. Plaintiff seeks to recover from defendant one-half of the purchase price of lumber
sold by the partnership to the United States Army. But his complaint does not show why he
should be entitled to the sum he claims. It does not allege that there has been a liquidation of the
partnership business and the said sum has been found to be due him as his share of the profits.
The proceeds from the sale of a certain amount of lumber cannot be considered profits until costs
and expenses have been deducted. Moreover, the profits of the business cannot be determined by
taking into account the result of one particular transaction instead of all the transactions had.
Hence, the need for a general liquidation before a member of a partnership may claim a specific
sum as his share of the profits.
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I. TITLE: Fernandez vs. De la Rosa (1 Phil. 671)
II. TOPIC: When partnership exists
III. FACTS:
Plaintiff entered into a verbal agreement with defendant to form a partnership for the
purchase of cascoes and the carrying on of the business of letting the same for hire in Manila.
The defendant was to buy the cascoes and each partner was to furnish as much money as he
could and the profits are to be divided proportionately. Fernandez furnished Dela Rosa with
money to purchase and repair cascoes, with Dela Rosa taking the same in his own name. The
parties decided to make up the articles of partnership but defendant prepared a draft different
from that agreed upon by the parties and thus they were not able to to reach an agreement. The
same resulted in the defendant having the control and management of the cascoes. Plaintiff then
demanded an accounting to which defendant 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 done by purchasing them separately, and that they 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 parties would have become joint tenants only; but, as nothing
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of this sort appears in the case, we must assume that the object of the purchase was active use
and profit and not mere passive ownership in common.
It is thus apparent that a complete and perfect contract of partnership was entered into by
the parties. This contract, it is true, might have been subject to a suspensive condition,
postponing its operation until an agreement was reached as to the respective participation of the
partners in the profits, the character of the partnership as collective or en comandita, and other
details, but although it is asserted by counsel for the defendant that such was the case, there is
little or nothing in the record to support this claim, and that fact that the defendant did actually
go on and purchase the boat, as it would seem, before any attempt had been made to formulate
partnership articles, strongly discountenances the theory.
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I. TITLE: Garrido vs. Ascencio (10 Phil. 691)
II. TOPIC: Statement of accounts of the partnership
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 members. The plaintiff brought
this action to recover the amount of capital which he had invested in the business from defendant
who was in charge of the books and funds. Defendant argued that there were considerable losses
in the business and denied anything was due to the plaintiff and filed a cross complaint wherein
he prayed for a judgment against the plaintiff for a certain amount which he alleged to be due by
the plaintiff under the articles of partnership on account of plaintiff's share of these losses. The
trial court found that the evidence substantially sustains the claim of the defendant as to the
alleged losses in the business of the partnership and gave judgment in his favor.
IV. ISSUE/S: WON the evidence he trial court based its findings as to the status of the accounts
of the company was correct
V. RULING:
YES. The record by mutual agreement the defendant had general charge and supervision
of the books and funds of the firm, but it appears that these books were at all times open to the
inspection of the plaintiff, and there is evidence which tends to show that the plaintiff himself
made entries in these books touching particular transactions in which he happened to be
interested; so that while it is clear that the defendant was more especially burdened with the care
of the books and accounts of the partnership, it would appear that the plaintiff had equal rights
with the defendant in this regard, and that during the existence of the partnership they were
equally responsible for the mode in which the books were kept and that the entries made by one
had the same effect as if they had been made by the other.
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 plaintiff made no allegation as
to profits, but denied defendant's allegation as to the losses. The defendant in support of his
allegations offered in evidence the estado de cuentas (general statement of accounts) of the
partnership, supported by a number of vouchers, and by his own testimony under oath as to the
accuracy and correctness of the items set out therein.
It appears from the record that the statement of account, the vouchers, and the books of
the company were placed at the disposition of the plaintiff for more than six weeks prior to the
trial, and that during the trial he was given every opportunity to indicate any erroneous or
fraudulent items appearing in the account, yet he was unable, or in any event he declined to
specify such items, contenting himself with a general statement to the effect that there must be
some mistake, as he did not and could not believe that the business had been conducted at a loss.
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I. TITLE: Ornum vs. Lasala (74 Phil. 242)
II. TOPIC: Statement of account of the partnership
III. FACTS:
Lasala the father of respondents and Ornum formed a partnership whereby the former
delievered the sum of P1000 to the latter who is an industrila partner. They were to conduct a
business in Romblon. When the partnership assets consisted of outstanding accounts and old
stocks of merchandise, Ornum asked for the dissolution of the partnership. Ornum then looked
for someone who could take his place and suggested the name of the petitioners who became
partners. After death of Lasala his children became the new partners to the business with
petitioners. After twenty years of business, their assets reached P44618.67. Dissolution of the
partnership was then decided. Pursuant to the letter written by Lasala, the petitioners remitted
and paid to the respondents the total amount corresponding to them under the above-quoted
statement of accounts which, however, was not signed by the latter.
A complaint was filed by the respondents, praying for an accounting and final liquidation
of the assets of the partnership. The Court of First Instance of Manila held that the last and final
statement of accounts prepared by the petitioners was tacitly approved and accepted by the
respondents who, by virtue of the above-quoted letter of Father Mariano Lasala, lost their right to
a further accounting from the moment they received and accepted their shares as itemized in said
statement. This judgment was reversed by the Court of Appeals principally on the ground that as
the final statement of accounts remains unsigned by the respondents, the same stands
disapproved.
IV. ISSUE/S: WON the last and final statement of accounts were approved by respondent.
V. RULING:
The last and final statement of accounts had been approved by the respondents. This
approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932, quoted in
part in the appealed decision from the failure of the respondents to object to the statement and
from their promise to sign the same as soon as they received their shares as shown in said
statement. After such shares had been paid by the petitioners and accepted by the respondents
without any reservation, the approval of the statement of accounts was virtually confirmed and
its signing thereby became a mere formality to be complied with by the respondents exclusively.
Their refusal to sign, after receiving their shares, amounted to a waiver to that formality in favor
of the petitioners who has already performed their obligation.
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I. TITLE: Deluao vs. Casteel (29 SCRA 350)
II. TOPIC: Dissolution of the partnership
III. FACTS:
Casteel unsuccessfully registered a fishpond in a big tract of swampy land, Padada,

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.
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
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.
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The approval was an event which made it unlawful for the members to carry it on in
partnership. Moreover, subsequent events likewise reveal the intent of both parties to terminate
the partnership because each refused to share the fishpond with the other.
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I. TITLE: The Leyte-Samar Sales and Tomassi vs. Suplicio V. Cea and Lastrilla (93 Phil. 100)
II. TOPIC: Recovery of interest by a creditor of a partner
III. FACTS:
This is a suit for damages by LESSCO and Raymond Tomassi against FELCO, Arnold
Hall, Fred Brown and Jean Roxas, whereby judgment against defendants jointly and severally for
the amount of P31,589.14 plus costs was rendered. The Court of Appeals confirmed the award in
November 1950, minus P2,000 representing attorney's fees mistakenly included.
The decision having become final, the sheriff sold at auction on June 9, 1951 to Dorfe
and Asturias "all the rights, interests, titles and participation" of the defendants in certain
buildings and properties described in the certificate, for a total price of eight thousand and one
hundred pesos.
But on June 4, 1951, Lastrilla filed in the case a motion, wherein he claimed to be the
owner by purchase on September 29, 1949, of all the "shares and interests" of defendant Fred
Brown in the FELCO, and requested "under the law of preference of credits" that the sheriff be
required to retain in his possession so much of the deeds of the auction sale as may be necessary
"to pay his right". Over the plaintiffs' objection the judge in his order of June 13, 1951, granted
Lastrilla's motion by requiring the sheriff to retain 17 per cent of the money "for delivery to the
assignee, administrator or receiver" of the FELCO.
IV. ISSUE/S: WON Lastrilla may recover the shares and interest of Fred Brown.
V. RULING:
NO, since he was not a creditor of FELCO. That is too elementary to need elaboration.
The properties sold at auction actually belonged to the FELCO partnership and the partners.
When the sale was effected of the properties of FELCO to Roberto Dorfe and Pepito Asturias,
Lastilla was already a partner of FELCO. Now, does Lastrilla have any proper claim to the
proceeds of the sale? If he was a creditor of the FELCO, perhaps or maybe. But he was no. The
partner of a partnership is not a creditor of such partnership for the amount of his shares. That is
too elementary to need elaboration.
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I. TITLE: In the Matter of the Petition for Authority to Continue Use of the Firm name
“Ozaeta, Romulo, etc.” (92 SCRA 1)
II. TOPIC: Using the name of a deceased partner
III. FACTS:
The surviving parters of Atty. Herminio Ozaeta filed a petition praying that they be
allowed to continue using, in the name of their firm, the names of their partner who passed away.
One of the petitioners’ arguments stated that no local custom prohibits the continued use of a
deceased partner’s name in a professional firm’s name in so far as Greater Manila Area is
concerned. No custom exists which recognizes that the name of a law firm necessarily identifies
the individual members of the firm. They also stated that the continued use of a deceased
partner’s name in the firm name of law partnerships has been consistently allowed by U.S.
Courts and is an accepted practice in the legal profession of most countries in the world.
IV. ISSUE/S: Whether or not the law firm “Ozaeta, Romulo, De Leon, Mabanta & Reyes” is
allowed to sustain the name of their deceased partner,
V. RULING:
NO. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta,
Romulo, De Leon, Mabanta and Reyes" are partnerships, the use in their partnership names of
the names of deceased partners will run counter to Article 1815 of the Civil Code which
provides:
Art. 1815. Every partnership shall operate under a firm name, which may or may not
include the name of one or more of the partners.
Those who, not being members of the partnership, include their names in the firm name,
shall be subject to the liability, of a partner. It is clearly tacit in the above provision that names in
a firm name of a partnership must either be those of living partners and. in the case of non-
partners, should be living persons who can be subjected to liability. In fact, Article 1825 of the
Civil Code prohibits a third person from including his name in the firm name under pain of
assuming the liability of a partner. The heirs of a deceased partner in a law firm cannot be held
liable as the old members to the creditors of a firm particularly where they are non-lawyers.
Thus, Canon 34 of the Canons of 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 benefits accruing, there ran be no corresponding liability. Prescinding the law, there could be
practical objections to allowing the use by law firms of the names of deceased partners. The
public relations value of the use of an old firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able lawyer without connections will have to
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make a name for himself starting from scratch. Another able lawyer, who can join an old firm,
can initially ride on that old firm's reputation established by deceased partners.
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1. Garcia, Charlotte Yris C.
I. TITLE: Teck Seing and Co., Ltd. (petitioner-appellee) Santiago Jo Chung Cang et al.
(partners) vs. Pacific Commercial Company, et al. (creditors-appellants) (45 Phil. 142)
II. TOPIC: Limited Partnership (Article 1815)
III. FACTS:
In the insolvency proceedings of “Sociedad Mercantil, Teck Seing & Co., Ltd.” creditors
Pacific Commercial Company, Piñol & 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.
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I. TITLE: Philippine National Bank vs. Severo Eugenio Lo, et al. (defendants) Severio
Eugenio, Ng Khey Ling and Yep Seng (appellants) (50 Phil. 802)
II. TOPIC: General Partnership (Article 1815)
III. FACTS:
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
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justify the reversal of the judgment, for two reasons at least: (1) Because Ou Yong Kelam was a
partner who contracted in the name of the partnership, without any objection of the other partners;
and (2) because it appears in the record that the appellant-partners Severo Eugenio Lo, Ng Khey
Ling and Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit
in current account, the debit balance of which is sought to be recovered in this action.
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I. TITLE: Sharruf & Co., known also as Sharruf & Eskenazi, Salomon Sharruf and Elias
Eskenazi, (plaintiffs-appellees) vs. Balooise Fire Insurance Co., Sun Insurance Office, Ltd.
and Springfield Insurance Co., represented by Kuenzle & Streiff, Inc. (defendants-appellants)
(64 Phil. 258)
II. TOPIC: Personality to Sue of Partnerships (Article 1815)
III. FACTS:
Plaintiffs Salomon Sharruf and Elias Eskenazi were doing business under “Sharruf &
Co.” They applied to defendant companies for insurance of the merchandise in stock. Defendant
insurance companies issued them insurance policies in the total amount of P40,000 in the name of
“Sharruf & Co.”
Plaintiffs executed a contract of partnership substituting “Sharruf & Eskenazi” as the firm
name as Elias Ezkenazi. The total value of the merchandise contributed by both partners amounted
to P50,505.04. Part of said merchandise, most of which were textiles, was sold for P8,000, leaving
goods worth P43,000. In all there were from 60 to 70 bolts of silk. All the goods, most of which
were aluminum kitchen utensils, various porcelain and glass wares, and other articles of stucco, 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
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to the plaintiffs by virtue of the respective insurance policies has not been altered. If this is true, the
plaintiffs have juridical personality to bring this action.
This court is of the opinion and so holds: (1) that when the partners of a general
partnership doing business under the firm name of "Sharruf & Co." obtain insurance policies
issued to said firm and the latter is afterwards changed to "Sharruf & Eskenazi", which are
the names of the same and only partners of said firm "Sharruf & Co.", continuing the same
business, the new firm acquires the rights of the former under the same policies; (2) that when
the evidence relative to the cause of a fire and the author thereof is so vague and doubtful, the
insured cannot be attributed incendiary intervention therein for the mere fact that he had the keys to
the unoccupied building in his possession; (3) that a person who presents a claim for damages caused
by fire to articles and goods not existing at the time of the fire does so fraudulently and his claim is
fraudulent, and (4) that when immediately after a fire that broke out inside a completely locked
building, lasting scarcely 27 minutes, only about ten or eleven partly burned and scorched cases,
some containing textiles and wrapping paper and others, statutes of saints, have been found without
any trace of the destruction of other cases by said fire, it can neither logically nor reasonably be
inferred that 40 of said cases were inside the building when the fire broke out.
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I. TITLE: La Compañia Maritima (plaintiff-appellant) vs. Francisco Muñoz, et al.
(defendants-appellees) (9 Phil. 326)
II. TOPIC: Liability of Industrial Partners (Article 1816)
III. FACTS:
Defendants Francisco Muñoz, Emilio Muñoz, and Rafael Naval formed an ordinary
general mercantile partnership under the name of “Francisco Muñoz & Sons” for the purpose of
carrying on the mercantile business in the Province of Albay. Francisco Muñoz was a capitalist
partner and Emilio Muñoz and Rafael Naval were industrial partners.
In the articles of partnership, it was agreed upon by the three that for profits, Francisco
shall have a three-fourth shares while the other two would have one-eighth shares each. For the
losses, only Francisco shall bear it.
La Compañia brought an action in the Court of First Instance of Manila against the
partnership of “Franciso Muñoz & Sons”, and against Francisco Muñoz, Emilio Muñoz, 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
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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
that there is not enough property in the partnership to pay him, then the capitalist partners must pay
him.
`If industrial partners in commercial partnerships are not responsible to third persons for
the debts of the firm, then industrial partners in civil partnerships are not. Waiving the question as to
whether there can be a commercial partnership composed entirely of industrial partners, it seems
clear that there can be such civil partnership, for article 1678 of the Civil Code provides as follows:
A particular partnership has for its object specified things only, their use of profits, or a
specified undertaking, or the exercise of a profession or art.
It might very easily happen, therefore, that a civil partnership could be composed entirely
of industrial partners. If it were, according to the claim of the appellees, there would be no personal
responsibility whatever for the debts of the partnership.
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I. TITLE: Teodoro de los Reyes (plaintiff-appellee) vs. Vicente Lukban (defendant-appellant)
and Esperidion Borja (defendant) (35 Phil. 757)
II. TOPIC: Liability of an Industrial Partner (Article 1816)
III. FACTS:
Plaintiff Teodoro brought a suit against “Lukban & Borja” to recover P1,086.65 owing
for merchandise bought on credit from the ship supply store known by the name of La Industria.
Defendant was ordered to pay such amount by the court. Plaintiff brought another suit in the CFI
against Lukban and Borja to recover individually the sum of P853 which is the balance of the
P1,086.65. Defendant Lukban contends that he is not liable because he was merely an industrial
partner.
The lower court ordered defendants to jointly and severally pay the plaintiff since the
partnership has already been dissolved and has no more remaining property.
IV. ISSUE/S: Whether or not plaintiff may collect individually from the partners the amount owed
by the partnership before its dissolution.
V. RULING:
YES. Under Article 127 of the Code of Commerce, “All the member of the general co-
partnership, be they or be they not managing partners of the same, are personally and severally liable
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.”
The creditor, who has not succeeded judicially in recovering a debt owing him by a
general copartnership, on account of its insolvency, has a right to sue the partners thereof in the
manner provided by the abovementioned article, inasmuch as each and all of the copartners are
personally and severally liable with all their property for the result 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.
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I. TITLE: Pacific Commercial Company (plaintiff-appellee) vs. Aboitiz & Martinez, et al.
(defendants) Jose Martinez (defendant-appellant) (48 Phil. 841)
II. TOPIC: Liability of an Industrial Partner (Article 1816)
III. FACTS:
Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a
"regular, collective, mercantile partnership" with a capital of P40,000 of which each of the partners
Aboitiz and De Silva furnished one-third. Jose Martinez was an industrial partner; it was provided in
the partnership article that he was to receive 30% of the profits and that his responsibility for losses
should not exceed the amount of the profits received by him.
The partnership through its representative, Aboitiz, executed a promissory note in favor
of plaintiff for P23,168.71 with interest. As security, the partnership executed a chattel mortgage in
favor of plaintiff on certain personal property.
For failure to pay the debt the chattel mortgage was foreclosed, sold for P2,000 and paid
to the plaintiff. An action was filed by plaintiff for the unpaid balance wherein the trial court decided
in favor of the plaintiff.
The judgment further provided that execution should first issue against the property of
the partnership should first issue against the insolvency of the partnership, it might issue against the
property of the partners De Silva and Aboitiz and in the event of their insolvency, then against the
property of the industrial partner Jose Martinez. From this judgment Martinez appealed to this court
and here maintains that under article 141 of the Code of Commerce he, as a mere industrial partner,
cannot be held responsible for the partnership's debt.
IV. ISSUE: Whether or not an industrial partner is liable for the partnership’s debt.
V. RULING:
YES. Article 127 of the Code of Commerce reads as follows, “All the members of the
general co-partnership, 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 transaction made in the name and for the
account of the partnership, under the 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
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that given it in the La Compañia 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.
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I. TITLE: Island Sales, Inc. (plaintiff-appellee) vs. United Pioneers General Construction
Company, et al. (defendants) Benjamin C. Daco (defendant-appellant) (65 Phil. 544)
II. TOPIC: Extent of Partners’ Liability Where the Complaint Against One is Dismissed (Article
1816)
III. FACTS:
Defendant company, a general partnership duly registered under the laws of the
Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for this
purpose executed a promissory note for P9,440.00, payable in 12 equal monthly installments of
P786.63.
For failure to pay, plaintiff sued the defendant company for an unpaid balance of
P7,199.07.
The complaint against defendant Lumauig was dismissed and the trial court rendered a
decision ordering the defendant company to pay the plaintiff. And the partners shall be liable in case
the defendant company has no more leviable properties to satisfy the judgment.
Defendants Daco and Sim moved for reconsideration claiming that since there are five
general partners the joint and subsidiary liability of each partner should not exceed one-fifth of the
obligations of the defendant company. The trial court denied such motion for reconsideration.
IV. ISSUE: Whether or not the liability of the partners are increased due to the dismissal of the
complaint against one of the partners.
V. RULING:
NO. Under article 1816 of the Civil Code, all partners including industrial ones, shall be
liable pro rata with all their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership. However, any partner may enter into
a separate obligation to perform a partnership contract.
There were five general partners when the promissory note was executed for and in
behalf of the partnership. Since the liability of the partners is pro rata, the liability of appellant Daco
shall be limited to only one-fifth of the obligations of the defendant company. The fact that the
complaint against Lumauig was dismissed, upon motion of the Island Sales, does not unmake
Lumauig as a general partner in the company. In so moving to dismiss the complaint, Island Sales
merely condoned Lumauig’s individual liability to them.
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I. TITLE: Elmo Muñasque (petitioner) vs. Court of Appeals, Celestino Galan Tropical
Company and Ramon Pons (respondents) (139 SCRA 533)
II. TOPIC: Liability of a Partner (Article 1816
III. FACTS:
Petitioner Muñasque, in behalf of Galan & Muñasque, entered into a contract with
respondent Tropical through branch manager Pons for the remodeling of a portion of private
respondent Tropical’s building without exchanging or expecting any consideration from Galan
although the latter was casually named as partner in the contract. Galan would receive some kind of
compensation in the form of some percentages or commission.
Private respondent Tropical agreed to give petitioner the amount of P7,000 soon after the
construction began and thereafter, the amount of P6,000.00 every 15 days during the construction to
make a total sum of P25,000.
The first payment was a check for P7,000.00 but it was not given to the plaintiff but to a
stranger to the contract, Galan, who succeeded in getting petitioner's indorsement on the same
persuading the latter that the check be deposited in a joint account. Galan allegedly misappropriated
the P6,183.37 for his personal use.
Muñasque refused to indorse the second check worth P6,000 but through later
manipulations, respondent Pons succeeded in changing the payee's name from Elmo Muñasque to
“Galan and Associates”, thus enabling Galan to encash the same
Petitioner undertook the construction at his own expense. Because of the unauthorized
disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan petitioner
demanded that said amount be paid to him by respondents under the terms of the written contract
between the petitioner and respondent company.
Petitioner filed a complaint for payment of sum of money and damages against
respondents.
IV. ISSUE/S: Whether or not Muñasque is solidarily liable with respondent Galan.
V. RULING:
YES. While it is true that under Article 1816 of the Civil Code, "All partners, including
industrial ones, shall be liable prorate with all their property and after all the partnership assets have
been exhausted, for the contracts which may be entered into the name and 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
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solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and
1823." In short, while the liability of the partners are merely joint in transactions entered into by the
partnership, a third person who transacted with said partnership can hold the partners solidarily
liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.
The respondent Tropical had every reason to believe that a partnership existed between
the petitioner and Galan and no fault or error can be imputed against it for making payments to
"Galan and Associates" and delivering the same to Galan because as far as it was concerned, Galan
was a true partner with real authority to transact on behalf of the partnership with which it was
dealing.
Justice also dictates that Muñasque 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 Muñasque as a partner.
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I. TITLE: Ildefonso de la Rosa, administrator of the intestate estate of the deceased Go-Lio
(plaintiff-appellant) vs. Enrique Ortega Go-Cotay (defendant-appellant) (48 Phil. 605)
II. TOPIC: Liability of the Partnership (Article 1818)
III. FACTS:
Go-Lio and Go-Sengco formed a society for the purchase and sale of articles of
commerce, and for this purpose they opened a store in the town of San Isidro, Nueva Ecija.
Defendant-appellant took charge of the business when his father, Go-Sengco, died and Go-Lio went
to China.
Go-Lio died and one of his children went to the Philippines to file a petition for
appointment of 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
partnership’s 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
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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.
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1. Landayan, Mary Mercedita R.
I. TITLE: Litton v. Hill (67 Phil. 509)

(Partners’ relationships with third persons/ Presumption of authority in
transactions entered into in the name of the partnership)
III. FACTS:
The plaintiff, George Litton, sold and delivered to Carlos Ceron, one of the managing
partners of Hill & Ceron, a certain number of mining claims. By virtue of said transaction, the
defendant Carlos Ceron delivered to the plaintiff a document providing that Ceron received from
Litton three (3) share certificates with a total of 17, 000 shares of Big Wedge Mining Company
for P1,870.00, with “Hill & Ceron” indicated therein before the signature of Carlos Ceron. The
document reads as follows:
"Feb. 14, 1934
"Received from Mr. George Litton share certificates Nos. 4428, 4429 and 6699 for 5,000,
5,000 and 7,000 shares respectively total 17,000 shares of Big Wedge Mining Company,
which we have sold at P0.11 (eleven centavos) per share or P1,870.00 less 1/2 per cent
brokerage.
"Hill & Ceron
"By: (Sgd.) Carlos Ceron"
Ceron paid to the plaintiff the sum of P1,150 leaving an unpaid balance of P720, and
unable to collect this sum either from Hill & Ceron or from its surety Visayan Surety &
Insurance Corporation, Litton filed a complaint in the CFI Manila against the said defendants for
the recovery of the said balance.
The court, after trial, ordered Carlos Ceron personally to pay the amount claimed and
absolved the partnership Hill & Ceron, Robert Hill and the Visayan Surety & Insurance
Corporation. On appeal to the Court of Appeals, the latter affirmed the decision of the court,
having reached the conclusion that Ceron did not intend to represent and did not act for the firm
Hill & Ceron in the transaction.
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:
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The Supreme Court held that the transaction made by Ceron with the plaintiff should be
understood in law as effected by Hill & Ceron and binding upon it.
There is a general presumption that each individual partner is an authorized agent for the
firm and that he has authority to bind the firm in carrying on the partnership transactions. The
presumption is sufficient to permit third persons to hold the firm liable on transactions entered
into by one of members of the firm acting apparently in its behalf and within the scope of his
authority.
Robert Hill insists that Litton had not established that Carlos Ceron had his (Hill) consent
to enter with the appellant into the contract whose breach gave rise to the complaint. It is argued
that, it being is stipulated in the articles of partnership that either Hill or Ceron may contract and
sign for the partnership with the consent of the other; the consent therefore of Hill was necessary
for the validity of the contract.
The stipulation in the articles of partnership that any of the two managing partners may
contract and sign in the name of the partnership with the consent of the other, undoubtedly
creates an obligation between the two partners, which consists in asking the other's consent
before contracting for the partnership. This obligation of course is not imposed upon a third
person who contracts with the partnership. Neither is it necessary for the third person to ascertain
if the managing partner with whom he contracts has previously obtained the consent of the other.
A third person may and has a right to presume that the partner with whom he contracts has, in the
ordinary and natural course of business, the consent of his copartner; for otherwise he would not
enter into the contract.
Wherefore, unless the contrary is shown, namely, that one of the partners did not consent
to his copartner entering into a contract with a third person, and that the latter with knowledge
thereof entered into said contract, the aforesaid presumption with all its force and legal effects
should be taken into account.
There is nothing in the case at bar which destroys this presumption; the only thing
appearing in the findings of fact of the Court of Appeals is that the plaintiff "has failed to prove
that Hill had consented to such contract". Defendants are ordered to pay to the plaintiff, jointly
and severally the sum of P720 with legal interest.
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I. TITLE: Muñasque vs. CA (139 SCRA 533)

(Existence of partnership despite feud between the partners)
III. FACTS:
Petitioner Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor

entered into a written contract with respondent Tropical for remodelling the respondent's Cebu
branch building. A total amount of P25,000.00 was to be paid under the contract for the entire
services of the Contractor. The terms of payment were as follows: thirty percent (30%) of the
whole amount upon the signing of the contract and the balance thereof divided into three equal
installments at the lute of Six Thousand Pesos (P6,000.00) every fifteen (15) working days.
The first payment made by respondent Tropical was in the form of a check for P7,000.00
in the name of the petitioner. Petitioner, however, indorsed the check in favor of respondent
Galan to enable the latter to deposit it in the bank and pay for the materials and labor used in the
project. Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so
that when the second check in the amount of P6,000.00 came and Galan asked the petitioner to
indorse it again, the petitioner refused. The check was withheld from the petitioner.
Since Galan informed the Cebu branch of Tropical that there was a "misunderstanding"
between him and petitioner, respondent Tropical changed the name of the payee in the second
check from Muñasque to "Galan and Associates" which was the duly registered name of the
partnership between Galan and petitioner and under which name a permit to do construction
business was issued by the mayor of Cebu City. This enabled Galan to encash the second check.
Meanwhile, as alleged by the petitioner, the construction continued through his sole
efforts and although Galan failed to pay what was partly due the laborers and partly due for the
materials, the construction work was finished ahead of schedule with the total expenditure
reaching P34,000.00.
The two remaining checks, each in the amount of P6,000.00, were subsequently given to
the petitioner alone with the last check being given pursuant to a court order.
The petitioner filed a complaint for payment of sum of money and damages against the
respondents, seeking to recover the following: the amounts covered by the first and second
checks which fell into the hands of respondent Galan, the additional expenses that the petitioner
incurred in the construction, moral and exemplary damages, and attorney's fees.
Both the trial and appellate courts not only absolved respondents Tropical and its Cebu
Manager, Pons, from any liability but they also held the petitioner together with respondent
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Galan, liable to the intervenors Cebu Southern Hardware Company and Blue Diamond Glass
Palace for the credit which the intervenors extended to the partnership of petitioner and Galan.
IV. ISSUES:
(1) Whether or not the appellate court erred in holding that a partnership existed between
petitioner and respondent Galan;
(2) Assuming that there was such a partnership, whether or not the court erred in not finding
Galan accountable to the petitioner for the P13,000.00 covered by the first and second
checks; and
(3) Whether or not the court committed grave abuse of discretion in holding that the
payment made by Tropical through its manager Pons to Galan was "good payment "
V. RULING:
There is nothing in the records to indicate that the partnership organized by the two men
was not a genuine one. If there was a falling out or misunderstanding between the partners, such
does not convert the partnership into a sham organization.
Likewise, when Muñasque received the first payment of Tropical in the amount of
P7,000.00 with a check made out in his name, he indorsed the check in favor of Galan.
Respondent Tropical therefore, had every right to presume that the petitioner and Galan were
true partners. If they were not partners as petitioner claims, then he has only himself to blame for
making the relationship appear otherwise, not only to Tropical but to their other creditors as well.
The payments made to the partnership were, therefore, valid payments.
Since the two were partners when the debts were incurred, they are also both liable to
third persons who extended credit to their partnership.
While the liability of partners are merely joint in transactions entered into by the
partnership, the parties are liable to third persons solidarily for the whole obligation if the case
involves loss or injury caused to any person not a partner in the partnership, and misapplication
of money or property of a third person received by a partner of the partnership. The reason is that
the law protects him, who in good faith relied upon the authority of a partner, whether such
authority is real or apparent.
In the case at bar, the respondent Tropical had every reason to believe that a partnership
existed between the petitioner and Galan and no fault or error can be imputed against it for
making payments to "Galan and Associates" and delivering the same to Galan because as far as it
was concerned, Galan was a true partner with real authority to transact on behalf of the
partnership with which it was dealing. This is even more true in the cases of Cebu Southern
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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 Muñasque and Galan,justice also dictates that
Muñasque 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 Muñasque as a partner.
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I. TITLE: Santiago Syjuco, Inc. v. Castro (175 SCRA 533)

(Estoppel in asserting the existence of partnership)
III. FACTS:
In November 1964, Eugenio Lim et al., called the Lims, borrowed from petitioner
Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of P800,000.00. The loan was given on
the security of a first mortgage on property registered in the names of said borrowers as owners
in common. Thereafter additional loans on the same security were obtained by the Lims from
Syjuco, so that the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the
security had been augmented by bringing into the mortgage other property, also registered as
owned pro indiviso by the Lims under two titles.
As stipulated in the mortgage deed, the obligation matured in November 1967; that the
Lims failed to pay it despite demands therefor; that Syjuco consequently caused extra-judicial
proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of Manila; and
that the latter scheduled the auction sale of the mortgaged property in December 1968. The
attempt to foreclose triggered off a legal battle that has dragged on for more than twenty years
now, fought through five (5) cases in the trial courts, two (2) in the Court of Appeals, and three
(3) more in this Court.
The respondents argue that the mortgage which they, together with their mother, had
individually constituted over lands standing in their names in the Property Registry as owners
pro indiviso, in fact no longer belonged to them at that time, having been earlier deeded over by
them to the partnership, "Heirs of Hugo Lim". Hence, said mortgage was void because they
executed it without authority from the partnership.
IV. ISSUE/S: Whether or not estoppel bars the Lims from asserting the existence of the
partnership
V. RULING:
YES. The respondent partnership is composed exclusively of the individual Lims, their
contribution to the partnership consisting chiefly, if not solely, of the property subject of the
Syjuco mortgage. Despite its having been allegedly contributed to the partnership, the property
was never registered with the Register of Deeds in the name of the partnership, but to this date
remains registered in the names of the Lims as owners in common. The Lims as such owners
executed the original mortgage deed. Therefore, there can be no dispute that in those
circumstances, the respondent partnership was chargeable with knowledge of the mortgage from
the moment of its execution.
If, therefore, the respondent partnership was inescapably chargeable with knowledge of
the mortgage executed by all the partners thereof, its silence and failure to impugn said mortgage
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within a reasonable time, let alone a space of more than seventeen years, brought into play the
doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized.
Art. 1819 states that, “Where the title to real property is in the names of all the partners, a
conveyance executed by all the partners passes all their rights in such property.”
Thus, there is no reason to distinguish between the Lims, as individuals, and the
partnership itself, since the former constituted the entire membership of the latter. Despite the
concealment of the existence of the partnership, for all intents and purposes and consistently with
the Lims’ own theory, it was that partnership which was the real party in interest in all the
actions; it was actually represented in said actions by all the individual members thereof.
Consequently, those members’ acts, declarations and omissions cannot be deemed to be simply
the individual acts of said members, but in fact and in law, those of the partnership.
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I. TITLE: Aguila, Jr. v. CA (316 SCRA 246)
(Separate and distinct juridical personality of the partnership/ Partnership
as the real party-in-interest)
III. FACTS:
Private respondent, with the consent of her late husband, and A.C. Aguila & Sons, Co.,
represented by petitioner, entered into a Memorandum of Agreement, which provided that A.C.
Aguila & Sons, Co. shall buy the Marikina property of private respondent for P200,000.00 with
an option to repurchase within 90 days from the execution of this MOA for P230,000.00; in case
of failure to exercise such option, private respondent is obliged to deliver the possession of the
property to Aguila & Sons, Co.
On the same day they entered into a MOA, the parties executed a deed of absolute sale of
the subject property to. Private respondent failed to redeem the property within the 90-day period
as provided in the MOA. Hence, petitioner, pursuant to a Special Power of Attorney, caused the
cancellation of private respondent’s title and the issuance of a new certificate of title in the name
of A.C. Aguila and Sons, Co.
Private respondent was demanded to vacate the premises within 15 days to which she
refused. A.C. Aguila & Sons, Co. filed an ejectment case against her in the MTC, Marikina,
which ruled in favor of A.C. Aguila & Sons, Co. She appealed but lost in all the cases.
Private respondent then filed a petition for declaration of nullity of a deed of sale with the
RTC Marikina, alleging that the signature of her husband on the deed of sale was a forgery
because he was already dead when the deed was supposed to have been executed. RTC Marikina
dismissed the petition. On appeal, the Court of Appeals reversed the RTC ruling that the
agreement entered into by the parties is in the nature of pactum commissorium, and declared the
deed of sale void for being violative of law.
IV. ISSUE/S: Whether or not the petitioner is not the real party in interest but A.C. Aguila &
Co., the partnership, against which this case should have been brought
V. RULING:
YES. Petitioner is not the real party in interest against whom this action should be
prosecuted.
Every action must be prosecuted and defended in the name of the real party in interest.
Any decision rendered against a person who is not a real party in interest in the case cannot be
executed. Hence, a complaint filed against such a person should be dismissed for failure to state
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a cause of action.
Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and
distinct from that of each of the partners. The partners cannot be held liable for the obligations of
the partnership unless it is shown that the legal fiction of a different juridical personality is being
used for fraudulent, unfair, or illegal purposes.
In this case, private respondent has not shown that A.C. Aguila & Sons, Co., as a separate
juridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the
subject property is in the name of A.C. Aguila & Sons, Co. and the MOA was executed between
private respondent, with the consent of her late husband, and A. C. Aguila & Sons, Co.,
represented by petitioner. Hence, it is the partnership, not its officers or agents, which should be
impleaded in any litigation involving property registered in its name. A violation of this rule will
result in the dismissal of the complaint, as in this case.
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I. TITLE: Ormachea Tin-Congco vs. Trillana (13 Phil. 194)

(Authority to collect debt/ release debtor after the dissolution of the
partnership)
III. FACTS:
Manuel Ormachea Tin-Congco presented an amended complaint against Santiago

Trillana, alleging that the plaintiff Ormachea and Luis Vizmanos Ong Queco were engaged in
business in Bulacan, and that in the course thereof the defendant purchased from them
merchandise which had not yet been paid; that two years prior to that date, the partnership was
dissolved and the business was divided up between the partners, all accounts and debts of the
defendant were allotted to the plaintiff, and became the individual property of Ormachea Tin-
Congco. The indebtedness is proven by the documents signed by the defendant or his agents in
favor of Ormachea or of Vizmanos Ong Queco or their agent named Lawa in charge of the
business. The plaintiff prays that the defendant be ordered to pay said amount.
The defendant alleges that he had already settled his accounts and obligations by means
of periodical payments in tuba, and that if any accounts are still pending, the same should, owing
to their character and the manner in which they were constituted, be paid in kind and not in
money.
The trial court ordered the defendant to pay in tuba. The defendant appealed by means of
a bill of exceptions. The trial judge modified the decision by adding that after six months without
payment, he should be obliged to pay his debt in cash. Defendant requested a motion for a new
trial but it was denied. He presented an amended bill of exceptions and the court ordered the
suspension of the execution providing that the defendant furnish a bond.
While testifying under oath, the defendant introduced a document providing that Jose R.
Lopez (Lawa), former manager of the distillery, declares that D. Santiago Trillana has no
outstanding debt whatever with the distillery.
IV. ISSUE/S: Whether or not the defendant should be absolved from his debt due to the
document made by Jose R. Lopez Lawa as the former manager of the distillery
V. RULING:
NO. Lopez Lawa gave the document because the latter was not indebted to him but to
Manuel Ormachea. It was not his intention to annul and set aside the vales which represented the
indebtedness of Trillana. Two years after ceasing to be manager, he cannot relieve the debtor
from paying what he owed by virtue of the document because the right to recover the debts of the
defendant belonged to Ormachea and Lawa was not authorized by Ormachea to release Trillana
from his debt.
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Art. 1240 (1162) provides that “Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or any person authorized to receive
it.”
The court ruled that the repayment of a debt must be made to the person in whose favor
the obligation is constituted, or to another expressly authorized to receive the payment in his
name. Jose Lawa after his definite retirement has no authority to release debtor.
Since the vales existed, and were in the possession of the creditor, it was because the
amounts they called for had not presumed to have been fulfilled when the proofs of its existence
have been returned to the debtor. A debt can only be presumed to have been paid and an
obligation fulfilled when the proof of their existence has been delivered to the debtor, and not
when the documents showing the existence of the debt are still in the hands of the creditor. The
discharge of a debt given by a managing partner, two years after the partnership had been
dissolved does not qualify as a partner’s admission and cannot prejudice or bind the other
partners.
As the document was made out and issued two years after Lawa ceased to be the head of
the distillery, without a previous payment of the amounts secured on the said vales, when the
business no longer existed, when the owners had entirely withdrawn from it, and when Lawa,
who then acted as manager of the distillery, had no express authority to issue such a document,
with the further circumstance of its being written in Spanish, a language with which the
Chinaman who signed it was probably not well acquainted and the fact that it was written by the
defendant, Santiago Trillana himself; it is not proper nor lawful to admit the said document as
possessing a force and effect that would fully exempt the defendant from the payment of his
obligation.
Judgement affirmed.
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I. TITLE: Liwanag and Reyes vs. Workmen’s Compensation Commission (105 Phil. 741)
II. TOPIC: Article 1821-24
(Liability of partners in a claim for compensation in case of a worker’s

death)
III. FACTS:
Appellants Liwanag and Reyes are co-owners of Liwanag Auto Supply, a commercial
establishment located in Dimasalang, Sampaloc, Manila. They employed Roque Balderama as
security guard who, while in line of duty, was killed by criminal hands. His widow Ciriaca vda.
de Balderama and three minor children filed a claim for compensation with the Workmen’s
Compensation Commission, which was granted in an award ordering Liwanag and Reyes to pay
jointly and severally P3, 494.40 to the claimants in lump sum and to pay to the Workmen’s
Compensation Funds P4.00 (including P5.00 for this review) as fees.
In appealing the case to this Tribunal, appellant claim that, under the Workmen’s
Compensation Act, the compensation is divisible, hence the Commission erred in ordering
appellants to pay jointly and severally the amount awarded.
IV. ISSUE: Whether or not the obligation of an employer arising from compensable injury or
death of an employee should be solidary
V. RULING:
YES. Ordinarily, the liability of the partners in a partnership is not solidary; but the law
governing the liability of partners is not applicable to the case at bar wherein a claim for
compensation by dependents of an employee who died in line of duty is involved. And although
the Workmen’s Compensation Act does not contain any provision expressly declaring solidary
obligation of business partners like the herein appellants, there are other provisions of law from
which it could be gathered that their liability must be solidary. Arts. 1711 and 1712 of the new
Civil Code provide:
"Art. 1711. Owners of enterprises and other employers are obliged to pay compensation
for the death of or injuries to their laborers, workmen, mechanics or other employees,
even though the event may have been purely accidental or entirely due to a fortuitous
cause, if the death or personal injury arose out of and in the course of the employment. . .
. ."
"ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter
and the employer shall be solidarily liable for compensation. . . . ."
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And Section 2 of the Workmen’s Compensation Act, as amended, reads in part as
follows:
". . . . The right to compensation as provided in this Act shall not be defeated or impaired
on the ground that the death, injury or disease was due to the negligence of a fellow
servant or employee, without prejudice to the right of the employer to proceed against the
negligent party."
The quoted provisions reasonably indicate that in compensation cases, the liability of
business partners, like appellants, should be solidary; otherwise, the right of the employee may
be defeated, or at least crippled. If the responsibility of the partners were to be merely joint and
not solidary, and one of them happens to be insolvent, the amount awarded to the dependent of
the deceased employee would only be partially satisfied, which is evidently contrary to the intent
and purpose of the law to give full protection to the employee.
Award is affirmed.
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I. TITLE: Marisol vs. Municipality of Albay (43 Phil. 610)
(Liability of a person arising from the representations he made to another)
III. FACTS:
Sometime in the year 1916 the defendant Municipality decided to have an artesian well
drilled in the central portion of the town. Three landowners expressed themselves as willing to
furnish sites for the well without compensation, among whom is the plaintiff. The engineer in
charge of drilling artesian wells in the locality advised that the plaintiff’s lot would be the most
suitable site to which the plaintiff had no objection. After the machinery was installed on his lot,
but before drilling was actually begun, the plaintiff apparently changed his mind and objected to
the continuation of the work, but upon hearing that there was a possibility of the well being
bored on the land of someone else, he again gave his consent and did not object until its
completion.
The plaintiff then filed an action for ejectment and for damages alleging that the
defendant Municipality, without his consent, caused the artesian well to be bored on his lot
rendering it unserviceable for the uses he intended for it. The trial court absolved the defendant
from the complaint, from which judgment the plaintiff appeals.
IV. ISSUE/S: Whether or not the plaintiff can revoke the license granted to the Municipality
when he consented to have the well drilled on his lot
V. RULING:
NO. The plaintiff is estopped from revoking the license without first reimbursing the
defendant for the expenditures incurred upon the strength of said license.
The defendant Municipality has acquired no title to the land occupied by the well nor
even an easement therein; its interest can only be regarded as a mere license. A license is
generally created by parole or implied from acquiescence on the part of the owner of the land.
Ordinarily, it is revocable at the pleasure of the licenser, but it has been held that where a
licensee has entered upon land under a license and has with the express or implied consent of the
owner expended money or labor for extensive improvements on the strength of such license, the
owner is estopped from revoking the license without first reimbursing the licensee for the
expenses incurred.
Under the circumstances, the license may not be revoked, otherwise we would be putting
a premium upon fraud and deception which equity will not tolerate and would also be in conflict
with the provisions of subsection 1 of section 333 of the Code of Civil Procedure, which reads:
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"Whenever a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration act, or omission, be permitted to
falsify it.”
The judgment appealed from is affirmed.
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I. TITLE: Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc. (317 SCRA 728)

(Doctrine of corporation by estoppel)
III. FACTS:
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered
into a Contract for the purchase of fishing nets of various sizes from the Philippine Fishing Gear
Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture
with Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The buyers
failed to pay P532,045 for the fishing nets and P68,000 for the floats; hence, private respondents
filed a collection suit, with a prayer for a writ of preliminary attachment, against Chua, Yao and
Petitioner Lim Tong Lim, in their capacities as general partners as "Ocean Quest Fishing
Corporation" was shown to be a nonexistent corporation.
The lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by
attaching the fishing nets on board F/B Lourdes, and upon motion of private respondent, ordered
the sale of the fishing nets at a public auction.
The trial court ruled that Philippine Fishing Gear Industries was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay
respondent. The trial court ruled that a partnership among Lim, Chua and Yao existed. The CA
affirmed the RTC holding that petitioner was a partner of Chua and Yao in a fishing business and
may thus be held liable as a such for the fishing nets and floats purchased by and for the use of
the partnership.
IV. ISSUE/S: Whether by their acts, Lim, Chua and Yao could be deemed to have entered into a
partnership/ Whether petitioner should be held jointly liable with Chua and Yao
V. RULING:
YES. A partnership may be deemed to exist among parties who agree to borrow money to
pursue a business and to divide the profits or losses that may arise therefrom, even if it is shown
that they have not contributed any capital of their own to a "common fund." Their contribution
may be in the form of credit or industry, not necessarily cash or fixed assets.
Chua, Yao and Lim were engaged in a fishing business which they started by buying
boats financed by a loan with the intention to pay the same with the proceeds of the sale of the
boats, and to divide equally among them the excess or loss. This shows that they formed a
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partnership and being partner, they are all liable for debts incurred by or on behalf of the
partnership. These boats, the purchase and the repair of which were financed with borrowed
money, fell under the term "common fund" under Article 1767.
Moreover, the liability for a contract entered into on behalf of an unincorporated

association or ostensible corporation, even if proven to be legally nonexistent, may lie in a
person who may not have directly transacted on its behalf but reaped benefits from that contract.
While petitioner did not directly act on behalf of the corporation, he benefited from the
contract entered into by persons with whom he previously had an existing relationship, thus, he
is deemed to be part of said association and is covered by the scope of the doctrine of corporation
by estoppel, and the fact that the corporation was never legally formed does not preclude the
liabilities of the three as contracting parties in representation of it. Under the law on estoppel,
those acting on behalf of a corporation and those benefited by it, knowing it to be without valid
existence, are held liable as general partners.
Petition is DENIED and the assailed Decision AFFIRMED.
CONCURRING OPINION
Liability of partners in a general partnership
When a person by his act or deed represents himself as a partner in an existing

partnership or with one or more persons not actual partners, he is deemed an agent of such
persons consenting to such representation and in the same manner, if he were a partner, with
respect to persons who rely upon the representation. The association formed by Chua, Yao and
Lim, should be, as it has been deemed, a de facto partnership with all the consequent obligations
for the purpose of enforcing the rights of third persons.
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I. TITLE: Pioneer Insurance vs. Court of Appeals (175 SCRA 668)

(Existence/ Inexistence of de facto partnership)
III. FACTS:
Japan Domestic Airlines (JDA) and Jacob Lim, owner-operator of Southern Airlines
(SAL), entered into a sales contract for the purchase of 2 aircrafts and 1 set of necessary spare
parts to be paid on installments. Pioneer Insurance and Surety Corporation as surety executed its
surety bond in favor of JDA in behalf of its principal Lim for the balance price of the purchase.
Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto
Cervantes (Cervanteses), and Constancio Maglana contributed some funds used in the purchase,
which were supposed to be their contributions to a new corporation proposed by Lim to expand
his airline business but never materialized. They executed 2 separate indemnity agreements in
favor of Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL,
Bormaheco and the Cervanteses.
Lim executed in favor of Pioneer a deed of chattel mortgage as security for the latter's
suretyship stipulating that Lim transfers and conveys to the surety the two aircrafts. Lim
defaulted on his subsequent installment payments prompting JDA to request payments from the
surety, to which Pioneer paid.
Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage,
however, the Cervanteses and Maglana filed a third party claim alleging that they are co-owners
of the aircrafts and that they were not privies to the contracts signed by Lim and sought for
damages and for recovery of the sums of money they advanced to Lim for the purchase of the
aircrafts in question.
The CFI held Lim liable to pay Pioneer but dismissed Pioneer's complaint against all
other defendants. The CA dismissed the plaintiff’s complaint against all the defendants.
IV. ISSUE/S: Whether or not failure to incorporate automatically resulted to de facto partnership
(and that as a consequence, all must share in the losses/gains of the venture)
V. RULING:
NO. While persons who attempt but fail to form a corporation and who carry on business
under the corporate name occupy the position of partners inter se, such a relation does not
necessarily happen when their purpose is that no partnership shall exist, for ordinarily persons
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cannot be made to assume the relation of partners, as between themselves and it should be
implied only when necessary to do justice between the parties; thus, one who takes no part
except to subscribe for stock in a proposed corporation which is never legally formed does not
become a partner with other subscribers who engage in business under the name of the pretended
corporation, so as to be liable as such in an action for settlement of the alleged partnership and
contribution.
It is clear from the facts that petitioner never had the intention to form a corporation with
the respondents despite his representations to them. The respondents were induced and lured by
Lim to make contributions to a proposed corporation which was never formed because the
petitioner reneged on their agreement.
Necessarily, no de facto partnership was created among the parties which would entitle
the petitioner to a reimbursement of the supposed losses of the proposed corporation. The
petitioner was acting on his own and not in behalf of his other would-be incorporators in
transacting the sale of the airplanes and spare parts.
Petitions are DISMISSED.
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1. Lucero, Mark Joey S.
I. TITLE: Viuda de Chan Diaco vs. Peng (53 Phil. 906)
II. TOPIC: Partners’ Relationships in the Third Persons (Article 1826 – 1827)
III. FACTS:
Leoncia Vda. De Chan Diaco (Lao Liong Naw) owner of a grocery store known as “La
Viuda De G. G. Chan Diaco.”. San Miguel Brewery, Porta Pueco & Co., and Ruiz & Remantaria
S. en C. instituted insolvency proceedings against Vda. De Chan Diaco, alleging that the latter
was indebted to them in the sum of P26, 234.47.Petitioner herein did not appear at the hearing
despite being notified so the court declared her insolvent and ordered the sheriff to take
possession of her property. Judge Del Rosario appointed Ricardo Summers as referee authorizing
him to take further evidence. After sometime the referee rendered a report to the court
recommending that Vda. De Chan Diaco deliver to Jose S. Y. Peng, the assignee of San Miguel
Brewery a sum of money and other accounts receivable including books of account. The report
was approved by Judge Del Rosasio.
Attorney for the insolvent filed a motion asking the court to dismiss the proceedings
against her on the ground that they should have been brought against the partnership "Lao Liong
Naw & Co.," of which she was only a member. In view of the aforesaid motion Judge Del
Rosario suspended for the time being the effects of the decision on the report first made by the
referee. However appointed the same referee again. Several hearings in which various witnesses
were examined and documents presented on behalf of both sides, the referee, rendered a second
report, in which he found as facts that the alleged partnership between the insolvent and some of
her relatives and employees was only a fictitious organization created for the purpose of
deceiving the Bureau of Customs and enable some of the aforesaid relatives, who were mere
coolies, to come to the Philippines under the status of merchants. He, therefore, recommended
that the motion of the insolvent to dismiss the proceedings against her be denied.
The report was assigned for hearing however Judge Del Rosario was then absent on leave
and the matter was, therefore, submitted to Judge Francisco Zandueta, who had been temporarily
assigned to take the place of Judge Del Rosario, and on June 6, 1927, a decision was rendered
disapproving the report of the referee. The court, therefore, affirmed the suspension of the
decision of Judge Del Rosario. A motion for reconsideration was presented by the assignee but
was denied.
IV. ISSUE/S: Whether or not the lower court erred in ordering the filing of a new petition of
insolvency against the fictitious partnership Lao Liong Niew & Co. and the delivery to the
sheriff of all the property of the insolvency.
V. RULING:
YES. It clearly appears from the record that said partnership, as such, has no visible
assets that, therefore, the partners individually must, jointly and severally, respond for its debts
(Code of Commerce, art. 127). As the appellee is one of the partners and admits that she is
112 | P a g e
insolvent, we can see no reason for the dismissal of the proceedings against her. It is further to be
noted that both the partnership and the separate partners thereof may be joined in the same
action, though the private property of the latter cannot be taken in payment of the partnership
debts until the common property of the concern is exhausted and, under this rule, it seems clear
that the alleged partnership here in question may, if necessary, be included in the case by
amendments to the insolvency petition.
We also call attention to the fact that the evidence clearly shows that the business, alleged
to have been that of the partnership, was carried on under the name "Leoncia Vda. de Chan
Diaco" or "La Vda. de G. G. Chan Diaco," both of which are names of the appellee, and we think
it can be safely held that a partnership may be adjudged bankrupt in the name of an ostensible
partner, when such name is the name under which the partnership did business.
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I. TITLE: Yu vs. National Labor Relations Commission (223 SCRA 75)
II. TOPIC: Dissolution of Partnership (Article 1828)
III. FACTS:
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership with the firm name of "Jade
Mountain Products Company Limited". The partnership was originally organized on 28 June
1984 with Lea Bendal and Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-
Fu and Yu Chang, all citizens of the Republic of China (Taiwan), as limited partners.
Benjamin Yu was hired by virtue of a Partnership Resolution as Assistant General

Manager with a monthly salary of P4, 000.00. However, he actually received only half of his
stipulated monthly salary, since he had accepted the promise of the partners that the balance
would be paid when the firm shall have secured additional operating funds from abroad. Without
the knowledge of Benjamin Yu, the general partners sold and transferred their interests in the
partnership to private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a
limited partner, also sold and transferred his interest in the partnership to Willy Co. Between Mr.
Emmanuel Zapanta and himself, private respondent Willy Co acquired the great bulk of the
partnership interest. The new major partners decided to transfer the firm’s main office but opted
to continue the operation of the old partnership under its old firm name and with all its
employees and workers except for the petitioner. having learned of the transfer of the firm's main
office, Benjamin Yu reported for work and there met private respondent Willy Co for the first
time. Petitioner was informed by Willy Co that the latter had bought the business from the
original partners and that it was for him to decide whether or not he was responsible for the
obligations of the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not
allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries remained
unpaid.
Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries
accruing from November 1984 to October 1988, moral and exemplary damages and attorney's
fees, against Jade Mountain, Mr. Willy Co and the other private respondents. The partnership
and Willy Co denied petitioner's charges, contending in the main that Benjamin Yu was never
hired as an employee by the present or new partnership.
Labor Arbiter rendered a decision holding that petitioner had been illegally dismissed.
The Labor Arbiter decreed his reinstatement and awarded him his claim for unpaid salaries,
backwages and attorney's fees.
On appeal, the National Labor Relations Commission reversed the decision of the Labor
Arbiter and dismissed petitioner's complaint. The NLRC held that a new partnership consisting
of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the
new partnership had not retained petitioner Yu in his original position as Assistant General
Manager, and that there was no law requiring the new partnership to absorb the employees of the
old partnership. Benjamin Yu, therefore, had not been illegally dismissed by the new partnership
which had simply declined to retain him in his former managerial position or any other position.
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Finally, the NLRC held that Benjamin Yu's claim for unpaid wages should be asserted against
the original members of the preceding partnership, but these though impleaded had, apparently,
not been served with summons in the proceedings before the Labor Arbiter.
IV. ISSUE/S:
1. Whether the partnership which had hired petitioner Yu as Assistant General Manager
had been extinguished and replaced by a new partnerships composed of Willy Co and Emmanuel
Zapanta
2. If indeed a new partnership had come into existence, whether petitioner Yu could
nonetheless assert his rights under his employment contract as against the new partnership.
V. RULING:
1. YES. The legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired the petitioner in 1984 and the emergence of
the new firm composed of Willy Co and Emmanuel Zapanta in 1988. This is based on the
following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on as a distinguished from the winding up of
the business.
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
(b) by the express will of any partner, who must act

in good faith, when no definite term or particular
undertaking is specified;
(2) in contravention of the agreement between the

partners, where the circumstances do not permit a
dissolution under any other provision of this
article, by the express will of any partner at any
time;
However, the legal consequence of dissolution of a partnership do not automatically result in the
termination of the legal personality of the old partnership as according to Art. 1829, “on
dissolution of the partnership is not terminated, but continues until the winding up of the
partnership affairs is completed. The new partnership simply continued the operations of the old
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partnership under its old firm name without winding up the business affairs of the old
partnership.
2. YES. Under Art. 1840, creditors of the old partnership are also creditors of the new
partnership which continued the business of former without liquidation of the partnership affairs.
Thus, creditor of the old Jade Mountain, such as the petitioner is entitled to enforce his claim for
unpaid salaries, as well as other claims relating to his employment with the old partnership
against the new Jade Mountain.
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I. TITLE: Idos vs. Court of Appeals (296 SCRA 194)
III. FACTS:
The petitioner herein, Irma L. Idos, is a businesswoman engaged in leather tanning. Her
accuser for violation of B.P. 22 is her erstwhile supplier and business partner. Complainant
Eddie Alarilla supplied chemicals and rawhide to the accused-appellant Irma L. Idos for use in
the latters business of manufacturing leather. In 1985, he joined the accused-appellants business
and formed with her a partnership under the style Tagumpay Manufacturing, with offices in
Bulacan and Cebu City.
However, the partnership was short lived. In January, 1986 the parties agreed to terminate
their partnership. Upon liquidation of the business the partnership had as of May 1986
receivables and stocks worth P1, 800,000.00. The complainants’ share of the assets was P900,
000.00 to pay for which the accused-appellant issued the 4 postdated checks, all drawn against
Metrobank Branch in Mandaue, Cebu. Alarilla was able to encash the first, second and fourth
checks but the third was dishonored for insufficiency of funds. He demanded payment but Idos
failed to pay. She claimed that the checks were issued as assurance of Alarilla’s share in the
assets of the partnership and that it was supposed to be deposited until the stocks were sold. He
filed an information for violation of BP blg. 22 against Idos in which she was found guilty by the
trial court.
IV. ISSUE/S: Whether or not the mere agreement of the parties to dissolve the partnership
automatically dissolves the partnership.
V. RULING:
NO. such agreement did not automatically put an end to the partnership, since they still
had to sell the goods on hand and collect the receivables from debtors. In short, they were still in
the process of winding up the affairs of the partnership, when the check in question was issued.
These final stages in the life of a partnership are recognized under the Civil Code that
explicitly declares that upon dissolution, the partnership is not terminated, to wit:
Art. 1828. The dissolution of a partnership is the change in the relation of the partners
caused by any partner ceasing to be associated in the carrying on as distinguished from the
winding up of the business.
Art. 1829. On dissolution the partnership is not terminated, but continues until the
winding up of partnership affairs is completed.
The best evidence of the existence of the partnership, which was not yet terminated
(though in the winding up stage), were the unsold goods and uncollected receivables, which were
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presented to the trial court. Since the partnership has not been terminated, the petitioner and
private complainant remained as co-partners. The check was thus issued by the petitioner to
complainant, as would a partner to another, and not as payment from a debtor to a creditor.
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I. TITLE: Testate Estate of Mota vs. Serra (47 Phil. 464)
III. FACTS:
On February 1, 1919, plaintiffs and defendant entered into a contract of partnership for
the construction and exploitation of a railroad line from the "San Isidro" and "Palma" centrals to
the place known as "Nandong." The original capital stipulated was P150,000. It was covenanted
that the parties should pay this amount in equal parts and the plaintiffs were entrusted with the
administration of the partnership. The agreed capital of P150,000, however, did not prove
sufficient, as the expenses up to May 15, 1920, had reached the amount of P226,092.92,
presented by the administrator and O.K.'d by the defendant. Defendant entered into a contract of
sale with Venancio Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he
sold to the latter the estate and central known as "Palma". So it results that the "Hacienda
Palma," with the entire railroad, the subject-matter of the contract of partnership between
plaintiffs and defendant, became the property of Whitaker and Concepcion.
Phil. C. Whitaker and Venancio Concepcion having failed to pay to the defendant a part
of the purchase price, that is, P750,000, the vendor, the herein defendant, foreclosed the
mortgage upon the said hacienda, which was adjudicated to him at the public sale held by the
sheriff for the amount of P500,000, and the defendant put in possession thereof, including what
was planted at the time, together with all the improvements made by Messrs. Phil. C. Whitaker
and Venancio Concepcion.
Since the defendant Salvador Serra failed to pay one-half of the amount expended by the
plaintiffs upon the construction of the railroad line, plaintiffs instituted the present action praying
that the defendant be sentenced to pay plaintiffs the amount owed to them with the stipulated
interest at 10 per cent per annum beginning June 4, 1920, until full payment thereof, with the
costs of the present action.
Defendant set up three special defenses: (1) The novation of the contract by the
substitution of the debtor with the conformity of the creditors; (2) the confusion of the rights of
the creditor and debtor; and (3) the extinguishment of the contract.
IV. ISSUE/S:
1. Whether or not Messrs. Whitaker and Concepcion, upon purchasing the "Palma"
Central, were subrogated in the place of the defendant in all his rights and obligations under the
contract relating to the railroad line existing between the "Palma" and the "San Isidro" centrals
and that the plaintiffs agreed to this subrogation
2. Whether or not the obligation of the defendant is extinguished upon the dissolution of
the partnership with plaintiff
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V. RULING:
1. NO. The fact that Phil. C. Whitaker and Venancio Concepcion were willing to assume
the defendant's obligation to the plaintiffs is of no avail, if the latter have not expressly consented
to the substitution of the first debtor. Neither can the letter be considered as proof of the consent
of the plaintiffs to the substitution of the debtor, because that exhibit is a letter written by
plaintiffs to Phil. C. Whitaker and Venancio Concepcion for the very reason that the defendant
had told them (plaintiffs) that after the sale of the "Hacienda Palma" to Messrs. Phil. C. Whitaker
and Venancio Concepcion, the latter from then on would bear the cost of the repairs and
maintenance of the railroad line and of the construction of whatever addition thereto might be
necessary.
As has been said, in all contracts of novation consisting in the change of the debtor, the consent
of the creditor is indispensable, pursuant to article 1205 of the Civil Code which reads as
follows:
Novation which consists in the substitution of a new debtor in the place of the original
one may be made without the knowledge of the latter, but not without the consent of the
creditor.
2. NO. the dissolution of a partnership must not be understood in the absolute and strict
sense so that at the termination of the object for which it was created the partnership is
extinguished, pending the winding up of some incidents and obligations of the partnership, but in
such case, the partnership will be reputed as existing until the juridical relations arising out of the
contract are dissolved. The dissolution of a firm does not relieve any of its members from
liability for existing obligations, although it does save them from new obligations to which they
have not expressly or impliedly assented, and any of them may be discharged from old
obligations by novation of other form of release. It is often said that a partnership continues, even
after dissolution, for the purpose of winding up its affairs.
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I. TITLE: Sy vs. Court of Appeals (313 SCRA 328)
III. FACTS:
Sy Yong Hu & Sons is a partnership of Sy Yong Hu and his sons, Jose Sy, Jayme Sy,
Marciano Sy, Willie Sy, Vicente Sy, and Jesus Sy, registered with the SEC on March 29, 1962,
with Jose Sy as managing partner. The partners and their respective shares are reflected in the
Amended Articles of Partnership. Partners Sy Yong Hu, Jose Sy, Vicente Sy, and Marciano Sy
died on May 18, 1978, August 12, 1978, December 30, 1979 and August 7, 1987, respectively.
At present, the partnership has valuable assets such as tracts of lands planted to sugar cane and
commercial lots in the business district of Bacolod City.
Sometime in September, 1977, during the lifetime of all the partners, Keng Sian brought
an action before the then Court of First Instance of Negros Occidental, against the partnership as
well as against the individual partners for accounting of all the properties allegedly owned in
common by Sy Yong Hu and the plaintiff (Keng Sian), and for the delivery or reconveyance of
her one-half (1/2) share in said properties and in the fruits thereof. Keng Sian averred that she
was the common law wife of partner Sy Yong Hu, that Sy Yong Hu, together with his children,
who were partners in the partnership, connived to deprive her of her share in the properties
acquired during her cohabitation with Sy Yong Hu, by diverting such properties to the
partnership. In their answer dated November 3, 1977, the defendants, including Sy Yong Hu
himself, countered that Keng Sian is only a house helper of Sy Yong Hu and his wife, subject
properties are exclusively owned by defendant partnership, and plaintiff has absolutely no right
to or interest therein
During the pendency of said civil case, Marciano Sy filed a petition for declaratory relief
against partners Vicente Sy, Jesus Sy and Jayme Sy, docketed as SEC Case No. 1648, praying
that he be appointed managing partner of the partnership, to replace Jose Sy who died on August
12, 1978. Answering the petition, Vicente Sy, Jesus Sy and Jaime Sy, who claim to represent the
majority interest in the partnership, sought the dissolution of the partnership and the appointment
of Vicente Sy as managing partner. In due time, Hearing Officer Emmanuel Sison came out with
a decision(Sison Decision) dismissing the petition, dissolving the partnership and naming Jesus
Sy, in lieu of Vicente Sy who had died earlier, as the managing partner in charge of winding the
affairs of the partnership.
Respondents’ appealed. Court of Appeals issued its assailed Resolution, reversing its
Decision of January 15, 1990, and remanding the case to the SEC for the formation of a
receivership committee
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IV. ISSUE/S: Whether or not the order placing the partnership under a receivership committee
was erroneous and tainted with excess of jurisdiction.
V. RULING:
NO. Petitioners fail to recognize the basic distinctions underlying the principles of
dissolution, winding up and partition or distribution. The dissolution of a partnership is the
change in the relation of the parties caused by any partner ceasing to be associated in the
carrying on, as might be distinguished from the winding up, of its business. Upon its dissolution,
the partnership continues and its legal personality is retained until the complete winding up of its
business culminating in its termination. The dissolution of the partnership did not mean that the
juridical entity was immediately terminated and that the distribution of the assets to its partners
should perfunctorily follow. On the contrary, the dissolution simply effected a change in the
relationship among the partners. The partnership, although dissolved, continues to exist until its
termination, at which time the winding up of its affairs should have been completed and the net
partnership assets are partitioned and distributed to the partners. Thus, the disputed order placing
the partnership under a receivership committee cannot be said to have varied the final order of
dissolution. Neither did it suspend the dissolution of the partnership. If at all, it only suspended
the partition and distribution of the partnership assets pending disposition of Civil Case No. 903
on the basis of the agreement by the parties and under the circumstances of the case.
122 | P a g e
I. TITLE: Bearneza vs. Dequilla (43 Phil. 237)
III. FACTS:
In the year 1903, Balbino Dequilla, the herein defendant, and Perpetua Bearneza formed
a partnership for the purpose of exploiting a fish pond situated in the barrio of Talisay,
municipality of Barotac Nuevo, Province of Iloilo, Perpetua obligating herself to contribute to
the payment of the expenses of the business, which obligation she made good, and both agreeing
to divide the profits between themselves, which they had been doing until the death of the said
Perpetua in the year 1912. The deceased left a will in one of the clauses of which she appointed
Domingo Bearneza, the herein plaintiff, as her heir to succeed to all her rights and interests in the
fish pond in question.
Petitioner then instituted an action to recover a part of the fish pond belonging to the
decedent, including one half of the profits received by the defendant from the years 1913-
1919. the defendant denies generally and specifically the allegations of the complaint, and
alleges, as special defense, that "the formation of the supposed partnership between the plaintiff
and the defendant for the exploitation of the aforesaid fish pond was not carried into effect, on
account of the plaintiff having refused to defray the expenses of reconstruction and exploitation
of said fish pond." As another special defense, the defendant alleges "that in the event that the
court should hold the plaintiff to be entitled to the undivided one-half of the fish pond, claimed in
the complaint, the plaintiff’s action has prescribed, the time for bringing the same having
elapsed."
Proceedings having been held as usual, the court below rendered judgment, declaring the
plaintiff owner of one-half of the fish pond, which composed of the portions known as
"Alimango" and "Dalusan," but without awarding him any of the damages claimed by him, the
same not having been proven, in the opinion of the court, and ordering the defendant to pay the
costs.
IV. ISSUE/S: Whether or not the plaintiff has any right to maintain an action for the recovery of
one-half of the said fish pond.
V. RULING:
The partnership formed was a particular partnership, it having had for its subject matter a
specified thing, the exploitation of the aforementioned fish pond. Although, as the trial court says
in its decision, the defendant, in his letters to Perpetua or her husband, makes reference to the
fish pond, calling it "our," or "your fish pond," this reference cannot be held to include the land
on which the said fish pond, was built. It has not been proven that Perpetua Bearneza participated
in the ownership of said land
123 | P a g e
The conclusion, therefore, from the evidence is that the land on which the fish pond was
constructed did not constitute a part of the subject-matter of the aforesaid partnership. Now, this
partnership not having been organized in the form of a mercantile partnership, and, therefore, the
provisions of the Code of Commerce not being applicable thereto (article 1670 of the Civil
Code), it was dissolved by the death of Perpetua Bearneza, and falls under the provisions of
article 1700, subsection 3, of the same Code, and not under the exception established in the last
paragraph of said article 1700 of the Civil Code.
There is no sufficient ground for that a community of property existed between plaintiff and the
defendant, it not being known whether the deceased still had any interest in the partnership
property which could have been transmitted by will to the plaintiff. There being no community
of property, article 395 of the Civil Code cited by the plaintiff in support of his contention can
have no application to the case at bar.
124 | P a g e
I. TITLE: Goquiolay vs. Sycip (9 SCRA 663)
III. FACTS:
Tan Sin An and Goquiolay entered into a general commercial partnership under the
partnership name “Tan Sin An and Antonio Goquiolay” for the purpose of dealing in real estate.
The agreement lodged upon Tan Sin An the sole management of the partnership affairs. The
lifetime of the partnership was fixed at ten years and the Articles of Co-partnership stipulated
that in the event of death of any of the partners before the expiration of the term, the partnership
will not be dissolved but will be continued by the heirs or assigns of the deceased partner. But
the partnership could be dissolved upon mutual agreement in writing of the partners. Goquiolay
executed a GPA in favor of Tan Sin An. The plaintiff partnership purchased 3 parcels of land
which was mortgaged to “La Urbana” as payment of P25,000. Another 46 parcels of land were
purchased by Tan Sin An in his individual capacity which he assumed payment of a mortgage
debt for P35K. A down payment and the amortization were advanced by Yutivo and Co.
The two obligations were consolidated in an instrument executed by the partnership and
Tan Sin An, whereby the entire 49 lots were mortgaged in favor of “Banco Hipotecario” Tan Sin
An died leaving his widow, Kong Chai Pin and four minor children. The widow subsequently
became the administratrix of the estate. Repeated demands were made by Banco Hipotecario on
the partnership and on Tan Sin An. Defendant Sing Yee, upon request of defendant Yutivo Sons
, paid the remaining balance of the mortgage debt, the mortgage was cancelled Yutivo Sons and
Sing Yee filed their claim in the intestate proceedings of Tan Sin An for advances, interest and
taxes paid in amortizing and discharging their obligations to “La Urbana” and “Banco
Hipotecario.” Kong Chai Pin filed a petition with the probate court for authority to sell all the 49
parcels of land. She then sold it to Sycip and Lee in consideration of P37K and of the vendees
assuming payment of the claims filed by Yutivo Sons and Sing Yee.
Later, Sycip and Lee executed in favor of Insular Development a deed of transfer
covering the 49 parcels of land. When Goquiolay learned about the sale to Sycip and Lee, he
filed a petition in the intestate proceedings to set aside the order of the probate court approving
the sale in so far as his interest over the parcels of land sold was concerned. Probate court
annulled the sale executed by the administratrix with respect to the 60% interest of Goquiolay
over the properties. The administratix appealed and the decision of probate court was set aside
for failure to include the indispensable parties. New pleadings were filed. The second amended
complaint prays for the annulment of the sale in favor of Sycip and Lee and their subsequent
conveyance to Insular Development. The complaint was dismissed by the lower court hence this
appeal.
125 | P a g e
ISSUE/S:
1. Whether or not a widow or substitute become also a general partner or only a limited
partner.
2. Whether or not the consent of the other partners was necessary to perfect the sale of the
partnership properties to Sycip and Lee?
RULING:
1. The widow Kong Chai Pin, who, by her affirmative actions, manifested her intent to be
bound by the partnership agreement not only as a limited but as a general partner. Thus, she
managed and retained possession of the partnership properties and was admittedly deriving
income therefrom up to and until the same were sold to Washington Sycip and Betty Lee. In fact,
by executing the deed of sale of the parcels of land in dispute in the name of the partnership, she
was acting no less than as a managing partner. Having thus preferred to act as such, she could be
held liable for the partnership debts and liabilities as a general partner, beyond what she might
have derived only from the estate of her deceased husband.
2. NO. Strangers dealing with a partnership have the right to assume, in the absence of
restrictive clauses in the co-partnership agreement, that every general partner has power to bind
the partnership, especially those partners acting with ostensible authority. The provision of
Article 129 of the Code of Commerce to the effect state that -
If the management of the general partnership has not been limited by special agreement
to any of the members, all shall have the power to take part in the direction and management of
the common business, and the members present shall come to an agreement for all contracts or
obligations which may concern the association.
Goqulay recognized her as such partner, and is now in estoppel to deny her position as a
general partner, with authority to administer and alienate partnership property. The articles did
not provide that the heirs of the deceased would be merely limited partners; on the contrary, they
expressly stipulated that in case of death of either partner, “the co partnership will have to be
continued” with the heirs or assignees. It certainly could not be continued if it were to be
converted from a general partnership into a limited partnership since the difference between the
two kinds of associations is fundamental, and specially because the conversion into a limited
association would leave the heirs of the deceased partner without a share in the management.
Hence, the contractual stipulation actually contemplated that the heirs would become general
partners rather than limited ones.
126 | P a g e
I. TITLE: Ortega vs. Court of Appeals (245 SCRA 529)
III. FACTS:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered
in the Mercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange
Commission on 4 August 1948. The SEC records show that there were several subsequent
amendments to the articles of partnership on 18 September 1958, to change the firm [name] to
ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL
ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA &
LOZADA; on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on
11 March 1977 to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA
& LOZADA; on 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M.
Lozada associated themselves together, as senior partners with respondents-appellees Gregorio
F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.
On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter
stating that they are withdrawing and retiring from the firm of Bito, Misa and Lozada, effective
at the end of this month. On the same day, petitioner-appellant wrote respondents-appellees
another letter stating their intention of liquidation. On 19 February 1988, petitioner-appellant
wrote respondents-appellees another letter stating that the partnership has ceased to be mutually
satisfactory because of the working conditions of our employees including the assistant
attorneys.
On 30 June 1988, petitioner filed a petition for dissolution and liquidation of partnership.
Subsequently, respondents-appellees filed their opposition to the petition. The hearing officer
rendered a decision ruling that petitioner's withdrawal from the law firm did not dissolve the said
law partnership. On appeal, the SEC en banc reversed the decision and held that the withdrawal
of Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada."
The parties filed with the appellate court separate appeals. During the pendency of the
case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died.
The death of the two partners, as well as the admission of new partners prompted Attorney Misa
to renew his application for receivership. He expressed concern over the need to preserve and
care for the partnership assets. The other partners opposed the prayer. The Court of Appeals,
finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC
decision and order appealed from.
IV. ISSUE/S: Whether or not the Court of Appeals has erred in holding that the partnership of
Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will
127 | P a g e
V. RULING:
NO, the partnership is a partnership at will. A partnership that does not fix its term is a
partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega and
Castillo," is indeed such a partnership need not be unduly belabored. In the partnership
agreement, it does not provide for a specified period or undertaking.
The hearing officer erred when it opined that the partnership is one for a specific
undertaking and hence not a partnership at will. The "purpose" of the partnership is not the
specific undertaking referred to in the law. Otherwise, all partnerships, which necessarily must
have a purpose, would all be considered as partnerships for a definite undertaking. There would
therefore be no need to provide for articles on partnership at will as none would so exist.
Apparently what the law contemplates, is a specific undertaking or "project" which has a definite
or definable period of completion.
The birth and life of a partnership at will is predicated on the mutual desire and consent
of the partners. The right to choose with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued existence is, in turn, dependent on the
constancy of that mutual resolve, along with each partner's capability to give it, and the absence
of a cause for dissolution provided by the law itself. Verily, any one of the partners may, at his
sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith,
not that the attendance of bad faith can prevent the dissolution of the partnership but that it can
result in a liability for damages.
In passing, neither would the presence of a period for its specific duration or the
statement of a particular purpose for its creation prevent the dissolution of any partnership by an
act or will of a partner. Among partners, mutual agency arises and the doctrine of delectus
personae allows them to have the power, although not necessarily the right, to dissolve the
partnership. An unjustified dissolution by the partner can subject him to a possible action for
damages.
128 | P a g e
I. TITLE: Deluao vs. Casteel (26 SCRA 475)
III. FACTS:
In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy

land, 178.76 hectares, in the then sitio of Malalag, municipality of Padada, Davao for 3
consecutive times because the Bureau of Fisheries did not act upon his previous applications.
Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon his
position by the other applicants who entered upon and spread themselves within the area, Casteel
realized the urgent necessity of expanding his occupation thereof by constructing dikes and
cultivating marketable fishes. But lacking financial resources at that time, he sought financial aid
from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were already
occupied by rival applicants, Casteel immediately filed a protest. Consequently, two
administrative cases ensued involving the area in question. However, despite the finding made in
the investigation of the above administrative cases, the Director of Fisheries nevertheless
rejected Casteel's application on October 25, 1949, required him to remove all the improvements
which he had introduced on the land, and ordered that the land be leased through public auction
On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and
Nicanor Casteel as party of the second part, executed a contract — denominated 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
On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe
Deluao on November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the
same area in the two administrative cases and asked for reinvestigation of the application of
Nicanor Casteel over the subject fishpond.
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 (encargado), Jesus Donesa, from the premises.
IV. ISSUE: Whether the reinstatement of Casteel over the subject land constitute a dissolution
V. RUING:
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
129 | P a g e
decision both dated Sept. 15, 1950 were issued by the Secretary of Agriculture and Natural
Resources in DANR Cases 353 and 353-B.
The approval was an event which made it unlawful for the members to carry it on in
partnership. Moreover, subsequent events likewise reveal the intent of both parties to terminate
the partnership because each refused to share the fishpond with the other.
130 | P a g e

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ATTY. GREGORIO GERRY F.

PARTNERSHIP AGENCY &

I. TITLE: CIR vs. Suter & CTA ( 27 SCRA 152 ) ......................................................................... 4

Saniwares, a domestic corporation was incorporated for the primary purpose of

IV. ISSUE/S: Whether or not Lim Tong Lim is liable.

NO. To organize a corporation or a partnership that could claim a juridical personality of

II. TOPIC: Article 1769

I. TITLE: Afisco Insurance Corporation v. Court of Appeals (302 SCRA 1)

II. TOPIC: Article 1770

In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy

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

I. TITLE: Smith v. Lopez (5 Phil 78)

I. TITLE: Lyons v. Rosenstock (56 Phil 632)

The elements of estafa are present:

IV. ISSUE/S: Whether or not estafa is the proper action

On October 9, 1954, a co-partnership with herein petitioners as capitalist partners was

SC initially applied a Solomonic solution by dividing equally between spouses Ishwar

NO. Ishram cannot recover the entire properties subject.

II. TOPIC: Article 1800

II. TOPIC: Article 1800

The Insurance Commission and Travellers Multi-Indemnity Corporation argues however,

II. TOPIC: Article 1803

II. TOPIC: Article 1803

Article 1695 of the Civil Code provides as follows:

On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which

II. TOPIC: Article 1805

II. TOPIC: Article 1806

II. TOPIC: Article 1806

II. TOPIC: Accounting of shares in the profits of the partnership

II. TOPIC: Requisites of a partnership

II. TOPIC: Importance of liquidation before claiming share in profits

II. TOPIC: When partnership exists

II. TOPIC: Statement of accounts of the partnership

II. TOPIC: Statement of account of the partnership

II. TOPIC: Dissolution of the partnership

Casteel unsuccessfully registered a fishpond in a big tract of swampy land, Padada,

II. TOPIC: Recovery of interest by a creditor of a partner

II. TOPIC: Using the name of a deceased partner

II. TOPIC: Limited Partnership (Article 1815)

a. Declare the individual partners as parties to the proceedings;

Sy Tit, authorized by a power of attorney, obtained a credit of P20,000 from PNB,

The trial court decided in favor of PNB.

The defendant association formed by the defendants is a general partnership, as defined

3. Garcia, Charlotte Yris C.

IV. ISSUE/S: Whether or not plaintiffs, as a partnership, had personality to sue.

Yes. Article 127 of the Code of Commerce states that:

A receiver has no right to carry on and conduct a business unless he is authorized or

II. TOPIC: Article 1818

"Feb. 14, 1934

"Hill & Ceron

"By: (Sgd.) Carlos Ceron"

II. TOPIC: Article 1818

Petitioner Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor

II. TOPIC: Article 1819

II. TOPIC: Article 1820

Manuel Ormachea Tin-Congco presented an amended complaint against Santiago

(Liability of partners in a claim for compensation in case of a worker’s

The judgment appealed from is affirmed.

II. TOPIC: Article 1825