PARTNERSHIP CASES MARCH 23, 2021

MAURICIO AGAD, PLAINTIFF-APPELLANT, VS. SEVERINO MABATO AND MABATO

AND AGAD COMPANY, DEFENDANTS-APPELLEES.

FACTS:
Agad, alleging that he and defendant Severino Mabato are — pursuant to a public instrument dated
August 29, 1952 — partners in a fishpond business, to the capital of which Agad contributed P1,000,
with the right to receive 50% of the profits; that from 1952 up to 1956, Mabato who handled the
partnership funds, had yearly rendered accounts of the operations of the partnership; and that, despite
repeated demands, Mabato had failed and refused to render accounts for the years 1957 to 1963, Agad
prayed in his complaint against Mabato and Mabato & Agad Company, filed on June 9, 1964, that
judgment be rendered sentencing Mabato to pay him (Agad) the sum of P14,000, as his share in the
profits of the partnership for the period from 1957 to 1963, and ordering the dissolution of the
partnership, as well as the winding up of its affairs by a receiver to be appointed therefor.

In his answer, 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.

ISSUE:
Whether or not “immovable property or real rights” have been contributed to the partnership under
consideration.

RULING:
YES, because “it is really inconceivable how a partnership engaged in the fishpond business could exist
without said fishpond property (being) contributed to the partnership.” It should be noted, however, that,
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.

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.

The operation of the fishpond 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.

SC ruled that Article 1773 of the Civil Code is not in point, the case was remanded to the lower court for
further proceedings, with the costs of this instance against defendant-appellee, Severino Mabato.

ESTANISLAO V. COURT OF APPEALS; G.R. NO. L-49982; APRIL 27, 1988

FACTS:
The petitioner and the private respondents were siblings who co-owned a certain lot in QC, which were
being leased to Shell. They agreed to open and operate a gas station with an initial investment of
P15,000.00 to be taken from the advance rentals due to them from SHELL. Thus, a joint affidavit was
executed stating that the advanced rentals would redound to the “capital investment” for the operation of
the partnership. Consequently, the petitioner and the respondents executed another document entitled
“Additional Cash Pledge Agreement”, with Shell as a signatory, indicating that the advanced rentals of
the same amount would start on May 24, 1966, rather than May 25, 1996 of the earlier agreement.

The petitioner failed to render proper accounting of the partnership. Thus, the private respondents filed a
complaint for the petitioner to render proper accounting, and for the respondents to be given their proper
share in the profits. The petitioner contended that there was no longer a partnership existing between him
and the respondents since:

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1. The subsequent agreement expressly superseded the former agreement;

2. The subsequent agreement no longer referred to as “capital investments”; and
3. The subsequent agreement was indicated that the business was in the nature of a
sole proprietorship.

ISSUE:
Did the subsequent agreement terminate the existing partnership between the petitioner and the
respondents?

HELD:
No. The Court held that the subsequent agreement did not terminate the partnership. The Court
maintained that the provision containing the terms, “cancels and supersedes” only refers to the
P15,000.00 amount which moved the date from May 24, 1996 from May 25, 1996.

Furthermore, while the term “capital investment” was no longer retained in the new agreement, and that
the agreement speaks of the petitioner as the sole dealer, there still was no cancellation of the partnership
since these adjustments were only proper since shell was a signatory and it was against their company
policy that business would be a partnership and not a sole proprietorship.

Lastly, the Court made notice of the fact that the petitioner himself gave periodic accounting of the
business, allowed authority to the respondent to examine and audit the accounts. Clearly, therefore,
they bound themselves to contribute money to a common fund with the intention of dividing the
profits among themselves.

MICHAEL C. GUY, PETITIONER, VS. ATTY. GLENN C. GACOTT, RESPONDENT.; G.R.

NO. 206147 (JANUARY 13, 2016)

DOCTRINE LAID DOWN (if any):

Notice to any partner operates as notice to or knowledge to the partnership only. Evidently, it does not
provide for the reverse situation, or that notice to the partnership is notice to the partners.

With regard to partnerships, ordinarily, the liability of the partners is not solidary.

XPNs: Only in exceptional circumstances shall the partners’ liability be solidary in nature. Articles 1822,
1823 and 1824 of the Civil Code provide for these exceptional conditions. It is the act of a partner which
caused loss or injury to a third person that makes all other partners solidarily liable with the partnership

FACTS:
Gacott purchased two (2) brand new transreceivers from Quantech Systems Corp (QSC) through its
employee Rey Medestomas. Due to major defects, Gacott returned the items to QSC and requested for
replacement. However, despite several demands, Gacott was never given a replacement or a refund.
Thus, Gacott filed a complaint for damages. Summons was served upon QSC and Medestomas,
afterwhich they filed their Answer.

RTC’s decision ordered the defendants to jointly and severally pay plaintiff. The decision became final
as QSC and Medestomas did not interpose an appeal. Gacott learned that QSC was not a corporation,
but was in fact a general partnership. In the articles of partnership, Guy was appointed as General
Manager of QSC. The sheriff attached Guy’s vehicle. Guy argued that:

1. He was not a judgment debtor and, therefore, his vehicle could not be attached.
2. That jurisdiction over the person of the partnership (QSC) was not acquired because the
summons was never served upon it or through any of its authorized officer;
3. Article 1816 of the Civil Code which states that the liability of the partners to the
partnership is merely joint and subsidiary in nature. And he is not solidarily liable with
the partnership because the solidary liability of the partners under Articles 1822, 1823
and 1824 of the Civil Code only applies when it stemmed from the act of a partner. In
this case, the alleged lapses were not attributable to any of the partners.

ISSUE 1a: WON the service of summons to QSC was flawed.

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HELD: YES, however, voluntary appearance cured the defect.

Under Section 11, Rule 14 of the 1997 Revised Rules of Civil Procedure, when the defendant is a
corporation, partnership or association organized under the laws of the Philippines with a juridical
personality, the service of summons may be made on the president, managing partner, general
manager, corporate secretary, treasurer, or in-house counsel.

Jurisprudence is replete with pronouncements that such provision provides an exclusive

enumeration of the persons authorized to receive summons for juridical entities.

In this case, QSC was not served with the summons through any of the enumerated authorized
persons to receive such. Service of summons upon persons other than those officers enumerated in
Section 11 is invalid. Even substantial compliance is not sufficient service of summons. Nevertheless,
lack of or defect in the service of summons may be cured by the defendant’s subsequent voluntary
submission to the court’s jurisdiction through his filing a responsive pleading such as an answer. Thus,
jurisdiction over its person was acquired through voluntary appearance.

ISSUE 1b: WON the trial court’s jurisdiction over QSC extended to the person of Guy insofar as
holding him solidarily liable with the partnership.

HELD: NO. Although a partnership is based on delectus personae or mutual agency, whereby any
partner can generally represent the partnership in its business affairs, it is non sequitur that a
suit against the partnership is necessarily a suit impleading each and every partner. It must be
remembered that a partnership is a juridical entity that has a distinct and separate personality from the
persons composing it.

Article 1816. All partners, including industrial ones, shall be liable pro rata with all their property and
after all the partnership assets have been exhausted.

In this case, Guy’s liability would only arise after the properties of QSC would have been exhausted.
The records, however, miserably failed to show that the partnership’s properties were exhausted.
Clearly, no genuine efforts were made to locate the properties of QSC that could have been attached
to satisfy the judgment − contrary to the clear mandate of Article 1816.

Second, Article 1816 provides that the partners’ obligation to third persons with respect to the partnership
liability is pro rata or joint. Liability is joint when a debtor is liable only for the payment of only a
proportionate part of the debt. In contrast, a solidary liability makes a debtor liable for the payment of
the entire debt.

In the same vein, Article 1207 does not presume solidary liability unless: 1) the obligation expressly so
states; or 2) the law or nature requires solidarity. With regard to partnerships, ordinarily, the liability of
the partners is not solidary. The joint liability of the partners is a defense that can be raised
by a partner impleaded in a complaint against the partnership.

In other words, only in exceptional circumstances shall the partners’ liability be solidary in nature.
Articles 1822, 1823 and 1824 of the Civil Code provide for these exceptional conditions, to wit:

In essence, these provisions articulate that it is the act of a partner which caused loss or injury to a third
person that makes all other partners solidarily liable with the partnership because of the words "any
wrongful act or omission of any partner acting in the ordinary course of the business,"
" one partner acting within the scope of his apparent authority" and "misapplied by any partner
while it is in the custody of the partnership." The obligation is solidary because the law protects
the third person, who in good faith relied upon the authority of a partner, whether such authority
is real or apparent.

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In the present case, it was not shown that Guy or the other partners did a wrongful act or misapplied the
money or property he or the partnership received from Gacott.

Petition is GRANTED. TO RELEASE Michael C. Guy's Suzuki Grand Vitara subject of the Notice of
Levy/ Attachment upon Personalty.

ANICETO G. SALUDO, JR., PETITIONER, VS. PHILIPPINE NATIONALBANK,

RESPONDENT. [ G.R. No. 193138, August 20, 2018 ]
FACTS:
Agpalo Fernandez and Aquino Law Office entered into a Contract of Lease with PNB, whereby the latter agreed to lease
the second floor of the PNB Financial Center Building a period of three year. SAFA Law Office then occupied the leased
premises and paid advance rental fees and security deposit. On August 1, 2001, the Contract of Lease expired. According to
PNB, SAFA Law Office continued to occupy the leased premises, but discontinued paying its monthly rental obligations
after. Consequently, PNB sent several demand letters for SAFA Law Office to pay its outstanding unpaid rents. On
September 1, 2006, Saludo, in his capacity as managing partner of SAFA Law Office, filed an amended complaint for
accounting and/or recomputation of unpaid rentals and damages against PNB in relation to the Contract of Lease.

PNB filed a motion to include an indispensable party as plaintiff, praying that Saludo be ordered to amend anew his
complaint to include SAFA Law Office as principal plaintiff. PNB argued that the lessee in the Contract of Lease is not
Saludo but SAFA Law Office, and that Saludo merely signed the Contract of Lease as the managing partner of the law
firm. Thus, SAFA Law Office must be joined as a plaintiff in the complaint because it is considered an indispensable party
under Section 7, Rule 3 of the Rules of Court.

RTC denied PNB’s motion to include SAFA Law Office as plaintiff. CA affirmed.
 
ISSUE 1: WoN SAFA Law Office is a sole proprietorship.
NO, it is a partnership. Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a partnership
at the time its partners signed the Articles of Partnership wherein they bound themselves to establish a partnership for the
practice of law, contribute capital and industry for the purpose, and receive compensation and benefits in the course of its
operation.

The subsequent registration of the Articles of Partnership with the SEC, on the other hand, was made in
compliance with Article 1772 of the Civil Code.
 
The other provisions of the Articles of Partnership also positively identify SAFA Law Office as a partnership. It constantly
used the words "partners" and "partnership." It designated Saludo as managing partner, and Attys. Agpalo, Fernandez, and
Aquino as industrial partners. It also provided for the term of the partnership and management of the firm in which "the
partners shall have equal interest in the conduct of [its] affairs." Moreover, it provided for the cause and manner of
dissolution of the partnership. These provisions would not have been necessary if what had been established was a sole
proprietorship. Indeed, SAFA Law Office is a partnership created and organized in accordance with the Civil Code
provisions on partnership.

 ISSUE 2: WoN SAFA Law Office has a separate and distinct juridical personality.

YES. Having settled that SAFA Law Office is a partnership, we hold that it acquired juridical personality by
operation of law.
 
ISSUE 3: WoN SAFA is the real party-in-interest.

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YES. SAFA Law Office is the party that would be benefited or injured by the judgment in the suit before the RTC. This is
because it is the one that entered into the contract of lease with PNB. As an entity possessed of a juridical personality, it
has concomitant rights and obligations with respect to the transactions it enters into.

Equally important, the general rule under Article 1816 of the Civil Code is that partnership assets are primarily liable for the
contracts entered into in the name of the partnership and by a person authorized to act on its behalf. All partners, including
industrial ones, are only liable pro rata with all their property after all the partnership assets have been exhausted.
 
Thus, considering that SAFA Law Office is primarily liable under the contract of lease, it is the real party-in-interest
that should be joined as plaintiff in the RTC case.

Saludo, Jr. is hereby ordered to amend his complaint to include SAFA Law Office as plaintiff, being the real party-in-
interest.