CASES FOR PARTNERSHIP
Associate Solicitor Marlon V. Madridijo
1. Tocao vs. Court of Appeals, G.R. No. 127405, October 4, 2000;
2. Mendiola vs. Court of Appeals, G.R. No. 159333, July 31, 2006;
3. Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc., G.R. No.
136448, November 3, 1999;
4. Pascual vs. Commissioner of Internal Revenue, G.R. No. 78133, October
18, 1988;
5. Philex Mining Corp. vs. Commissioner of Internal Revenue, G.R. No.
148187, April 16, 2008;
6. Jo Chung Cang vs. Pacific Commercial Co., G.R. No. 19892,
September 6, 1923;
7. Agad vs. Mabolo and Agad & Co., G.R. No. L-24193, June 28, 1968;
8. Tuazon vs. Bolanos, G.R. No. L-4935, May 28, 1954;
9. Lozano vs. Depakakibo, G.R. No. L-13680, April 27, 1960;
10. Liwanag vs. Court of Appeals, G.R. No. 114398, October 24, 1997;
11. Tai Tong Chuache & Co vs. Insurance Commission, G.R. No. L-55397,
February 29, 1988;
12. Ornum vs. Lasala, G.R. No. L-47823, July 26, 1943;
13. Evangelista & Co., vs. Abad Santos, G.R. No. L-31684, June 28, 1973;
14. Clemente vs. Galvan, G.R. No. L-45662, April 26, 1939;
15. Pacific Commercial Co. vs. Aboitiz & Martinez, G.R. No. L-25007, March
2, 1926;
16. Litton vs. Hill, G.R. No. L-45624, April 25, 1939;
17. Goquiolay vs. Sycip, G.R. No. L-11840, July 26, 1960;
18. Liwanag and Reyes vs. Workmen’s Compensation Commission, G.R.
No. L-12164, May 22, 1959;
19. Ortega vs. Court of Appeals, G.R. No. 109248, July 3, 1995;
20. Dojas vs. Maglana, G.R. No. 30616, December 10, 1990;
21. Yu vs. National Labor Relations Commissions, G.R. No. 97212, June 30,
1993;
22. Laguna Transportation Co., Inc., vs Social Security System, G.R. No.
L-14606, April 28, 1960.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#1
TITLE:
Tocao vs. Court of Appeals, G.R. No. 127405, October 4, 2000
FACST OF THE CASE:
Through her former employer in Bangkok, private respondent Nenita A. Anay met petitioner William T.
Belo, then the vice-president for operations of Ultra Clean Water Purifier. Belo introduced Anay to
petitioner Marjorie Tocao, who expressed a desire to collaborate with her on the importation and
distribution of kitchen cookwares. Belo served as a capitalist in the joint venture, Tocao as president and
general manager, and Anay as head of the marketing department and, later, vice-president for sales.
Belo's name was not to appear in any documents relating to their transactions with West Bend Company,
the parties agreed. The cookware business took off successfully after Anay secured the distributorship of
West Bend Company's cookware products and organized the administrative staff and sales force. They
operated as Geminesse Enterprise, a sole proprietorship registered in the name of Marjorie Tocao.
The parties also agreed that Anay would be entitled to the following:
(1) ten percent (10%) of the company's annual net profits;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) a third (30%) of the sales she would make; and
(4) two% (2%) for her demonstration services. On the strength of Belo's assurances that he was sincere,
dependable, and honest when it came to financial commitments, the agreement was not reduced to
writing.
Anay learned on October 9, 1987, that Marjorie Tocao had signed a letter addressed to the Cubao sales
office stating that she was no longer the vice-president of Geminesse Enterprise.
Anay made an attempt to contact Belo. She wrote to him twice, requesting her overriding commission for
the period January 8, 1988 to February 5, 1988, as well as an audit of the company to determine her share
of the net profits.
Anay continued to receive her 5% overriding commission until December 1987. Despite the company's
gross sales of P 13,300,360.00 the following year, she did not receive the same commission.
Nenita A. Anay filed Civil Case No. 88-509, a complaint for monetary damages against Marjorie D. Tocao
and William Belo, before the Makati Regional Trial Court, Branch 140, on April 5, 1988.
The trial court determined that there was a "oral partnership agreement" between the plaintiff and the
defendants, and the Court of Appeals upheld that decision.
ISSUES:
Whether the parties formed a partnership.
HELD:
Yes, the parties in this case did form a partnership.
The Supreme Court ruled that in order to be considered a legal person, a partnership must meet the
following requirements:
(1) two or more persons bind themselves to contribute money, property or industry to a common fund;
and
(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in
any form; a public instrument is necessary only where immovable property or real rights are contributed
thereto.
This means that, because a partnership contract is consensual, an oral partnership contract is just as good
as a written one.
In this case, Belo served as the capitalist, Tocao as president and general manager, and Anay as head of
the marketing department and, later, vice-president of sales. Anay was also entitled to a percentage of
the company's net profits.
As a result, the parties formed a partnership.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#2
TITLE:
Mendiola vs. Court of Appeals, G.R. No. 159333, July 31, 2006
FACST OF THE CASE:
Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation formed and existing under the laws of
California, USA, and is a subsidiary of Cellulose Marketing International, a corporation formed and existing
under the laws of Sweden, with its headquarters in Gothenburg, Sweden.
It is a subsidiary of Cellulose Marketing International, a corporation duly organized under Swedish law
with its headquarters in Gothenburg, Sweden.
On May 1, 1995, private respondent Pacfor entered into a "Side Agreement on Representative Office
known as Pacific Forest Resources (Phils.), Inc." with petitioner Arsenio T. Mendiola (ATM). "assuming
Pacfor-Phils. has already been approved by the Securities and Exchange Commission SEC on the stated
date." The Side Agreement defines the parties' business relationship in relation to Pacfor's Philippine
operations. Private respondent will open a Pacfor representative office in the Philippines, Pacfor Phils,
with petitioner ATM as President.
On July 14, 1995, the SEC granted private respondent's application... The representative office will bear
operational expenses, which will be funded by all parties "as equal partners," while profits and
commissions will be shared among them. Petitioner wrote Pacfor-USA in October 2000, demanding
payment of unpaid commissions and office furniture and equipment rentals totaling more than one
million dollars. On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner
to turn over to it all papers, documents, files, records, and other materials belonging to Pacfor or Pacfor
Phils in his or ATM Marketing Corporation's possession.
Petitioner was charged with willful disobedience and serious misconduct by private respondent Pacfor for
his... refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged
unpaid commissions.
Private respondent also accused petitioner of breach of trust and gross negligence of duty for allegedly
allowing another corporation owned by... petitioner's relatives, High End Products, Inc. (HEPI), to use
Pacfor's phone and fax numbers to potentially steal and divert private respondent's sales and business for
HEPI's principal, International Forest Products, a competitor of private... respondent.[25]... The petitioner
filed a complaint with the EEOC alleging illegal dismissal, recovery of separation pay, and payment of
attorney's fees.
NLRC.
It held there was no employer-employee... The parties' relationship. Based on the two agreements
between the parties, it was determined that petitioner is a full co-owner (50/50 equity) of private
respondent Pacfor, rather than an employee.
ISSUES:
Whether petitioner and private respondent Pacfor have an employer-employee relationship.
HELD:
It held there was no employer-employee... The parties' relationship. Based on the two agreements
between the parties, it was determined that petitioner is a full co-owner (50/50 equity) of private
respondent Pacfor, rather than an employee.
We conclude that petitioner is an employee of private respondent Pacfor and that the parties have no
partnership or co-ownership. In the present case, private respondent Pacfor, as employer, clearly has such
control. As a private respondent, the petitioner Pacfor's resident agent in the Philippines is nothing more
than a corporate agent, a Pacfor representative who transacts business and accepts service on its behalf.
Following that, we will determine whether the petitioner was constructively fired from his job.
In a partnership, the members become co-owners of what is contributed to the firm capital as well as any
property acquired as a result of the members' efforts. The partnership's property or stock constitutes a
community of goods, a... Each party has a proprietary interest in a common fund.
In fact, under the New Civil Code, a partner is considered a co-owner of specific partnership property.
Each partner has a vested interest in the success of the partnership... property. Furthermore, a
corporation cannot join a partnership unless expressly authorized by statute or charter.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#3
TITLE:
Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc., G.R. No. 136448, November 3, 1999
FACST OF THE CASE:
Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing with him. The three
agreed to buy two fishing boats, but they couldn't afford them so they borrowed money from Lim Tong
Lim's brother, Jesus Lim. They then borrowed money again to purchase fishing nets and other fishing
equipment. Yao and Chua claimed to be acting on behalf of "Ocean Quest Fishing Corporation" (OQFC),
and they made a P500,000 purchase of fishing nets from Philippine Fishing Gear Industries (PFGI).
However, because Ocean Quest Fishing Corporation is a non-existent corporation, they were sued in their
own names because they were unable to pay PFGI. Chua admitted his liability, but Lim Tong Lim denied
it, claiming that Chua and Yao misrepresented themselves as a corporation without his knowledge or
consent.
ISSUES:
Whether Lim Tong Lim is liable as a partner.
HELD:
Yes. It is clear from the facts that the three decided to start a fishing business. Furthermore, their
Compromise Agreement stated that they intended to repay the loan with the proceeds of the sale and
divide the excess or loss equally among themselves. Their common fund includes the boats and equipment
used for their business. Contributions to such funds do not have to be in cash or fixed assets; they can be
intangibles such as credit or industry. The fact that the parties agreed to divide any loss or profit from the
sale and operation of the boats equally among themselves demonstrates that they had formed a
partnership. The principle of corporation by estoppel cannot be applied in this case because Lim Tong Lim
benefited from the use of the nets in the boat, which was a partnership asset. According to the law of
estoppel, those acting on behalf of a corporation and those who benefit from it while knowing it lacks
legal existence are held liable as general partners. As a result, whether such was legally formed for
unknown reasons is irrelevant to the case.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#4
TITLE:
Pascual vs. Commissioner of Internal Revenue, G.R. No. 78133, October 18, 1988
FACST OF THE CASE:
Petitioners purchased two (2) parcels of land and three (3) parcels of land a year later. Petitioners later
sold the aforementioned lots for a profit in 1968 and 1970. Petitioners paid the corresponding capital
gains taxes in 1973 and 1974 by taking advantage of the tax amnesties granted in those years. The Acting
BIR Commissioner, on the other hand, assessed and required Petitioners to pay a total of P107,101.70 in
alleged deficiency corporate income taxes for the years 1968 and 1970. Petitioners objected to the
assessment, claiming that they had taken advantage of tax amnesties in 1974. Respondent Commissioner
informed petitioners in a reply that in 1968 and 1970, petitioners as co-owners in real estate transactions
formed an unregistered partnership or joint venture taxable as a corporation under Section 20(b) and its
income was subject to the taxes prescribed under Section 24, both of the National Internal Revenue Code
that the unregistered partnership was subject to corporate income tax as opposed to profits derived from
the pa No. 23, as amended by petitioners, relieved petitioners of their individual income tax liabilities but
did not relieve them of the unregistered partnership's tax liability. As a result, the petitioners were
required to pay the assessed deficiency income tax.
ISSUES:
Whether the Petitioners should be treated as an unregistered partnership or a co-ownership for the
purposes of income tax.
HELD:
A partnership contract binds two or more people to contribute money, property, or industry to a common
fund with the intention of dividing the profits among themselves (Art. 1767, Civil Code of the Philippines).
There is no evidence in this case that petitioners agreed to contribute money, property, or industry to a
common fund with the intention of dividing the profits among themselves. Whether or not the persons
sharing the returns have a joint or common right or interest in the property, the sharing of returns does
not establish a partnership. A clear intent to form a partnership, the existence of a legal personality
distinct from the individual partners, and the freedom of each party to transfer or assign the entire
property are all required. As a result, there is no adequate basis to support the claim that they formed an
unregistered partnership as a result. The two separate transactions in which they purchased properties
and then sold them a few years later did not make them partners. They shared in the gross profits as coowners, paid capital gains taxes on their net profits, and took advantage of the tax amnesty as a result.
Under the circumstances, they cannot be considered to have formed an unregistered partnership liable
for corporate income tax, as proposed by the respondent commissioner.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#5
TITLE:
Philex Mining Corp. vs. Commissioner of Internal Revenue, G.R. No. 148187, April 16, 2008
FACST OF THE CASE:
On April 16, 1971, the petitioner (Philex Mining Corporation) entered into an agreement with Baguio Gold
Mining Company, in which Philex Mining agreed to manage Baguio Gold Mining Company's mining
operations. In which a Power of Attorney is used as evidence. According to the contract, Baguio Gold's
contribution was P 11 million under the owner's account, with any remaining income within the project
to be added to the actual mining claim. For the petitioner's contribution (Philex Mining), it applies its
expertise in mine management and operations, and it also manages the petitioner's account, which
contains P 11 million in funds and compensation. The mine has suffered ongoing losses for years as a
result of the petitioner's cash and property advances. Following that, the parties reached an agreement
with dation in payment. Philex mining was assessed for tax deficiencies by the respondent (Commissioner
of Internal Revenue). It was stated that Philex Mining had formed a partnership with Baguio Gold.
Petitioner denies the respondent's (CIR) allegations and maintains that the advances of money and
property to Baguio Gold are in the nature of loans, as evidenced by the compromised agreement between
both parties.
DECISION OF BIR:
However, the Bureau of Internal Revenue (BIR) disallowed the amount as a bad debt deduction and
assessed petitioner a deficiency income tax of P62,811,161.39. Petitioner protested before the BIR,
arguing that the deduction should be allowed because all requirements for a bad debt deduction were
met, namely:
(a) there was a valid and existing debt;
(b) the debt was determined to be worthless; and
(c) it was charged off within the taxable
The BIR denied the petitioner's protest on October 28, 1994, citing a lack of legal and factual basis. It held
that the alleged debt was not determined to be worthless because Baguio Gold was still operating and
had not filed a bankruptcy petition; and that the deduction did not consist of a valid and continuing debt
because, under the management contract, petitioner was to be paid fifty percent (50%) of the project's
net profit.
DECISION OF OF COURT TAX APPEALS:
The CTA denied the petitioner's claim that the advances it made for the Sto. The Nino mines were in the
form of a loan. The advances were instead described as the petitioner's investment in a partnership with
Baguio Gold for the development and exploitation of the Sto. Nino is mine. The CTA determined that the
"Power of Attorney" signed by petitioner and Baguio Gold was in fact a partnership agreement. Because
the advanced amount was of the nature of It could not be deducted as a bad debt from the petitioner's
gross income because it was an investment.
The CTA also ruled that the amount paid by petitioner for Baguio Gold's long-term loan obligations could
not be deducted as a bad debt. Baguio Gold was not in default at the time the payments were made
because its loans were not yet due and demandable. Petitioner pre-paid the loans, as evidenced by the
notice sent by Bank of America, which stated that it was only demanding payment of the installment and
interest due. Furthermore, Citibank imposed and collected a "pre-termination penalty" for the early
termination.
DECISION OF OF COURT OF APPEALS:
The Court of Appeals upheld the CTA's decision. As a result, following the denial of its motion for
reconsideration, petitioner invoked Rule 45 of the Rules of Court, alleging that:
1. The Court of Appeals erred in interpreting Philex's advances in the management of the Sto. Nino
Mine operated as an investment rather than a loan as a result of the Power of Attorney.
2. The Court of Appeals erred in ruling that the 50%-50% sharing of the Sto. Nino Mine indicates that
Philex is a partner in the development of the Sto. Tomas. Despite the clear lack of intent on the
part of Philexand Baguio Gold to form a partnership, Nino Mine remains open.
3. When construing the nature of Philex's advances, the Court of Appeals erred by relying solely on
the Power of Attorney and completely disregarding the Compromise Agreement and the
Amended Compromise Agreement.
4. The Court of Appeals erred in declining to consider the legality of the bad debt write-off. The Court
of Appeal dismisses the petitioner's petition for review for lack of merit. The assessment in
question for deficiency income tax in the amount of P 62,811,161.39 is hereby affirmed and
hereby ordered the petitioner to pay the respondent Commissioner of Internal Revenue the
amount of P 62,811,161.39 plus 205delinquency interest due computed from February 10,1995.
DECISION OF OF COURT OF APPEALS:
The lower courts correctly held that the "Power of Attorney" is the instrument that is relevant in
determining the true nature of the petitioner's business relationship with Baguio Gold.
Before resorting to the two compromise agreements, the parties' contractual intent must first be
ascertained from the express language of the primary contract that established the parties' business
relations. It should be noted that the compromise agreements were mere collateral documents executed
by the parties pursuant to the termination of their business relationship created under the "Power of
Attorney". The lower courts did not err in classifying petitioner's advances as investments in the Sto. Nino
is mine. The advances were not "debts" of Baguio Gold to petitioner inasmuch as the latter was under no
unconditional obligation to return the same to the former under the "Power of Attorney".
DECISION OF OF COURT OF TAX APPEALS:
As the Court of Tax Appeals pointed out, the petitioner was only entitled to a proportionate return of the
mine's assets upon the dissolution of the parties' business relations. There was nothing in the agreement
that required Baguio Gold to pay the advances to the petitioner as an item of obligation or "accounts
payable" for Baguio Gold. As a result, the tax court correctly concluded that the agreement provided for
the distribution of the Sto's assets. Nino mine upon termination, which is more akin to a partnership than
a creditor-debtor relationship.
Regarding the amounts paid as guarantor to Baguio Gold's creditors by petitioner, we see no reason to
depart from the tax court's factual finding that Baguio Gold's debts were not yet due and demandable at
the time petitioner paid them. It should be noted that under a loan contract, a person who receives a
loan, money, or any fungible thing acquires ownership and is obligated to repay the credit or an equal
amount of the same kind and quality.
Following that, the Tax Court correctly observed that it was unlikely for a business corporation to lend
hundreds of millions of pesos to another corporation with no security, collateral, or specific deed
evidencing the terms and conditions of such loans. On this point, the Tax Court correctly observed that
petitioner was not an employee of Baguio Gold who would be paid "wages" in accordance with an
employer-employee relationship.
To begin with, petitioner was the project's manager and had invested significant funds in the venture to
ensure its viability and profitability. By tying its compensation to profits, petitioner also risked not being
paid if the mine failed to generate revenue. If the petitioner were truly just an ordinary employee, it is
difficult to believe that it would take the risk of not being paid at all for its services.
ISSUES:
Whether or not there is an existing partnership between Philex Mining and Baguio Gold.
HELD:
The reading of the "Power of Attorney" agreement reveals that the parties intended to form a partnership
and establish a common fund for that purpose. They also shared a 50-50 share of the mine's income,
indicating a shared interest in the company's profits. Under the "Power of Attorney," petitioner and
Baguio Gold agreed to contribute money, real estate, and business to the common fund. In this regard, it
was noted that the parties' respective contributions to the mine's development and operation are
substantively equivalent. According to the agreement's paragraphs 4 and 5, petitioner and Baguio Gold
were to contribute equally to the joint venture assets under their respective accounts. The parties'
agreement regarding petitioner's contribution to the common fund is unaffected by the fact that
petitioner transferred its funds and property to the project as specified in paragraph 5, thereby making
the other provisions of the contract effective, particularly paragraph 5(c), which prohibits petitioner from
withdrawing the advances until the parties' business relations are terminated. As can be seen, once the
transfers were made, petitioner was bound by its contributions. When the petitioner chose to exercise its
option under paragraph 5, the contributions became mandatory.
However, the Supreme Court has recognized a distinction between these two business forms, ruling that
while a corporation cannot enter into a partnership contract, it may enter into a joint venture with others.
In this case, the totality of the circumstances and the terms of the parties' agreement indubitably lead to
the conclusion that petitioner and Baguio Gold formed a partnership.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#6
TITLE:
Jo Chung Cang vs. Pacific Commercial Co., G.R. No. 19892,
September 6, 1923
FACST OF THE CASE:
Creditors, Pacific Commercial, and others filed a motion with the Court in an insolvency proceeding of
petitioner establishment, "Sociedad Mercantil, Teck Seing & Co., Ltd." to declare the individual partners
parties to the proceeding, for each to file an inventory, and for each to be adjudicated as insolvent
debtors.
The RTC granted the motion but later denied it. Hence this appeal.
ISSUES:
Whether the nature of the mercantile establishment, Teck Seing & Co., Ltd. is a limited partnership.
HELD:
NO.
The partnership contract established a general partnership.
Teck Seing & Co., Ltd. was eliminated through a process of elimination. Is neither a corporation nor a joint
account association.
A limited partnership must have at least one general partner, and the name of at least one of the general
partners must appear in the firm name. This requirement has not been fulfilled. Those seeking the
protection of laws allowing the formation of limited partnerships must demonstrate substantial
compliance with such laws. It should be noted that all of the Code's requirements have been met with the
exception of the one relating to the composition of the firm name.
In determining the existence of a partnership, the legal intention deduced from the parties' actions takes
precedence. If they intend to do something that, in law, constitutes a partnership, they are partners, even
if their intention was to avoid the formation of such a relationship. Teck Seing & Co., Ltd.'s intention is
expressed here. Was to form a partnership that they incorrectly labeled as a limited partnership. The
appealed order is reversed.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#7
TITLE:
Agad vs. Mabolo and Agad & Co., G.R. No. L-24193, June 28, 1968
FACST OF THE CASE:
Alleging that he and defendant Severino Mabato are — pursuant to a public instrument dated August 29,
1952, a copy of which is attached to the complaint as Annex "A" — 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 to
and including 1956, Mabato, who handled the partnership funds, had yearly rendered accounts of the
partnership's operations; and that, despite repeated demands, Mabato had failed and refused to render
accounts for the years 1957 to 1963, In his complaint against Mabato and Mabato & Agad Company, filed
on June 9, 1964, Agad requested that a judgment be rendered ordering Mabato to pay him (Agad) P14,000
as his share of the partnership's profits from 1957 to 1963, plus P1,000 as attorney's fees, and ordering
the dissolution of the partnership and the winding up of its affairs by a receiver to be appointed.
In his response, Mabato admitted the formal allegations of the complaint but denied the existence of said
partnership on the grounds that the contract for it had not been perfected.
ISSUES:
Whether or not “immovable property or real rights” have been contributed to the partnership under
consideration.
HELD:
Mabato alleged and the lower court held that the answer should be in the affirmative, 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, as stated in Annex
"A" the partnership was established "to operate a fishpond", not to "engage in a fishpond business".
Furthermore, none of the partners contributed a fishpond or a genuine right to any fishpond. Their
contributions were each limited to P1,000.
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 mentioned in Annex "A" was the goal of the partnership. Even if a fishpond
or a real right thereto could become part of its assets, neither said fishpond nor a real right thereto was
contributed to the partnership or became part of its capital.
WHEREFORE, we find that said Article 1773 of the Civil Code is not applicable and that the order appealed
from should be set aside and the case remanded to the lower court for further proceedings, with the costs
of this instance assessed against defendant-appellee, Severino Mabato. It's so well-organized.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#8
TITLE:
Tuazon vs. Bolanos, G.R. No. L-4935, May 28, 1954
FACST OF THE CASE:
J.M. Tuason and Co. Inc., represented by its managing partner, Gregoria Araneta, Inc., filed a complaint
for the recovery of possession of land against Bolanos before the Court of First Instance of Rizal, Quezon
City Branch, alleging that the land in dispute is covered by the plaintiff's certificate of title, of which the
plaintiff is allegedly the registered owner.
The defendant in his answer sets up prescription and title in himself thru "open, continuous, exclusive and
public notorious possession of land in dispute under the claim of ownership adverse to the entire world
by the defendant and his predecessor in interest from time-in-memorial. The plaintiff or its predecessors
in interest obtained registration of the land in dispute through "fraud or error and without knowledge of
or interest either personal or through publication to the defendant and/or predecessor in interest,"
according to the answer. As a result, the defendant requests that the complaint be dismissed with costs,
and that the plaintiff be ordered to return the land to the defendant and pay its fair market value.
The lower court ruled in favor of the plaintiff, declaring the defendant to have no right to the land in
question and ordering him to return possession to the plaintiff and pay the latter P132.62 per month from
January 1940 until he vacates the land.
ISSUES:
Whether a Corporation can legally enter into a joint venture with another Corporation.
HELD:
YES. There is no merit to the claim that the current action was not brought by the true party in interest,
namely J. M. Tuason & Company, Inc. According to the Rules of Court, an action must be brought in the
name of, but not necessarily by, the real party in interest. In fact, the practice is for an attorney-at-law to
bring the action, that is, to file the complaint, in the name of the plaintiff (Section 2, Rule 2). That practice
appears to have been followed in this case, as the complaint is signed by Araneta and Araneta, "counsel
for the plaintiff," and begins with the words "comes now plaintiff, through its undersigned counsel." True,
the plaintiff is "represented herein by its Managing Partner Gregorio Araneta, Inc.," another corporation,
but there is nothing prohibiting one corporation from being represented in court by another person,
natural or juridical. The contention that Gregorio Araneta, Inc. cannot act as managing partner for the
plaintiff on the theory that it is illegal for two corporations to enter into a partnership is without merit,
for the true rule is that "though a corporation has no power to enter into a partnership, it may
nevertheless enter into a joint venture with another where the nature of that venture is in line with the
business authorized by its charter. Nothing in the record suggests that the venture in which the plaintiff
is represented by Gregorio Araneta, Inc. as "its managing partner" is inconsistent with either of them's
corporate business.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#9
TITLE:
Lozano vs. Depakakibo, G.R. No. L-13680, April 27, 1960
FACST OF THE CASE:
Under the franchise issued by Piadosa Buenaflor, Mauro Lozana formed a partnership with Serafin
Depakakibo to operate, distribute, and maintain electric lights and power in the Municipality of
Dumangas, Iloilo. Lozana contributed 18,000 pesos to the partnership, accounting for 60% of the capital,
with Depakakibo shouldering the remaining 40%. However, the franchise in favor of Buenaflor was
revoked, and Lozana, without liquidation, sold his contribution to the partnership, a Generator Buda, to
one Decolongon. Depakakibo, on the other hand, sold his contribution to the partnership, one Crossly
Diesel Engine, to Spouses Jimenea and Harder. Lozana filed a lawsuit against Depakakibo, alleging that he
wrongfully detained the Generator Buda and wooden posts, which Lozana is entitled to possess. Lozana
prayed for the return of the aforementioned items, and the Court of First Instance ruled in his favor.
Depakakibo filed an appeal with the Supreme Court.
ISSUES:
1. Whether or not the partnership is void because it lacked thea pproval of the Public
Service Commission.
2. Whether or not the disposal of the contribution of the parties is allowed
HELD:
1. The partnership is valid even if the Public Service Commission does not approve it. The absence
of prior Public Service Commission approval does not, in and of itself, render the contract of partnership
null and void from the start, rendering the partnership entered into by the parties for purpose void and
non-existent.
2. "Properties of the partnership, the same could not be disposed of by the party contributing the
same without the consent or approval of the partnership or of the other partner." (Clemente vs. Galvan,
67Phil., 565). It is obvious that Lozano contributed to the partnership an amount of 18,000 pesos and
there has been no liquidation prior to the sale of the Buda Diesel Engine and 70 posts.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#10
TITLE:
Liwanag vs. Court of Appeals, G.R. No. 114398, October 24, 1997
FACST OF THE CASE:
Petitioner Carmen Liwanag and a woman named Thelma Tabligan went to the home of complainant
Isidora Rosales (Rosales) and invited her to join them in the buying and selling of cigarettes. Rosales readily
agreed, having been persuaded of the venture's viability. Rosales agreed to provide the money for the
cigarettes while Liwanag and Tabligan acted as her agents, with a 40% commission if the goods were sold;
otherwise, the money would be returned to Rosales. As a result, Rosales made several cash advances to
Liwanag and Tabligan totaling P633,650.00.
Rosales filed an estafa case against Liwanag after becoming concerned that he was no longer visiting her
about their business and believing that the funds she advanced were being misappropriated.
Liwanag proposes that the parties intended to enter into a partnership contract in which Rosales would
contribute the funds while she bought and sold the cigarettes and divided the profits between them. She
also claims that the transaction can be interpreted as a simple loan, with Rosales lending her the stated
amount in installments. Liwanag was found guilty of estafa by the RTC. The decision of the lower court
was upheld by the Court of Appeals.
ISSUES:
Whether Liwanag can be acquitted from the crime of estafa because she and Rosales formed a
partnership.
HELD:
No, Liwanag could not be exonerated of the estafa crime.
Estafa, according to the Supreme Court, is a crime committed by someone who defrauds another, causing
him to suffer damages, through unfaithfulness or abuse of trust, or through false pretenses or fraudulent
acts.
Even assuming that a partnership contract was entered into by and between the parties in the case at
hand, we have ruled that when money or property is received by a partner for a specific purpose (such as
that obtained in the instant case) and he later misappropriates it, such partner is guilty of estafa.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#11
TITLE:
Tai Tong Chuache & Co vs. Insurance Commission, G.R. No. L-55397, February 29, 1988
FACST OF THE CASE:
Tai Tong Chuache Inc. granted Azucena Palomo a loan in the amount of P100,000.00. To ensure loan
repayment, a mortgage was executed over the land and building in favor of Tai Tong Chuache & Co. Thai
Tong Chuache & Co. representative Arsenio Chua insured the latter's interest with Travellers MultiIndemnity Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents
thereof)
Pedro Palomo obtained a P50,000.00 Fire Insurance Policy for the building from respondent Zenith
Insurance Corporation. On July 16, 1975, respondent Philippine British Assurance Company obtained
another Fire Insurance policy covering the same building for P50,000.00 and the contents for P70,000.00.
The building and its contents were completely destroyed by fire.
Respondents, Zenith Insurance, and Phil. British Assurance and the S.S.S. Accredited Group of Insurers
each paid their respective losses. Complainants received the following payments: P41,546.79 from
Philippine British Assurance Co., P11,877.14 from Zenith Insurance Corporation, and P5,936.57 from S.S.S.
Group of Accredited Insurers. A demand was made of respondent Travellers Multi-Indemnity for its share
of the loss, but it was denied. As a result, the complainants demanded from the other three (3)
respondents the balance of each share of the loss in the amount of P30,894.31 (P5,732.79-Zenith
Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited), which was refused, resulting in this
action.
Philippine British Assurance and Zenith Insurance Corporation denied liability in their responses, claiming
that the complainants' claim had already been waived, extinguished, or paid. Both companies filed
counterclaims for a total of P 91,546.79.
The SSS Accredited Group of Insurers informed the Commission that the complainants' claim for the
balance had been paid in full.
Travellers Insurance, for its part, admitted the issuance of a Policy and asserted defenses that a Fire Policy,
covering the complainants' furniture and building, was secured by a certain Arsenio Chua and that the fire
policy premium was paid by Arsenio Chua.
Tai Tong Chuache & Co. also filed an intervention complaint, claiming the proceeds of respondent
Travellers Multi-fire Indemnity's insurance policy.
As previously stated, the respondent Insurance Commission dismissed spouses Palomos' complaint on the
grounds that the insurance policy at issue was obtained by Tai Tong Chuache & Company solely for its
own benefit as mortgagee of the insured property, and thus the complainants, as mortgagors of the
insured property, have no right of action against the respondent. It also dismissed petitioner's
intervention complaint in the following words. Following the above decision, only intervenor Tai Tong
Chuache filed a motion for reconsideration, which was also denied, giving rise to the current petition.
ISSUES:
Whether or not Tai Tong had insurable interest.
HELD:
Yes. Petition is granted.
Respondent asserted an affirmative defense of lack of insurable interest on the part of the petitioner,
claiming that the Palomos had already paid their credit due the petitioner prior to the occurrence of the
peril insured against. They were never able to prove, however, that Tai lacked insurable interest. As a
result, the decision must be adverse to them. Respondent Insurance Commission, on the other hand,
absolved respondent insurance company of liability on the basis of a certification issued by the then Court
of First Instance of Davao, Branch II, that in a civil action against the Palomos, Arsenio Lopez Chua is the
complainant, not Tai Tong Chuache.
Respondent commission inferred from the evidence that the credit extended by petitioner to the Palomos
and secured by the insured property had to be paid. These findings were based solely on inference.
According to the case record, the petitioner offered as evidence the contract of mortgage that had not
been cancelled or released to support its claim for the insurance proceeds. In a long line of cases, it has
been held that when the creditor has possession of the credit document, he does not need to prove nonpayment because it is presumed. Private respondent did not challenge the validity of petitioner's
insurance policy. Furthermore, Azucena Palomo, who testified that they are still indebted to herein
petitioner, corroborated petitioner's claim that the loan extended to the Palomos had not yet been paid.
However, the public respondent contends that if the civil case was truly based on the loan granted to
Azucena Palomo by petitioner, it should have been brought by Tai Tong Chuache or its representative on
its own behalf. Respondent deduced from the preceding premise that the obligation secured by the
insured property had to be paid. However, because the petitioner is a partnership, it may sue and be sued
in its own name or through a duly authorized representative. Respondent insurance company confirmed
petitioner's declaration that Arsenio Lopez Chua is the managing partner of the partnership. Thus, Chua,
as the managing partner of the partnership, has the authority to carry out all administrative functions,
including the right to sue the partnership's debtors if they fail to pay their obligations when they become
due and demandable. The public respondent's claim that Arsenio Chua filed the civil case in his capacity
as a personal creditor of spouses Palomo is without merit. The policy was then legally binding.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#12
TITLE:
Ornum vs. Lasala, G.R. No. L-47823, July 26, 1943
FACST OF THE CASE:
Mariano Lasala et al. are Taal, Batangas natives who lived in Taal or in Manila, while Jose and
EmerencianoOrnum are also Taal natives who lived in the bario of Tan-agan, Tamblas, Romblon.
1908
Emerenciano Ornum and Pedro Lasala, father of Mariano Lasala et al., formed a partnership. Pedro will
be the financier, while Emerenciana will be the business partner. Pedro gave Emerenciana P1,000 in order
for her to conduct business in Romblon.
1912
The partnership's assets were outstanding accounts and old merchandise stock.
Emerenciano, in accordance with his wife's wishes, requested that the partnership be dissolved. He then
proposed that someone else take his place.
Jose and Emerenciana. The latter two became the new partners.
Jose and Emerenciana invested P505.54, resulting in Pedro Lasala having a capital of P1,000, the appraised
value of the assets of the former partnership, plus the said P505.54.
Following Pedro's death, his children Mariano et al. (the respondents) inherited all of his rights and
interests in the partnership.
The partners had never met in person.
There was no formal partnership agreement ever signed.
As managing partners, Jose and Emerenciana received half of the net gains, with the other half divided
equally between them and the Lasala group based on the capital invested by each. They split the profits,
but the partners had the option of investing their respective shares in the partnership as additional capital.
Petitioners Jose and Emerenciana agreed to invest a larger portion of their profits in the partnership.
After twenty years, the company had grown to a total value of P44,618.67. Jose and Eme prepared
accounting statements on a regular basis and sent them to the Lasala children, who never objected.
Jose and Eme prepared the last and final statement of accounts on May 27, 1932, after the Lasala children
announced their intention to dissolve the partnership. Mariano Lasala wrote on the other siblings' behalf:
"We have already stated openly here, as a partner, and we authorize you to repeat it to your sister Mering,
widow, that the reason why we collect the capital and utilities of our society in all our business that is
under your care, is that we want to help you two have a significant commitment that we cannot avoid,
which is why we are pleading with you once more before the end of the year. We await your consideration
in July 1932."As soon as we receive this, we will sign the balance you made there, a copy of which you
have left here. "Memories to everyone there and send."
RULING OF THE LOWER COURT
CFI of Manila
Lasala children prayed for an accounting and final liquidation of the partnership's assets.
The CFI determined that the Lasala children waived their right to a further accounting when they received
and accepted their shares as itemized in the last and final statement of accounts prepared by Jose and
Eme.
Court Of Appeals
The CA reversed the CFI judgment, primarily because the final statement of accounts was not signed by
the Lasala children and thus stands disapproved.
To support a plea of a stated account in order to conclude the parties in relation to all dealings between
them, the accounting must be shown to have been final, according to the decision appealed by Jose and
Eme. The defendants' first nine statements to the plaintiffs were all partial settlements, while the last,
though intended to be final, has yet to be signed.
ISSUES:
Whether or not statement of accounts were duly approved by the Lasala children.
HELD:
Yes.
By virtue of Father Mariano Lasala's letter of July 19, 1932, this approval resulted from the Lasala
children's failure to object to the statement and their promise to sign it as soon as they received their
shares as shown in said statement. After such shares were paid by Jose and Eme and accepted without
reservation by the Lasalas, the approval of the statement of accounts was virtually confirmed, and its
signing became a mere formality to be complied with solely by the respondents. After receiving their
shares, their refusal to sign amounted to a waiver of that formality in favor of Jose and Eme, who had
already fulfilled their obligation. This approval precludes the Lasalas from exercising any further
liquidation rights, unless the latter can demonstrate that the approval was obtained through fraud,
deception, error, or mistake. The CA made no determinations regarding fraud or error or mistake.
The declaration that the evidence tends to prove that there were errors in Jose and Eme's statements of
accounts, without specifying the errors, merely implies a suspicion and is not such a positive and
unmistakable finding of fact as to justify a revision, especially given that the CA relied on the parties' bare
allegations.
Even if the petitioners admit in their counterclaim that they overpaid the respondents by P575.12, this
error is essentially fatal to the latter's theory that they are entitled to more than the statement of accounts
shows, and is thus not the type of error that calls for another accounting that will serve the purpose of
the respondent's suit. Furthermore, because the petitioners did not appeal the CFI's decision, they
abandoned such allegation in the CA.
CA decision was revesed.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#13
TITLE:
Evangelista & Co., vs. Abad Santos, G.R. No. L-31684, June 28, 1973
FACST OF THE CASE:
On October 9, 1954, a co-partnership called "Evangelista & Co." was formed, and on June 7, 1955, the
Articles of Co-partnership were amended to include herein respondent, Estrella Abad Santos, as industrial
partner, with herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad Santos, and Conchita
P. Navarro, the original capitalist partners, remaining in that capacity with contributions of P17,500 each.
On December 17, 1963, respondent filed suit against the three other partners, alleging that the
partnership, which was also made a party-defendant, had been paying dividends to the partners except
her; and that, despite her demands, the defendants had refused and continued to refuse to let her
examine the partnership books, give her information about the partnership's affairs, or pay her any share
of the partnership's declared dividends.
Respondent filed suit against the three other partners on December 17, 1963, alleging that the
partnership, which was also made a party-defendant, had been paying dividends to all partners except
her; and that, despite her demands, the defendants had refused and continued to refuse to let her
examine the partnership books, give her information about the partnership's affairs, or pay her any share
of the partnership's declared dividends.
ISSUES:
Whether Abad Santos has access to the partnership books because she is an industrial partner.
HELD:
Yes, Abad Santos is entitled to see the partnership books.
The case at bar was ruled according to ART. 1299. Any partner shall have the right to a formal account as
to partnership affairs:
(1)If he is wrongfully excluded from the partnership business or possession of its property by his copartners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and reasonable
In this case, the company is barred from denying Abad Santos as an industrial partner because it has been
8 years and the company has never corrected their agreement to show their true intentions. Until Abad
Santos filed a complaint, the company never bothered to correct those errors.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#14
TITLE:
Clemente vs. Galvan, G.R. No. L-45662, April 26, 1939
FACST OF THE CASE:
The intervenor, Jose Echevarria, lost in the Court of First Instance of Manila, which rendered judgment
against him, the relevant portion of which reads: "and with respect to the complaint of the intervenor,
the mortgage executed in his favor by plaintiff is declared null and void, and said complaint in intervention,
as well as the defendant's counterclaim against the intervenor, is dismissed."
" he appealed to this court on the ground that, according to him, the lower court committed the error
plaintiff and defendant organized a civil partnership which they named "Galvan y Compaia" to engage in
the manufacture and sale of paper and other stationery, agreeing to invest a capital of P100,000, but in
fact they did not cover more than one-fifth thereof, each contributing P10,000.
In his response, the defendant expressed his agreement with the dissolution... and the dissolution of its
operations; however, as a counterclaim. He requested that, after covering a P4,000 deficit incurred by the
partnership with his own money, plaintiff reimburse him for half of that amount.
A receiver and liquidator, Juan D. Mencarini, was appointed on the plaintiff's petition to take charge of
the partnership's properties and business while it was not yet definitively dissolved. The latter was already
carrying out his official duties when the court issued an order requiring said receiver to deliver to him
(plaintiff) certain machines but authorizing him to charge their P4,500 value against the portion which
may eventually be due to said plaintiff.
To comply with said order, the receiver delivered the keys to plaintiff at the location where the machines
were discovered, which was also the location of defendant's home; however, before he could take actual
possession of said machines, the court, on motion of the latter, suspended the effects of its order in order
to avoid the attachment and subsequent sale of the machines by the sheriff for satisfaction from the
proceeds thereof.
After the one-year period specified in the mortgage deed for the plaintiff to fulfill the obligation he had
contracted with the interveneor expired, the latter filed a lawsuit to collect his mortgage credit.
As the plaintiff in the aforementioned case, he obtained judgment in his favor because the defendant did
not raise any defenses or objections, and he also admitted to being truly indebted to the intervenor in the
amount specified in Exhibit B of the mortgage deed. The machines that the intervenor claimed were
mortgaged to him were then in custodia legis, as they were under the control of the receiver and
liquidator.
ISSUES:
The court a quo also erred in ruling against the interveneor-appellant in the current case, stating that
"plaintiff has not adduced any evidence nor has he testified to show that the machines mortgaged by him
to the interveneor have ever belonged to him, despite the fact that said interveneor is his close relative.".
HELD:
According to the evidence on file, the machines in question were originally owned by the defendant and
were later transferred to the partnership Galvan y Compania. As a result, said machines are the property
of partnership, not to him, and shall belong to it until partition is effected in accordance with the outcome
of the liquidation.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#15
TITLE:
Pacific Commercial Co. vs. Aboitiz & Martinez, G.R. No. L-25007, March 2, 1926
FACST OF THE CASE:
Arnaldo F. F. de Silva, Guillermo Aboitiz, Vidal Aboitiz, and Jose Martinez formed a regular, collective,
mercantile partnership with a capital of P40,000, which de Silva and the two Aboitiz contributed equally,
while Jose Martinez was an industrial partner with no capital contribution. Martinez was to receive 30%
of the profits and be responsible for losses that did not exceed 30%, according to the partnership
agreement.
Guillermo Aboitiz, on behalf of the partnership, executed a promissory note in the amount of P23,168.71
with interest at 12% per year in favor of Pacific Commercial Company. To secure the note, they executed
a chattel mortgage. The chattel mortgage was foreclosed and sold for P2,000 due to their failure to pay
their obligation, which was paid over to plaintiff Pacific Co. Plaintiff sued the partnership for unpaid
balance with interest due to the partnership's failure to pay the remaining balance.
A judgment was entered in favor of the plaintiff, and the partnership was ordered to pay the sum of
P27,951.68 plus interest at 10% per annum until fully paid, plus fees. The judgment also stated that the
execution should be issued first against the property of the partnership Aboitiz & Martinez, and in the
event of the partnership's insolvency, it may issue against the property of de Silva and Aboitiz, and in the
event of insolvency, it may issue against the property of Jose Martinez. Defendant Martinez filed an
appeal, claiming that under Art.141 of the Code of Commerce, he is only an industrial partner and thus
cannot be held liable for the partnership's debt.
ISSUES:
Is an industrial partner liable for partnership's debt?
HELD:
Yes.
The language of Art. 127 of the Code of Commerce is clear and specific, and it must be interpreted to
mean exactly what it says, namely, that all members of a general co partnership are liable with all their
property for the results of the partnership's duly authorized transactions. Defendant's reliance on Art. 141
is incorrect. This article of the Code of Commerce is only concerned with the distribution of losses among
partners in the settlement of partnership affairs and imposes no obligations on third parties.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#16
TITLE:
Litton vs. Hill, G.R. No. L-45624, April 25, 1939
FACST OF THE CASE:
This is a petition for certiorari to review the Court of Appeals' decision. On February 14, 1934, Litton sold
and delivered a certain number of mining claims to Carlos Ceron, one of the managing partners of Hill &
Ceron, and as a result of that transaction, Ceron delivered to plaintiff a document (receipt) acknowledging
that he received from Litton certain share certificates of Big Wedge Mining Company totaling P1870.
Ceron paid the plaintiff P1,150, leaving an unpaid balance of P720. Unable to collect this sum from Hill &
Ceron or its surety Visayan Surety & Insurance Corporation, Litton filed a complaint in the Court of First
Instance of Manila against the aforementioned defendants for the recovery of the said balance.
After a trial, the lower court ordered Carlos Ceron to pay the amount claimed personally and absolved the
partnership Hill & Ceron, Robert Hill, and the Visayan Surety & Insurance Corporation. On appeal to the
CA, the latter upheld the lower court's decision, concluding that Ceron did not intend to represent and
did not act for the firm Hill & Ceron in the transaction at issue.
ISSUES:
Weather or not Ceron’s act binds the partnership
HELD:
Yes,
We conclude that Ceron's transaction with the plaintiff should be interpreted in law as effected by Hill &
Ceron and binding on it.
To begin with, Robert Hill admitted during the trial that he and Ceron had the same power to buy and sell
during the partnership; that in said partnership, Hill and Ceron made the transaction as equal partners;
and that on the date of the transaction, February 14, 1934, the partnership between Hill and Ceron was
in existence.
A written contract of 'Hill & Ceron' can only be signed by one of the partners if the other partner consents,
according to the firm's articles of copartnership. A written contract cannot bind the firm without the
consent of one partner. Now, even if Ceron attempted to represent the firm in this contract with the
plaintiff (the plaintiff admitted that the firm name was not mentioned at the time), the latter has failed
to prove that Hill consented to such contract. Furthermore, third parties, such as the plaintiff, are not
obligated to enter into a contract with either of the two partners to determine whether or not the partner
with whom the transaction is made has the consent of the other partner. The public is not required to
inquire about the agreements reached between the partners. Its knowledge is sufficient to contract with
the partnership represented by one of the managing partners.
Even if one of the partners could not, in his individual capacity, engage in a transaction similar to that in
which the partnership is engaged without binding the latter, the respondent argues in its brief that there
is no law that prohibits a partner in the stock brokerage business from engaging in other transactions
different from those of the partnership, as happens in the present case, because the transaction made by
Ceron is a mere person transaction. We reject this alleged corroboration because the Court of Appeals'
only finding of fact is that Ceron's transaction with the plaintiff occurred in his individual capacity.
The appealed decision is reversed, and the defendants are ordered to pay the plaintiff, jointly and
severally, the sum of P720, plus legal interest, from the date of the complaint's filing, less a commission
of one-half percent (12%) of the original price of P1,870, plus costs to the respondents. So ordered.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#17
TITLE:
Goquiolay vs. Sycip, G.R. No. L-11840, July 26, 1960
FACST OF THE CASE:
Tan Sin An and Goquiolay formed a general commercial partnership called "Tan Sin An and Antonio
Goquiolay" with the intention of dealing in real estate. Tan Sin An was given sole management of the
partnership's affairs under the terms of the agreement. The partnership's term was set at ten years, and
the Articles of Co-partnership stated that if any of the partners died before the term expired, the
partnership would not be dissolved but would be continued by the deceased partner's heirs or assigns.
However, the partnership could be dissolved by mutual written agreement of the partners. Tan Sin An
was the beneficiary of Goquiolay's GPA. The plaintiff partnership purchased three parcels of land that
were mortgaged to "La Urbana" for P25,000. Tan Sin An purchased another 46 parcels of land in his
individual capacity, for which he assumed payment of a P35K mortgage debt. Yutivo and Co. provided a
down payment and amortization.
Tan Sin An died, leaving behind a widow, Kong Chai Pin, and four minor children. The widow was later
appointed executrix of the estate. Banco Hipotecario made repeated demands on the partnership and
Tan Sin An. Defendant Sing Yee paid the remaining balance of the mortgage debt at the request of
defendant Yutivo Sons, and the mortgage was cancelled. Yutivo Sons and Sing Yee filed their claim in Tan
Sin An's intestate proceedings for advances, interest, and taxes paid in amortizing and discharging their
obligations to "La Urbana" and "Banco Hipotecario." Kong Chai Pin petitioned the probate court for
authority to sell all 49 parcels of land. She then sold it to Sycip and Lee for P37K, with the vendees
assuming payment of Yutivo Sons and Sing Yee's claims. Later, Sycip and Lee executed a deed of transfer
covering the 49 parcels of land in favor of Insular Development.
When Goquiolay learned of the sale to Sycip and Lee, he petitioned the intestate court to vacate the
probate court's order approving the sale in so far as his interest in the parcels of land sold was concerned.
The administratrix's sale with respect to the 60% interest of Goquiolay in the properties was annulled by
the probate court. The probate court's decision was overturned because the necessary parties were not
included. New pleadings have been filed. The second amended complaint seeks to vacate the sale in favor
of Sycip and Lee, as well as their subsequent conveyance to Insular Development. The lower court
dismissed the complaint, prompting this appeal.
ISSUES:
Whether a widow or substitute becomes a general partner as well as a limited partner.
Whether the lower court erred in holding that the widow succeeded her husband Tan Sin An in sole
management of the partnership upon Tan's death; and whether the consent of the other partners was
required to finalize the sale of the partnership properties to Sycip and Lee.
HELD:
No. Kong Chai Pin was reduced to the status of general partner. Tan Sin An's widow demonstrated her
desire to be considered a general partner by requesting authority to manage partnership property.
Goqulay recognized the widow as a partner by authorizing her to manage partnership property (which a
limited partner could not do) 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 state that the deceased's
heirs would be merely limited partners; rather, they stated that if either partner died, "the co partnership
will have to be continued" with the heirs or assignees. It could not be continued if it were converted from
a general partnership to a limited partnership because the difference between the two types of
associations is fundamental, and especially because the conversion into a limited partnership would deny
the heirs of the deceased partner a share in the management. As a result, the contractual provision
anticipated that the heirs would become general partners rather than limited partners.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#18
TITLE:
Liwanag and Reyes vs. Workmen’s Compensation Commission, G.R. No. L-12164, May 22, 1959
FACST OF THE CASE:
Appellants Benito Liwanag and Maria Liwanag Reyes own Liwanag Auto Supply, a business located at 349
Dimasalang, Sampaloc, Manila. They hired Roque Balderama as a security guard, who was killed in the line
of duty by criminals. Ciriaca vda, his widow. de Balderama and his minor children, Genara, Carlos, and
Leogardo, all surnamed Balderama, filed a compensation claim with the Workmen's Compensation
Commission, which was granted in the following award:
WHEREFORE, the order of the referee under consideration should be, as it is hereby, affirmed and
respondents Benito Liwanag and Maria Liwanag Reyes, ordered:
"1. To pay jointly and severally the amount of Three Thousand Four Hundred Ninety-four and 40/100
(P3,494.40) Pesos to the claimants in lump sum; and
"To pay to the Workmen's Compensation Funds the sum of P4.00 (including P5.00 for this review) as fees,
pursuant to Section 55 of the Act."
Appellants do not challenge the appellees' right to compensation or the amount awarded in their appeal
to this Tribunal. They only claim that because the compensation is divisible under the Workmen's
Compensation Act, the Commission erred in ordering appellants to pay the amount awarded jointly and
severally. They contend that nothing in the compensation Act provides that an employer's obligation
arising from compensable injury or death of an employee should be solidary; that if the legislative intent
in enacting the law is to impose solidary obligation, the same should have been specifically provided; and
that, in the absence of such clear provision, appellants' responsibility should be joint rather than solidary.
ISSUES:
Whether or not the liability of the partners are jointly and severally despite the absence of a clear
provision stating such liability in the Compensation Act.
HELD:
Yes.
Although the Workmen's Compensation Act does not expressly state that the obligation of business
partners arising from compensable injury or death of an employee must be solidary, there are other legal
provisions from which it can be inferred that their liability must be solidary. Arts. Sections 1711 and 1712
of the New Civil Code, as well as Section 2 of the Workmen's Compensation Act, reasonably indicate that
in compensation cases, business partners' liability should be solidary. If the partners' responsibility is
merely joint and not solidary, and one of them becomes insolvent, the amount awarded to the
dependents of the deceased employee will only be partially satisfied, which is clearly contrary to the law's
intent and purpose of providing full protection to the employee.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#19
TITLE:
Ortega vs. Court of Appeals, G.R. No. 109248, July 3, 1995
FACST OF THE CASE:
Petitioner filed a petition for dissolution and liquidation of partnership with this Commission's Securities
Investigation and Clearing Department (SICD). The hearing officer ruled that petitioner's withdrawal from
the law firm Bito, Misa & Lozada did not result in the dissolution of the said law partnership. On appeal,
the SEC en banc received the Hearing Officer's decision and determined that Atty. Misa had terminated
the partnership. The Commission ruled that because the law firm was a partnership at will, it could be
dissolved at any time, such as by his withdrawal, regardless of good faith or bad faith, because no partner
can be forced to continue in the partnership against his will.
On appeal, the CA affirmed in toto the SEC decision and order appealed from.
ISSUES:
Whether or not the CA has erred in holding that the partnership is a partnership at will.
HELD:
NO. The CA did not err in concluding that the partnership is a partnership at will because the partnership
agreement did not specify a time limit or an undertaking. The birth and life of a partnership at will is
predicated on the partners' mutual desire and consent. The freedom to choose with whom one wants to
associate is the very foundation and essence of that partnership. Its continued existence is, in turn,
dependent on the consistency of that mutual resolve, as well as the ability of each partner to give it, and
the absence of a cause for dissolution provided by the law itself. In this case, the partnership agreement
did not specify a time frame or undertaking. The partnership's purpose is not the specific undertaking
referred to in the law. Otherwise, all partnerships that must have a purpose would be considered
partnerships for a specific undertaking.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#20
TITLE:
Rojas vs. Maglana, G.R. No. 30616, December 10, 1990
FACST OF THE CASE:
Maglana and Rojas signed the Eastcoast Development Enterprises Articles of Co-Partnership (EDE). It was
a partnership with an indefinite lifespan. Maglana will oversee business operations, while Rojas will
oversee the logging operation as the logging superintendant. They will share equally in all profits and
losses. Due to the difficulties they encountered, they decided to use Pahamatong sources as industrial
partners. They signed their Articles of Co-Partnership under EDE once more. The contract is for 30 years.
Pamahatong eventually sold his stake to Maglana and Rojas, who also contributed equipment. Maglana
and Rojas continued their collaboration after Pamahatong left. After three months, Rojas signed a
management contract with another logging company. He walked away from the partnership. He even
resigned from the partnership and was transferred to CMS. He never informed Maglana that he would be
unable to make the promised contributions and would be unable to work as logging superintendent.
Maglana then informed Rojas that the latter's share would be limited to 20% of net profits. Rojas took
more money from the partnership than he contributed. As a result, Maglana informed Rojas that he was
dissolving the partnership.
ISSUES:
What is the nature of the partnership and legal relationship of Maglana and Rojas after Pahamatong
retired from the second partnership.
HELD:
The partners did not intend to dissolve the first partnership upon the formation of the second, which they
unmistakably called "additional agreement," and all business transactions were carried out under the duly
registered articles even during the second partnership's existence. Except in favor of Pahamatong, which
was fully paid by the duly registered partnership, no rights or obligations accrued in the name of the
second partnership.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#21
TITLE:
Yu vs. National Labor Relations Commissions, G.R. No. 97212, June 30, 1993
FACST OF THE CASE:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain Products Company Limited,
where he was primarily responsible for the overall operations of the partnership's marble quarrying and
export business. In 1985, he was hired through a Partnership Resolution with a monthly salary of
P4,000.00. He initially received only half of his monthly salary and was promised by the partners that the
balance would be paid once additional operating funds from abroad were secured. However, the general
partners and one of the limited partners sold and transferred their interest to Willy Co and Emmanuel
Zapanta without his knowledge in 1988. As a result, the new major partners decided to relocate the firm's
headquarters while continuing to operate the old partnership under its old firm name and with all of its
employees and workers except the petitioner. When petitioner learned of the changes in the partnership,
he went to the new main office to meet the new partners and demand payment of his unpaid salaries,
but the latter refused to pay him and instead informed him that because he bought the business from the
original partners, he was responsible for the obligations of the old partnership, including petitioner's
unpaid salaries. As a result, petitioner was fired from the partnership.
ISSUES:
1.
Whether the partnership which had hired the petitioner as Asst. General Manager had been
extinguished and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta.
2.
Whether petitioner could assert his rights under his employment contract as against the new
partnership.
HELD:
1. Yes. The legal effect of the changes in partnership membership was the dissolution of the old
partnership that hired the petitioner in 1984 and the establishment of the new firm composed of Willy Co
and Emmanuel Zapanta in 1988. This is based on the provisions listed below:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on as a distinguished from the winding up of the
business.
Art. 1830. Dissolution is caused: 1. without violation of the agreement between the partners; b. by the
express will of any partner, who must act in good faith, when no definite term or particular undertaking
is specified. 2. in contravention of the agreement between the partners, where the circumstances do
not permit a dissolution under any other provision of this article, by the express will of any partner at
any time;
However, the legal consequence of dissolution of a partnership do not automatically result in the
termination of the legal personality of the old partnership as according to Art. 1829, " on dissolution of
the partnership is not terminated, but continues until the winding up of the partnership affairs is
completed. The new partnership simply continued the old partnership's operations under its old firm
name without winding up the old partnership's business affairs.
2. Yes. Creditors of the old partnership are also creditors of the new partnership, which continued the
former's business without liquidating the partnership affairs, according to Art. 1840. Thus, a creditor of
the old Jade Mountain, such as the petitioner, has the right to sue the new Jade Mountain for unpaid
wages and other claims relating to his employment with the old partnership.
Harry Emerson T. Abiera
Juris Doctor
Philippine Law School
ATP CD-#22
TITLE:
Laguna Transportation Co., Inc., vs Social Security System, G.R. No. L-14606, April 28, 1960
FACST OF THE CASE:
On January 24, 1958, petitioner Laguna Transportation Co., Inc. filed a petition with the Court of First
Instance of Laguna, requesting that the court issue an order declaring that it is not required to register as
a member of respondent Social Security.
Respondent filed its answer to this petition on February 11, 1958, praying for dismissal due to petitioner's
failure to exhaust the Social Security Act contributions. administrative remedies, as well as a declaration
that the petitioner is covered by the Act, because the latter's business has been in operation for at least
two years prior to September 1, 1957.
On the day of the trial, the parties agreed to present a stipulation of facts in lieu of any other evidence,
which they did on May 27, 1958, as follows:
"Therefore, the Court is of the opinion and declares that the petitioner was an employer engaged in the
business of common carrier for at least two years prior to the enactment of Republic Act No. 1161, as
amended by Republic Act 1792, and... as a result, it was subject to compulsory coverage under said law."
Petitioner filed a direct appeal to us based on this decision, raising purely legal issues.
ISSUES:
Petitioner contends that the lower court erred in concluding that it is an employer engaged in business as
a common carrier for at least two years prior to the enactment of the Social Security Act and thus subject
to mandatory coverage under the Act.
HELD:
The Laguna Transportation Company, an unregistered partnership comprised of Gonzalo Mercado,
Artemio Mereado, Florentina Mata, and Dominador Vera Cruz, began operations as a common carrier on
April 1, 1949. These four unique. On June 20, 1956, the partners, along with two others (Maura Mendoza
and Sabina Borja), converted the partnership into a corporate entity by filing articles of incorporation with
the Securities and Exchange Commission. The company name "Laguna Transportation Company" was not
chosen at random... changed, except for the addition of the word "Inc." to indicate that the petitioner had
been duly incorporated under existing laws. The corporation continued the unregistered partnership's
transportation business, using the same lines and equipment. In reality, there was only a change in the
organizational structure of the entity engaged in the passenger transportation business. As a result, said
entity had been in operation as an employer engaged in business for at least three years prior to the
enactment of the Social Security Act on June 18, 1954 and for at least two years prior to the amendment
act's passage on June 21, 1957. Petitioner contends that because it was only registered as a corporation
with the Securities and Exchange Commission on June 20, 1956, it must be considered to have been in
operation on... stated the time. While it is true that a corporation, once formed, is given a legal personality
separate and distinct from the individuals who comprise it, this is merely a legal fiction introduced for
convenience and to serve the ends of justice. The idea cannot be extended beyond its reasons and policy,
and when invoked in support of an end subversive of this policy, the courts will disregard it. Adopting the
petitioner's argument would undermine rather than advance the goals of the Social Security Act. An
employer could easily avoid the statute by changing his organizational form every other year and then
claiming exemption from contribution... to the System as needed, on the basis that, as a new entity, it has
not been in operation for at least two years.
Finally, the weight of authority supports the position that where a corporation was formed and consisted
of members of a partnership whose business and property was conveyed and transferred to the
corporation for the purpose of continuing its business, in exchange for which. When corporate capital
stock is issued, the corporation is presumed to have assumed partnership debts and is therefore prima
facie liable for them.
The corporation is simply an extension of the partnership.