Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin Misa G.R.

No. 109248 July 3, 1995 Vitug, J. Facts: Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew in said firm. He filed with SEC a petition for dissolution and liquidation of partnership. SEC en banc ruled that withdrawal of Misa from the firm had dissolved the partnership. Reason: since it is partnership at will, the law firm could be dissolved by any partner atanytime, such as by withdrawal therefrom, regardless of good faith or bad faith, since nopartner can be forced to continue in the partnership against his will. Issue: 1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo)is a partnership at will; 2. WON the withdrawal of Misa dissolved the partnership regardlessof his good or bad faith; Held: 1. Yes. The partnership agreement of the firm provides that [t]he partnership shallcontinue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners. 2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will (e.g. by way of withdrawal of a partner). He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages. ANTONIA TORRES assisted by her husband, ANGELO TORRES; andEMETERIA BARING, petitioners, vs. COURT OF APPEALS and MANUELTORRES, respondents.

FACTS: This is a petition for Review on Certiorari for the decision of the Court of Appeals affirming the decision of the Trial Court in favour of herein respondent anddenying reconsideration.Sisters Antonia Torres and Emeteria Baring, petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of aparcel of land into a subdivision. They executed a Deed of Sale covering the saidparcel of land in favor of respondent, who then had it registered in his name. Bymortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots . The project did not push through, and the land was subsequently foreclosed by thebank.Respondent used the loan to implement the Agreement, among others are: effectthe survey and subdivision of the lots; approval of the subdivision project with LapuLapu City Council; advertisement in the local newspaper; construction of roads,curbs and gutters; and construction of 6 low cost housing units.Respondent claimed that the subdivision project failed, however, becausepetitioners and their relatives had separately caused the annotations of adverseclaims on the title to the land, which eventually scared away prospective buyers.Despite his requests, petitioners refused to cause the clearing of the claims, therebyforcing him to give up on the project.Petitioners filed with the RTC a civil action against respondent. RTC ruled in favourof respondent and which was later affirmed by CA. Hence, this Petition. ISSUE: WON, the CA erred in concluding that the agreement entered betweenpetitioners and respondent was that of a joint venture/partnership. HELD: Art. 1767. By the contract of partnership two or more persons bindthemselves to contribute money, property, or industry to a common fund, with theintention of dividing the profits among themselves. Under the parties Agreement, petitioners would contribute property to thepartnership in the form of land which was to be developed into a subdivision; whilerespondent would give, in addition to his industry,

the amount needed for generalexpenses and other costs. Furthermore, the income from the said project would bedivided according to the stipulated percentage. Clearly, the contract manifested theintention of the parties to form a partnership.

It should be stressed that the parties implemented the contract. Thus, petitionerstransferred the title to the land to facilitate its use in the name of the respondent.On the other hand, respondent caused the subject land to be mortgaged, theproceeds of which were used for the survey and the subdivision of the land and soon. Respondent's actions clearly contradict petitioners' contention that he made nocontribution to the partnership. Under Article 1767 of the Civil Code, a partner maycontribute not only money or property, but also industry.Moreover, petitioners contend that they cannot be bound by the contract.Art. 1315. Contracts are perfected by mere consent, and from that moment theparties are bound not only to the fulfillment of what has been expressly stipulatedbut also to all the consequences which, according to their nature, may be in keepingwith good faith, usage and law.It is undisputed that petitioners are educated and are thus presumed to haveunderstood the terms of the contract they voluntarily signed. If it was not inconsonance with their expectations, they should have objected to it and insisted onthe provisions they wanted.Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to befinancially disadvantageous will not relieve parties thereto of their obligations. Theycannot now disavow the relationship formed from such agreement due to theirsupposed misunderstanding of its terms.Lastly, claiming that respondent was solely responsible for the failure of thesubdivision project, petitioners maintain that he should be made to pay damagesequivalent to 60 percent of the value of the property, which was their share in theprofits under the Joint Venture Agreement.We are not persuaded. True, the Court of Appeals HELD that petitioners' acts werenot the cause of the failure of the project. But it also ruled that neither wasrespondent responsible therefor. In imputing the blame solely to him, petitionersfailed to give any reason why we should disregard the factual findings of theappellate court relieving him of fault. Accordingly, we find no reversible error in theCA's ruling that petitioners are not entitled to damages. WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED.Costs against petitioners. Bourn vs. Carman, 7 Phil 168 Facts: Plaintiff seeks to recover the sum of money balance due on a contract for the sawing of lumber for the lumber yard of Lo-chim-Lim. The latter entered into a contract acting in hid own name and to

personally pay the work. The plaintiff, however, brought the action to the inclusion of the defendants because at the time of the contract they were joint proprietor and operators.

Issue: What is the real legal nature of the participation of the appellants? Held: The partnership between Lim and the defendants was formed by verbal agreement only. There was no showing that it was reduced into writing nor recorded in public instruments and no corporate name between them. It does not appear that there is a mutual agreement between the parties. The accidental partnership of cuentas en participacion was in effect. Therefore, the claim of the plaintiff must fail. Binglangawa vs. Constantino, 109 Phil 168 Facts: Petitioners were the owners of parcel of land. They appoint the respondent as their exclusive agent to develop and sell the area. As compensation, the respondent shall receive a commission and percentage for the collection. There was a breached of contract of agency on the part of petitioners rendering the respondent to file a complaint to pay the respondent of the unpaid balances. Petitioners promised to pay their liability and the respondent consented to the settlement but to no avail. While the case was pending, respondent filed with the ROD notice of lis pendens; involving rights and interest and claims for services and damages. The ROD requested the petitioners to surrender the owners copy of CTC. When petitioners registered the absolute deed of sale in favor of Santos, the ROD made the annotations of lis pendens. The petitioners sought for the cancellation of the lis pendens which te lower courts granted. The courts ruled that the action of respondent is purely a claim of money. The respondents contends that the commission and collection made by him, as well as the advancements, converted him into partner. Issue: Is the respondent a partner?

Held: No. Respondent was only an appointed agent. In fact he expressly said in his complaint that the petitioners were indebted to him for the unpaid balance and consented to the settlement. The advances made by the respondent were never considered as contribution to make him a partner. In fact, after the liquidation at the time of the termination of the agency, the whole balance was considered petitioners debts which appellant consented. U.S. vs. Mhun, 6 Phil 164

Facts: a contract between Nicolas Carranceja and Muhn was entered into making the latter the agent to buy products. Muhn admitted that he was indedted to the estate of the deceased and promise to pay. No payment was made and so the representativeof the estate filed a case of estafa. Muhn contends that he is a partner. Issue: Is the respondent a partner? Held: No. Muhn was only an agent of Nicolas. The money that was furnished to the defendant for the purpose of carrying on the business was the money of Nicolas, and did not become the money of defendant as soon as it was furnished to him. The fact that the money was charged to the defendant and other articles cannot change the essential character of the contract. Pioneer Insurance vs. Court of Appeals, 175 scra 668 Facts: Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship. One time, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in installments. Pioneer Insurance and Surety Corporation as surety executed and issued its Surety Bond in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts. It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in both petitions) contributed some funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand his airline business. During these transactions, Lim executed two(2) separate indemnity agreements in favor of Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts. Lim in an undertaking promised to incorporate his airline in accordance with their agreement and proceeded to acquire the planes on his own account. Since then, Lim has refused, failed and still refuses to set up the corporation or return the money of Maglana and the others upon demand. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety, Pioneer. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage.

Pioneer filed an action for judicial foreclosure with an application for a writ of preliminary attachment against Lim and respondents, Cervanteses, Bormaheco and Maglana. After trial on the merits, a decision was rendered holding Lim liable to pay Pioneer but dismissed Pioneer's complaint against all other defendants. Issues: 1. Was the failure to incorporate in effect created a de facto partnership which would allow petitioner to be reimbursed from the losses incurred? 2. What legal rules govern the relationship of co- investors Jacob S. Lim, Bormacheco, Fransico, Cervantes and Maglana whose agreement was to do business as a Corporation but failed to do so? Ruling: No. The Supreme Court held that no de facto partnership was created among the parties which would entitle the petitioner to a reimbursement of the supposed losses of the proposed corporation. In some cases, it is ordinarily held that persons who attempt, but fail, to form a corporation and who carry on business under the corporate name occupy the position of partners inter se (Lynch v. Perryman, 119 P. 229, 29 Okl. 615, Ann. Cas. 1913A 1065). However, in London Assur. Corp. v. Drennen, Minn., 6 S.Ct. 442, 116 U.S. 461, 472, 29 L.Ed. 688, such a relation does not necessarily exist, for ordinarily persons cannot be made to assume the relation of partners, as between themselves, when their purpose is that no partnership shall exist and it should be implied only when necessary to do justice between the parties; thus, one who takes no part except to subscribe for stock in a proposed corporation which is never legally formed does not become a partner with other subscribers who engage in business under the name of the pretended corporation, so as to be liable as such in an action for settlement of the alleged partnership and contribution (Ward v. Brigham, 127 Mass. 24). In the instant case, it was found during trial that the petitioner received the amount of P151,000.00 representing the participation of Bormaheco and Atty. Constancio B. Maglana in the ownership of the subject airplanes and spare parts. The record shows that defendant Maglana gave P75,000.00 to petitioner Jacob Lim thru the Cervanteses in order to incorporate his airline in accordance with their agreement and proceeded to acquire the planes on his own account. However, petitioner denied their claims of such. Doctrinal pronouncement in Pioneer Insurance: When parties come together intending to form a

Corporation, but failed to do so, then the Following Rules may apply:

(a) Parties who had intended to participate or actually participated in the business affairs of the proposed corporation would be considered as partners under a de facto partnership, and would be liable as such in an action for settlement of partnership obligations; -While(b) Parties who took no part except to subscribe to shares of stock in a proposed corporation, do not become partners with other subscribers who engaged in business under the name of the pretended corporation, and are not liable for action for settlement of the alleged partnership contribution. Lim Tong Lim vs. Philippine Fishing, 317 SCRA 728 Facts: On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation. On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay respondent. It ruled that a partnership among Lim, Chua and Yao was formed based on a compromised agreement providing that after selling their 4 vessels and the nets they will divide the excess into three (3). Lim appealed asserting that no partnership existed among them. He disclaims any direct participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only, and that he has not even met the representatives of the respondent company, invoking the doctrine of Corporation by estoppel. Issue: 1.Was there a Contract of Partnership formed between, Lim, Chua and Yao? 2. What is the Doctrine of Corporation by estoppel? Will it apply in this case?

Ruling: 1. Yes, there was a partnership formed. The Supreme Court held that under Art. 1767 of the Civil Code By the contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. In the case at bar, from the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim who was petitioner's brother. In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the excess or loss. Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. 2. Sec. 21 of the Corporation Code of the Philippines provides: Sec. 21. Corporation by estoppel. All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided however, That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality. Although, petitioner insists that the doctrine of corporation by estoppel only applies to those who dealt in the name of the ostensible corporation (Ocean Quest Fishing Corp.) should be held liable. Since his name does not appear on any of the contracts and since he never directly transacted with the respondent corporation, ergo, he cannot be held liable. The Supreme Court in applying the doctrine of Corporation by estoppel held that The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first instance, an unincorporated association, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as a corporation and received benefits from it, may be barred from denying its corporate existence in a suit brought against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for contracts they impliedly assented to or took advantage of.

In the case at bar, petitioner as considered to be a third party who, benefited from the use of the nets found inside F/B Lourdes, the boat which has earlier been proven to be an asset of the partnership. Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. CIR vs. Suter Facts: Suter, Spirig and Carlson agreed to form a limited partnership in a business engaged in importation, marketing, distribution and operations of automatic phonographs, radios, television sets and amusement machines. Later on, Suter and Spirig got married. Thereafter, Carlson sold his share to Suter and Spirig. Ever since, the couple had been filing a separate income return for the limited partnership, in which the CIR had expressed no objection. In the CIRs assessment in 1959, it determined that there was discrepancy on the income return of the spouses and the limited partnership. Upon learning of such determination, partner-spouses protested against the assessment and requested for its cancelation. Issues: 1. Whether or not the subsequent marriage between the parties and the sale of Carlsons share to them had made the partnership into a universal one. Held: 1. The partnership between the spouses was not a universal partnership, but a particular one. A universal partnership requires either that the object of the association be all the present property of the partners, as contributed by them to the common fund, or else all that the partners may acquire by their industry or work during the existence of the partnership.

In the instant case, each of them contributed a fixed sum of money, which they separately owned before their marriage. Their subsequent union had made those contributions to be part of their respective separate and exclusive property. Also, the partnership between the spouses is not one contemplated under Article 1677, which was one prohibited to enter by the parties. E. S. LYONS vs. C. W. ROSENSTOCK, FACTS: Henry W. Elser was engaged in buying, selling, and administering real estate. E. S. Lyons joined with him, the profits being shared by the two in equal parts. In buying the San Juan Estate, he obtained a loan of P50,000 to complete the amount needed for the first payment. The lender insisted that he should procure the signature of the Fidelity & Surety Co. on the note to be given for said loan. Elser mortgaged to the Fidelity & Surety Co. the property owned by himself and Lyons on Carriedo Street to secure the liability thus assumed by it. ISSUE: Whether there was a general relation of partnership. HELD: NO. There was clearly no general relation of partnership, under article 1678 of the Civil Code. It is clear that Elser, in buying the San Juan Estate, was not acting for any partnership composed of himself and Lyons, and the law cannot be distorted into a proposition which would make Lyons a participant in this deal contrary to his express determination. Ortega vs. Court of Appeals Facts: Misa, a senior partner in the Bito, Misa & Lozada law firm, wrote a letter to his associates that he will be withdrawing and retiring from the firm. Later, he filed a petition for dissolution and liquidation of partnership in the SEC. The respondent-appellees (Misas associates) filed an opposition of such petition for dissolution. The hearing officer did not grant the petition. However, upon appeal on SEC, it was reversed;

The CA affirmed the decision of SEC in toto. Issue: Whether or not the partnership of Bito, Misa & Lozada is a partnership at will. Held: Yes, it is a partnership at will. A partnership that does not fix its term is a partnership at will. In the partnership agreement between the parties, it does not provide for a specified period or undertaking. The duration clause simply stated the continuance of the partnership. The Court stated that the birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Thus, a partner may ask for the dissolution of the partnership at will, provided that he is acting in good faith. LIM TONG LIM VS PHIL FISHING GEAR FACTS: On behalf of Ocean Fishing Corporation, Antonio Chua & Peter Yao entered into a Contract for the purchase of fishing nets from the respondent. They claimed that they were engaged in a business venture w/ Lim Tong Lim (petitioner), who however was not a signatory to the agreement.

They failed to pay the fishing nets and the floats; hence, Philippine Fishing Gear filed a collection suit against Chua, Yao and Lim Tong Lim. The Suit was brought against the three in their capacities as general partners, on the allegation that Ocean Quest was a non-existent corporation as shown by a Certification from the Securities and Exchange Commission. ISSUE: Whether a general partnership is formed between Chua, Yao and Lim. YES

RULING:

Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in the fishing business. They purchased the boats, which constituted the main assets of the partnership, and they agreed that the proceeds from the sales and operations thereof would be divided among them.

Lim, Chua and Yao decided to form a corporation. Although it was never legally formed for unknown reasons, this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held liable as general partners. J. M. TUASON & CO., INC., represented by it Managing PARTNER,GREGORIA ARANETA, INC., plaintiff-appellee,-versusQUIRINO BOLAOS, defendant-appellant. FACTS: This was an action to recover possession of a parcel of land where theplaintiff was represented by a corporation. Issue: WON the case should be dismissed on the ground that the case was notbrought by the real property in interest Held:No. there is nothing to the contention that the present action is not brought bythe real party in interest, that is, by J. M. Tuason and Co., Inc. What the Rulesof Court require is that an action be brought in the name of, but notnecessarily by , the real party in interest. (Section 2, Rule 2.)

 The complaint is signed by the law firm of Araneta and Araneta, "counsel forplaintiff" and commences with the statement "comes now plaintiff, throughits undersigned counsel." It is true that the complaint also states that theplaintiff is "represented herein by its Managing Partner Gregorio Araneta,Inc.", another corporation There is nothing against one corporation being represented byanother person, natural or juridical, in a suit in court. The contention that Gregorio Araneta Inc. cannot act as managingpartner for plaintiff on the theory that it is illegal for twocorporations to enter into a partnership is without merit, for the truerule is that though a corporation has no power into a partnership, itmay nevertheless enter into a joint venture with another where thenature of that venture is in line with the business authorized by itscharter. NOTE: Point of the case is about joint ventures being treated separately frompartnerships. Tuason does not explain why there was a difference in treatment of corporate involvement in partnerships as compared to that when it come to jointventures. Manuel Torres, Jr. vs Court of Appeals 278 SCRA 793 Business Organization Corporation Law Transfer of Shares of Stocks Corporate Records Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty & Development Corporation (TRDC). TRDC is a small family owned corporation and other stockholders thereof include Judge Torres nieces and nephews. However, even though Judge Torres owns the majority of TRDC and was also the president thereof, he is only entitled to one vote among the 9-seat Board of Directors, hence, his vote can be easily overridden by minority stockholders. So in 1987, before the regular election of TRDC officers, Judge Torres assigned one share (qualifying share) each to 5 outsiders for the purpose of qualifying them to be elected as directors in the board and thereby strengthen Judge Torres power over other family members.

However, the said assignment of shares were not recorded by the corporate secretary, Ma. Christina Carlos (niece) in the stock and transfer book of TRDC. When the validity of said assignments were questioned, Judge Torres ratiocinated that it is impractical for him to order Carlos to make the entries because Carlos is one of his opposition. So what Judge Torres did was to make the entries himself because he was keeping the stock and transfer book. He further ratiocinated that he can do what a mere secretary can do because in the first place, he is the president.

Since the other family members were against the inclusion of the five outsiders, they refused to take part in the election. Judge Torres and his five assignees then decided to conduct the election among themselves considering that the 6 of them constitute a quorum.

ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the subsequent election is valid.

HELD: No. The assignment of the shares of stocks did not comply with procedural requirements. It did not comply with the by laws of TRDC nor did it comply with Section 74 of the Corporation Code. Section 74 provides that the stock and transfer book should be kept at the principal office of the corporation. Here, it was Judge Torres who was keeping it and was bringing it with him. Further, his excuse of not ordering the secretary to make the entries is flimsy. The proper procedure is to order the secretary to make the entry of said assignment in the book, and if she refuses, Judge Torres can come to court and compel her to make the entry. There are judicial remedies for this. Needless to say, the subsequent election is invalid because the assignment of shares is invalid by reason of procedural infirmity. The Supreme Court also emphasized: all corporations, big or small, must abide by the provisions of the Corporation Code. Being a simple family corporation is not an exemption. Such corporations cannot have rules and practices other than those established by law. ANGELES v. SECRETARY OF JUSTICE

(July 29, 2005)

Oscar Angeles and petitioners, The Hon. respondents DOCTRINE: The purpose e of v.

Emerita

Angeles,

Secretary of Justice

and Felino Mercado,

registration

of the contract of

partnership

with the

SEC is to giv a

notice to third

parties. Failure to register the contract of partnership does not partnership and

ffect the liability of the s he it affect the partners NATURE: Special civil PONENTE: Carpio, J. action.

of the partners to third persons, nor doe A partnership or partnership. may exist even if t

partnerships juridical personality. the words partner

do not use

Certiorari.

FACTS: Angeles -in-law oClaimed ast for 5 that Mercado convinced years, covering 8 them to enter into a contract of antichresis, to l of land planted with fruitby Juan Sanzo parties ag spouses filed a criminal complaint for estafa against Mercado, their brother

parcels

bearing lanzones trees in Nagcarlan, reed that Mercado would

Laguna and ands

owned

administer the

and complete

the necessary paperwork

After

years, the Angeles

spouses asked for an accounting from Mercado, and th demand for an over accounting did thy discover that the subject land under Mercado Mer and

ey claim that only after this cado had

put the contract of antichresis names

his spouses

Mercado denied the o

Angeles

spouses allegations

Claimed industrial

that there exists an partnership, as

colloquially known sosyo industrial, him and

between

his spouse

as industrial partners and the Angeles before the

spouses

as

fina

nciers, and that this had the subject land o

existed since 1991,

contract of antichresis over

Mercado used

his

and his spouses earnings as he entered into in behalf

part

of the capital in the

business was thei of

transactions which r

of the Angeles spouses. It

practice to enter into

business transactions with other people under the name

Mercado ciers o

because the Angeles spouses did not want to be identified as the finan

Attached bank receipts showing deposits in behalf of Emerita Angeles under his name for the Angeles spouses

and contracts

During the written sosyo

barangay conciliation

proceedings,

Oscar

Angeles stated that there

was

industrial would come from the Angeles spouses while the profit would

agreement: capital be divided

evenly between

Mercado and the

Angeles spouses

Provincial Prosecution Office: first recommended filed his the filing of a criminal information for estafa, but after Mercado

counterfor reconsideration, issued an amended resolution dismissing the

affidavit and moved complaint

Angeles he

spouses of

appealed

to Sec. of Justice,

saying that the document of

evidencing t o

contract

antichresis executed in the name

the Mercado spouses, instead

the

Angeles

spouses, P210, 000

and that such document

alone

proves

Mercados misappropria

tion of their

Sec.

of Justice: appeal

dismissed the o

Angeles

spouses

failed to show sufficient proof that Mercado

deliberately deceived

hem in the o

transaction

Mercado satisfactorily explained that the d o as the financiers

Angeles spouses

do not want to be

reveale

Under the circumstances, the o very start that the

it

was

more

likely that the Angeles spouses knew from was not really in their names

questioned document

A partnership truly existed

between the

Angeles spouses

and Mercado,

which was t

clear from the fact that they contributed money to a common he profits among themselves.

fund and divided

Angeles n o

spouses

acknowledged

their joint business the

venture in the barangay conciliatio business was conducted

proceedings

although

they assailed

manner the

Although the legal formalities for the p o relationship was evident.

formation were

not

adhered to, the partnershi

There is no estafa

where money is

delivered

by a amount

partner shall be

to his coapplied to the busin

partner on the latters representation that the ess of their partnership. civil In case of the

money received, the co-

partners liability is

in nature

ISSUES/HELD: 1.

W/N the

Sec. of Justice 2.

committed

grave abuse of discretion in dismissing the ap

peal - No

W/N a partnership existed between Mercado and the Angeles spouses - Yes

3.

W/N there

was

misappropriation

by Mercado

No

RATIO/RULING: 1. Angeles spouses fail to convince when that the Secretary of Justice appeal. Moreover, committed grave a pr Sec. o 2. A

abuse of discretion ocedural error

he dismissed their

they committed of the

when they failed to file a motion

for reconsideration

f Justices resolution, which is already enough ngeles spouses allege that of the they had Civil Code. no

reason to dismiss the case. with Mercado, relying on

partnership

Arts.

1771 to 1773

The Angeles spouses position that there is a public instrument no water indicating the same

no

partnership

because

of the lack of with the SEC

and a

lack of registration

holds o

The Angeles spouses contributed money to the rty o

partnership and

not

immovable

prope

Mere te

failure to register that has

the the

contract

of

partnership of

with the

SEC does not invalida of re

a contract

essential requisites

a partnership. The purpose

gistration is to give notice to third parties.

Failure to register

does

not

affect the

liability of the partnership and

of the partn

ers to third persons, nor

does it affect the

partnerships juridical personality

The Angeles spouses admit o

to facts

that prove

the existence

of a

partnership

A contract showing a sosyo or o industrial partnership

industrial

Contribution of money o

& industry to a

common

fund

Division of profits between orily explained that the ciers, thus the document

the

Angeles

spouses and Mercado

3.

Mercado

satisfact

Angeles spouses do not want to be revealed which was in the was deceit or false name of Mercado and

as the finan

his spouse fail Angeles

to convince that there spouses to part with

representation that induced the

their money

Even

the

RTC of spouses the

Sta.

Cruz,

Laguna,

which

handled the

civil case filed by the was the practice b

Angeles

against contracts

Mercado and

Leo Cerayban name

stated that it

to have

secured in Mercados

as the Angeles BIR as

spouses fear Oscar Angeles

eing kidnapped

by the NPA or

being questioned

by the

was

working with

the government.

Accounting of the

proceeds is

not a

proper

subject for the present case. DISPOSITION: Petition for certiorari dismissed. Decision ROJAS VS. MAGLANA FACTS: Maglana and Rojas executed their Articles of Co-partnership called Eastcoast DevelopmentEnterpises which had an indefinite term of existenceand was registered with the SEC and had a TimberLicense. One of the EDEs purposes was to apply orsecure timber and/or private forest lands a nd tooperate, develop and promote such forests rightsand concessions. M shall manage the business affairswhile R shall be the logging superintendent. Allprofits and losses shall be divided share and sharealike between them.Later on, the two availed the services of Pahamotangas industrial partner and executed another articles of copartnership with the latter. The purpose of thissecond partnership was to hold and secure renewalof timber license and the term of which was fixed to30 years.Still later on, the three executed a conditional sale of interest in the partnership wherein M and R shallpurchase the interest, share and participation in thepartnership of P. It was also agreed that afterpayment of such including amount of loan securedby P in favor of the partnership, the two shall becomeowners of all equipment contributed by P. After this,the two continued the partnership without anywritten agreement or reconstitution of their articlesof partnership.Subsequently, R entered into a managementcontract with CMS Estate Inc. M wrote him re: hiscontribution to the capital investments as well as hisduties as logging superintendent. R replied that hewill not be able to comply with both. M then told Rthat the latters share will just be 20% of the netprofits. Such was the sharing from 1957 to 1959without complaint or dispute. R took funds from thepartnership more than his contribution. M notified Rthat he dissolved the partnership. R filed an actionagainst M for the recovery of properties andaccounting of the partnership and damages. CFI: the partnership of M and R is after P retired isone of de facto and at will; the sharing of profits andlosses is on the basis of actual contributions; there isno evidence these properties were acquired by the partnership funds thus it should not belong to it;neither is entitled to damages; the letter of M ineffect dissolved the partnership; sale of forestconcession is valid and binding and should beconsidered as Ms contribution; R must pay or turnover to the partnership the profits he received fromCMS and pay his of Sec. of Justice affirmed.

personal account to the partnership;M must be paid 85k which he shouldve received butwas not paid to him and must be considered as hiscontribution. ISSUE: what is the nature of the partnership andlegal relationship of M-R after P retired from thesecond partnership? May M unilaterally dissolve thepartnership? SC: There was no intention to dissolve the firstpartnership upon the constitution of the second aseverything else was the same except for the fact thatthey took in an industrial partner: they pursued thesame purposes, the capital contributions call for thesame amounts, all subsequent renewals of TimberLicense were secured in favor of the first partnership,all businesses were carried out under the registeredarticles.M and R agreed to purchase the interest, share andparticipation of P and after, they became owners of the equipment contributed by P. Both consideredthemselves as partners as per their letters. It is not apartnership de facto or at will as it was existing andduly registered. The letter of M dissolving thepartnership is in effect a notice of withdrawal andmay be done by expressly withdrawing even beforeexpiration of the period with or without justifiablecause. As to the liquidation of the partnership it shallbe divided share and share alike after anaccounting has been made.R is not entitled to any pr ofits as he failed to give theamount he had undertaken to contribute thus, hadbecome a debtor of the partnership.M cannot be liable for damages as R abandoned thepartnership thru his acts and also took funds in anamount more than his contribution. AGAD v. MABATO (June 28, 1968) DOCTRINE: A partnership may be constituted in any form, except case a where immovable public instrument property or shall be ne

real rights are contributed thereto, in which cessary. ed A contract of partnership is said

void, whenever immovable

property is contribut parties, and

thereto, if inventory of

property is not made,

signed by the

attached to the public instrument. NATURE:

Appeal, taken of First

by plaintiff Mauricio Agad, we

from an

order of

dismissal

of the

Court

Instance of Davao, 1773 of our Civil

are called

upon to determine the applicability of of partnership on which the co

Article mplaint

Code to the contract

herein is based.

PONENTE: Concepcion, C.J. FACTS: -

Plaintiff

alleges

that he

and defendant Severino Mabato are instrument business, Agad dated August 29, 1952 "

pursuant

to a public

partners in a fishpond to the capital of which of the profits.

contributed P1,000, with the right

to receive

50%

That from 1952 up to Mabato erations nd who handled the

and including 1956, partnership funds, had and that, yearly rendered accounts demands, of the op

of the partnership;

despite repeated

Mabato had failed a

refused to render accounts for the years 1957 to 1963.

Agad

prayed 9,

in his complaint against Mabato 1964, that

and Mabato

& Agad

Company,

filed

on June judgment as be

rendered sentencing Mabato of the

to pay him (Agad)

the sum of

P14,000,

his share in the profits for the

partnership to P1,000 as attorney's winding up fees, of and

period from 1957 to 1963, in addition of the partnership, as

ordering the dissolution fairs by a receiver to

well as the

its af

be appointed.

In his

answer, the formal the allegations of the ground that the complaint and denied contract therefor had the not existence o been perfect

Mabato admitted f ed,

said partnership, upon

despite the execution of his

Annex "A", because

Agad

had allegedly failed to give prayed, therefore, that the

P1,000 contribution to the partnership capital. Mabato be dismissed; that Annex "A" be

complaint ab ; initio

declared void

and that Agad

be sentenced to pay actual, fees.

moral and exemplary damages,

as w

ell as attorney's -

Mabato filed a cause of action ter of the case

motion to dismiss, upon the and that

ground that the complaint states no jurisdiction over the subject

no mat

the lower court had

, because it involves due smiss hearing, the the

principally the

determination of rights order appealed from, of

over

public lands.

After

court issued the

granting the motion to di conclusion was pr void, pursuant

complaint for

failure to state a cause

action. This

edicated

upon

the theory that the contract of Civil not Code, because

partnership is null and an inventory of the

to Art. 1773 of our in said instrument had ISSUES: The issue hinges n contributed

fishpond referred

been attached thereto.

on whether or not "immovable

property or real rights" have

bee

to the partnership under consideration. HELD: NO. lower court held that the answer partnership should be in the affir in the

(Mabato alleged and the mative,

because "it is really inconceivable how a business without said fishpond property (being)

engaged

fishpond could exist t...)

contributed

to the

partnership."

Bu

RATIO/RULING: -

The Court said that it should be noted, however, that, was established "to as stated in

Annex "A" the partnership operate a fishpond", not Moreover, to "engage

in a fishpond business". a fishpond or a real right to

none of the

partners contributed either were limited

any fishpond. Their contributions

to the

sum of P1,000 each.

The operation

of

the fishpond mentioned in fishpond nor a real

Annex "A" was the right thereto

purpose of the p

partnership. Neither said artnership or became ght thereto

was contributed to the or

part of the part

capital thereof,

even if a fishpond

a real ri

could become

of its assets.

DISPOSITION: WHEREFORE, we find that said Article 1773 of the Civil Code is not in point

and that, the order appealed case remanded to the

from should be, as it is hereby set aside and the with the costs of this ordered

lower court for further proceedings, Severino Mabato. It

instance against LITONJUA v. (Dec 13, 2005)

defendant-appellee,

is so

LITONJUA

DOCTRINE: A Partnership must be in a public document if: 1)

Immoveable

Property and

Real

Rights

contributed to it.

a.

If

it

involves immoveable property, 2)

inventory of such is needed signed

by the

par

tners. (else VOID)

It

involves

capital P

3,000 (must

be filed

in the

SEC)

NATURE: Petition for review on certiorari PONENTE: Garcia, J. FACTS: Aurelio (Petitioner) a and Eduardo Litonjua are brothers. Aurelio alleges that he had

partnership with his brother by Eduardo

Eduardo evidenced by a giving 10%

private memorandum (unsig of the equity or 1 m

ned) executed

which said he was

illion pesos, and that they would A third person Yang was nd partnership. also

work together in maintaining the family business. alleged to be a member in the joint venture against a

Here Aurelio files for an action of Specific Performance accounting and give him his share of the

his partners, to render an ISSUES:

profits.

W/N there is a Valid HELD: No,

Partnership?

the contract was void

or at most

unenforceable.

RATIO/RULING: The supposed gned), him a contract of Eduardo partnership was evidenced by a desire to train his private brother, memorandum (unsi and promising

in which

expressed his pesos.

10% share or 1 million

The supposed 3

contract is void,

for being contrary to Articles its face, As an contains

1771,

1772,

and 177

of the Civil Code. The but is

memorandum, on

typewritten entries, p there can

ersonal in tone, be

unsigned and undated.

unsigned document, not Civil

no quibbling that

1) The memorandum does under Article 1771 of the

meet the public Code. 2) more for

instrume

ntation requirements exacted

Moreover, than P3,00

being unsigned and doubtless referring to a 0.00 in money or let alone property, The

partnership be

involving presented

Memorandum cannot Exchange

notarization,

registered with the Securities and 1772 of the

Commission

(SEC), as called

for under the Article equirement immovable

Code. 3) 1773 goes

And inasmuch as the inventory r into the matter of validity when point of in

under the succeeding Article property is

contributed to the partnership, the next of petitioners

logical

quiry turns on the nature ership. was Petitioner, then goes not one of

contribution, if any, to the supposed partn assuming arguendo, actually established an ruled even as a that the contract innominate contr innominate cont

on to allege that,

partnership that the same

act and ract, it mance

was a

source void

of actionable rights. Court as in violation 1 year after

would be was

of the statute of frauds. perfection of the contract.)

(Being its perfor

to be done

DISPOSITION:

Petition is DENIED ruling of the AFFIRMED JO CHUNG CANG vs. PACIFIC COMMERCIAL Co. Facts: In an insolvency proceedings of petitioner-establishment, Sociedad Mercantil, Teck Seing &Co., Ltd., creditors, Pacific Commercial and othersfiled a motion with the Court to declare the individualpartners parties to the proceeding, for each to file aninventory, and for each to be adjudicated asinsolvent debtors. Issue: What is the nature of the mercantileestablishment, Teck Seing & Co., Ltd.? Held : The contract of partnership established ageneral partnership.By process of elimination, Teck Seing & Co., Ltd. Isnot a corporation nor an accidental partnership (jointaccount association). To establish a limited partnership, there must be, atleast, one general partner and the name of at leastone of the general partners must appear in the firmname. This requirement has not been fulfilled. Thosewho seek to avail themselves of the protection of laws permitting the creation of limited partnershipsmust the show a substantially full compliance withsuch laws. It must be noted that all the requirementsof the Code have been met w/ the sole exception of that relating to the composition of the firm name. The legal intention deducible from the acts of theparties controls in determining the existence of apartnership. If they intend to do a thing w/c in lawconstitutes a partnership, they are partners althoughtheir very purpose was to avoid the creation of suchrelation. Here the intention of the persons makingup, Teck Seing & Co., Ltd. Was to establishpartnership w/c they erroneously denominated as alimited partnership. Hung-Man Yoc v. Kieng-chiong- Seng Arellano, J. , 1906 CA

Facts: Chua-Che Co, Yu Yec-Pin, and Ang Chu Keng were partners of Kiong-Tiao-Eng, under the firm name Kiong-Chiong-Seng. It was a mercantile partnership organized for engaging in commercial pursuits, specifically, importation of goodsfor sale here at a profit. Such organization was not evidenced by any public document as required by Art. 119 of the Code of Commerce,nor was it registered as required by Art. 17 of the said code. It was merely recorded in the Internal Revenueoffice and not in the Mercantile Registry. The agent Yu Yec Pin himself and some of his so-called partners have merely noted in the books of thepartnership, the capital which each had contributed. The name was considered as the designation of the partnership and was not proved to be the firm name. The CFI of Manila rendered a judgment for a sum of money against each and all of the defendant partners for7,962.14 pesos. Chu-Che-Co is the only one who appealed questioning his liability. Issue : Whether or not Chu-Che-Co can be held liable to pay the amount together with the other defendants. Held: No. He is absolved. Chu-Che-Co has incurred no liability and cannot be held individually responsible for thepayment of the plaintiffs claims. Ratio:

 Firm Name: o Kieng-Chiong-Seng cannot be the firm name of a general partnership. o Firm names should contain the names of all the partners, or at least one of them to be, followed in twolatter cases by the words and company. o In this case, none of the four names appear in the firm name. o Neither can it be considered as the firm name of a limited partnership; this should contain the samerequisites as the firm name of a general partnership, and in addition thereto the word limited. o Anonymous partnerships (corporations) do not require a firm name or signature; a designation adequate,for the object or objects of the business to which it is dedicated, is sufficient; however The alleged partnership never had any legal existence nor has it acquired any juridical personality in the acts andcontracts executed and made by it. It is a partnership de facto and the liability arising from the obligations it contracted with third parties must beenforceable against someone despite its lack of juridical personality.

The general provisions applicable to all partnerships in Art. 120 shall be applied: The persons in charge of the management of the association who do not comply with the requirements of recording the articles of general partnership in the public instrument and registration in the MercantileRegister shall be responsible together with the persons not members of the association with whom theymay have transacted business in the name of the same. Chu-Che-Co was not in charge of the management of the association nor did he contract with the plaintiffs. The agent of the partnership, being the person who made all the contracts of the partnership; also KiengTiao-Eng are the ones liable to plaintiffs.

(wla ko Compania vs Reyes. Mag basa sko. E follow lang nko. S.A.L.T.8.4)