1.

Fernando Santos vs Spouses Arsenio and Nieves

Reyes
Facts:

This is a petition for review on certiorari assailing CA decision which affirmed the RTC decision. Santos
and Nieves Reyes verbally agreed that Santos would act as financier while Nieves and Meliton Zabat
would act as solicitors for membership and collectors of loan payment. 70% of the profits would go to
Santos while Nieves and Zabat would get 15% each. 

It was a lending venture business.

Nieves introduced Gragera of Monte Maria Corp, who obtained short term loans for the partnership in
consideration of commissions. In 1986, Nieves and Zabat executed an agreement which formalized their
earlier verbal agreement. But, Santis and Nieves later discovered that Zabat engaged in the same
lending business. Hence, Zabat was expelled from the partnership. On June 1987, Santos filed a
complaint for recovery of sum of money and damages against the respondents, alleging them as
employees who misappropriated the funds. Respondents assert they were partners and not mere
employees. Santos claimed that after discovery of Zabat's activities, he ceased infusing funds thereby
extinguishing the partnership. 

Issue:

Whether or not the parties' relationship was one of partnership or of employer-employee

Held:

Yes they were partners. 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.  The "Articles of Agreement" stipulated that the signatories shall share the profits of
the business in a 70-15-15 manner, with petitioner getting the lion's share.  This stipulation clearly
proved the establishment of a partnership.

Indeed, the partnership was established to engage in a money-lending business, despite the fact that it
was formalized only after the Memorandum of Agreement had been signed by petitioner and Gragera. 
 2. Heirs of Tan Eng Kee vs. CA

FACTS:

Benguet Lumber has been around even before World War II but during the war, its stocks were
confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled their
resources in order to revive the business. In 1981, Tan Eng Lay caused the conversion of Benguet
Lumber into a corporation called Benguet Lumber and Hardware Company, with him and his family as
the incorporators. In 1983, Tan Eng Kee died. Thereafter, the heirs of Tan Eng Kee demanded for an
accounting and the liquidation of the partnership.

Tan Eng Lay denied that there was a partnership between him and his brother. He said that Tan Eng Kee
was merely an employee of Benguet Lumber. He showed evidence consisting of Tan Eng Kee’s payroll;
his SSS as an employee and Benguet Lumber being the employee. As a result of the presentation of said
evidence, the heirs of Tan Eng Kee filed a criminal case against Tan Eng Lay for allegedly fabricating
those evidence. Said criminal case was however dismissed for lack of evidence.

ISSUE:

 Whether or not Tan Eng Kee is a partner.

HELD:

 No. There was no certificate of partnership between the brothers. The heirs were not able to show
what was the agreement between the brothers as to the sharing of profits. All they presented were
circumstantial evidence which in no way proved partnership.

It is obvious that there was no partnership whatsoever.  Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence, no certificate of partnership, no agreement as to
profits and losses, and no time fixed for the duration of the partnership.  There was even no attempt to
submit an accounting corresponding to the period after the war until Kee’s death in 1984.  It had no
business book, no written account nor any memorandum for that matter and no license mentioning the
existence of a partnership.

In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship. He
registered the same as such in 1954; that Kee was just an employee based on the latter’s payroll and SSS
coverage, and other records indicating Tan Eng Lay as the proprietor.

Also, the business definitely amounted to more P3,000.00 hence if there was a partnership, it should
have been made in a public instrument.
But the business was started  after the war  (1945) prior to the publication of the New Civil Code in 1950?

Even so, nothing prevented the parties from complying with this requirement.

Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an accounting. The
essence of a partnership is that the partners share in the profits and losses. Each has the right to
demand an accounting as long as the partnership exists. Even if it can be speculated that a scenario
wherein “if excellent relations exist among the partners at the start of the business and all the partners
are more interested in seeing the firm grow rather than get immediate returns, a deferment of sharing
in the profits is perfectly plausible.” But in the situation in the case at bar, the deferment, if any, had
gone on too long to be plausible.  A person is presumed to take ordinary care of his concerns. A demand
for periodic accounting is evidence of a partnership which Kee never did.

The Supreme Court also noted:

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners
as to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or
co-possessors do or do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in any property which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.
 3. Ortega vs. CA

 FACTS:

On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners
Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a
letter stating that he is withdrawing and retiring from the firm and asking for a meeting with the
petitioners to discuss the mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to
the Commision's Securities Investigation and Clearing Department for the formal dissolution and
liquidation of the partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the
withdrawal of the petitioner has not dissolved the partnership. On appeal, the SEC en banc reversed the
decision and was affirmed by the Court of Appeals. Hence, this petition.

ISSUE:

Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will
and whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad faith

HELD: 

No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated
that a partnership that does not fix its term is a partnership at will. The birth and life of a partnership at
will is predicated on the mutual desire and consent of the partners. The right to choose with whom a
person wishes to associate himself is the very foundation and essence of that partnership. Its continued
existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's
capability to give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one
of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must,
however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the
partnership but that it can result in a liability for damages.
4. Saludo, Jr. v. PNB

[G.R. No. 193138, August 20, 2018]

JARDELEZA, J. FIRST DIVISION

FACTS: SAFA Law Office entered into a Contract of Lease with PNB. When the Contract of Lease
expired, SAFA Law Office continued to occupy the leased premises but were remiss in paying its monthly
rental obligations. Consequently, PNB sent a demand letter for SAFA Law Office to pay its outstanding
unpaid rents. SAFA Law Office then asked PNB to review and discuss its billings, evaluate the
improvements in the area and agree on a compensatory sum to be applied to the unpaid rents. Saludo,
in his capacity as managing partner of SAFA Law Office, filed a complaintfor accounting and/or
recomputation of unpaid rentals and damages against PNB in relation to the Contract of Lease. PNB filed
its answer. By way of compulsory counterclaim, it sought payment from SAFA Law Office in the sum of
money representing overdue rentals. PNB argued that as a matter of right and equity, it can claim that
amount from SAFA Law Office in solidum with Saludo. Saludo filed his motion to dismiss counterclaims,
mainly arguing that SAFA Law Office is neither a legal entity nor party litigant. As it is only a relationship
or association of lawyers in the practice of law and a single proprietorship which may only be sued
through its owner or proprietor, no valid counterclaims may be asserted against it. Saludo asserts that
SAFA Law Office is a sole proprietorship on the basis of the Memorandum of Understanding (MOU)
executed by the partners of the firm.

ISSUE: Whether or not the SAFA Law Office is a sole proprietorship.

RULING: No. SAFA Law Office is a partnership and not a sole proprietorship. Article 1767 of the Civil
Code provides that by a contract of partnership, two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits among
themselves. Two or more persons may also form a partnership for the exercise of a profession. Under
Article 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. Article 1784, on the
other hand, provides that a partnership begins from the moment of the execution of the contract,
unless it is otherwise stipulated.

Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a partnership at the
time its partners signed the Articles of Partnershipwherein they bound themselves to establish a
partnership for the practice of law, contribute capital and industry for the purpose, and receive
compensation and benefits in the course of its operation. The opening paragraph of the Articles of
Partnership reveals the unequivocal intention of its signatories to form a partnership. This MOU,
however, does not serve to convert SAFA Law Office into a sole proprietorship. As discussed, SAFA Law
Office was manifestly established as a partnership based on the Articles of Partnership. The MOU, from
its tenor, reinforces this fact. It did not change the nature of the organization of SAFA Law Office but
only excused the industrial partners from liability.

The law, in its wisdom, recognized the possibility that partners in a partnership may decide to place a
limit on their individual accountability. Consequently, to protect third persons dealing with the
partnership, the law provides a rule, embodied in Article 1816 of the Civil Code, which states:
Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after
all the partnership assets have been exhausted, for the contract which may be entered into in the name
and for the account of the partnership, under its signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate obligation to perform a partnership
contract.
The foregoing provision does not prevent partners from agreeing to limit their liability, but such
agreement may only be valid as among them. Thus, Article 1817 of the Civil Code provides:
Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except as
among the partners.

Considering that the MOU is sanctioned by the law on partnership, it cannot change the nature of a
duly-constituted partnership. Hence, we cannot sustain Saludo’s position that SAFA Law Office is a sole
proprietorship. Having that settled SAFA Law Office is a partnership, we hold that it acquired juridical
personality by operation of law. The perfection and validity of a contract of partnership brings about the
creation of a juridical person separate and distinct from the individuals comprising the partnership.
Thus, Article 1768 of the Civil Code provides:
Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the
partners, even in case of failure to comply with the requirements of Article 1772, first paragraph.
5. NAVARRO VS. COURT OF APPEALS
LOURDES NAVARRO AND MENARDO NAVARRO, petitioners, vs. COURT OF APPEALS,
JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of
Bacolod City, Branch
G.R. No. 101847. May 27, 1993
FACTS: 
On July 23, 1976, herein private respondent Olivia Yanson filed a complain against petitioner Lourdees
Navarro for " Delivery of Personal Properties with Damages". The complaint incorporated an application
for a Writ of Replevin. The Complaint was docketed and was later amended to included the husband of
the petioner, Ricardo Yanson as co-plaintiff and petitioner's husband as co-defendant. 

It is undeniable that both the plaintiff and the defendant wife made admission to have entered into an
agreement of operating this Allied Air Freight Agency of which the plaintiff personally constituted with
the Manila Office in a sense that the plaintiff did supply the necessary equipment and money while her
brother Atty. Villaflores was the Manager and the defendant the cashier. It was also admitted that part of
this agreement was an equal sharing of whatever proceeds realized. Consequently, the plaintiff brought
into this transaction certain chattels in compliance with her obligation. The same has been done by the
herein brother and the herein defendant who started to work in the business. 

In 1976, Judge Victoriano (later to be promoted and to retire as Presiding Justice of the Court of Appeals)
approved private respondents' application for a writ of replevin. The Sheriff's return of service affirmed
receipt by private respondents of all the pieces of personal property sought to be recovered from
petitioners. 

In 1990, Presiding Judge Moscardon rendered a decision disposing:

All chattels already recovered by plaintiff by virtue of the Writ of Replevin and as listed in the complaint
are hereby sustained to belong to plaintiff being the owner of these properties; the motor vehicle,
particularly that Ford Fiesta Jeep registered in and which had remain in the possession of the defendant is
likewise declared to belong to her, however, said defendant is hereby ordered to reimburse plaintiff the
sum of P 6,500.00 representing the amount advanced to pay part of the price therefor; sand said
defendant is likewise hereby ordered to return to plaintiff such other equipment as were brought by the
latter to and during the operation of their business as were listed in the complaint and not recovered as
yet by virtue of the previous writ of replevin."

Trial Court issued Writ of Execution. The sheriff's return of Service declared that the writ was sduly
served and satisfied. A receipt for the amount of P 6,500.00 issued by Mrs. Lourdes Yanson, was likewise
submitted by the Sheriff. 

Petitioner petitioned and claim that the trial judge ignored evidence that would show that the parties
clearly intended to form and actually formed a verbal partnership engaged in the business of Air Freight
Service Agency in Bacolod and that the decision sustaining the writ of replevin is void since the properties
belonging to the partnership do not actually belong to any of the parties until the final disposition and
winding up of the partnership. 

ISSUE:
1) Whether there was a partnership that existed between the parties based on their verbal contention. 

2) Whether the properties that were commonly used in the operation of Allied Freight belonged to this
alleged partnership business. 
HELD:
1) No. Art. 1767 of the NCC defines the contract of partnership "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 proceeds among themselves.Furthermore, the Code provides under Art. 1771 and
1772 that while a partnership may be constituted in any form, public instrument is necessary where
immovable or any rights is constituted. Likewise, if the partnership involves a capitalization of P 3,000.00
or more in money or property, the same must appear in a public instrument which must be recorded in
the office of the securities and exchange commission. Failure to comply with these requirements shall only
affect liability of the partners to third persons. 

A cursory examination of the evidences presented no proof that a partnership, whether oral or written had
been constituted at the inception of this transaction. True it is even that even up to the filling of this
complaint those movables brought by plaintiff for the use in the operation of the business remain
registered in her name. 

While there may have been co-ownership to cor-possession of some items and or any sharing of proceeds
by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of
the existence of any partnership between them, Art. 1769 of the Civil Code is explicit. Such that is
assuming that there were profits realized in 2975 after 2 year deficits were compensated, this could only
be subject to an equal sharing consonant to the agreement to equally divide profit realized, besides the
alleged profits was a difference found dafter valuating the assets and not arising from the real operation of
the business. In accounting procedures, this could not be profit but a net worth. 

2) As to the properties sought to be recovered. This Court affirmed to the decision of the Court of
Appeals. 

Petition Dismissed. 
6. Tacao et al. v. CA, 342 SCRA 20

Facts: Petitioner William T. Bello introduced private

respondent Nenita Anay to petitioner Tocao, who conveyed her desire to enter into a joint venture
with her for the importation and local distribution of kitchen cookwares. Belo acted the
capitalist,Tocao as president and general manager, and Anay as head ofthe marketing
department (considering her experience and established relationship with West Bend
Company,c a manufacturer of kitchen wares in Wisconsin, U.S.A) and later,vice-president for
sales. The parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the
annual net profits of the business; (2) overriding commission of six percent (6%) of theoverall weekly
production; (3) thirty percent (30%) of thesales she would make; and (4) two percent (2%)
for herdemonstration services.

The same was not reduced to writing on the strength of Belo’sassurances.

Later, Anay was able to secure the distributorship of

cookware products from the West Bend Company. They operated underthe name of Geminesse
Enterprise, a sole proprietorship registered in Marjorie Tocao’s name. Anay attended
distributor/dealer meetings with West Bend Company with theconsent of Tocao.

Due to Anay’s excellent job performance she was given a plaque of appreciation. Also, in a memo
signed by Belo, Anaywas given 37% commission for her personal sales "up Dec31/87,” apart
from the 10% share in profits

On October 9, 1987, Anay learned that Marjorie Tocao terminated her as vice-president of Geminesse
Enterprise. Anay attempted to contact Belo. She wrote him twice to demand her overriding commission
for the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her
share in the net profits. Belo did not answer.

Anay still received her five percent (5%) overriding commission up to December 1987. The following year,
1988, she did not receive the same commission although the company netted a gross sales of
P13,300,360.00.

 On April 5, 1988, Nenita A. Anay filed a complaint for sum of money with damages against Tocao and
Belo before the RTC of Makati. She prayed that she be paid (1) P32,00.00 as unpaid overriding
commission from January 8, 1988 to February 5, 1988; (2) P100,000.00 as moral damages, and (3)
P100,000.00 as exemplary damages. The plaintiff also prayed for an audit of the finances of Geminesse
Enterprise from the inception of its business operation until she was “illegally dismissed” to determine her
ten percent (10%) share in the net profits. She further prayed that she be paid the five percent (5%)
“overriding commission“ on the remaining 150 West Bend cookware sets before her “dismissal.”

However, Tocao and Belo asserted that the alleged agreement was not reduced to writing nor ratified,
hence, unenforceable, void, or nonexistent. Also, they denied the existence of a  partnership because, as
Anay herself admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao. Belo also
contended that he merely acted as a guarantor of Tocao and denied contributing capital. Tocao, on the
other hand, denied that they agreed on a ten percent (10%) commission on the net profits.

Both trial court and court of appeals ruled that a business  partnership existed and ordered the
defendants to pay.
Issue:

Whether or not a partnership existed – YES

Ratio:

 To be considered a juridical personality, a partnership must fulfill these requisites: (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 implies
that since a contract of partnership is consensual, an oral contract of partnership is as good as a written
one.

Private respondent Anay contributed her expertise in the  business of distributorship of cookware to the
partnership and hence, under the law, she was the industrial or managing  partner.

Petitioner Belo had an proprietary interest. He presided over meetings regarding matters affecting the
operation of the  business. Moreover, his having authorized in writing giving Anay 37% of the proceeds of
her personal sales, could not be interpreted otherwise than that he had a proprietary interest in the
business. This is inconsistent with his claim that he merely acted as a guarantor. If indeed he was, he
should have  presented documentary evidence. Also, Art. 2055 requires that a guaranty must be express
and the Statute of Frauds requires that it must be in writing. Petitioner Tocao was also a capitalist in the
partnership. She claimed that she herself financed the business.

The business venture operated under Geminesse Enterprise did not result in an employer-employee
relationship between  petitioners and private respondent. First, Anay had a voice in the management of
the affairs of the cookware distributorship and second, Tocao admitted that Anay, like her, received only
commissions and transportation and representation allowances and not a fixed salary. If Anay was an
employee, it is difficult to believe that they recieve the same income. Also, the fact that they operated
under the name of Geminesse Enterprise, a sole proprietorship, is of no moment. Said  business name
was used only for practical reasons - it was utilized as the common name for petitioner Tocao’s
various  business activities, which included the distributorship of cookware.

The partnership exists until dissolved under the law. Since the  partnership created by petitioners and
private respondent has no fixed term and is therefore a partnership at will predicated on their mutual
desire and consent, it may be dissolved by the will of a partner.

Petitioners Tocao’s unilateral exclusion of private respondent from the partnership is shown by her memo
to the Cubao office plainly stating that private respondent was, as of October 9, 1987, no longer the vice-
president for sales of Geminesse Enterprise. By that memo, petitioner Tocao effected her own withdrawal
from the partnership and considered herself as having ceased to be associated with the  partnership in
the carrying on of the business. Nevertheless, the partnership was not terminated thereby; it continues
until the winding up of the business.

The partnership among petitioners and private respondent is ordered dissolved, and the parties are
ordered to effect the winding up and liquidation of the partnership pursuant to the  pertinent provisions of
the Civil Code. Petitioners are ordered to pay Anay’s 10% share in the profits, after accounting, 5%
overriding commission for the 150 cookware sets available for disposition since the time private
respondent was wrongfully excluded from the partnership by petitioner, overriding commission on the total
production, as well as moral and exemplary damages, and attorney’s fees
7. JG Summit Holdings v. CA, Sept. 24, 2003, G.R. No.
124293

Facts:  The National Investment and Development Corporation (NIDC), a government corporation,

entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan
(KAWASAKI) for the construction, operation and management of the Subic National Shipyard Inc., (SNS)
which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO).

Under the JVA, the NDC and KAWASAKI will contribute P330M for the capitalization of PHILSECO in the
proportion of 60%-40% respectively.  One of its salient features is the grant to the parties of the right of
first refusal should either of them decide to sell, assign or transfer its interest in the joint venture.

NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such
interests were subsequently transferred to the National Government pursuant to an Administrative Order.

When the former President Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve,
manage and dispose of non-performing assets of the National Government, a trust agreement was
entered into between the National Government and the APT wherein the latter was named the trustee of
the National Government’s share in PHILSECO.

In the interest of the national economy and the government, the COP and the APT deemed it best to sell
the National Government’s share in PHILSECO to private entities.  After a series of negotiations between
the APT and KAWASAKI , they agreed that the latter’s right of first refusal under the JVA be “exchanged”
for the right to top by 5%, the highest bid for the said shares.  They further agreed that KAWASAKI woul.d
be entitled to name a company in which it was a stockholder, which could exercise the right to
top.  KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top.

At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two Billion and Thirty Million
Pesos (Php2,030,000,000.00) with an acknowledgement of KAWASAKI/PHILYARDS right to top.

As petitioner was declared the highest bidder, the COP approved the sale “subject to the right of
Kawasaki Heavy Industries, Inc. / PHILYARDS Holdings Inc. to top JG’s bid by 5% as specified in the
bidding rules.”

On the other hand, the respondent by virtue of right to top by 5%, the highest bid for the said shares
timely exercised the same.

Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the maintenance of the 60%-
40% relationship between the NIDC and KAWASAKI arising from the Constitution because PHILSECO is
a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional
limitation.

ISSUE: Whether under the 1977 Joint Venture Agreement, KAWASAKI can purchase only a
maximum of 40% of PHILSECO’s total capitalization.
The right of first refusal is meant to protect the original or remaining joint venturer(s) or shareholder(s)
from the entry of third persons who are not acceptable to it as co-venturer(s) or co-shareholder(s). The
joint venture between the Philippine Government and KAWASAKI is in the nature of a
partnership36 which, unlike an ordinary corporation, is based on delectus personae.37 No one can become
a member of the partnership association without the consent of all the other associates. The right of first
refusal thus ensures that the parties are given control over who may become a new partner in substitution
of or in addition to the original partners. Should the selling partner decide to dispose all its shares, the
non-selling partner may acquire all these shares and terminate the partnership. No person or corporation
can be compelled to remain or to continue the partnership. Of course, this presupposes that there are no
other restrictions in the maximum allowable share that the non-selling partner may acquire such as the
constitutional restriction on foreign ownership in public utility. The theory that KAWASAKI can acquire, as
a maximum, only 40% of PHILSECO’s shares is correct only if a shipyard is a public utility. In such
instance, the non-selling partner who is an alien can acquire only a maximum of 40% of the total
capitalization of a public utility despite the grant of first refusal. The partners cannot, by mere agreement,
avoid the constitutional proscription. But as afore-discussed, PHILSECO is not a public utility and no other
restriction is present that would limit the right of KAWASAKI to purchase the Government’s share to 40%
of Philseco’s total capitalization.

Furthermore, the phrase “under the same terms” in section 1.4 cannot be given an interpretation that
would limit the right of KAWASAKI to purchase PHILSECO shares only to the extent of its original
proportionate contribution of 40% to the total capitalization of the PHILSECO. Taken together with the
whole of section 1.4, the phrase “under the same terms” means that a partner to the joint venture that
decides to sell its shares to a third party shall make a similar offer to the non-selling partner. The selling
partner cannot make a different or a more onerous offer to the non-selling partner.

The exercise of first refusal presupposes that the non-selling partner is aware of the terms of the
conditions attendant to the sale for it to have a guided choice. While the right of first refusal protects the
non-selling partner from the entry of third persons, it cannot also deprive the other partner the right to sell
its shares to third persons if, under the same offer, it does not buy the shares.

Apart from the right of first refusal, the parties also have preemptive rights under section 1.5 in the
unissued shares of Philseco. Unlike the former, this situation does not contemplate transfer of a partner’s
shares to third parties but the issuance of new Philseco shares. The grant of preemptive rights preserves
the proportionate shares of the original partners so as not to dilute their respective interests with the
issuance of the new shares. Unlike the right of first refusal, a preemptive right gives a partner a
preferential right over the newly issued shares only to the extent that it retains its original proportionate
share in the joint venture.

The case at bar does not concern the issuance of new shares but the transfer of a partner’s share in
the joint venture. Verily, the operative protective mechanism is the right of first refusal which does not
impose any limitation in the maximum shares that the non-selling partner may acquire.

RULING: The court upheld the validity of the mutual rights of first refusal under the JVA between
KAWASAKI and NIDC.

The right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the
terms of their JVA.  This right allows them to purchase the shares of their co-shareholder before they are
offered to a third party.  The agreement of co-shareholders to mutually grant this right to each other, by
itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to
Filipinos and Filipino corporations.  As PHILYARDS correctly puts it, if PHILSECO still owns the land, the
right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40%
ration.  This transfer by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any
fraudulent intent.  The transfer could be made either to a nominee or such other party which the holder of
the right of first refusal feels it can comfortably do business with.

Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right
of first refusal, can exceed 40% of PHILSECO’s equity.  In fact, in can even be said that if the foreign
shareholdings of a landholding corporation exeeds 40%, it is not the foreign stockholders’ ownership of
the shares which is adversely affected but the capacity of the corporation to won land—that is, the
corporation becomes disqualified to own land.

This finds support under the basic corporate law principle that the corporation and its stockholders are
separate judicial entities.  In this vein, the right of first refusal over shares pertains to the shareholders
whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land
cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing
shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what
the law disqualifies is the corporation from owning land.
8. Aldecoa & Co. vs Warner, Barnes, & Co.., 16 Phil. 423

Facts: From the fourth to the twelfth paragraph of the complaint, the plaintiff set forth that, prior to
December 1, 1898, Warner, Barnes and Co. were conducting a business in Albay. The principal object of
the business was the purchase of hemp in the pueblos of Legaspi and Tobacco for the purpose of
bringing it to Manila to sell if for exportation. On the same date, the plaintiff company became interested in
the business of Warner, Barnes and Co. in Albay and formed therewith a joint-account partnership in
which Aldecoa and Co. were to share equally in the gains and losses of the business.

 The defendant is the successor to all the rights and obligations of Warner, Barnes and Co., among which
is that of being manager of the joint-account partnership with Aldecoa and Co., It is a recognized fact, and
one admitted by both parties that the partnership herein concerned concluded its transactions on
December 31, 1903. Wherefore the firm of Warner, Barnes & Co. Ltd., the manager of the partnership, in
declaring the latter's transactions concluded and in rendering duly verified accounts of its results, owes
the duty to include therein the property and effects belonging to the partnership in common.

Issue: WON this litigation concerns the rendering of accounts pertaining to the management of the
business of a joint-account partnership formed between the two litigants companies.

Held: It is a rule of law generally observed that he who takes charge of the management of another's
property is bound immediately thereafter to render accounts covering his transactions; and that it is
always to be understood that all accounts rendered must be duly substantiated by vouchers. It is one of
the duties of the manager of a joint-account partnership, to liquidate the assets that form the common
property, and to state the result obtained therefrom in the final rendering of the accounts which he is to
present at the conclusion of the partnership.

1.PARTNERSHIP; ACCOUNTING; DUTY OF BUSINESS MANAGER.—It is a general rule of law that he

who takes charge of the management of another's property is bound immediately thereafter to render
accounts of his transactions; and that it is always to be understood that all accounts must be duly
supported by proofs.

2.ID. ; ID, ; ID.—The acceptance and approval of any account rendered from a certain date does not
excuse nor relieve the manager of a joint-account partnership from complying with the unquestionable
duty of rendering accounts covering a period of time prior to the said date. They must be rendered from
the time the partnership was actually formed and its business actually commenced.

3.ID.; ID.; ID.; REVISION OF ACCOUNTS.—Once certain accounts have been approved, which were
duly rendered by the manager of a joint-account partnership, the member of the entity not vested with the
character of manager is not entitled afterwards to claim the revision of the accounts already approved,
unless it shall be proved satisfactorily, by the production of evidence, that there was fraud, deceit, error,
or mistake in the approval of the said accounts. (Arts. 1265, 1266, Civil Code, and law 30, title 11, 5th
Partida.)

4.ID.; ID.; ID.—One of the duties of the manager of a joint-account partnership is that of liquidating the
assets of the common ownership and to state the result obtained therefrom in the final rendering of
accounts which he is to present at the conclusion of the partnership, as no person should enrich himself
unjustly at the expense of another. (Art. 243, Code of Commerce, and decision in cassation given on July
1, 1870, by the supreme court of Spain
9. PO YENG CHEO vs. LIM KA YAM

Facts:

The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, and as such Po Yeng Cheo inherited the interest
left by Po Gui Yao in a business conducted in Manila under the style of Kwong Cheong Tay. This business had been in
existence in Manila for many years prior to 1903, as a mercantile partnership, engaged in the import and export trade;
and after the death of Po Gui Yao the following seven persons were interested therein as partners in the amounts set
opposite their respective names, to wit: Po Yeng Cheo, Chua Chi Yek, Lim Ka Yam, Lee Kom Chuen, Ley Wing Kwong,
Chan Liong Chao, Lee Ho Yuen. The manager of Kwong Cheong Tay, for many years prior of its complete cessation from
business in 1910, was Lim Ka Yam, the original defendant herein.

Among the properties pertaining to Kwong Cheong Tay and consisting part of its assets were ten shares of a total par
value of P10,000 in an enterprise conducted under the name of Yut Siong Chyip Konski and certain shares to the among
of P1,000 in the Manila Electric Railroad and Light Company, of Manila.

In the year 1910 Kwong Cheong Tay ceased to do business, owing principally to the fact that the plaintiff ceased at that
time to transmit merchandise from Hongkong, where he then resided. Lim Ka Yam appears at no time to have submitted
to the partners any formal liquidation of the business, though

The trial judge rendered judgment in favor of the plaintiff, Po Yeng Cheo, to recover of the defendant Lim Yock Tock, as
administrator of Lim Ka Yam, the sum of sixty thousand pesos (P60,000), constituting the interest of the plaintiff in the
capital of Kwong Cheong Tay, plus the plaintiff's proportional interest in shares of the Yut Siong Chyip Konski and Manila
Electric Railroad and Light Company, estimated at P11,000, together with the costs. From this judgment the defendant
appealed.

Issue:

Whether or not the award given to Po Yeng Cheo constituting his interest to the extent of his share of the capital of
Kwong Cheong Tay was proper.

Held:

No. It was erroneous in any event to give judgment in favor of the plaintiff to the extent of his share of the capital of
Kwong Cheong Tay. The managing partner of a mercantile enterprise is not a debtor to the shareholders for the capital
embarked by them in the business; and he can only be made liable for the capital when, upon liquidation of the business,
there are found to be assets in his hands applicable to capital account.

The only property pertaining to Kwong Cheong Tay at the time this action was brought consisted of shares in the two
concerns already mentioned of the total par value of P11,000. Of course, if these shares had been sold and converted
into money, the proceeds, if not needed to pay debts, would have been distributable among the various persons in
interest, that is, among the various shareholders, in their respective proportions. But under the circumstances revealed
in this case, it was erroneous to give judgment in favor of the plaintiff for his aliquot part of the par value of said shares.
It is elementary that one partner, suing alone, cannot recover of the managing partner the value of such partner's
individual interest; and a liquidation of the business is an essential prerequisite.

Moreover, after the death of the original defendant, Lim Ka Yam, the trial court allowed the action to proceed against
Lim Yock Tock, as his administrator, and entered judgment for a sum of money against said administrator as the
accounting party. This is an error because it is well settled that when a member of a mercantile partnership dies, the
duty of liquidating its affair devolves upon the surviving member, or members, of the firm, not upon the legal
representative of the deceased partner.
10. Guidote v. Borja
53 Phil 900

Facts:

Guidote and Santos formed a partnership in which Santos was the capitalist partner and Guidote
was the industrial partner. After Santos died, Guidote brought an action against Borja, the adminstratrix
of the estate of the deceased, to recover a sum of money. The court found that when Santos died, the
plaintiff was left as the surviving partner, and that plaintiff failed to liquidate the affairs of the
partnership and to render an account thereof to the administratrix of Santos' estate. The court,
dismissed the plaintiff's complaint and absolved the defendant therefrom, and ordered the plaintiff to
render a full and complete accounting, verified by vouchers, of the partnership business.

Plaintiff argues that as the deceased up to the time of his death generally took care of the
payments and collections of the partnership, his legal representatives were under the obligation to
render accounts of the operations of the partnership, notwithstanding the fact that the plaintiff was in
charge of the business subsequent to the death of Santos.

Issue:

WON Santos’ legal representatives were under the obligation to render accounts of the
operations of the partnership.

Held:

No, the legal representatives were under no obligation to render accounts of the operations of
the partnership.

The death of one of the partners dissolves the partnership, but that the liquidation of its affairs
is by law intrusted, not to the executors of the deceased partner, but to the surviving partners or the
liquidators appointed by them.

In equity surviving partners are treated as trustees of the representatives of the deceased
partner, in regard to the interest of the deceased partner in the firm. As a consequence of this
trusteeship, surviving partners are held in their dealings with the firm assets and the representatives of
the deceased to that nicety of dealing and that strictness of accountability required of and incident to
the position of one occupying a confidential relation. It is the duty of surviving partners to render an
account of the performance of their trust to the personal representatives of the deceased partner, and
to pay over to them the share of such deceased member in the surplus of firm property, whether it
consists of real or personal assets.