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WEEK 12
Lozana v. Depakakibo
DOCTRINE: An equipment which was contributed by one of the partners to the
partnership becomes the property of the partnership and as such cannot be
disposed of by the party contributing the same without the consent of the
partnership or the other partner.
FACTS:
- Plaintiff Mauro Lozana entered into a contract with defendant Serafin
Depakakibo wherein they established a partnership capitalized at the
sum of P30,000, plaintiff furnishing 60% thereof and the defendant, 40%,
for the purpose of maintaining, operating and distributing electric light
and power in the Municipality of Dumangas, Province of Iloilo, under a
franchise issued to Mrs. Piadosa Buenaflor.
- However, the franchise or certificate of public necessity and convenience
in favor of the said Mrs. Piadosa Buenaflor was cancelled and revoked by
the Public Service Commission.
- A temporary certificate of public convenience was issued in the name of
Olimpia D. Decolongon. Evidently because of the cancellation of the
franchise in the name of Mrs. Piadosa Buenaflor, plaintiff herein Mauro
Lozana sold a generator, Buda (diesel) to the new grantee Olimpia D.
Decolongon.
- Defendant Serafin Depakakibo, on the other hand, sold one Crossly Diesel
Engine, to the spouses Felix Jimenea and Felina Harder.
- Plaintiff Mauro Lozana brought an action against the defendant, alleging
that he is the owner of the Generator Buda (Diesel), valued at P8,000 and
70 wooden posts with the wires connecting the generator to the different
houses supplied by electric current in the Municipality of Dumangas, and
that he is entitled to the possession thereof, but that the defendant has
wrongfully detained them as a consequence of which plaintiff suffered
damages.
- Plaintiff prayed that said properties be delivered back to him.
- Judge Pantaleon A. Pelayo issued an order in said case authorizing the
sheriff to take possession of the generator and 70 wooden posts, upon
plaintiff's filing of a bond in the amount of P16,000 in favor of the
defendant (for subsequent delivery to the plaintiff).
- Defendant denied the allegations. He alleged that under the partnership
agreement the parties were to contribute equipments, plaintiff
contributing the generator and the defendant, the wires for the purpose
of installing the main and delivery lines; that the plaintiff sold his
contribution to the partnership, in violation of the terms of their
agreement.
- Defendant prayed for dissolution of the partnership and the accounting
and liquidation of the same.
- Lower court ruled that there was no liquidation of partnership at the time
of sale when defendant was then the manager.
ISSUE: W/N there was a contract of partnership?
SC: YES. As it appears from the above stipulation of facts that the plaintiff and the
defendant entered into the contract of partnership, plaintiff contributing the
amount of P18,000, and as it is not stated therein that there has been a liquidation
of the partnership assets at the time plaintiff sold the Buda Diesel Engine on
October 15, 1955, and since the court below had found that the plaintiff had
actually contributed one engine and 70 posts to the partnership, it necessarily
follows that the Buda diesel engine contributed by the plaintiff had become the
property of the partnership. As properties of the partnership, the same could not
be disposed of by the party contributing the same without the consent or approval
of the partnership or of the other partner.
The lower court declared that the contract of partnership was null and void,
because by the contract of partnership, the parties thereto have become dummies
of the owner of the franchise. The reason for this holding was the admission by
defendant when being cross-examined by the court that he and the plaintiff are
dummies. However, such admission by the defendant is an error of law, not a
statement of a fact. The Anti-Dummy law has not been violated as parties plaintiff
and defendant are not aliens but Filipinos. The Anti-Dummy law refers to aliens
only (Commonwealth Act 108 as amended).
The contract of partnership between plaintiff and defendant, especially the
provision thereon wherein the parties agreed to maintain, operate and distribute
electric light and power under the franchise belonging to Mrs. Buenaflor is not
illegal, or contrary to law and public policy such as to make the contract of
partnership, null and void ab initio.
The agreement could have been submitted to the Public Service Commission if the
rules of the latter require them to be so presented. But the fact of furnishing the
current to the holder of the franchise alone, without the previous approval of the
Public Service Commission, does not per se make the contract of partnership null
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and void from the beginning and render the partnership entered into by the parties
for the purpose also void and non-existent.
The court erred in declaring that the contract was illegal from the beginning and
that parties to the partnership are not bound therefor, such that the contribution
of the plaintiff to the partnership did not pass to it as its property. It also follows
that the claim of the defendant in his counterclaim that the partnership be
dissolved and its assets liquidated is the proper remedy, not for each contributing
partner to claim back what he had contributed.
Litton v. Hill & Ceron
DOCTRINE: The stipulation in the articles of partnership that any of the 2 managing
partners may contract and sign in the name of the partnership with the consent of
the other, undoubtedly creates an obligation between the two partners, which
consists in asking the other’s consent before contracting for the partnership. The
obligation of course is not imposed upon a third person who contracts with the
partnership. Neither it is necessary for the third person to ascertain if the managing
partner with whom he contracts has previously obtained the consent of the other.
A third person may and has the right to presume that the partner with whom he
contracts has, in the ordinary and regular course of business, the consent of his co-
partner; for otherwise, he wouldn’t enter into the contract.
FACTS:
- Plaintiff sold and delivered to Carlos Ceron, who is one of the managing
partners of Hill & Ceron, a certain number of mining claims, and by virtue
of said transaction, the defendant Carlos Ceron delivered to the plaintiff a
document reading as follows evidencing receipt of share certificates.
- Ceron paid to the plaintiff the sum or P1,150 leaving an unpaid balance of
P720.
- Unable to collect such sum either from Hill & Ceron or from its surety
Visayan Surety & Insurance Corporation, Litton filed a complaint in the
Court of First Instance of Manila against the said defendants for the
recovery of the said balance.
- The court, after trial, ordered Carlos Ceron personally to pay the amount
claimed and absolved the partnership Hill & Ceron, Robert Hill and the
Visayan Surety & Insurance Corporation.
- CA affirmed the decision of the court on May 29, 1937, having reached
the conclusion that Ceron did not intend to represent and did not act for
the firm Hill & Ceron in the transaction involved in this litigation. It
ratiocinated that Ceron individually entered into the transaction with the
plaintiff, but in view, however, of certain undisputed facts and of certain
regulations and provisions of the Code of Commerce; and that the
transaction made by Ceron with the plaintiff should be understood in law
as effected by Hill & Ceron and binding upon it.
ISSUE: W/N conveyance was effectively made by Hill & Ceron as partners?
SC: YES. It follows from the sixth paragraph of the articles of partnership of Hill &
Ceron that the management of the business of the partnership has been entrusted
to both partners thereof, but the Court dissents from the view of the Court of
Appeals that for one of the partners to bind the partnership the consent of the
other is necessary. Third persons, like the plaintiff, are not bound in entering into a
contract with any of the two partners, to ascertain whether or not this partner with
whom the transaction is made has the consent of the other partner. The public
need not make inquires as to the agreements had between the partners. Its
knowledge, is enough that it is contracting with the partnership which is
represented by one of the managing partners.
There is a general presumption that each individual partner is an authorized agent
for the firm and that he has authority to bind the firm in carrying on the
partnership transactions. (Mills vs. Riggle)
The presumption is sufficient to permit third persons to hold the firm liable on
transactions entered into by one of members of the firm acting apparently in its
behalf and within the scope of his authority. (Le Roy vs.Johnson)
The kind of business in which the partnership Hill & Ceron is to engage being thus
determined, none of the two partners, under article 130 of the Code of Commerce,
may legally engage in the business of brokerage in general as stock brokers,
security brokers and other activities pertaining to the business of the partnership.
Ceron, therefore, could not have entered into the contract of sale of shares with
Litton as a private individual, but as a managing partner of Hill & Ceron.
The stipulation in the articles of partnership that any of the two managing partners
may contract and sign in the name of the partnership with the consent of the
other, undoubtedly creates an obligation between the two partners, which consists
in asking the other's consent before contracting for the partnership. This obligation
of course is not imposed upon a third person who contracts with the partnership.
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Neither is it necessary for the third person to ascertain if the managing partner
with whom he contracts has previously obtained the consent of the other.
Island Sales, Inc, v. United Pioneers Gen. Construction Co.
DOCTRINE:
Condonation by creditor of share in partnership debt of one partner doesn’t
increase pro rate liability of other partners.
FACTS:
- Defendant company, a general partnership duly registered under the
laws of the Philippines, purchased from the plaintiff a motor vehicle on
the installment basis and for this purpose executed a promissory note for
P9,440.00, payable in twelve (12) equal monthly installments of P786.63,
the first installment payable on or before May 22, 1961 and the
subsequent installments on the 22nd day of every month thereafter, until
fully paid, with the condition that failure to pay any of said installments
as they fall due would render the whole unpaid balance immediately due
and demandable.
- Having failed to receive the installment on due date, the plaintiff sued the
defendant company for the unpaid balance amounting to P7,119.07.
Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig,
and Augusto Palisoc were included as co-defendants in their capacity as
general partners of the defendant company.
- Daniel A. Guizona failed to file an answer and was consequently declared
in default. Subsequently, on motion of the plaintiff, the complaint was
dismissed insofar as the defendant Romulo B. Lumauig is concerned.
- Defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the
decision claiming that since there are five (5) general partners, the joint
and subsidiary liability of each partner should not exceed one-fifth ( 1/ 5 )
of the obligations of the defendant company.
- The trial court denied the said motion notwithstanding the conformity of
the plaintiff to limit the liability of the defendants Daco and Sim to only
one-fifth ( 1/ 5 ) of the obligations of the defendant company. Hence, this
appeal. The trial court sentenced defendants United Pioneer General
Construction Company to pay plaintiff the stipulated sum with interest at
the rate of 12% per annum until it is fully paid, plus attorney's fees and
costs. Defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and
Augusto Palisoc are sentenced to pay the plaintiff in this case with the
understanding that the judgment against these individual defendants
shall be enforced only if the defendant company has no more leviable
properties with which to satisfy the judgment against it. The individual
defendants shall also pay the costs.
ISSUE: W/N the dismissal of the complaint to favor one of the general partners of a
partnership increases the joint and subsidiary liability of each of the remaining
partners for the obligations of the partnership?
SC:NO.
Article 1816 of the Civil Code provides:
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 contracts which may be entered into in the name and
for the account of the partnership, under its signature and by a person
authorized to act for the partnership. However, any partner may enter
into a separate obligation to perform a partnership contract.
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Yulo and Palacios was engaged in the operation of a sugar
estate in Negros. It was, therefore, a civil partnership as distinguished from a
mercantile partnership. Being a civil partnership, by the express provisions of
articles l698 and 1137 of the Civil Code, the partners are not liable each for the
whole debt of the partnership. The liability is pro rata and in this case Pedro Yulo is
responsible to plaintiff for only one-half of the debt. The fact that the other
partner, Jaime Palacios, had left the country cannot increase the liability of Pedro
Yulo.
In the instant case, there were five (5) general partners when the promissory note
in question was executed for and in behalf of the partnership. Since the liability of
the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be
limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. The
fact that the complaint against the defendant Romulo B. Lumauig was dismissed,
upon motion of the plaintiff, does not unmake the said Lumauig as a general
partner in the defendant company. In so moving to dismiss the complaint, the
plaintiff merely condoned Lumauig's individual liability to the plaintiff.
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Bachrach v. La Protectora
DOCTRINE:
1. While a member of a partnership isn’t liable solidarily with his fellows for
its entire indebtedness, he is liable with them for his aliquot part thereof.
2. When one of the partners was authorized to buy trucks for the
partnership and effected such authority, signed the name of the
partnership to the purchase money notes and added his own name as an
individual, thereby assuming solidary liability with the firm, the partners
who omitted the authority were not liable on the note, as the document
in question contained no authority to bind them personally and in fact
the notes didn’t purport to do so; but they were held liable in their
capacity as partners.
FACTS:
- In the year 1913, Defendants formed a civil partnership, called "La
Protectora," for the purpose of engaging in the business of transporting
passengers and freight at Laoag, Ilocos Norte.
- Marcelo Barba, acting as manager, came to Manila and upon June 23,
1913, negotiated the purchase of two automobile trucks from the
plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid the sum
of 3,000 in cash, and for the balance executed promissory notes
representing the deferred payments.
- These notes provided for the payment of interest from June 23, 1913, the
date of the notes, at the rate of 10 % per annum. Three of these notes,
for the sum of P3,375 each, have been made the subject of the present
action, and there are exhibited with the complaint in the cause. One was
signed by Marcelo Barba in the following manner.
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
- The other two notes are signed in the same way with the word "By"
omitted before the name of Marcelo Barba in the second line of the
signature. It is obvious that in thus signing the notes Marcelo Barba
intended to bind both the partnership and himself.
- Preliminary to the purchase of these trucks, defendants Nicolas Segundo,
Antonio Adiarte, Ignacio Flores, and Modesto Serrano executed in due
form a document in which they declared that they were members of the
firm "La Protectora" and that they had granted to its president full
authority "in the name and representation of said partnership to contract
for the purchase of two automobiles". This document was apparently
executed in obedience to the requirements of subsection 2 of article
1697 of the Civil Code, for the purpose of evidencing the authority of
Marcelo Barba to bind the partnership by the purchase. The document in
question was delivered by him to Bachrach at the time the automobiles
were purchased.
- Marcelo Barba purchased of the plaintiff various automobile effects and
accessories to be used in the business of "La Protectora."
- In May, 1914, the plaintiff foreclosed a chattel mortgage which he had
retained on the trucks in order to secure the purchase price. The amount
realized from this sale was P1K. This was credited unpaid.
- To recover this balance, together with the sum due for additional
purchases, the present action was instituted in the CFI against t "La
Protectora" and the five individuals Marcelo Barba, Nicolas Segundo,
Antonio Adiarte, Ignacio Flores, and Modesto Serrano.
- No question has been made as to the propriety of impleading "La
Protectora" as if it were a legal entity. At the hearing, judgment was
rendered against all of the defendants.
- From this judgment no appeal was taken in behalf either of "La
Protectora" or Marcelo Barba; and their liability is not here under
consideration. The four individuals who signed the document to which
reference has been made, authorizing Barba to purchase the two trucks
have, however, appealed and assigned errors.
ISSUE: W/N the abovementioned individuals are liable for the firm debts and if so
to what extent?
SC: Appellants are severally liable for their respective shares of the entire
indebtedness found to be due and CFI committed no error in giving judgment
against them. The business conducted under the name of "La Protectora" was
evidently that of a civil partnership. The authority of Marcelo Barba to bind the
partnership, in the purchase of the trucks, is fully established by the document
executed by the four appellants. The transaction by which Barba secured these
trucks was in conformity with the tenor of this document. The promissory notes
constitute the obligation exclusively of "La Protectora" and of Marcelo Barba; and
they do not in any sense constitute an obligation directly binding on the four
appellants.
Their liability is based on the fact that they are members of the civil partnership
and as such are liable for its debts. It is true that article 1698 of the Civil Code
declares that a member of a civil partnership is not liable in solidum
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(solidariamente) with his fellows for its entire indebtedness; but it results from
this article, in connection with article 1137 of the Civil Code, that each is liable
with the others (mancomunadamente) for his aliquot part of such indebtedness.
And so it has been held by this court.
CFI seems to have founded its judgment against the appellants in part upon the
idea that the document executed by them constituted an authority for Marcelo
Barba to bind them personally, as contemplated in the second clause of article
1698 of the Civil Code. That cause says that no member of the partnership can
bind the others by a personal act if they have not given him authority to do so.
The document referred to was intended merely as an authority to enable Barba
to bind the partnership and that the parties to that instrument did not intend
thereby to confer upon Barba an authority to bind them personally. It is obvious
that the contract which Barba in fact executed in pursuance of that authority did
not by its terms profess to bind the appellants personally at all, but only the
partnership and himself. It follows that the four appellants cannot be held to have
been personally obligated by that instrument; but, as we have already seen, their
liability rests upon the general principles underlying partnership liability.
Pacific Commercial Co. v. Aboitiz
DOCTRINE:
All the members of a general partnership are liable with all their property for the
results of the duly authorized transactions made in the name and for the account
of the partnership. All the members of the general co-partnership, be they or be
they not managing partners of the same are liable personally and in solidum with
all their property for the results of the transaction made in the name and for the
account of the partnership.
An industrial partner is not liable for losses. A provision exempting an industrial
partner from losses is naturally valid but the same provision exempting a capitalist
partner is void.  A provision making an industrial partner liable for losses is
permissible. An industrial partner may be held liable by third persons but he may
recover from the capitalist partners for after all, he is not liable for losses.
FACTS:
- In 1919, Arnaldo de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose
Martinez formed a partnership. De Silva, Guillermo, and Vidal were the
capitalist partners while Martinez was the industrial partner. The articles
of partnership contained, among others that Martinez may also be liable
for losses but only to the extent of his shares in the profits which was at
30%.
- The partnership incurred loans from Pacific Commercial Company which
the partnership failed to pay. The partnership’s property was exhausted
but there remained an unpaid balance for which PCC sued the
partnership. The trial court issued a judgment where it ordered that the
deficiency should be satisfied by the properties of the three capitalist
partners; that in the event the properties of the three will not be enough,
the remaining balance shall issue against the property of Martinez.
Martinez appealed the decision.
ISSUE: Whether or not Martinez is liable for the said debt?
SC: YES. Article 127 of the Code of Commerce was used. Also, as held in the case
of La Compañia Maritama vs Francisco Muñoz et al,  all the members of a general
partnership are liable with all their property for the results of the duly authorized
transactions made in the name and for the account of the partnership. All the
members of the general co-partnership, be they or be they not managing partners
of the same are liable personally and in solidum with all their property for the
results of the transaction made in the name and for the account of the partnership.
The Supreme Court also emphasized that liability for losses relates merely to the
distribution of losses among the partners themselves in the settlement of the
partnership affairs and has no reference to partnership obligations or liabilities to
third parties.
Munasque v. Court of Appeals
DOCTRINE:
1. The fact that there was a misunderstanding between the parties doesn’t convert
the partnership into a sham organization.
2. Payments made to the partnership, valid where the recipient made it appear
that he and another were true partners in the partnership.
3. When persons were partners when the debts were incurred, they are also both
liable to third persons who extended credit to the partnership.
4. While the liability of partners are merely joint in transactions entered into by the
partnership, the parties are liable to third persons solidarily for the whole
obligation if the case involves loss or injury caused to any person not a partner in
the partnership, and misapplication of money or property of a third person
received by a partner of the partnership.
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5. The rationale for the solidary liability is that the law protects one who in good
faith relied on the authority of a partner, whether the authority is real or apparent.
6. Solidary liability of all partners and the partnership as a whole for the
consequences of any wrongful act committed by any of the partners.
FACTS:
- Petitioner seeks to annul and set added the decision of the CA affirming
the existence of a partnership between petitioner and one of the
respondents, Celestino Galan and holding both of them liable to the two
intervenors which extended credit to their partnership. The petitioner
wants to be excluded from the liabilities of the partnership.
- Petitioner Elmo Muñasque filed a complaint for payment of sum of
money and damages against respondents Celestino Galan, Tropical
Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the
petitioner entered into a contract with respondent Tropical through its
Cebu Branch Manager Pons for remodelling a portion of its building
without exchanging or expecting any consideration from Galan
although the latter was casually named as partner in the contract and
by virtue of his having introduced the petitioner to the employing
company (Tropical). Galan would receive some kind of compensation in
the form of some percentages or commission.
- Tropical, under the terms of the contract, agreed to give petitioner the
amount of P7K soon after the construction began and thereafter, the
amount of P6K every fifteen (15) days during the construction to make a
total sum of P25K.
- On January 9, 1967, Tropical and/or Pons delivered a check for P7K not to
the plaintiff but to a stranger to the contract, Galan, who succeeded in
getting petitioner's indorsement on the same check persuading the latter
that the same be deposited in a joint account.
- On January 26, 1967 when the second check for P6K was due, petitioner
refused to indorse said cheek presented to him by Galan but through
later manipulations, respondent Pons succeeded in changing the payee's
name from Elmo Muñasque to Galan and Associates, thus enabling Galan
to cash the same at the Cebu Branch of the Philippine Commercial and
Industrial Bank (PCIB) placing the petitioner in great financial difficulty in
his construction business and subjecting him to demands of creditors to
pay for construction materials.
- Petitioner also alleged that he undertook the construction at his own
expense completing it prior to the deadline and that because of the
unauthorized disbursement by respondents Tropical and Pons of the sum
of P13K to Galan, petitioner demanded that said amount be paid to him
by respondents under the terms of the written contract between the
petitioner and respondent company.
- RTC ordered petitioner and Galan to pay jointly and severally the
intervenors Cebu and Southern Hardware Co and Blue Diamond Glass
Palace. It also absolved defendants Tropical Comm Co. and Pons.
- CA affirmed with the sole modification that the liability imposed in the
dispositive part of the decision on the credit of Cebu Southern Hardware
and Blue Diamond Glass Palace was changed from "jointly and severally"
to "jointly."
- Both the trial and appellate courts not only absolved respondents
Tropical and its Cebu Manager, Pons, from any liability but they also held
the petitioner together with respondent Galan, hable to the intervenors
Cebu Southern Hardware Company and Blue Diamond Glass Palace for
the credit which the intervenors extended to the partnership of
petitioner and Galan.
ISSUE:
W/N there existed a partnership between Celestino Galan and Elmo Muñasque?
W/N there existed a justifiable cause on the part of respondent Tropical to disburse
money to respondent Galan?
SC:
1. YES. Petitioner entered into a con-tract with Tropical for the renovation
of the latter's building on behalf of the partnership of "Galan and
Muñasque" which is readily seen in the first paragraph of their contract.
2. There is nothing in the records to indicate that the partnership organized
by the two men was not a genuine one. If there was a falling out or
misunderstanding between the partners, such does not convert the
partnership into a sham organization.
3. Likewise, when Muñasque received the first payment of Tropical in the
amount of P7,000.00 with a check made out in his name, he indorsed the
check in favor of Galan. Respondent Tropical therefore, had every right to
presume that the petitioner and Galan were true partners. If they were
not partners as petitioner claims, then he has only himself to blame for
making the relationship appear otherwise, not only to Tropical but to
their other creditors as well. The payments made to the partnership
were, therefore, valid payments.
4. No error was committed by the appellate court in holding that the
payment made by Tropical to Galan was a good payment which binds
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both Galan and the petitioner. Since the two were partners when the
debts were incurred, they, are also both liable to third persons who
extended credit to their partnership.
5. While it is true that under Article 1816 of the Civil Code,"All partners,
including industrial ones, shall be liable prorate with all their property
and after all the partnership assets have been exhausted, for the
contracts which may be entered into the name and for the account of the
partnership, under its signature and by a person authorized to act for the
partnership. ...". this provision should be construed together with Article
1824 which provides that: "All partners are liable solidarily with the
partnership for everything chargeable to the partnership under Articles
1822 and 1823." In short, while the liability of the partners are merely
joint in transactions entered into by the partnership, a third person who
transacted with said partnership can hold the partners solidarily liable for
the whole obligation if the case of the third person falls under Articles
1822 or 1823.
6. The obligation is solidary, because the law protects him, who in good
faith relied upon the authority of a partner, whether such authority is real
or apparent. That is why under Article 1824 of the Civil Code all partners,
whether innocent or guilty, as well as the legal entity which is the
partnership, are solidarily liable.
7. As between the partners Muñasque and Galan, justice also dictates that
Muñasque be reimbursed by Galan for the payments made by the former
representing the liability of their partnership to herein intervenors, as it
was satisfactorily established that Galan acted in bad faith in his dealings
with Muñasque as a partner.
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WEEK 13 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
Ortega vs. CA result in a liability for damages.
DOCTRINE:
1. A partnership that doesn’t fix the term is a partnership at will.
2. The birth and life of a partnership at will is predicated on the mutual Tocao vs. CA
desire and consent of the partners. DOCTRINE:
3. Neither would the presence of a period for its specific duration or the
statement of a particular purpose for its creation prevent the dissolution FACTS:
of any partnership by an act or will of a partner. William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The three
4. Upon its dissolution, the partnership remains and continues its legal agreed to form a joint venture for the sale of cooking wares. Belo was to contribute
personality until the complete winding up of its business culminating in P2.5 million; Tocao also contributed some cash and she shall also act as president
its termination. and general manager; and Anay shall be in charge of marketing. Belo and Tocao
5. The liquidation of the assets of the partnership following its dissolution is specifically asked Anay because of her experience and connections as a marketer.
governed by various provisions of the CC. They agreed further that Anay shall receive the following:
6. It wouldn’t be right to let any of the parties remain in the partnership
under such atmosphere of animosity. 1. 10% share of annual net profits
2. 6% overriding commission for weekly sales
FACTS: 3. 30% of sales Anay will make herself
- Ortega, then a senior partner in the law firm Bito, Misa, and Lozada 4. 2% share for her demo services
withdrew in said firm.
- He filed with SEC a petition for dissolution and liquidation of partnership. They operated under the name Geminesse Enterprise, this name was however
- SEC en banc ruled that withdrawal of Misa from the firm had dissolved registered as a sole proprietorship with the Bureau of Domestic Trade under Tocao.
the partnership. It ruled that since it is partnership at will, the law firm The joint venture agreement was not reduced to writing because Anay trusted
could be dissolved by any partner at anytime, such as by withdrawal Belo’s assurances.
therefrom, regardless of good faith or bad faith, since no partner can be
forced to continue in the partnership against his will. The venture succeeded under Anay’s marketing prowess.

ISSUE/S: But then the relationship between Anay and Tocao soured. One day, Tocao advised
- WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & one of the branch managers that Anay was no longer a part of the company. Anay
Castillo) is a partnership at will? then demanded that the company be audited and her shares be given to her.
- WON the withdrawal of Misa dissolved the partnership regardless of his
good or bad faith? ISSUE: Whether or not there is a partnership?
SC:
1. Yes. The partnership agreement of the firm provides that ”[t]he SC: YES. Even though it was not reduced to writing, for a partnership can be
partnership shall continue so long as mutually satisfactory and upon the instituted in any form. The fact that it was registered as a sole proprietorship is of
death or legal incapacity of one of the partners, shall be continued by the no moment for such registration was only for  the company’s trade name.
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
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Anay was not even an employee because when they ventured into the agreement,
they explicitly agreed to profit sharing this is even though Anay was receiving
commissions because this is only incidental to her efforts as a head marketer.
The Supreme Court also noted that a partner who is excluded wrongfully from a
partnership is an innocent partner. Hence, the guilty partner must give him his due
upon the dissolution of the partnership as well as damages or share in the profits
“realized from the appropriation of the partnership business and goodwill.” An
innocent partner thus possesses “pecuniary interest in every existing contract that
was incomplete and in the trade name of the co-partnership and assets at the time
he was wrongfully expelled.”
An unjustified dissolution by a partner can subject him to action for damages
because by the mutual agency that arises in a partnership, the doctrine of delectus
personae allows the partners to have the power, although not necessarily
the right to dissolve the partnership.
Tocao’s unilateral exclusion of Anay from the partnership is shown by her memo to
the Cubao office plainly stating that Anay 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.
 
Rojas vs. Maglana
DOCTRINE:
FACTS:
- Maglana and Rojas executed their Articles of Co-partnership called
“Eastcoast Development Enterprises” which had an indefinite term of
existence and was registered with the SEC and had a Timber License. One
of the EDE’s purposes was to apply or secure timber and/or private forest
lands and to operate, develop and promote such forests rights and
concessions.
- M shall manage the business affairs while R shall be the logging
superintendent. All profits and losses shall be divided share and share
alike between them.
- Later on, the two availed the services of Pahamotangas industrial partner
and executed another articles of co-partnership with the latter. The
purpose of this second partnership was to hold and secure renewal of
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 shall purchase the interest, share and
participation in the partnership of P. It was also agreed that after
payment of such including amount of loan secured by P in favor of the
partnership, the two shall become owners of all equipment contributed
by P. After this, the two continued the partnership without any written
agreement or reconstitution of their articles of partnership.
- Subsequently, R entered into a management contract with CMS Estate
Inc. M wrote him re: his contribution to the capital investments as well as
his duties as logging superintendent. R replied that he will not be able to
comply with both. M then told R that the latter’s share will just be 20% of
the net profits. Such was the sharing from 1957 to 1959 without
complaint or dispute. R took funds from the partnership more than his
contribution.
- M notified R that he dissolved the partnership. R filed an action against
M for the recovery of properties and accounting of the partnership and
damages.
- CFI: The partnership of M and R is after P retired is one of de facto and at
will; the sharing of profits and losses is on the basis of actual
contributions; there is no 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 in effect dissolved the partnership; sale of forest
concession is valid and binding and should be considered as M’s
contribution; R must pay or turnover to the partnership the profits he
received from CMS and pay his personal account to the partnership; M
must be paid 85k which he should’ve received but was not paid to him
and must be considered as his contribution.
ISSUE: What is the nature of the partnership and legal relationship of M-R after P
retired from the second partnership? May M unilaterally dissolve the partnership?
SC: There was no intention to dissolve the first partnership upon the constitution of
the second as everything else was the same except for the fact that they took in an
industrial partner: they pursued the same purposes, the capital contributions call
for the same amounts, all subsequent renewals of Timber License were secured in
favor of the first partnership, all businesses were carried out under the registered
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articles. M and R agreed to purchase the interest, share and participation of P and
after, they became owners of the equipment contributed by P. Both considered
themselves as partners as per their letters. It is not a partnership de facto or at will
as it was existing and duly registered. The letter of M dissolving the partnership is
in effect a notice of withdrawal and may be done by expressly withdrawing even
before expiration of the period with or without justifiable cause. As to the
liquidation of the partnership it shall be divided “share and share alike” after an
accounting has been made. R is not entitled to any profits as he failed to give the
amount he had undertaken to contribute thus, had become a debtor of the
partnership. M cannot be liable for damages as R abandoned the partnership thru
his acts and also took funds in an amount more than his contribution.
Petitione for Authority to Continue Use of Firm Name
FACTS:
- Two separate Petitions were filed before this Court 1) by the surviving
partners of Atty. Alexander Sycip, who died on May 5, 1975, and 2) by the
surviving partners of Atty. Herminio Ozaeta, who died on February 14,
1976, praying that they be allowed to continue using, in the names of
their firms, the names of partners who had passed away.
- PETITIONER’S contentions:
1. Under the law, a partnership is not prohibited from continuing its
business under a firm name which includes the name of a deceased
partner; in fact, Article 1840 of the Civil Code explicitly sanctions the
practice when it provides in the last paragraph that:
a. The use by the person or partnership continuing the
business of the partnership name, or the name of a
deceased partner as part thereof, shall not of itself make
the individual property of the deceased partner liable for
any debts contracted by such person or partnership.
2. In regulating other professions, such as accountancy and
engineering, the legislature has authorized the adoption of firm
names without any restriction as to the use, in such firm name, of
the name of a deceased partner; 2 the legislative authorization given
to those engaged in the practice of accountancy — a profession
requiring the same degree of trust and confidence in respect of
clients as that implicit in the relationship of attorney and client — to
acquire and use a trade name, strongly indicates that there is no
fundamental policy that is offended by the continued use by a firm
of professionals of a firm name which includes the name of a
deceased partner, at least where such firm name has acquired the
characteristics of a "trade name."
3. The Canons of Professional Ethics are not transgressed by the
continued use of the name of a deceased partner in the firm name
of a law partnership because Canon 33 of the Canons of Professional
Ethics adopted by the American Bar Association declares that:
a. ... The continued use of the name of a deceased or former
partner when permissible by local custom, is not unethical
but care should be taken that no imposition or deception
is practiced through this use.
4. There is no possibility of imposition or deception because the deaths
of their respective deceased partners were well-publicized in all
newspapers of general circulation for several days; the stationeries
now being used by them carry new letterheads indicating the years
when their respective deceased partners were connected with the
firm; petitioners will notify all leading national and international law
directories of the fact of their respective deceased partners' deaths.
5. No local custom prohibits the continued use of a deceased partner's
name in a professional firm's name; 6 there is no custom or usage in
the Philippines, or at least in the Greater Manila Area, which
recognizes that the name of a law firm necessarily Identifies the
individual members of the firm.
6. The continued use of a deceased partner's name in the firm name of
law partnerships has been consistently allowed by U.S. Courts and is
an accepted practice in the legal profession of most countries in the
world.
- The question involved in these Petitions first came under consideration
by this Court in 1953 when a law firm in Cebu (the Deen case) continued
its practice of including in its firm name that of a deceased partner, C.D.
Johnston. The matter was resolved with this Court advising the firm to
desist from including in their firm designation the name of C. D. Johnston,
who has long been dead.
- Petitioners herein now seek a re-examination of the policy thus far
enunciated by the Court.
ISSUE: Whether or not a law firm can still retain its old firm name when one of its
partners is deceased?
SC: NO.
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1. The Court finds no sufficient reason to depart from the rulings thus laid
down. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and
"Ozaeta, Romulo, De Leon, Mabanta and Reyes" are partnerships, the use
in their partnership names of the names of deceased partners will run
counter to Article 1815 of the Civil Code which provides:
Art. 1815. Every partnership shall operate under a
firm name, which may or may not include the name
of one or more of the partners.
Those who, not being members of the partnership,
include their names in the firm name, shall be subject
to the liability, of a partner.
It is clearly tacit in the above provision that names in a firm name of a
partnership must either be those of living partners and. in the case of
non-partners, should be living persons who can be subjected to liability.
The heirs of a deceased partner in a law firm cannot be held liable as the
old members to the creditors of a firm particularly where they are non-
lawyers.
In fact, Article 1825 of the Civil Code prohibits a third person from
including his name in the firm name under pain of assuming the liability
of a partner. The heirs of a deceased partner in a law firm cannot be held
liable as the old members to the creditors of a firm particularly where
they are non-lawyers.
Thus, Canon 34 of the Canons of Professional Ethics "prohibits an
agreement for the payment to the widow and heirs of a deceased lawyer
of a percentage, either gross or net, of the fees received from the future
business of the deceased lawyer's clients, both because the recipients of
such division are not lawyers and because such payments will not
represent service or responsibility on the part of the recipient. "
Accordingly, neither the widow nor the heirs can be held liable for
transactions entered into after the death of their lawyer-predecessor.
There being no benefits accruing, there ran be no corresponding liability.
2. In regards to the last paragraph of Article 1840 of the Civil Code cited by
petitioners, supra, the first factor to consider is that it is under
"Dissolution and Winding Up” of the Civil Code. The Article primarily
deals with the exemption from liability in cases of a dissolved
partnership, of the individual property of the deceased partner for debts
contracted by the person or partnership which continues the business
using the partnership name or the name of the deceased partner as part
thereof. What the law contemplates therein is a hold-over situation
preparatory to formal reorganization.
Secondly, Article 1840 treats more of a commercial partnership with a
good will to protect rather than of a professional partnership, with no
saleable good will but whose reputation depends on the personal
qualifications of its individual members. Thus, it has been held that a
saleable goodwill can exist only in a commercial partnership and cannot
arise in a professional partnership consisting of lawyers.
As a general rule, upon the dissolution of a commercial partnership the
succeeding partners or parties have the right to carry on the business
under the old name, in the absence of a stipulation forbidding it, (s)ince
the name of a commercial partnership is a partnership asset inseparable
from the good will of the firm.
3. A partnership for the practice of law cannot be likened to partnerships
formed by other professionals or for business. For one thing, the law on
accountancy specifically allows the use of a trade name in connection
with the practice of accountancy A partnership for the practice of law is
not a legal entity. It is a mere relationship or association for a particular
purpose. ... It is not a partnership formed for the purpose of carrying on
trade or business or of holding property." 11 Thus, it has been stated that
"the use of a nom de plume, assumed or trade name in law practice is
improper.
4. Petitioners cited Canon 33 of the Canons of Professional Ethics of the
American Bar Association" in support of their petitions. It is true that
Canon 33 does not consider as unethical the continued use of the name
of a deceased or former partner in the firm name of a law partnership
when such a practice is permissible by local custom but the Canon warns
that care should be taken that no imposition or deception is practiced
through this use.
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It must be conceded that in the Philippines, no local custom permits or
allows the continued use of a deceased or former partner's name in the
firm names of law partnerships.
The possibility of deception upon the public, real or consequential, where
the name of a deceased partner continues to be used cannot be ruled
out. A person in search of legal counsel might be guided by the familiar
ring of a distinguished name appearing in a firm title.
DISPOSITIVE: petitions filed herein are denied and petitioners advised to drop the
names "SYCIP" and "OZAETA" from their respective firm names. Those names may,
however, be included in the listing of individuals who have been partners in their
firms indicating the years during which they served as such.
DISSENT: Aquino, J.
Petition may be granted with the condition that it be indicated in the letterheads of
the two firms (as the case may be) that Alexander Sycip, former Justice Ozaeta and
Herminio Ozaeta are dead or the period when they served as partners should be
stated therein.
Obviously, the purpose of the two firms in continuing the use of the names of their
deceased founders is to retain the clients who had customarily sought the legal
services of Attorneys Sycip and Ozaeta and to benefit from the goodwill attached to
the names of those respected and esteemed law practitioners. That is a legitimate
motivation.
The retention of their names is not illegal per se. That practice was followed before
the war by the law firm of James Ross. Notwithstanding the death of Judge Ross
the founder of the law firm of Ross, Lawrence, Selph and Carrascoso, his name was
retained in the firm name with an indication of the year when he died. No one
complained that the retention of the name of Judge Ross in the firm name was
illegal or unethical.
Fue Leung vs. IAC
DOCTRINE:
FACTS:
- The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street,
Sta. Cruz, Manila, was established sometime in October, 1955. It was
registered as a single proprietorship and its licenses and permits were
issued to and in favor of petitioner Dan Fue Leung as the sole proprietor.
- Respondent Leung Yiu adduced evidence during the trial of the case to
show that Sun Wah Panciteria was actually a partnership and that he was
one of the partners having contributed P4K to its initial establishment.
ISSUE: W/N the private respondent is a partner of the petitioner in the
establishment of Sun Wah Panciteria?
SC: YES.
1) Two or more persons bind themselves to contribute money, property, or
industry to a common fund; and
2) There exists an intention on the part of the partners to divide the profits
among themselves have been established. As stated by the respondent, a
partner shares not only in profits but also in the losses of the firm. If
excellent relations exist among the partners at the start of business and
all the partners are more interested in seeing the firm grow rather than
get immediate returns, a deferment of sharing in the profits is perfectly
plausible. It would be incorrect to state that if a partner does not assert
his rights anytime within ten years from the start of operations, such
rights are irretrievably lost. The private respondent's cause of action is
premised upon the failure of the petitioner to give him the agreed profits
in the operation of Sun Wah Panciteria. In effect the private respondent
was asking for an accounting of his interests in the partnership
Magdusa vs. Albaran
DOCTRINE:
FACTS:
Appellant – Magdusa
Appellee – Albaran
- CA found that appellant and appellees, together with various other
persons, had verbally formed a partnership de facto, for the sale of
general merchandise in Surigao, Surigao, to which appellant contributed
P2K as capital, and the others contributed their labor, under the
condition that out of the net profits of the business 25% would be added
to the original capital, and the remaining 75% would be divided among
the members in proportion to the length of service of each.
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- Sometime in 1953 and 1954, the appellees expressed their desire to
withdraw from the partnership, and appellant thereupon made a
computation to determine the value of the partners' shares to that date.
- Appellees thereafter made demands upon appellant for payment, but
appellant having refused, they filed the initial complaint in the court
below. Appellant defended by denying any partnership with appellees,
whom he claimed to be mere employees of his.
- The Court of First Instance of Bohol dismissed the complaint on the
ground that the other were indispensable parties but had not been
impleaded. Upon appeal, the Court of Appeals reversed, with the result
noted at the start of this opinion.
- The main argument of appellant is that the appellees' action cannot be
entertained, because in the distribution of all or part of a partnership's
assets, all the partners have no interest and are indispensable parties
without whose intervention no decree of distribution can be validly
entered. This is not an action for a dissolution of a partnership and
winding up of its affairs or liquidation of its assets in which the interest of
other partners who are not brought into the case may be affected. The
action of the plaintiffs is one for the recovery of a sum of money with
Gregorio Magdusa as the principal defendant.
- Plaintiffs' action was based on the allegation, substantiated in evidence,
that Gregorio Magdusa, having taken delivery of their shares, failed and
refused and still fails and refuses to pay them their claims. The liability,
therefore, is personal to Gregorio Magdusa, and the judgment should be
against his sole interest, not against the partnership's although the
judgment creditors may satisfy the judgment against the interest of
Gregorio Magdusa in the partnership subject to the condition imposed by
Article 1814 of the Civil Code.
ISSUE: Can appellant personally be held liable for the payment of partners’ shares?
SC: NO. A partner's share cannot be returned without first dissolving and
liquidating the partnership, for the return is dependent on the discharge of the
creditors, whose claims enjoy preference over those of the partners; and it is self-
evident that all members of the partnership are interested in his assets and
business, and are entitled to be heard in the matter of the firm's liquidation and the
distribution of its property.
In addition, unless a proper accounting and liquidation of the partnership affairs is
first had, the capital shares of the appellees, as retiring partners, can not be repaid,
for the firm's outside creditors have preference over the assets of the enterprise
(Civ. Code, Art. 1839), and the firm's property can not be diminished to their
prejudice. Finally, the appellant can not be held liable in his personal capacity for
the payment of partners' shares for he does not hold them except as manager of,
or trustee for, the partnership. It is the latter that must refund their shares to the
retiring partners. Since not all the members of the partnership have been
impleaded, no judgment for refund can be rendered, and the action should have
been dismissed.
Sison vs. McQuaid
FACTS:
- Plaintiff brought an action in the CFI of Manila against defendant, alleging
that during the year 1938 the latter borrowed from him various sums of
money, aggregating P2,210, to enable her to pay her obligation to the
Bureau of Forestry and to add to her capital in her lumber business,
receipt of the amounts advanced being acknowledged in a document.
- As defendant was not able to pay the loan in 1938, as she had promised,
she proposed to take in plaintiff as a partner in her lumber business:
o Plaintiff to contribute to the partnership the said sum of P2,210
due him from defendant in addition to his personal services.
- Plaintiff agreed to defendant‘s proposal and, as a result, there was
formed between them, under the provisions of the Civil Code, a
partnership in which they were to share alike in the income or profits of
the business, each to get one-half thereof.
- In accordance with said contract, plaintiff, together with defendant,
rendered services to the partnership without compensation from June
15, 1938 to December, 1941.
- Before the last World War, the partnership sold to the United States
Army 230,000 board feet of lumber for P13,800, for the collection of
which sum defendant, as manager of the partnership, filed the
corresponding claim with the said army after the war; that the claim was
―finally‖ approved and the full amount paid – the complaint does not
say when – but defendant has persistently refused to deliver one-half of
it, or P6,900, to plaintiff notwithstanding repeated demands, investing
the whole sum of P13,800 for her own benefit.
- Plaintiff, therefore, prays for judgment declaring the existence of the
alleged partnership and requiring the defendant to pay him the said sum
of P6,900 in addition to damages and costs.
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- Defendant filed a motion to dismiss on the grounds that plaintiff‘s action
had already prescribed, that plaintiff‘s claim was not provable under the
Statute of Frauds, and that the complaint stated no cause of action.
Sustaining the first ground, the court dismissed the case, whereupon,
plaintiff appealed to the Court of Appeals; but that court has certified the
case here on the ground that the appeal involved only questions of law.
ISSUE: W/N dismissal of the case is proper?
SC: YES. The Court held that the defense of prescription cannot be sustained on a
mere motion to dismiss based on what appears on the face of the complaint.
But though the reason given for the order of dismissal be untenable, the Court
finds that the said order should be upheld on the ground that the complaint states
no cause of action, which is also one of the grounds on which defendant‘s motion
to dismiss was based.
Plaintiff seeks to recover from defendant one-half of the purchase price of
lumber sold by the partnership to the United States Army. But his complaint does
not show why he should be entitled to the sum he claims. It does not allege that
there has been a liquidation of the partnership business and the said sum has been
found to be due him as his share of the profits.
Moreover, the profits of the business cannot be determined by taking into account
the result of one particular transaction instead of all the transactions had. Hence,
the need for a general liquidation before a member of a partnership may claim a
specific sum as his share of the profits.
Songcuya vs. De Luna
FACTS:
- On September 11, 1936, plaintiff Josue Soncuya filed with the CFI of
Manila and amended complaint against Carmen de Luna in her own name
and as co-administratrix of the intestate estate, of Librada Avelino, in
which, upon the facts therein alleged, he prayed that defendant be
sentenced to pay him the sum of P700,432 as damages and costs.
- Defendant Carmen de Luna interposed a demurrer based on the
following grounds: (1) That the complaint does not contain facts
sufficient to constitute a cause of action; and (2) that the complaint is
ambiguous, unintelligible and vague.
- The court found the same well-founded and sustained it, ordering the
plaintiff to amend his complaint within a period of ten days from receipt
of notice of the order.
- Plaintiff having manifested that he would prefer not to amend his
amended complaint, the attorney for the defendant, Carmen de Luna,
filed a motion praying that the amended complaint be dismissed with
costs against the plaintiff. Said motion was granted.
- In the amended complaint it is prayed that defendant Carmen de Luna be
sentenced to pay plaintiff damages in the sum of P700,432 as a result of
the administration, said to be fraudulent, of the partnership, "Centro
Escolar de Señoritas", of which plaintiff, defendant and the deceased
Librada Avelino were members.
ISSUE: W/N plaintiff is entitled to damages for the supposed fraudulent
management of the partnership referred to in the case?
SC: It is first necessary that a liquidation of the business thereof be made to the end
that the profits and losses may be known and the causes of the latter and the
responsibility of the defendant as well as the damages which each partner may
have suffered may be determined. It is not alleged in the complaint that such
liquidation has been effected nor is it prayed that it be made. Consequently, there
is no reason or cause for plaintiff to institute the action for damages which he
claims from the managing partner Carmen de Luna.
For a partner to be able to claim from another partner who manages the general
co-partnership, damages allegedly suffered by him by reason of the fraudulent
administration of the latter, a previous liquidation of said partnership is necessary.
Guidote vs. Borja
FACTS:
- Maximo Guidote and Narciso Santos formed in 1918 a partnership
business under the name of “Taller Sinukuan,” in which Santos was the
capitalist partner and Guidote was the industrial partner. Santos died in
1920. Guidote failed to liquidate the affairs of the partnership and to
render an account thereof to Borja, the administratrix of Santos’ estate.
- Guidote brought an action against Borja to recover a sum of money
[9k~], a part of which was alleged to be the net profits from the business
due Guidote, and the rest of the sum consisting of advances allegedly
made by Guidote.
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- Borja admitted the partnership’s existence and prayed that Guidote be
ordered to render an accounting and to pay the estate 25k as net
profits, credits, and property pertaining to Santos.
- Guidote called several witnesses and introduced a so-called accounting
and a mass of documentary evidence, which was so hopelessly and
inextricably confused that the court could not consider it of much
probative value. T
- The court dismissed Guidote’s complaint and absolved Borja. Guidote
was ordered to render a full and complete accounting, verified by
vouchers, of the partnership business.
- Guidote rendered an account prepared by one Tomas Alfonso, a public
accountant. Numerous objections were presented by Borja. The court
disapproved the account and ordered that Borja submit an accounting
from the date of the commencement of the partnership up to the time
the business was closed.
- Borja presented an account and liquidation prepared by a public
accountant, Santiago A. Lindaya, showing a balance of P29k~ in Borja’s
[Santos’ estate] favor. At the hearing, Borja introduced the public
accountant Jose Turiano Santiago to testify as to the results of an audit
made by him of the partnership accounts. Santiago testified that he had
prepared a separate accounting or liquidation similar in results to that
prepared by Lindaya, but with a few differences in the sums total.
[Computation: Santos is a creditor of the Taller Sinukuan in the sum of
P26k. Guidote is a debtor to the Taller Sinukuan in the sum of P20k.]
- In order to contradict the conclusions of the two public accountants,
Guidote presented Tomas Alfonso and the bookkeeper, Pio Gaudier, as
witnesses. The trial court judge said that the testimonies of these
witnesses are unreliable.
o Tomas Alfonso is the same public accountant who filed the
liquidation Exhibit O on behalf of Guidote, in relation to the
partnership business, which liquidation was disapproved by this
court in a decision. The judge did not believe Alfonso’s
proposition that Guidote, a mere industrial partner,
notwithstanding his having received 21k on the various jobs
and contracts of the business had actually expended and paid
out 63k, of 44k in excess of the gross receipts of the business. It
materially contradicts Guidote’s allegations to the effect that
the advances that he [Guidote] made amounted only to 2k.
o Pio Gaudier is the same bookkeeper who prepared three
entirely separate and distinct liquidation for the same
partnership business, and the court found that the testimony
given by him at the last hearing is confusing, contradictory and
unreliable.
o Other witnesses were given scant consideration—Chua Chak
can neither read nor write English, Spanish, or Tagalog; Claro
Reyes was forced to admit that a certain exhibit was not the
original.
- The court gave credence to the conclusions reached by the public
accountants presented by Borja. Guidote was ordered to pay P26k to
Borja, with legal interest, plus costs.
ISSUE: WON the trial court is correct in ordering Guidote to pay P26k to Borja. YES
SC: There may be some merit in Guidote’s contention that the dismissal of his
complaint was premature. The better practice would been to let the complaint
stand until the result of the liquidation of the partnership affairs was known. But
under the circumstances, no harm was done by the dismissal of Guidote’s
complaint.
GUIDOTE’S ARGUMENT
Since Santos, up to the time of his death, generally took care of the partnership’s
payments and collections, his legal representatives were under the obligation to
render accounts of the operations, notwithstanding the fact that Guidote was in
charge of the business subsequent to the death of Santos.
GUIDOTE’S ARGUMENT IS UNAVAILING
Wahl v. Donaldson Sim & Co.
The death of one of the partners dissolves the partnership, but that the liquidation
of its affairs is by law entrusted, not to the executors of the deceased partner, but
to the surviving partners or the liquidators appointed by them.
The rule for the conduct of a surviving partner
In equity, surviving partners are treated as trustees of the representatives of the
deceased partner, with 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
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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.
Guidote failed to observe this rule, and he is not in position to complain if his
testimony and that of his witnesses is discredited.
The appealed judgment is AFFIRMED.
Po Yeng Cheo vs. Lim Ka Yam
DOCTRINE: A partner’s share cannot be returned without first dissolving and
liquidating the partnership.
FACTS:
- The present plaintiff, Po Yeng Cheo, alleged sole owner of a business
formerly conducted in the City of Manila under the style of Kwong
Cheong, as managing partner in said business and to recover from him its
properties and assets. The defendant having died during the pendency of
the cause in the court below and the death suggested of record, his
administrator, one Lim Yock Tock, was required to appear and make
defense.
- Honorable C. A. Imperial found that the plaintiff was entitled to an
accounting from Lim Ka Yam, the original defendant, as manager of the
business already referred to, and he accordingly required Lim Yock Tock,
as administrator, to present a liquidation of said business within a stated
time. This order bore no substantial fruit, for the reason that Lim Yock
Tock personally knew nothing about the aforesaid business (which had
ceased operation more than ten years previously) and was apparently
unable to find any books or documents that could shed any real light on
its transaction. However, he did submit to the court a paper written by
Lim Ka Yam in life purporting to give, with vague and uncertain details, a
history of the formation of the Kwong Cheong Tay and some account of
its disruption and cessation from business in 1910. The court eventually
ruled in favor of plaintiff.
- 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, with a capitalization of P160,000, engaged in
the import and export trade; and after the death of Po Gui Yao the there
were seven persons who were interested to venture in.
- 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.
- 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 repeated demands to that effect have been made upon him by
the plaintiff.
- 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,
ISSUE: Can plaintiff recover from defendant their partnership’s properties and
assets?
SC: NO. It is quite apparent that the judgment cannot be sustained. In the first
place, 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.
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.
In the present case, the shares referred to--constituting the only assets of Kwong
Cheong Tay--have not been converted into ready money and doubtless still remain
in the name of Kwong Cheong Tay as owner. Under these circumstances it is
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impossible to sustain a judgment in favor of the plaintiff for his aliquot part of the
par value of said shares, which would be equivalent to allowing one of several co-
owners to recover from another, without process of division, a part of an undivided
property.
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. Upon the death of Lim
Ka Yam it therefore became the duty of his surviving associates to take the proper
steps to settle the affairs of the firm, and any claim against him, or his estate, for a
sum of money due to the partnership by reason of any misappropriation of its
funds by him, or for damages resulting from his wrongful acts as manager, should
be prosecuted against his estate in administration in the manner pointed out in
sections 686 to 701, inclusive, of the Code of Civil Procedure.
The proper step for the surviving associates to take would be to make application
to the court having charge to the administration to require the administrator to
surrender such property.
Defendant absolved.
Claridades vs. Mercader
DOCTRINE: As plaintiff’s complaint merely seeks the liquidation of his partnership
with the defendants, it is to be considered a personal action which may be brought
in the place of residence of either the plaintiff or the defendant. The fact that the
plaintiff prayed for the sale of the assets of the partnership, did not change the
nature or character of action, such sale being merely a necessary incident of the
liquidation of the partnership, which should precede and/or is part of its process of
dissolution.
Plaintiff-Appellant: Dr. Simeon S. Claridades
Defendants-Appellees: Vicente Mercader and Perfecto Fernandez
Intervenors: Guillermo Reyes, Armando Asuncion, Alfredo Zulueta, Yap Leding
FACTS:
- Claridades brought the present action against Mercader and Fernandez
for the dissolution of a partnership allegedly existing between them and
an accounting of the operation of the partnership, particularly a fishpond
located in Sta. Cruz, Marinduque, which was the main asset of the
partnership, from September 1954, as well as to recover moral and
exemplary damages, in addition to attorney's fees and costs.
- On the other hand, defendants admit the existence of the partnership
and that it had been so far unproductive, averring further that there is an
impending auction sale of said fishpond due to delinquency in the
payment of taxes owing to lack of funds and plaintiff's failure to
contribute what is due from him.
- Subsequently, Reyes was allowed to intervene for the purpose of
recovering a sum of money allegedly due him for services rendered as
foreman of said fishpond, plus damages. Later, Asuncion succeeded in
intervening as the alleged assignee of the interest of Mercader in said
partnership and fishpond.
- Thereafter, the lower court appointed a receiver of the fishpond. Upon
the other hand, Alfredo Zulueta and his wife Yap Leding sought
permission to intervene, still later, alleging that they are the owners of
said fishpond, having bought ½ of it from Regencia, who, in turn, had
acquired it from Asuncion, who had purchased the fishpond from
defendant Mercader, and the other half having been assigned to him
directly by Asuncion. Despite plaintiff's opposition thereto, said
permission was granted in an order dated Feb. 8, 1962, which, likewise
gave the Zuluetas ten days within which to file such pleading as they may
deem necessary for the protection of their rights.
- On Feb. 12, 1962, the Zuluetas filed a motion to dismiss upon the ground
that the complaint states no cause of action; that venue has been
improperly laid; and that plaintiff complaint is moot and academic.
- Acting upon the motion, on March 2, 1962, the lower court granted the
same upon the ground of improper venue ratiocinating that that the
subject matter of this case is the possession of said fishpond, because
plaintiff prays in the complaint that the assets of the partnership,
including said fishpond be sold, that the proceeds of the sale be applied
to the payment of the debts of the partnership, and that the residue be
distributed equally among the partners and since the fishpond is located
in Marinduque, the complaint should have been lodged there.
ISSUE: WON the present action should have been instituted, not in the CFI of
Bulacan, but in that of Marinduque, where the disputed fishpond is located?
SC: NO. The present action was correctly instituted in the CFI of Bulacan. Plaintiff's
complaint merely seeks the liquidation of his partnership with defendants
Fernandez and Mercader. This is obviously a personal action, which may be
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brought in the place of residence of either the plaintiff or the defendants. Since
plaintiff is a resident of Bulacan, he had the right to bring the action in the court of
first instance of that province. What is more, although defendants Fernandez and
Mercader reside in Marinduque, they did not object to the venue. In other words,
they waived whatever rights they had, if any, to question it. The fact that plaintiff
prays for the sale of the assets of the partnership, including the fishpond in
question, did not change the nature or character of action, such sale being merely a
necessary incident of the liquidation of the partnership, which should precede
and/or is part of its process of dissolution. Neither plaintiff's complaint nor the
answer filed by defendants Fernandez and Mercader questioned the title to said
property or the possession thereof. The situation was not changed materially by
the Intervention either of Asuncion or of the Zuluetas, for, as alleged successors to
the interest Mercader in the fishpond, they, at best, stepped into his shoes.
Villareal vs. Ramirez
DOCTRINE: A share in a partnership can be returned only after the completion of
the latter’s dissolution, liquidation and winding up of the business.
FACTS:
- Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a
partnership with a capital of P750K for the operation of a restaurant and
catering business under the name “Aquarius Food House and Catering
Services.” Villareal was appointed general manager and Carmelito Jose,
operations manager.
- Respondent Donaldo Ramirez joined as a partner on September 5, 1984
with a capital contribution of P250K  which was paid by his parents,
Respondents Cesar and Carmelita Ramirez. Jesus Jose withdrew from the
partnership and his capital contribution of P250,000 was refunded to him
in cash by agreement of the partners.
- In the same month, without prior knowledge of respondents, petitioners
closed down the restaurant, allegedly because of increased rental. The
restaurant furniture and equipment were deposited in the respondents’
house for storage.
- On March 1, 1987, respondent spouses wrote petitioners, saying that
they were no longer interested in continuing their partnership or in
reopening the restaurant, and that they were accepting the latter’s offer
to return their capital contribution.
- Respondent wrote another letter informing petitioners of the
deterioration of the restaurant furniture and equipment stored in their
house. She also reiterated the request for the return of their one-third
share in the equity of the partnership. The repeated oral and written
requests were, however, left unheeded.
- Respondents filed before the RTC for the collection of a sum of money
from petitioners. Petitioners contended that respondents had expressed
a desire to withdraw from the partnership and had called for its
dissolution under Articles 1830 and 1831; that respondents had been
paid, upon the turnover to them of furniture and equipment worth over
P400K; and that the latter had no right to demand a return of their equity
because their share, together with the rest of the capital of the
partnership, had been spent as a result of irreversible business losses.
- In their Reply, respondents alleged that had not received any regular
report or accounting from the latter, who had solely managed the
business. Respondents also alleged that they expected the equipment
and the furniture stored in their house to be removed by petitioners as
soon as the latter found a better location for the restaurant.
- RTC ruled that the parties had voluntarily entered into a partnership,
which could be dissolved at any time. Petitioners clearly intended to
dissolve it when they stopped operating the restaurant. Hence, the trial
court rendered a judgment in favor of respondents and ordering the
petitioners to pay jointly and severally.
ISSUE: WON petitioners are liable to respondents for the latter’s share in the
partnership
SC: YES. The Petition has merit. Both the trial and the appellate courts found that a
partnership had indeed existed, and that it was dissolved on March 1, 1987. They
found that the dissolution took place when respondents informed petitioners of
the intention to discontinue. Respondents consequently demanded from
petitioners the return of their one-third equity in the partnership. We hold that
respondents have no right to demand from petitioners the return of their equity
share. Except as managers of the partnership, petitioners did not personally hold its
equity or assets.
“The partnership has a juridical personality separate and distinct from that of each
of the partners.” Since the capital was contributed to the partnership, not to
petitioners, it is the partnership that must refund the equity of the retiring
partners.
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The amount to be refunded is necessarily limited to its total resources. In other
words, it can only pay out what it has in its coffers, which consists of all its assets.
However, before the partners can be paid their shares, the creditors of the
partnership must first be compensated. After all the creditors have been paid,
whatever is left of the partnership assets becomes available for the payment of the
partners’ shares.
Evidently, in the present case, the exact amount of refund equivalent to
respondents’ one-third share in the partnership cannot be determined until all the
partnership assets will have been liquidated.
Laguna Transportation Co. vs. SSS
DOCTRINE:
FACTS:
- Petitioner is a domestic corporation duly organized and existing under
the laws of the Philippines, with principal place of business at Biñan,
Laguna. Respondent is an agency created under Republic Act No. 1161, as
amended by Republic Act No. 1792, with the principal place of business
at the new GSIS Bldg., corner Arroceros and Concepcion Streets, Manila,
where it may be served with summons.
- Respondent has served notice upon the petitioner requiring it to register
as member of the System and to remit the premiums due from all the
employees of the petitioner and the contribution of the latter to the
System beginning the month of September, 1957.
- Sometime in 1949, the Biñan Transportation Co., a corporation duly
registered with the Securities and Exchange Commission, sold part of the
lines and equipment it operates to Gonzalo Mercado, Artemio Mercado,
Florentino Mata and Dominador Vera Cruz.
- Said vendees formed an unregistered partnership under the name of
Laguna Transportation Company which continued to operate the lines
and equipment bought from the Biñan Transportation Company, in
addition to new lines which it was able to secure from the Public Service
Commission.
- The original partners forming the Laguna Transportation Company (LTC),
with the addition of two new members, organized a corporation known
as the Laguna Transportation Company, Inc., which was registered with
the Securities and Exchange Commission on June 20, 1956, and which
corporation is the plaintiff now in this case.
- Plaintiff filed on August 30, 1957 an Employee's Data Record . . . and a
supplemental Information Sheet. Prior to November 11, 1957, plaintiff
requested for exemption from coverage by the System on the ground
that it started operation only on June 20, 1956, when it was registered
with the Securities and Exchange Commission but on November 11, 1957,
the Social Security System notified plaintiff that it was covered.
- Plaintiff through counsel sent a letter to the Social Security System
contesting the claim of the System that plaintiff was covered. However,
Carlos Sanchez, Manager of the Production Department of the
respondent System for and in behalf of the Acting Administrator,
informed plaintiff that plaintiff's business has been in actual operation for
at least two years.
- On January 24, 1958, petitioner Laguna Transportation Co., Inc. filed with
the CFI of Laguna a petition praying that an order be issued by the court
declaring that it is not bound to register as a member of respondent
Social Security System and, therefore, not obliged to pay to the latter the
contributions required under the Social Security Act. To this petition,
respondent filed its answer on February 11, 1958 praying for its dismissal
due to petitioner's failure to exhaust administrative remedies, and for a
declaration that petitioner is covered by said Act, since the latter's
business has been in operation for at least 2 years prior to September 1,
1957.
- CFI: Petitioner was an employer engaged in business as common carrier
which had been in operation for at least two years prior to the enactment
of Republic Act No. 1161, as amended by Republic Act 1792 and by virtue
thereof, it was subject to compulsory coverage under said law.
ISSUE: W/N petitioner is covered by Sec. 9 of the Social Security Act?
SC: YES. It is not disputed that the Laguna Transportation Company, an
unregistered partnership composed of Gonzalo Mercado, Artemio Mercado,
Florentina Mata, and Dominador Vera Cruz, commenced the operation of its
business as a common carrier on April 1, 1949. These 4 original partners, with 2
others (Maura Mendoza and Sabina Borja) later converted the partnership into a
corporate entity, by registering its articles of incorporation with the Securities and
Exchange Commission on June 20, 1956. The firm name "Laguna Transportation
Company" was not altered, except with the addition of the word "Inc." to indicate
that petitioner was duly incorporated under existing laws. The corporation
continued the same transportation business of the unregistered partnership, using
the same lines and equipment. There was, in effect, only a change in the form of
the organization of the entity engaged in the business of transportation of
passengers. Hence, said entity as an employer engaged in business, was already in
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operation for at least 3 years prior to the enactment of the Social Security Act on
June 18, 1954 and for at least two years prior to the passage of the amendatory act
on June 21, 1957.
Petitioner argues that, since it was registered as a corporation with the Securities
and Exchange Commission only on June 20, 1956, it must be considered to have
been in operation only on said date. If any general rule can be laid down, in the
present state of authority, it is that a corporation will be looked upon as a legal
entity as a general rule, and until sufficient reason to the contrary appears; but,
when the motion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an
association of persons. To adopt petitioner's argument would defeat, rather than
promote, the ends for which the Social Security Act was enacted.
Moreover, petitioner admitted that as an employer engaged in the business of a
common carrier, its operation commenced on April 1, 1949 while it was a
partnership and continued by the corporation upon its formation on June 20, 1956.
The weight of authority supports the view that where a corporation was formed by,
and consisted of members of a partnership whose business and property was
conveyed and transferred to the corporation for the purpose of continuing its
business, in payment for which corporate capital stock was issued, such
corporation is presumed to have assumed partnership debts, and is prima facie
liable therefore. The reason for the rule is that the members of the partnership
may be said to have simply put on a new coat, or taken on a corporate cloak, and
the corporation is a mere continuation of the partnership.
Yu vs. NLRC
DOCTRINE:
1. The changes in the membership of the partnership were the dissolution
of the old partnership.
2. Occurrence of events which precipitate the legal consequence of
dissolution of a partnership don’t automatically result in the termination
of the legal personality of the old partnership
3. The legal personality of a partnership persists for the limited purpose of
winding up and closing of the affairs of the partnership.
4. A withdrawing partner remains liable to a third party creditor of the old
partnership.
5. The new partnership is entitled to appoint and hire a new general or
assistant general manager to run the affairs of the business enterprise
taken over.
FACTS:
Benjamin Yu used to be the Assistant General Manager of Jade Mountain, a
partnership engaged in marble quarrying and export business. The majority of the
founding partners sold their interests in said partnership to Willy Co and Emmanuel
Zapanta without Yu’s knowledge. Said new partnership continued operating under
the same name and continued the business’s operations. However, it transferred
its main office from Makati to Mandaluyong. Said new partnership did not anymore
availed of the services of Yu. Thus, he filed a complaint for illegal dismissal,
recovery of unpaid wages and damages.
ISSUE:
- WON the old partnership had been extinguished and replaced by the new
partnership [YES]
- WON Yu could still claim his unpaid wages against the new partnership
[YES]
RATIO:
1. The legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired Yu in 1984 and the emergence of
a new firm composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable laws to this case are Articles 1828 and 1830.
- The acquisition of 82% of the partnership interest by new partners,
coupled with the retirement or withdrawal of the partners who had
originally owned such 82% interest, was enough to constitute a new
partnership.
- The occurrences of events which precipitate the legal consequence of
dissolution of a partnership do not, however, automatically result in the
termination of the legal personality of the old partnership in line with
Article 1829.
- In the ordinary course of events, the legal personality of the expiring
partnership persists for the limited purpose of winding up and closing of
the affairs of the partnership.
- However, in this case, the business of the old partnership was simply
continued by the new partners, without the old partnership undergoing
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the procedures relating to dissolution and winding up of its business
affairs.
- The new partnership simply took over the business enterprise owned by
the preceding partnership, and continued using the old name of Jade
Mountain Products Company Limited, without winding up the business
affairs of the old partnership, paying off its debts, liquidating and
distributing its net assets, and then re-assembling the said assets or most
of them and opening a new business enterprise.
- Indeed, a creditor of the old Jade Mountain, like petitioner Benjamin Yu
in respect of his claim for unpaid wages, is entitled to priority vis-a-vis any
claim of any retired or previous partner insofar as such retired partner's
interest in the dissolved partnership is concerned.
- Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as
other claims relating to his employment with the previous partnership,
against the new Jade Mountain.
- Even though the new partnership is liable to Yu, it is entitled to appoint
and hire a new general or assistant general manager to run the affairs of
the business enterprise take over. An assistant general manager belongs
to the most senior ranks of management and a new partnership is
entitled to appoint a top manager of its own choice and confidence.
- The non-retention of Benjamin Yu as Assistant General Manager did not
therefore constitute unlawful termination, or termination without just or
authorized cause. It appears that Yu’s former position had become
superfluous and redundant since Willy Co now personally runs the
business.
2. Not only the retiring partners (Rhodora Bendal, et al.) but also the new
partnership itself which continued the business of the old, dissolved, one,
are liable for the debts of the preceding partnership.
The SC held in Singsong et al., vs. Isabela Saw Mill et al., that withdrawing
partner remains liable to a third party creditor of the old partnership.
Under Article 1840, creditors of the old Jade Mountain are also creditors
of the new Jade Mountain which continued the business of the old one
without liquidation of the partnership affairs. Indeed, a creditor of the old
Jade Mountain, like petitioner Benjamin Yu in respect of his claim for
unpaid wages, is entitled to priority vis-a-vis any claim of any retired or
previous partner insofar as such retired partner's interest in the dissolved
partnership is concerned.
Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as
other claims relating to his employment with the previous partnership,
against the new Jade Mountain.
Even though the new partnership is liable to Yu, it is entitled to appoint
and hire a new general or assistant general manager to run the affairs of
the business enterprise take over. An assistant general manager belongs
to the most senior ranks of management and a new partnership is
entitled to appoint a top manager of its own choice and confidence.
The non-retention of Benjamin Yu as Assistant General Manager did not
therefore constitute unlawful termination, or termination without just or
authorized cause. It appears that Yu’s former position had become
superfluous and redundant since
Willy Co now personally runs the business.
Bearneza vs. Dequilla
DOCTRINE:
FACTS:
- In the year 1903, Balbino Dequilla, the herein defendant, and Perpetua
Bearneza formed a partnership for the purpose of exploiting a fish pond
with Perpetua obligating herself to contribute to the payment of the
expenses of the business, which obligation she made good, and both
agreeing to divide the profits between themselves, which they had been
doing until the death of the said Perpetua in the year 1912.
- The deceased left a will in one of the clauses of which she appointed
Domingo Bearneza, the herein plaintiff, as her heir to succeed to all her
rights and interests in the fish pond in question-Domingo Bearneza then
instituted an action to recover a part of the fish pond belonging to the
decedent, including ½ of the profits received by the defendant from the
years 1913-1919.
- The defendant alleges that "the formation of the supposed partnership
between the plaintiff and the defendant for the exploitation of the
aforesaid fish pond was not carried into effect, on account of the plaintiff
having refused to defray the expenses of reconstruction and exploitation
of said fishpond." and further averred that the right of the plaintiff had
already prescribed. Judgment was then rendered declaring the plaintiff
owner of one-half of the fish pond but without may awarding him any
damages-From this judgment the defendant appeals.
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ISSUE: W/N the plaintiff has any right to maintain an action for recovery of the said
one-half of the fishpond?
SC: NONE.
- The partnership formed was a particular partnership, it having had for its
subject-matter a specified thing, the exploitation of the aforementioned
fish pond-Although, as the trial court says in its decision, the defendant,
in his letters to Perpetua or herhusband, makes reference to the fish
pond, calling it "our," or "your fish pond," this reference cannot be held
to include the land on which the said fish pond was built-It has not been
proven that Bearneza participated in the ownership of the said land.
o Therefore, the land on which the fish pond was constructed did
not constitute part of the subject-matter of the partnership.
- This partnership was dissolved by the death of Perpetua Bearneza.
o Neither can it be maintained that the partnership continued to
exist after the death of Perpetua, inasmuch as it does not
appear that any stipulation to that effect has ever been made
by her and the defendant-The partnership having been
dissolved by the death of Perpetua Bearneza, its subsequent
legal status was that of a partnership in liquidation, and the
only rights inherited by her testamentary heir, the herein
plaintiff, were those resulting from the said liquidation in favor
of the deceased partner, and nothing more.
- Before this liquidation is made, which up to the present has not been
effected, it is impossible to determine what rights or interests, if any, the
deceased had, the partnership bond having been dissolved-There is no
sufficient ground for holding that a community of property existed
between the plaintiff and the defendant, it not being known whether the
deceased still had any interest in the partnership property which could
have been transmitted by will to the plaintiff.
- Furthermore, it cannot be said that the partnership continued between
the plaintiff and the defendant. It is true that the latter's act in requiring
the heirs of Perpetua to contribute to the payment of the expenses of
exploitation of the aforesaid fishing industry was an attempt to continue
the partnership, but it is also true that neither the said heirs collectively,
nor the plaintiff individually, took any action in response to that
requirement, nor made any promise to that effect, and therefore no new
contract of partnership existed-The decision is hereby REVERSED.
Bonnevie vs. Hernandez
DOCTRINE:
FACTS:
- Plaintiffs with other associates formed a syndicate or secret partnership
for the purpose of acquiring the plants, franchises and other properties of
the Manila Electric Co. — hereinafter called the Meralco..
- No formal articles were drawn for it was the purpose of the members to
incorporate once the deal had been consummated.
- Negotiation for the purchase was commenced, but as it made no
headway, defendant was taken in as a member of the partnership so that
he could push the deal through, and to that end he was given the
necessary power of attorney.
- Using partnership funds, defendant was able to buy the Meralco
properties.
- Although defendant was the one named vendee in the deed of sale, there
is no question that the transaction was in penalty made for the
partnership so that the latter assumed control of the business the day
following the sale
- About the latter half of the following month the members of the
partnership proceeded with the formation of the proposed corporation,
apportioning among themselves its shares of stock in proportion to their
respective contributions to the capital of the partnership and their
individual efforts in bringing about the acquisition of the Meralco
properties.
- But before the incorporation, Judge Reyes and the plaintiffs withdrew
from the partnership for the reason that the business was not going well,
and, as admitted by both parties, the partnership was then dissolved. In
accordance with the terms of the resolution, the withdrawing partners.
- Following the dissolution of the partnership, the members who preferred
to remain in the business went ahead with the formation of the
corporation, taking in new associates as stockholders.
- And defendant, on his part, in fulfillment of his trust, made a formal
assignment of the Meralco properties to the treasurer of the corporation,
giving them a book value of P365,000, in return for which the corporation
issued, to the various subscribers to its capital stock, shares of stock of
the total face value of P225,000 and assumed the obligation of paying
what was still due the Meralco on the purchase price.
- Two years from their withdrawal from the partnership, when the
corporate business was already in a prosperous condition, plaintiffs
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brought the present suit against Jaime Hernandez, claiming a share in the
profit the latter is supposed to have made from the assignment of the
Meralco properties to the corporation, estimated by plaintiffs to be
P225,000 and their share of it to be P115,312.50.
- Defendant's answer denies that he has made any profit out of the
assignment in question and alleges that in any event plaintiffs, after their
withdrawal from the partnership, ceased to have any further interest in
the subsequent transactions of the remaining members.
ISSUE/S:
- WON the partnership had realized profit out of the Meralco properties
made by the defendant to the corporation. – No.
- If there was indeed a profit, WON the plaintiffs are entitled for their
share out of such profit. – No.
SC:
1. NO. The profit alleged to have been realized from the assignment of the
Meralco properties to the new corporation, the Bicol Electric Company, is
more apparent than real. It is true that the value set for those properties
in the deed of assignment was P365,000 when the acquisition price was
only P122,000. But one should not jump to the conclusion that a profit,
consisting of the difference between the two sums was really made out
of the transaction, for the assignment was not made for cash but in
payment for subscriptions to shares of stock in the assignee, and while
those shares had a total face value of P225,000, this is not necessarily
their real worth.
2. NO. Assuming that the assignment actually brought profit to the
partnership, it is hard to see how defendant could be made to answer for
plaintiffs' alleged share thereof.
However, it does not appear that plaintiffs have ever asked for a liquidation, and as
will presently be explained no liquidation was called for because when plaintiffs
withdrew from the partnership the understanding was that after they had been
reimbursed their investment, they were no longer to have any further interest in
the partnership or its assets and liabilities.
As a general rule, when a partner retires from the firm, he is entitled to the
payment of what may be due him after a liquidation. But certainly no liquidation is
necessary where there is already a settlement or an agreement as to what the
retiring partner shall receive.
In the instant case, it appears that a settlement was agreed upon on the very day
the partnership was dissolved. For when plaintiffs and Judge Jaime Reyes withdrew
from the partnership on that day they did so as agreed to by all the partners,
subject to the only condition that they were to be repaid their contributions or
investments within three days from said date. And this condition was fulfilled when
on the following day they were reimbursed the respective amounts due them
pursuant to the agreement.
The SC therefore, found that, the acceptance by the withdrawing partners,
including the plaintiffs, of their investment in the instant case was understood and
intended by all the parties as a final settlement of whatever rights or claim the
withdrawing partners might have in the dissolved partnership. Such being the case
they are now precluded from claiming any share in the alleged profits, should there
be any, at the time of the dissolution.

In the case at bar, the defendant did not receive the consideration for the
assignment for, as already stated, the assignment was made in payment for
subscriptions of various persons to the capital stock of the new corporation.
Plaintiffs, in order to give color of legality to their claim against defendant, maintain
that the latter should be held liable for damages caused to them, consisting of the
loss of their share of the profits, due to defendant's failure properly to perform his
duty as a liquidator of the dissolved partnership, this on the theory that as
managing partner of the partnership, it was defendant's duty to liquidate its affairs
upon its dissolutions.