PEDRO MARTINEZ, plaintiff-appellee, vs. ONG PONG CO and ONG LAY, defendants. — ONG PONG CO, appellant.

Facts:

Plaintiff Pedro Martinez delivered P1,500 to the defendants who, in a private document, acknowledged that they had
received the same with the agreement, as stated by them, "that we are to invest the amount in a store, the profits or
losses of which we are to divide with the former, in equal shares."

The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an accounting of the
partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong Pong Co
alone appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him and to Ong Lay
of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was the one who had
managed the business, and that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the
plaintiff had agreed.

Issue: Whether or not the defendant is liable to Pedro Martinez

Held:

Yes but only to the extent of 750 plus legal interest since they are jointly liable. The defendants acted as administrators
and are obliged to render an accounting of the business. Since they both failed to render such accounting, they are
obliged to return the capital.

Article 1688 of the Civil Code (Article 1796 of the New Civil Code) is not applicable in this case as no other money than
the one contributed by the plaintiff was involved.

Fernando Santos vs Spouses Arsenio and Nieves Reyes

Facts:

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

It was a lending venture business.

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

Issue: Whether or not the Spouses Reyes has a share in the partnership profits being industrial partners

Held:

No. For the purpose of determining the profit that should go to an industrial partner (who shares in the profits but is not
liable for the losses), the gross income from all the transactions carried on by the firm must be added together, and from
this sum must be subtracted the expenses or the losses sustained in the business. Only in the difference representing
the net profits does the industrial partner share. But if, on the contrary, the losses exceed the income, the industrial
partner does not share in the losses.
In the instant case, the Court held that the award of partnership share to be incomplete and not binding.

TAI TONG CHUACHE & CO. , petitioner, vs. THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY
CORPORATION, respondents.

Facts:

Complainants acquired from a certain Rolando Gonzales a parcel of land and a building located at San Rafael Village,
Davao City. Complainants assumed the mortgage of the building in favor of S.S.S., which building was insured with
respondent S.S.S. Accredited Group of Insurers for P25,000.00.

On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache, Inc. in the amount of P100,000.00. To
secure the payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache &
Co. Arsenio Chua, representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-
Indemnity Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof).

Pedro Palomo secured a Fire Insurance Policy No. F02500, covering the building for P50,000.00 with respondent Zenith
Insurance Corporation. Another Fire Insurance Policy No. 8459 was procured from respondent Philippine British
Assurance Company, covering the same building for P50,000.00 and the contents thereof for P70,000.00.

On July 31, 1975, the building and the contents were totally razed by fire.

Palomo was able to claim from Philippine British Assurance Co., Zenith Insurance Corporation and from SSS Group of
Accredited Insurers but Travellers Multi-indemnity refused so it demanded the balance from the other three but they
refused so they filed against them.

The Insurance Commission ruled that a certain Arsenio Lopez Chua is the one entitled to the insurance proceeds and not
Tai Tong Chuache & Company.

Issue: Whether or not Arsenio Chua can brought the claim against the defendant being the representative of Tai Tong
Chuache & Company

Held:

Yes. Arsenio Lopez Chua is the representative of petitioner as corroborated by the respondent insurance company. Thus
Chua as the managing partner of the partnership may execute all acts of administration including the right to sue
debtors of the partnership in case of their failure to pay their obligations when it became due and demandable. Or at
the very least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an
agent, it is understood that he acted for and in behalf of the firm. Public respondent's allegation that the civil case filed
by Arsenio Chua was in his capacity as personal creditor of spouses Palomo has no basis.

ANTONIO PARDO, petitioner,  vs.  THE HERCULES LUMBER Co., INC., and IGNACIO FERRER, respondents.

Facts:

Antonio Pardo, a stockholder in the Hercules Lumber Company, Inc., seeks to compel the respondents to permit Pardo
and his duly authorized agent and representative to examine the records and business transactions of said company.
Ignacio Ferrer as acting secretary of the said company, has refused to permit the Pardo or his agent to inspect the
records and business transactions of the company at times desired by the Pardo. Ferrer contended that in article 10 of
the By-laws of the respondent corporation it is declared that "Every shareholder may examine the books of the company
and other documents pertaining to the same upon the days which the board of directors shall annually fix." And the
resolution states that “… the books of the company are at their disposition from the 15th to 25th of the same month for
examination, in appropriate hours.”

The contention for the respondent is that this resolution of the board constitutes a lawful restriction on the right
conferred by statute; and it is insisted that as the petitioner has not availed himself of the permission to inspect the
books and transactions of the company within the ten days thus defined, his right to inspection and examination is lost,
at least for this year.

Issue: Whether or not the board of directors can limit or restrict the inspection of the partnership books

Held:

No. It may be admitted that the officials in charge of a corporation may deny inspection when sought at unusual hours
or under other improper conditions; but neither the executive officers nor the board of directors have the power to
deprive a stockholder of the right altogether. A by-law unduly restricting the right of inspection is undoubtedly invalid.
The statutory right of inspection is not affected by the adoption by the board of directors of a resolution providing for
the closing of transfer books thirty days before an election.

It is well to be noted that our statute declares that the right of inspection can be exercised "at reasonable hours." This
means at reasonable hours on business days throughout the year, and not merely during some arbitrary period of a few
days chosen by the directors.

EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE
WILLIAM TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT
TABANAO, respondents.

Facts:

Emilio Emnace, Vicente Tabanao and Jacinto Divina-gracia were partners in a business concern known as Ma. Nelma
Fishing Industry. Sometime in January of 1986, they decided to dissolve their partnership and executed an agreement of
partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracia’s withdrawal
from the partnership. Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two (2) parcels of
land located at Sto. Niño and Talisay, Negros Occidental, and cash deposits in the local branches of the Bank of the
Philippine Islands and Prudential Bank.

Petitioner failed to submit to Tabanao’s heirs any statement of assets and liabilities of the partnership, and to render an
accounting of the partnership’s finances. Petitioner also reneged on his promise to turn over to Tabanao’s heirs the
deceased’s 1/3 share in the total assets of the partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00,
despite formal demand for payment thereof. This prompted the Tabanao’s heirs to file against petitioner an action for
accounting, payment of shares, division of assets and damages.

Issue: Whether or not the right to formal accounting is extinguished upon the dissolution of the partnership

Held:

No. The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination. The partnership,
although dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of
its affairs, including the partitioning and distribution of the net partnership assets to the partners. For as long as the
partnership exists, any of the partners may demand an accounting of the partnership’s business. Prescription of the said
right starts to run only upon the dissolution of the partnership when the final accounting is done.

The right to demand an accounting accrues at the date of dissolution in the absence of any agreement to the contrary.
When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has
been made, and that is precisely what respondents are seeking in their action before the trial court, since petitioner has
failed or refused to render an accounting of the partnership’s business and assets. Hence, the said action is not barred
by prescription.

ARSENIO T. MENDIOLA, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC
FOREST RESOURCES, PHILS., INC. and/or CELLMARK AB, respondents.

Facts:

Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. It
is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of Sweden, with
principal office in Gothenburg, Sweden. Private respondent Pacfor entered into a “Side Agreement on Representative
Office known as Pacific Forest Resources (Phils.), Inc.” with petitioner Arsenio T. Mendiola (ATM). The Side Agreement
outlines the business relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent
will establish a Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its
President. Petitioner’s base salary and the overhead expenditures of the company shall be borne by the representative
office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM and Pacfor-USA.

Side Agreement was amended through a “Revised Operating and Profit Sharing Agreement for the Representative Office
Known as Pacific Forest Resources (Philippines),” where the salary of petitioner was increased to $78,000 per annum.
Both agreements show that the operational expenses will be borne by the representative office and funded by all parties
“as equal partners,” while the profits and commissions will be shared among them.

In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of
Pacfor Phils. Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-
owner of Pacfor Phils. because the latter is merely Pacfor-USA’s representative office and not an entity separate and
distinct from Pacfor-USA. “It’s simply a ‘theoretical company’ with the purpose of dividing the income 50-50.”Petitioner
presumably knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the
setting up of a representative office, and “not a branch office” in the Philippines to save on taxes. Petitioner contended
that had he known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his
own company, ATM Marketing Corp.

Issue: Whether or not Mendiola is a co-owner of Pacfor Phils.

Held:

No. The essential element, the community of interest, or co-ownership of, or joint interest in partnership property is
absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-owner of Pacfor Phils.
William Gleason, private respondent Pacfor’s President established this fact when he said that Pacfor Phils. is simply a
“theoretical company” for the purpose of dividing the income 50-50. He stressed that petitioner knew of this
arrangement from the very start, having been the one to propose to private respondent Pacfor the setting up of a
representative office, and “not a branch office” in the Philippines to save on taxes. Thus, the parties in this case, merely
shared profits.

ELMO MUÑASQUE, petitioner, vs. COURT OF APPEALS, CELESTINO GALAN, TROPICAL COMMERCIAL COMPANY and
RAMON PONS, respondents.

Facts:

The present controversy began when petitioner Muñasque in behalf of the partnership of "Galan and Muñasque" as
Contractor entered into a written contract with respondent Tropical for remodelling the respondent's Cebu branch
building. A total amount of P25,000.00 was to be paid under the contract for the entire services of the Contractor. The
terms of payment were as follows: thirty percent (30%) of the whole amount upon the signing of the contract and the
balance thereof divided into three equal installments at the rate of Six Thousand Pesos (P6,000.00) every fifteen (15)
working days.

The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of the petitioner.
Petitioner, however, indorsed the check in favor of respondent Galan to enable the latter to deposit it in the bank and
pay for the materials and labor used in the project. Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00
for his personal use so that when the second check in the amount of P6,000.00 came and Galan asked the petitioner to
indorse it again, the petitioner refused.

The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there was a
"misunderstanding" between him and petitioner, respondent Tropical changed the name of the payee in the second
check from Muñasque to "Galan and Associates'' which was the duly registered name of the partnership between Galan
and petitioner and under which name a permit to do construction business was issued by the mayor of Cebu City, This
enabled Galan to encash the second check.

The court held that the petitioner together with respondent Galan, liable 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: Whether or not petitioner should be solidarily liable with Galan

Held:

Yes. While it is true that under Article 1816 of the Civil Code, "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 the name and for the account of the partnership, under its signature and by a person authorized to act for
the partnership. x x x", 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.

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.

In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the petitioner
and Galan and no fault or error can be imputed against it for making payments to "Galan and Associates" and delivering
the same to Galan because as far as it was concerned, Galan was a true partner with real authority to transact on behalf
of the partnership with which it was dealing. This is even more true in the cases of Cebu Southern Hardware and Blue
Diamond Glass Palace who supplied materials on credit to the partnership, Thus, it is but fair that the consequences of
any wrongful act committed by any of the partners therein should be answered solidarily by all the partners and the
partnership as a whole.

Antonio C. Goquilay, ET AL. vs. Washington Z. Sycip, ET AL. GR NO. L-11840, December 10, 1963

FACTS:

Tan Sin An and Goquiolay entered into a general commercial partnership under the partnership name “Tan Sin An and
Antonio Goquiolay” for the purpose of dealing in real estate. The agreement lodged upon Tan Sin An the sole
management of the partnership affairs. The lifetime of the partnership was fixed at ten years and the Articles of Co-
partnership stipulated that in the event of death of any of the partners before the expiration of the term, the
partnership will not be dissolved but will be continued by the heirs or assigns of the deceased partner. But the
partnership could be dissolved upon mutual agreement in writing of the partners. Goquiolay executed a GPA in favor of
Tan Sin An. The plaintiff partnership purchased 3 parcels of land which was mortgaged to “La Urbana” as payment of
P25,000. Another 46 parcels of land were purchased by Tan Sin An in his individual capacity which he assumed payment
of a mortgage debt for P35K. A downpayment and the amortization were advanced by Yutivo and Co. The two
obligations were consolidated in an instrument executed by the partnership and Tan Sin An, whereby the entire 49 lots
were mortgaged in favor of “Banco Hipotecario”Tan Sin An died leaving his widow, Kong Chai Pin and four minor
children. The widow subsequently became the administratrix of the estate. Repeated demands were made by Banco
Hipotecario on the partnership and on Tan Sin An. Defendant Sing Yee, upon request of defendant Yutivo Sons , paid the
remaining balance of the mortgage debt, the mortgage was cancelled Yutivo Sons and Sing Yee filed their claim in the
intestate proceedings of Tan Sin An for advances, interest and taxes paid in amortizing and discharging their obligations
to “La Urbana” and “Banco Hipotecario.” Kong Chai Pin filed a petition with the probate court for authority to sell all the
49 parcels of land. She then sold it to Sycip and Lee in consideration of P37K and of the vendees assuming payment of
the claims filed by Yutivo Sons and Sing Yee. Later, Sycip and Lee executed in favor of Insular Development a deed of
transfer covering the 49 parcels of land.When Goquiolay learned about the sale to Sycip and Lee, he filed a petition in
the intestate proceedings to set aside the order of the probate court approving the sale in so far as his interest over the
parcels of land sold was concerned. Probate court annulled the sale executed by the administratrix w/ respect to the
60% interest of Goquiolay over the properties Administratrix appealed.The decision of probate court was set aside for
failure to include the indispensable parties. New pleadings were filed. The second amended complaint prays for the
annulment of the sale in favor of Sycip and Lee and their subsequent conveyance to Insular Development. The complaint
was dismissed by the lower court hence this appeal.

ISSUE: Whether or not a Kong Chai Pin is an agent or a general partner

HELD:

Kong chai Pin was not a mere agent, because she had become a partner upon her husband’s death, as expressly
provided by the articles of co-partnership. Even more, granting that by succession to her husband, Tan Sin An, the
widow only became a limited partner, Goquiolay’s authorization to manage the partnership property was proof that he
considered and recognized her as general partner, at least since 1945. Goquiolay recognized her as such partner, and is
now in estoppel to deny her position as a general partner, with authority to administer and alienate partnership
property. The articles did not provide that the heirs of the deceased would be merely limited partners; on the contrary,
they expressly stipulated that in case of death of either partner, “the co partnership will have to be continued” with the
heirs or assignees. It certainly could not be continued if it were to be converted from a general partnership into a limited
partnership since the difference between the two kinds of associations is fundamental, and specially because the
conversion into a limited association would leave the heirs of the deceased partner without a share in the management.
Hence, the contractual stipulation actually contemplated that the heirs would become general partners rather than
limited ones.

Lim vs. Philippine Fishing Gear Industries Inc. [GR 136448, 3 November 1999]

FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing with him. The three agreed
to purchase two fishing boats but since they do not have the money they borrowed from one Jesus Lim the brother of
Lim Tong Lim. Subsequently, they again borrowed money for the purchase of fishing nets and other fishing equipments.
Yao and Chua represented themselves as acting in behalf of “Ocean Quest Fishing Corporation” (OQFC) and they
contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to more than P500k.
However, they were unable to pay PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is
a non-existent corporation. Chua admitted his liability while Lim Tong Lim refused such liability alleging that Chua and
Yao acted without his knowledge and consent in representing themselves as a corporation.

ISSUE: Whether Lim Tong Lim is liable as a partner

HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a fishing business. Moreover, their
Compromise Agreement had revealed their intention to pay the loan with the proceeds of the sale and to divide equally
among them the excess or loss. The boats and equipment used for their business entails their common fund. The
contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the
parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them
also shows that they had indeed formed a partnership. The principle of corporation by estoppel cannot apply in the case
as Lim Tong Lim also benefited from the use of the nets in the boat, which was an asset of the partnership. Under the
law on estoppel, those acting in behalf of a corporation and those benefited by it, knowing it to be without valid
existence are held liable as general partners. Hence, the question as to whether such was legally formed for unknown
reasons is immaterial to the case.