E.M. Bachrach vs.

La Protectora
37 Phil 441, January 21, 1918
Article 1803

Facts:
Nicolas Segundo, Antonio Adiarte, Ignacio Flores and Modesto Serrano (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, negotiated for the purchase of 2 automobile
trucks from E. M. Bachrach for P16,500. Barba paid P3,000 in cash and for the balance executed promissory notes.

One of these promissory notes was signed in the following manner: “P.P La Protectora, By Marcelo Barba”
The other 2 notes were signed in the same way but the word “by” was omitted. It was obvious that in signing the
notes, Barba intended to bind both the partnership and himself. The defendants executed a document in which
they declared that they were members of La Protectora and that they had granted to its president full authority to
contract for the purchase of the 2 automobiles.  The document was delivered by Barba to Bachrach at the time the
vehicles were purchased. Barba incurred a debt amounting to P2,617.57 and Bachrach foreclosed a chattel
mortgage on the trucks but there was still balance. To recover the balance, action was instituted against the
defendants. Judgment was rendered against the defendants.

Issue/s:
1. Whether or not the defendants are liable for the firm debts. (YES)
2. Whether or not Barba had authority to incur expenses for the partnership (YES)

Held:
1. Promissory notes constitute the obligation exclusively of La Protectora and Barba. They do not constitute
an obligation directly binding the defendants.  Their liability is based on the principles of partnership
liability. A member is not liable in solidum with his fellows for the entire indebtedness but is liable with
them or his aliquot part.

SC obiter:  the document was intended merely as an authority to enable Barba to bind the partnership and
that the parties to the instrument did not intend to confer upon Barba an authority to bind them
personally.

2. Under Art. 1804 of the Civil Code, every partner may associate another person with him in his share. All
partners are considered agents of the partnership. Barba must be held to have authority to incur these
expenses. He is shown to have been in fact the president/manager, and there can be no doubt that he had
actual authority to incur obligation.
The Great Council of the United States of the Improved order of Red Men
vs. The Veteran Army of the Philippines
7 Phil 685, March 7, 1907
Article 1803

Facts:
The Constitution of the Veterans Army provides for the organization of posts. Among the posts thus
organized is the General Henry W. Lawton Post, No. 1. On March 1, 1903, a contract of lease of parts of a certain
buildings in the city of Manila was signed by Lewis, Stovall, and Hayes (as trustees of the Apache Tribe, No. 1,
Improved Order of Red Men) as lessors, and McCabe (citing for and on behalf of Lawton Post, Veteran Army of the
Philippines) as lessee. The lease was for the term of two years commencing February 1, 903, and ending February
28, 1905. The Lawton Post occupied the premises in controversy for thirteen months, and paid the rent for that
time. Thereafter, it abandoned the premises. Council Red Men then filed an action to recover the rent for the
unexpired term of the lease. Judgment was rendered in the court below on favor of the defendant McCabe,
acquitting him of the complaint. Judgment was rendered also against the Veteran Army of the Philippines for
P1,738.50, and the costs.
It is claimed by the Veterans Army that the action cannot be maintained by the Council Red Men as this
organization did not make the contract of lease. It is also claimed that the action cannot be maintained against the
Veteran Army of the Philippines because it never contradicted, either with the Council Red Men or with Apach
Tribe, No. 1, and never authorized anyone to so contract in its name.

Issue:
Whether or not Article 1695 of the Civil Code is applicable to the Veteran Army of the Philippines. (NO)

Held:
Council Red Men must show that the contract of lease was authorized by the Veterans Army. The view
most favorable to the appellee (Council Red Men) is the one that makes the appellant (Veterans Army) a civil
partnership. Assuming that is such, and is covered by the provisions of title 8, book 4 of the Civil Code, it is
necessary for the appellee (Council Red Men) to prove that the contract in question was executed by some
authorized to so by the Veteran Army of the Philippines. Article 1695 of the Civil Code is not applicable in this case
which provides as follows: "Should no agreement have been made with regard to the form of management, the
following rules shall be observed: All the partners shall be considered as agents, and whatever any one of them
may do by himself shall bind the partnership; but each one may oppose the act of the others before they may have
produced any legal effect." One partner, therefore, is empowered to contract in the name of the partnership only
when the articles of partnership make no provision for the management of the partnership business.

The constitution of the Veteran Army of the Philippines makes provision for the management of its affairs.
In the case at bar, the articles of the Veteran Army do so provide. It is true that an express disposition to that effect
is not found therein, but we think one may be fairly deduced from the contents of those articles. They declare what
the duties of the several officers are. In these various provisions there is nothing said about the power of making
contracts, and that faculty is not expressly given to any officer. We think that it was, therefore, reserved to the
department as a whole; that is, that in any case not covered expressly by the rules prescribing the duties of the
officers, the department were present. The contract of lease is not binding on the Veterans Army absent showing
that it was authorized in a meeting of the department. The SC ruled that no contract, such as the one in question, is
binding on the Veteran Army of the Philippines unless it was authorized at a meeting of the department. No
evidence was offered to show that the department had never taken any such action. In fact, the proof shows that
the transaction in question was entirely between Apache Tribe, No. 1, and the Lawton Post, and there is nothing to
show that any member of the department ever knew anything about it, or had anything to do with it.

Judgment against the appellant is reversed, and the Veteran Army of the Philippines is acquitted of the
complaint. No costs will be allowed to either party in this court.
NOTE: Whether a fraternal society, such as the Veteran Army of the Philippines, is a civil partnership is not decided.
Jose Machuca vs. Chuidian, Buenaventura & Co.
2 Phil 210, May 13, 1903
Article 1804

Facts:
Chuidian Buenaventura & Co. is regular general partnership, organized in Manila, December 29, 1882, as a
continuation of a prior partnership of the same name. The original partners constituting the partnership of 1882
were D. Telesforo Chuidian, Doña Raymunda Chuidian, Doña Candelaria Chuidian, and D. Mariano Buenaventura.
Doña Raymunda Chuidian retired from the partnership November 4, 1885. On January 1, 1888, the partnership
went into liquidation, and it does not appear that the liquidation had been terminated when this action was
brought. On January 1, 1894, D. Mariano Buenaventura died, his estate passing by will to his children, among
whom was D. Vicente Buenaventura. Upon the partition of the estate the amount of the interest of D. Vicente
Buenaventura in his father's account-current and in the capital was ascertained and recorded in the books of the
firm. On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which for a valuable
consideration he "assigns to D. Jose Gervasio Garcia . . . a 25 per cent share in all that may be obtained by whatever
right in whatever form from the liquidation of the partnership of Chuidian, Buenaventura & Co., in the part
pertaining to him in said partnership. A subsequent assignment was made by D. Jose Gervasio Garcia in favour of
Jose Machuca (Plaintiff-Appellee), which has been notified to the liquidator of the partnership.

Trial Court – Brought by Jose Machuca against Chuidian Buenaventura & Co.. Action was for specific
performance to compel the liquidator of the partnership to record in the books Machuca’s claim under the
assignment as a credit due, and the he further asks that he be adjudicated to be a creditor of the partnership in an
amount equal to 25 per cent of D. Vicente Buenaventura's share in his father's account-current. That the necessary
liquidation being first had, the partnership pay to the plaintiff the balance which may be found to be due him; and
that if the partnership has no funds with which to discharge this obligation an adjudication of bankruptcy be made.
He also asks to recover the damages caused by reason of the failure of the liquidator to record his credit in the
books of partnership. Court ruled in favor of the plaintiff.

Issue/s:
Whether or not Machuca is entitled to the relief prayed pending the liquidation of the partnership? (NO)

Held:
A construction of Clause 19 establishes that the liabilities to non-partners are to be first discharged; that the
claims of the Chuidian minors are to be next satisfied; and that what is due to the respective partners on account of
their advances to the firm is to be paid last of all, leaving the ultimate residue, of course, if there be any, to be
distributed, among the partners in the proportions in which they may be entitled thereto. A distinction is made in
this clause between creditors who were partners and creditors who were not partners, and that the expression
"outside parties" refers to the latter class. Thus, it follows that D. Vicente Buenaventura, whose rights are those of
his father, is in no case entitled to receive any part of the assets until the creditors who are non-partners and the
Chuidian minors are paid. Whatever rights he had either as creditor or partner, he could only transfer subject to
this condition.

It is clear, from the language of the instrument, that this conditional interest was all that D. Vicente
Buenaventura ever intended to transfer. By that instrument he undertakes to assign to Garcia not a present interest
in the assets of the partnership but an interest in whatever "may be obtained from the liquidation of the
partnership," which Garcia is to receive "in the same form in which it may be obtained from said partnership," and
"on the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have effected the operations
necessary in order to satisfy" the claims of D. Vicente Buenaventura.

The assignment by its terms is not to take effect until all the liabilities of the partnership have been discharged
and nothing remains to be done except to distribute the assets, if there should be any, among the partners.
Meanwhile the assignor, Buenaventura, is to continue in the enjoyment of the rights and is to remain subject to the
liabilities of a partner as though no assignment had been made. The assignment does not purport to transfer an
interest in the partnership, but only a future contingent right to 25 per cent of such portion of the ultimate residue
of the partnership property as the assignor may become entitled to receive by virtue of his proportionate interest
in the capital.

There is nothing in the case to show either that the non-partner creditors of the partnership have been paid or
that the claims of the Chuidian minors have been satisfied. Thus, Machuca is not yet entitled to the relief.

The plaintiff having acquired no rights under the assignment which are now enforceable against the defendant,
this action can not be maintained. The liquidator of the defendant having been notified of the assignment, the
plaintiff will be entitled to receive from the assets of the partnership, if any remain, at the termination of the
liquidation, 25 percent of D. Vicente's resulting interest, both as partner and creditor. The judgment in this case
should not affect the plaintiff's right to bring another action against the partnership when the affairs of the same
are finally wound up. The proper judgment will be that the action be dismissed. The judgment of the court below is
reversed and the case is remanded to that court with directions to enter a judgment of dismissal. So ordered.
Antonio Pardo vs. Hercules Lumber Co. and Ferrer
47 Phil 964, August 1, 1924
Article 1805

Facts:
Antonio Pardo [Hercules Lumber Company stockholder] seeks to obtain a writ of mandamus to compel the
company and its acting secretary Ignacio Ferrer to permit him [Pardo] and his duly authorized agent and
representative to examine the company’s records and business transactions.

The main ground upon which the defense of the company appears to be rested has reference to the time, or
times, within which the right of inspection may be exercised.
● Article 10 of the By-laws of the company - "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."
● Board Resolution passed at the directors' meeting held on 16 February 1924 - The board also resolved to
call the usual general (meeting of shareholders) for March 30 of the present year, with notice to the
shareholders that the books of the company are at their disposition from the 15th to 25th of the same
month for examination, in appropriate hours.

Issue/s:
1. WON the board resolution constitutes a lawful restriction on the right conferred by statute. (NO)
2. WON Pardo lost his right to inspection and examination for the year, since he has not availed himself of
the permission [to inspect the company’s books and transactions within the 10 days defined in the board
resolution. (NO)
3. WON the shareholder’s motive in exercising this right is material. (NO)

Held:
The basis of right of inspection is Sec. 51 of Act No. 1459 [Corporation Law].1 In Philpotts v. Philippine
Manufacturing Co., and Berry, it was held that the right of examination there conceded to the stockholder may be
exercised either by a stockholder in person or by any duly authorized agent or representative.

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. Under a statute similar to our own it has been held that 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.

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.

It is alleged that the information which Pardo seeks is desired for ulterior purposes in connection with a
competitive firm with which Pardo is alleged to be connected. It is also insisted that one of Pardo’s purposes is to
obtain evidence preparatory to the institution of an action, which he means to bring against the company re: a
contract of employment which once existed between the corporation and himself. These suggestions are entirely
apart from the issue—the motive of the shareholder exercising the right is immaterial.