1

C.1 G.R. No. L-33580 February 6, 1931 particular. And it is a well-known principle that special
provisions prevail over general provisions.
MAXIMILIANO SANCHO, plaintiff-
appellant, vs.SEVERIANO By virtue of the foregoing, this appeal is hereby
LIZARRAGA, defendant-appellee. dismissed, leaving the decision appealed from in
full force, without special pronouncement of
Facts costs. So ordered.

The plaintiff brought an action for the rescission of a

partnership contract between himself and the C2 - SECOND DIVISION
defendant, entered into on October 15, 1920, the
reimbursement by the latter of his 50,000 peso G.R. No. L-19819 October 26, 1977
investment therein.
WILLIAM UY, plaintiff-appellee,
Defendant’s contention vs.
BARTOLOME PUZON, substituted by FRANCO
PUZON, defendant-appellant.
The defendant denies generally and specifically all the
CONCEPCION JR., J.:
allegations of the complaint which are incompatible
with his special defenses, cross-complaint and
counterclaim, setting up the latter and asking for the FACTS:
dissolution of the partnership, and the payment to him
as its manager and administrator.  Bartolome Puzon had two contracts with the
government for the construction of roads and
The CFI found that the defendant had not contributed bridges. (Bureau of Public Highways). He
all the capital he had bound himself to invest hence it sought the financial assistance of William Uy, so
demanded that the defendant liquidate the he proposed that they create a partnership
partnership, declared it dissolved on account of the which would be the sub-contractor of the
expiration of the period for which it was constituted,
projects.They also agreed that the profits will be
and ordered the defendant, as managing partner, to
proceed without delay to liquidate it, submitting to the divided among themselves.
court the result of the liquidation together with the  William Uy agreed to the formation of the
accounts and vouchers within the period of thirty days partnership "U.P. Construction Company". They
from receipt of notice of said judgment. The plaintiff agreed to contribute P50,000 each. (Note:
appealed from said decision praying for the rescission P40,000 was advanced by William Uy while
of the partnership contract between him and the Puzon was waiting for the approval of his
defendant in accordance with Art. 1124 of the Civil
P150,000 PNB Loan. Upon release of the loan,
Code.
he promised to reimburse William Uy of the
Issue P40,000; pay his share of P50,000 and loan
P60,000 to the partnership).Loan was approved
Whether or not the plaintiff acquired the right to by November 1956. Note: At the end of 1957,
demand rescission of the partnership contract Uy contributed a total of P115,453.39
according to article 1124 of the Civil Code.  Since Puzon was busy with other projects, Uy
was the one who managed the partnership.
Ruling  In order to guarantee the PNB Loan, Puzon,
without the knowledge of Uy, assigned the
The Supreme Court ruled that plaintiff has not payments to the payments to be received from
acquired the right to demand rescission of the
the projects to PNB.
partnership contract according to Article 1124 of the
Civil Code. But even going into the merits of the case,  Due to the financial demands of the projects, Uy
the affirmation of the judgment appealed from is demanded that Puzon comply with his obligation
inevitable. In view of the lower court's findings to place his capital contribution in the company.
referred to above, which we cannot revise because  However, Puzon failed to comply even after
the parol evidence has not been forwarded to this formal demand letters were sent to him.
court, articles 1681 and 1682 of the Civil Code have
 Thereafter, Puzon (as the primary contractor of
been properly applied. Owing to the defendant's
failure to pay to the partnership the whole amount the projects) wrote terminated the subcontract
which he bound himself to pay, he became indebted agreement with the partnership to which he is
to it for the remainder, with interest and any damages also a partner. (November 27, 1957)
occasioned thereby, but the plaintiff did not thereby  Thereafter, Uy was not allowed to hold office in
acquire the right to demand rescission of the the UP Construction Company and his authority
partnership contract according to article 1124 of the to negotiate with the Bureau was revoked by
Code. This article cannot be applied to the case in
Puzon.
question, because it refers to the resolution of
obligations in general, whereas article 1681 and 1682
specifically refer to the contract of partnership in Petitioner’s Allegation:
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amount of P200,000.00, as compensatory damages,

Uy clamied that Puzon had violated the terms of their is not speculative, but based on reasonable estimate.
partnership agreement. He sought for the dissolution
of the partnership with damages. FALLO:
Respondent’s Reply:
WHEREFORE, finding no error in the decision
Bartolome Puzon, substituted by Franco Puzon appealed from, the said decision is hereby affirmed
with costs against the appellant, it being understood
(administrator of his estate), after the former’s death,
that the liability mentioned herein shall be borne by
alleged that he is not guilty of breach of contract, and
the estate of the deceased Bartolome Puzon,
that Uy must pay Puzon his share in the losses represented in this instance by the administrator
suffered by the partnership. thereof, Franco Puzon.
C3 - ISABELO MORAN JR. V. COURT OF
The RTC ruled in favor of Uy. Puzon failed to APPEALS
contribute his share capital based on their partnership
agreement and applied the partnership funds to his G.R. No. L-59956 October 31, 1984
own personal use, ousted Uy from the management
of the firm and caused failure of the partnership to
realize the expected profits of at least P400,000. The
RTC ordered Puzon to pay Uy the amount of FACTS: On February 22, 1971, Mariano Pecson and
P320,103.13. Isabelo Moran Jr. entered into an agreement whereby
both would contribute P 15,000 each for the purpose
ISSUE:Whether or not Puzon failed to comply with his of printing 95,000 posters featuring the delegates of
obligations of paying the capital contribution of the the 1971 Constitutional Convention. In their
partnership stipulation, all of the 95,000 posters are ought to be
sold at P 2.00 each wherein Moran will supervise the
HELD: work while Pecson will receive P 1,000 monthly
commission. Pecson gave Moran P 10,000 for which
YES Moran issued a receipt.
According to the court, there was failure on the part of However, of the expected 95,000 copies of posters to
Puzon to contribute capital to the partnership. When
be printed, only 2,000 copies were actually printed
his load with PNB was approved, he only gave
P60,000 to Uy; P40,000 was for reimbursement to the which were sold at P 5.00 each.
payments made by Uy and the other P20,000 was for
the capital contribution. Thereafter, Puzon never In view of the foregoing, Moran executed a
made additional contribution. promissory note in the amount of P 20,000 payable in
two equal installments. Pecson then filed an action for
Also, it was found by the Supreme Court that Puzon the recovery of a sum of money for the return of his P
misapplied partnership funds by assigning all 10,000 contribution and payment of his share in the
payments for the projects to PNB. profits that the partnership would have earned.
Such assignment was prejudicial to the partnership The trial court held that: ‖Each party is entitled to
since the partnership only received a small share from
rescind the contract which right is implied in reciprocal
the total payments made by the Bureau of Public
Highways. As a result, the partnership was unable to obligations under Article 1385 of the Civil Code
discharge its obligations. whereunder 'rescission creates the obligation to return
the things which were the object of the contract‖. This
Here, the Court ordered Puzon to reimburse whatever is in consideration of the fact that Pecson failed to
amount Uy had invested in or spent for the give his full contribution as he only contributed P
partnership on account of construction projects. The 10,000 not P 15,000 as stipulated and Moran was
amount P200,000 as compensatory damages was
also awarded in favor of Uy. able to print only 2,000 copies out of the expected
95,000 copies.
Had the appellant not been remiss in his obligations
CA held adversely against Moran making him liable
as partner and as prime contractor of the construction
projects in question as he was bound to perform for the payment of P 47,500 which is the amount that
pursuant to the partnership and subcontract could have accrued to Pecson under their agreement.
agreements, and considering the fact that the total
Petitioner’s Allegation: THE HONORABLE COURT
contract amount of these two projects is
P2,327,335.76, it is reasonable to expect that the OF APPEALS GRIEVOUSLY ERRED IN HOLDING
partnership would have earned much more than the PETITIONER ISABELO C. MORAN, JR. LIABLE TO
P334,255.61 We have hereinabove indicated. The RESPONDENT MARIANO E. PECSON IN THE SUM
award, therefore, made by the trial court of the OF P47,500 AS THE SUPPOSED EXPECTED
PROFITS DUE HIM. The petitioner contends that the
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award is highly speculative. The petitioner maintains PESOS representing one half (1/2) of the net profits
that the respondent court did not take into account the gained by the partnership in the sale of the two
great risks involved in the business undertaking. thousand (2,000) copies of the posters, with interests
at the legal rate on both amounts from the date the
ISSUE: WON Moran is obliged to give Pecson the complaint was filed until full payment is made.
amount of expected profits from the partnership
C.4 MAURO LOZANA, plaintiff-appellee, vs.
HELD: No. The rule is, when a partner who has SERAFIN DEPAKAKIBO, defendant-appellant.
undertaken to contribute a sum of money fails to
do so, he becomes a debtor of the partnership for Facts
whatever he may have promised to contribute
Plaintiff Mauro Lozana entered into a contract
(Art. 1786, Civil Code) and for interests and
with defendant Serafin Depakakibo wherein they
damages from the time he should have complied
established a partnership capitalized at the sum of
with his obligation (Art. 1788, Civil Code). In this
P30,000, plaintiff furnishing 60% thereof and the
case, however, there was mutual breach. Private
defendant, 40%, for the purpose of maintaining,
respondent failed to give his entire contribution in the
operating and distributing electric light and power in
amount of P15,000.00. He contributed only
the Municipality of Dumangas, Province of Iloilo,
P10,000.00. The petitioner likewise failed to give any
under a franchise issued to Mrs. Piadosa Buenaflor.
of the amount expected of him. He further failed to
However, the franchise or certificate of public
comply with the agreement to print 95,000 copies of
necessity and convenience in favor of the said Mrs.
the posters. Instead, he printed only 2,000 copies.
Piadosa Buenaflor was cancelled and revoked by the
There is therefore no basis for the award of
Public Service Commission.
speculative damages in favor of the private
respondent unlike that in the case of UY V. PUZON Evidently because of the cancellation of the
(which was cited by the SC in this case) wherein the franchise in the name of Mrs. Piadosa Buenaflor,
SC awarded compensatory damages because only plaintiff herein Mauro Lozana sold a generator, Buda
the the appellant therein was remiss in his obligations (diesel), 75 hp. 30 KVA capacity, Serial No. 479, to
as a partner and as prime contractor of the the new grantee Olimpia D. Decolongon, by a deed
construction projects in question - only Puzon failed to dated October 30, 1955 (Exhibit "C"). Defendant
give his full contribution while Uy contributed much Serafin Depakakibo, on the other hand, sold one
more than what was expected of him. Crossly Diesel Engine, 25 h. p., Serial No. 141758, to
the spouses Felix Jimenea and Felina Harder.
Being a contract of partnership, each partner
must share in the profits and losses of the PLAINTIFF LOZANA’S ALLEGATION
venture. That is the essence of a partnership. And
even with an assurance made by one of the Mauro Lozana brought an action against the
partners that they would earn a huge amount of defendant, alleging that he is the owner of the
profits, in the absence of fraud, the other partner Generator Buda (Diesel), valued at P8,000 and 70
cannot claim a right to recover the highly wooden posts with the wires connecting the generator
speculative profits. to the different houses supplied by electric current in
the Municipality of Dumangas, and that he is entitled
Re: The amount that Pecson is entitled to recover to the possession thereof, but that the defendant has
wrongfully detained them as a consequence of which
Pecson is entitled to the SIX THOUSAND (P6,000.00)
plaintiff suffered damages. Plaintiff prayed that said
PESOS representing the amount of the private
properties be delivered back to him.
respondent's contribution to the partnership but which
remained unused; and THREE THOUSAND DEFENDANT DEPAKAKIBO’S ANSWER
(P3,000.00) PESOS representing one half (1/2) of the
net profits gained by the partnership in the sale of the Defendant filed an answer, denying that the
two thousand (2,000) copies of the posters generator and the equipment mentioned in the
complaint belong to the plaintiff and alleging that the
FALLO: WHEREFORE, the petition is GRANTED. same had been contributed by the plaintiff to the
The decision of the respondent Court of Appeals (now partnership entered into between them in the same
Intermediate Appellate Court) is hereby SET ASIDE manner that defendant had contributed equipment
and a new one is rendered ordering the petitioner also, and therefore that he is not unlawfully detaining
Isabelo Moran, Jr., to pay private respondent Mariano them. By way of counterclaim, defendant alleged that
Pecson SIX THOUSAND (P6,000.00) PESOS under the partnership agreement the parties were to
representing the amount of the private respondent's contribute equipment, plaintiff contributing the
contribution to the partnership but which remained generator and the defendant, the wires for the
unused; and THREE THOUSAND (P3,000.00) purpose of installing the main and delivery lines; that
 4

the plaintiff sold his contribution to the partnership, in court for the taking of the property into custody by the
violation of the terms of their agreement. sheriff must be, as they hereby are set aside and the
case remanded to the court below for further
RULING OF THE RTC proceedings in accordance with law.
The judge entered a decision declaring
C. 5 G.R. No. L-16318 October 21, 1921
plaintiff owner of the equipment and entitled to the
possession thereof. The lower court declared that the
PANG LIM and BENITO GALVEZ, plaintiffs-
contract of partnership was null and void, because by appellees, vs. LO SENG, defendant-appellant.
the contract of partnership, the parties thereto have
become dummies of the owner of the franchise. The FACTS:
reason for this holding was the admission by
defendant when being cross-examined by the court Plaintiff Pang Lim and Defendant Lo Seng were
that he and the plaintiff are dummies. partners in a firm named Lo Seng & Co. They were in
the business of running a distillery known as ―El
Issues Progreso‖. The land on which the distillery was
located was leased from a certain Lo Yao through Lo
1. Whether or not the contract of partnership Shui as his attorney in fact for a term of three years.
is void
2. Whether or not the partners can claim Upon the expiration of the lease, a new written
back the assets they contributed to the contract was entered into by the parties extending the
lease for 15 years because the BIR required the
partnership
distillery to make expensive improvements which
Rulings were at the expense of the lessees. Neither the
original contract of lease nor the agreement extending
1. The Supreme Court do not find the agreement the same was inscribed in the property registry.
to be illegal, or contrary to law and public
policy such as to make the contract of Plaintiff Pang Lim eventually sold all his interest in the
partnership, null and void ab initio. The SC distillery to defendant, making the latter the sole
found that the admission by the defendant is owner thereof.
an error of law, not a statement of a fact. The
Anti-Dummy law has not been violated as Lo Shui, again acting as attorney in fact of Lo Yao,
parties, plaintiff and defendant are not aliens executed and acknowledged before a notary public a
deed purporting to convey to Pang Lim and another
but Filipinos. The Anti-Dummy law refers to
Chinaman named Benito Galvez, an employee, the
aliens only (Commonwealth Act 108 as entire distillery plant including the land used in
amended). connection therewith. The document of conveyance
was also never recorded in the registry of property.
The SC did not find also that the agreement,
especially the provision thereon wherein the Plaintiffs demanded possession of the distillery from
parties agreed to maintain, operate and defendant, but the latter refused so an action of
distribute electric light and power under the unlawful detainer was initiated against him.
franchise belonging to Mrs. Buenaflor to be
PLAINTIFFS-APPELLEES’S ALLEGATION:
illegal, or contrary to law and public policy
such as to make the contract of partnership,
They are at liberty to terminate the lease as
null and void ab initio. The fact of furnishing purchasers of the estate under Article1571 of the Old
to the current holder of the franchise alone, Civil Code which provides that:
without the previous approval of the Public
Service Commission, does not per se make ART. 1571. The purchaser of a leased estate shall be
the contract of partnership null and void from entitled to terminate any lease in force at the time of
the beginning and render the partnership making the sale, unless the contrary is stipulated, and
entered into by the parties for the purpose subject to the provisions of the Mortgage Law
also void and non-existent.
DEFENDANT-APPELLANT’S ALLEGATION:
2. The SC held that the partners cannot claim
The lease is binding on all persons who participate
back the assets they contributed to the therein.
partnership. The proper remedy is to dissolve
the partnership and liquidate its assets. ISSUE: whether or not a partner who has left the
FALLO partnership may, after his departure, use information
known to him by reason of the partnership for his own
For the foregoing considerations, the benefit.
judgment appealed from as well as the order of the
 5

RULING: No. Above all other persons in business C. 6. EVANGELISTA & CO., DOMINGO C.
relations, partners are required to exhibit towards EVANGELISTA, JR., CONCHITA B. NAVARRO and
each other the highest degree of good faith. In fact the LEONARDA ATIENZA ABAD
relation between partners is essentially fiduciary, each SANTOS, petitioners, vs. ESTRELLA ABAD
being considered in law, as he is in fact, the SANTOS, respondent.
confidential agent of the other. It is therefore accepted G.R. No. L-31684 June 28, 1973. MAKALINTAL, J.:
as fundamental in equity jurisprudence that one
partner cannot, to the detriment of another, apply Facts:
exclusively to his own benefit the results of the
knowledge and information gained in the character of  On October 9, 1954 a co-partnership was formed
partner. Thus, it has been held that if one partner under the name of "Evangelista & Co."
obtains in his own name and for his own benefit the  On June 7, 1955 the Articles of Co-partnership was
renewal of a lease on property used by the firm, to amended as to include herein respondent, Estrella
commence at a date subsequent to the expiration of Abad Santos, as industrial partner, with herein
the firm's lease, the partner obtaining the renewal is petitioners Domingo C. Evangelista, Jr., Leonardo
held to be a constructive trustee of the firm as to such Atienza Abad Santos and Conchita P. Navarro, the
lease. And this rule has even been applied to a original capitalist partners, remaining in that
renewal taken in the name of one partner after the capacity, with a contribution of P17,500 each.
dissolution of the firm and pending its liquidation.  The amended Articles providedthat "the
contribution of Estrella Abad Santos consists of her
Pang Lim had been partner with Lo Seng and Benito industry being an industrial partner", and that the
Galvez an employee. Both therefore had been in profits and losses "shall be divided and distributed
relations of confidence with Lo Seng and in that among the partners ... in the proportion of 70% for
position had acquired knowledge of the possibilities of the first three partners, Domingo C. Evangelista,
the property and possibly an experience which would Jr., Conchita P. Navarro and Leonardo Atienza
have enabled them, in case they had acquired Abad Santos to be divided among them equally;
possession, to exploit the distillery with profit. On and 30% for the fourth partner Estrella Abad
account of his status as partner in the firm of Lo Seng Santos."
and Co., Pang Lim knew that the original lease had
been extended for fifteen years; and he knew the  On December 17, 1963 herein respondent filed suit
extent of valuable improvements that had been made against the three other partners in the Court of
thereon. Certainly, as observed in the appellant's First Instance of Manila, alleging that the
brief, it would be shocking to the moral sense if the partnership, which was also made a party-
condition of the law were found to be such that Pang defendant, had been paying dividends to the
Lim, after profiting by the sale of his interest in a partners except to her; and that notwithstanding
business, worthless without the lease, could intervene her demands the defendants had refused and
as purchaser of the property and confiscate for his continued to refuse and let her examine the
own benefit the property which he had sold for a partnership books or to give her information
valuable consideration to Lo Seng. regarding the partnership affairs to pay her any
share in the dividends declared by the partnership.
While yet a partner in the firm of Lo Seng and Co., She therefore prayed that the defendants be
Pang Lim participated in the creation of this lease, ordered to render accounting to her of the
and when he sold out his interest in that firm to Lo partnership business and to pay her corresponding
Seng this operated as a transfer to Lo Seng of Pang share in the partnership profits after such
Lim's interest in the firm assets, including the lease; accounting, plus attorney's fees and costs.
and Pang Lim cannot now be permitted, in the guise
of a purchaser of the estate, to destroy an interest  The defendants, in their answer, denied ever
derived from himself, and for which he has received having declared dividends or distributed profits of
full value. Pang Lim, having been a participant in the the partnership; denied likewise that the plaintiff
contract of lease now in question, is not in a position ever demanded that she be allowed to examine
to terminate it. the partnership books; and byway of affirmative
defense alleged that the amended Articles of Co-
It follows that as Lo Seng is vested with the partnership did not express the true agreement of
possessory right as against Pang Lim, he cannot be the parties, which was that the plaintiff was not an
ousted either by Pang Lim or Benito Galvez. Having industrial partner; that she did not in fact contribute
lawful possession as against one cotenant, he is industry to the partnership; and that her share of
entitled to retain it against both. Both Pang Lim and 30% was to be based on the profits which might be
Benito Galvez are bound to respect Lo Seng's lease, realized by the partnership only until full payment
at least in so far as the present action is concerned of the loan which it had obtained in December,
1955 from the Rehabilitation Finance Corporation
FALLO: in the sum of P30,000, for which the plaintiff had
signed a promisory note as co-maker and
mortgaged her property as security.
The judgment appealed from will be reversed, and the
defendant will be absolved from the complaint. It is so
 The Court of First Instance found for the plaintiff
ordered, without express adjudication as to costs.
and rendered judgement "declaring her an
industrial partner of Evangelista & Co.; ordering the
 6

defendants to render an accounting of the  Subsequently, spouses Ishwar executed

business operations of the said partnership from a general power of attorney appointing
June 7, 1955; to pay the plaintiff such amounts as Ishwar’fsull blood brothers Choithram and
may be due as her share in the partnership profits Navalrai as attorneys-in-fact, empowering
and/or dividends after such an accounting has them to manage and conduct their business
been properly made; to pay plaintiff attorney's fees concerns in the Philippines. Choithram, as
in the sum of P2,000.00 and the costs of this suit. attorney-in-factr, entered into two agreements
for the purchase of two parcels of land located
 The defendants appealed to the Court of Appeals, in Pasig Rizal from Ortigas & Company, Ltd.
which thereafter affirmed judgments of the court a Partnership (Ortigas Ltd.) with a total area of
quo. Hence, the petitioners filed a petition before approximately 10,048 square meters. Three
the SC. buildings were constructed thereon and were
leased out by Choithram as attorney-in-fact of
Contention of Petitioners: spouses Ishwar. Two of these buildings were
 Respondent did not bind herself to contribute her later burned. In 1970 Ishwar asked Choithram
industry, and she could not because she was one to account for the income and expenses
of the judges of the City Court of Manila since 1954 relative to these properties during the period
and she is also teaching in a law school in Manila. 1967 to 1970. Choithram failed and refused to
render such accounting which prompted
Issues: Ishwar to revoke the general power of
attorney. Choithram and Ortigas Ltd. were
1. WON Estrella Abad Santos (respondent) is an duly notified by notice in writing of such
industrial partner. revocation. It was also registered with the
2. WON Estrella Abad Santos has the right to Securities and Exchange Commission and
demand for a formal accounting. published in The Manila Times.

Ruling:  Nevertheless, Choithram as such attorney-in-

fact of Ishwar, transferred all rights and
interests of Ishwar spouses in favor of Nirmla
1. YES, respondent is an industrial partner.The
Ramnani, the wife of Choitram’s son, Moti.
appellants admitted the genuineness and due
execution of the exhibits that were considered by
the CA and the lower court. The exhibits  Ortigas also executed the corresponding
indubitably show the appellee is an industrial deeds of sale in favor of Nirmla and the TCT
partner of appellant company. Appellants are ISSUED in her favor. Thus, spouses Ishwar
virtually estopped from attempting to detract from filed a complaint in the Court of First Instance
the probative force of the said exhibits because of Rizal against Choithram and spouses
they all bear the imprint of their knowledge and Nirmla and Moti (Choithram et al.) and Ortigas
consent, and there is no credible showing that they Ltd. for reconveyance of said properties or
ever protested against or opposed their contents payment of its value and damages.
prior of the filing of their answer to appellee's
complaint.  ALLEGATIONS OF ISHWAR RAMANANI:

2. YES, respondent has the right to demand for a

Respondents Choithram Jethmal Ramnani,
formal accounting since she is an industrial
partner. Nirmla Ramnani and Moti G. Ramnani have
fraudulently executed a simulated mortgage of
As an industrial partner, A has the right under the properties subject of this litigation dated
Article 1809 for a formal accounting and to receive June 20, 1989, in favor of Overseas Holding
her share in the net profit that may result from such Co., Ltd. which appears to be a corporation
an accounting. organized in Cayman Islands, for the amount
of $ 3,000,000.00, which is much more than
C7. RAMNANI VS COURT OF APPEALS , 196 the value of the properties in litigation; that
SCRA 731 (1991) said alleged mortgagee appears to be a
"shell" corporation with a capital of only
$100.00; and that this alleged transaction
FACTS: appears to be intended to defraud petitioners
Ishwar and Sonya Jethmal Ramnani of any
 Ishwar Jethmal Ramnani and his wife favorable judgment that this Court may render
Sonya had their main business based in in this case;
New York. Ishwar received US $150,000.00
from his father-in-law in Switzerland. In 1965,
 RTC dismissed the complaint ruling that the
Ishwar Jethmal Ramnani sent the amount of
lone testimony of Ishwar regarding the cash
US $150,000.00 to Choithram in two bank
remittance is unworthy of faith and credit
drafts of US$65,000.00 and US$85,000.00 for
because the cash remittance was made
the purpose of investing the same in real
before the execution of the general power of
estate in the Philippines.
attorney. Ishwar also failed to corroborate this
 7

lone testimony and did not exhibit any Although the buildings were burned later, Choithram
commercial document as regard to the alleged was able to build two other buildings on the property.
remittances. It believed the claim of He rented them out and collected the rentals. Through
Choitram that he and Ishwar entered into the industry and genius of Choithram, Ishwar's
a temporary arrangement in order to property was developed and improved into what it is
enable Choithram, then a British citizen, to now a valuable asset worth millions of pesos. We
purchase the properties in the name of Ishwar
have a situation where two brothers engaged in a
who was an American citizen and who was
business venture. One furnished the capital, the other
then qualified to purchase property in the
Philippines under the then Parity contributed his industry and talent. Justice and equity
Amendment. dictate that the two share equally the fruit of their joint
investment and efforts. Perhaps this Solomonic
solution may pave the way towards their
 Upon appeal, the CA reversed the decision reconciliation. Both would stand to gain. No one would
and gave credence to Ishwar. It upheld the end up the loser. After all, blood is thicker than water.
validity of Ishwar’s testimony and gave However, because of the devious machinations and
cognizance to a letter written by schemes that Choithram employed he should pay
Choihtram imploring Ishwar to renew the
moral and exemplary damages as well as attorney's
power of attorney after it was revoked. It
fees to spouses Ishwar.
states therein that Choithram reassures his
brother that he is not after his money and that
the revocation is hurting the reputation of
Ishwar. Choithram also made no mention of 2. Whether Ishram can recover the entire
his claimed temporary arrangement in the properties subject in the ligitation
letter.

HELD: No, Ishram cannot recover the entire

 The CA ruled that Choithram is also estopped in properties subject.
pais or by deed from claiming an interest over the
properties. Because of Choitram’s admissions Verily, the acts of Choithram, et al. of disposing
from (1) power of attorney, (2) the Agreements, the properties subject of the litigation disclose a
and (3) the Contract of Lease It furthermore HELD scheme to defraud spouses Ishwar so they may not
that Choithram's 'temporary arrangement, by be able to recover at all given a judgment in their
which he claimed purchasing the two (2) parcels favor, the requiring the issuance of the writ of
in question in 1966 and placing them in the name attachment in this instance. The Supreme Court held
of Ishwar who is an American citizen circumvents that despite the fact that Choithram, et al., have
the disqualification provision of aliens acquiring committed acts which demonstrate their bad faith and
real properties in the Philippines. Upholding the
scheme to defraud spouses Ishwar and Sonya of their
supposed "temporary arrangement" with Ishwar
rightful share in the properties in litigation, the Court
would be sanctioning the perpetration of an illegal
act and culpable violation of the Constitution. cannot ignore the fact that Choithram must have been
During the pendency of the case, Choithram motivated by a strong conviction that as the industrial
made several attempts to dispose of his partner in the acquisition of said assets he has as
properties by way of donation and also mortgaged much claim to said properties as Ishwar, the capitalist
the properties under litigation for 3 million USD to partner in the joint venture.
a shell partnership with a mere capital of 100
USD. The Supreme Court affirms the findings of
the Court of Appeals. Choithram in turn decided to invest in the real estate
business. He bought the two (2) parcels of land in
ISSUE: question from Ortigas as attorney-in-fact of Ishwar.
Instead of paying for the lots in cash, he paid in
1. Whether or not there was a partnership installments and used the balance of the capital
between the brothers Ishwar and Choithram entrusted to him, plus a loan, to build two buildings.
Although the buildings were burned later, Choithram
HELD: Yes, Even without a written agreement, the was able to build two other buildings on the property.
scenario is clear. Spouses Ishwar supplied the capital He rented them out and collected the rentals. Through
of $150,000.00 for the business. They entrusted the the industry and genius of Choithram, Ishwar's
money to Choithram to invest in a profitable business property was developed and improved into what it is
venture in the Philippines. For this purpose they now.
appointed Choithram as their attorney-in-fact.
Choithram in turn decided to invest in the real estate
business. He bought the two (2) parcels of land in Justice and equity dictate that the two share
question from Ortigas as attorney-in-fact of Ishwar- equally the fruit of their joint investment and efforts.
Instead of paying for the lots in cash, he paid in Perhaps this Solomonic solution may pave the way
installments and used the balance of the capital towards their reconciliation. Both would stand to gain.
entrusted to him, plus a loan, to build two buildings.
 8

No one would end up the loser. After all, blood is

thicker than water.
 The petitioner did not receive any contribution
C8. G.R. No. 70926 January 31, 1989 DAN FUE at the time he started the Sun Wah Panciteria.
LEUNG, petitioner, He used his savings from his salaries as an
vs.HON. INTERMEDIATE APPELLATE COURT and employee at Camp Stotsenberg in Clark Field
LEUNG YIU, respondents. and later as waiter at the Toho Restaurant
amounting to a little more than P2,000.00 as
capital in establishing Sun Wah Panciteria.
THE COMPLAINT:  Sole proprietorship daw. the petitioner
presented various government licenses and
filed by respondent Leung Yiu with the then Court of permits showing the Sun Wah Panciteria was
First Instance of Manila, Branch II to recover the sum and still is a single proprietorship solely owned
equivalent to twenty-two percent (22%) of the annual and operated by himself alone. Fue Leung
profits derived from the operation of Sun Wah also flatly denied having issued to the private
Panciteria since October, 1955 from petitioner Dan respondent the receipt (Exhibit G) and the
Fue Leung. Equitable Banking Corporation's Check No.
13389470 B in the amount of P12,000.00
In essence, the private respondent alleged that when (Exhibit B).
Sun Wah Panciteria was established, he gave
P4,000.00 to the petitioner with the understanding that RTC and CA:
he would be entitled to twenty-two percent (22%) of Decided for plaintiff(now respondent).
the annual profit derived from the operation of the said Plaintiff(petitioner) to pay the sum of 22% of the
panciteria. net profit pkus interest and attorney’s fees.

EVIDENCE FOR RESPONDENT

Both the trial court and the appellate court found that
 About the time the Sun Wah Panciteria started the private respondent is a partner of the petitioner in
to become operational, the private respondent the setting up and operations of the panciteria. While
gave P4,000.00 as his contribution to the the dispositive portions merely ordered the payment
partnership. This is evidenced by a receipt of the respondents share, there is no question from
identified as Exhibit "A" wherein the petitioner the factual findings that the respondent invested in the
acknowledged his acceptance of the business as a partner. Hence, the two courts declared
P4,000.00 by affixing his signature thereto. that the private petitioner is entitled to a share of the
annual profits of the restaurant.
 Witnesses So Sia and Antonio Ah Heng
corroborated the private respondents
Petitioner’s Argument:
testimony to the effect that they were both
present when the receipt (Exhibit "A") was
Thus, the petitioner argues: "The complaint avers that
signed by the petitioner. So Sia further
private respondent extended 'financial assistance' to
testified that he himself received from the
herein petitioner at the time of the establishment of
petitioner a similar receipt (Exhibit D)
the Sun Wah Panciteria, in return of which private
evidencing delivery of his own investment in
respondent allegedly will receive a share in the profits
another amount of P4,000.00
of the restaurant. The same complaint did not claim
that private respondent is a partner of the business
 Examination by PC Crime Laboratory:
The signatures in Exhibits "A" and 'D' when
ISSUE: Whether or not Defendant is a partner?
compared to the signature of the petitioner
appearing in the pay envelopes of employees
HELD: YES.
of the restaurant, namely Ah Heng and Maria
Wong (Exhibits H, H-1 to H-24) showed that
1. As to the use of term “Financial
the signatures in the two receipts were indeed
Assistance”
the signatures of the petitioner.
Therefore, the lower courts did not err in construing
the complaint as one wherein the private respondent
 Furthermore, the private respondent received asserted his rights as partner of the petitioner in the
from the petitioner the amount of P12,000.00 establishment of the Sun Wah Panciteria,
covered by the latter's Equitable Banking notwithstanding the use of the term financial
Corporation Check No. 13389470-B from the assistance therein. We agree with the appellate
profits of the operation of the restaurant court's observation to the effect that "... given its
for the year 1974 ordinary meaning,financial assistance is the giving
out of money to another without the expectation
EVIDENCE FOR PETITIONER of any returns therefrom'. It connotes an ex
gratia dole out in favor of someone driven into a state
 denied having received from the private of destitution. But this circumstance under which the
respondent the amount of P4,000.00. He P4,000.00 was given to the petitioner does not obtain
contested and impugned the genuineness of in this case.' (p. 99, Rollo) The complaint explicitly
the receipt (Exhibit D).
 9

stated that "as a return for such financial was asking for an accounting of his interests
assistance, plaintiff (private respondent) would be in the partnership.
entitled to twenty-two percentum (22%) of the
annual profit derived from the operation of the
said panciteria.' (p. 107, Rollo) The well-settled It is Article 1842 of the Civil Code in conjunction with
doctrine is that the '"... nature of the action filed in Articles 1144 and 1155 which is applicable. Article
court is determined by the facts alleged in the 1842 states:
complaint as constituting the cause of action."
The right to an account of his interest
2. As to the findings of the PC Crime shall accrue to any partner, or his legal
Laboratory and the Pay envelopes representative as against the winding
(procedural) up partners or the surviving partners
The records also show that when the pay envelopes or the person or partnership
(Exhibits "H", "H-1" to "H-24") were presented by the continuing the business, at the date of
private respondent for marking as exhibits, the dissolution, in the absence or any
petitioner did not interpose any objection. Neither did agreement to the contrary.
the petitioner file an opposition to the motion of the
private respondent to have these exhibits together
Regarding the prescriptive period within which the
with the two receipts examined by the PC Crime
private respondent may demand an accounting,
Laboratory despite due notice to him. Likewise, no
Articles 1806, 1807, and 1809 show that the right to
explanation has been offered for his silence nor was
demand an accounting exists as long as the
any hint of objection registered for that purpose.
partnership exists. Prescription begins to run only
upon the dissolution of the partnership when the final
3. Petitioner also invokes prescription in the
accounting is done.
claim of respondent. He relies on Art. 1144
of the Civil Code, that actions upon a
written contract, obligation crated by law, WHEREFORE, the petition for review is hereby
or upon a judgment must be brought DISMISSED for lack of merit. The decision of the
within 10 years. respondent court is AFFIRMED with a
MODIFICATION that as indicated above, the
The alleged receipt is dated October 1, 1955 and the partnership of the parties is ordered dissolved.
complaint was filed only on July 13, 1978 or after the
lapse of twenty-two (22) years, nine (9) months and SO ORDERED.
twelve (12) days. From October 1, 1955 to July 13,
1978, no written demands were ever made by private C9. G.R. No. L-6304 December 29, 1953
respondent.
SERGIO V. SISON, plaintiff-appellant,
Not correct. vs.
HELEN J. MCQUAID, defendant-appellee.

 The private respondent is a partner of the Facts

petitioner in Sun Wah Panciteria. The
requisites of a partnership which are — 1) two
 On March 28, 1951, plaintiff brought an action
or more persons bind themselves to contribute in the Court of First Instance of Manila against
money, property, or industry to a common defendant, alleging that during the year 1938
fund; and 2) intention on the part of the
the latter borrowed from him various sums of
partners to divide the profits among money, aggregating P2,210, to enable her to
themselves (Article 1767, Civil Code; Yulo v. pay her obligation to the Bureau of Forestry
Yang Chiao Cheng, 106 Phil. 110)-have been
and to add to her capital in her lumber
established. As stated by the respondent, a business, receipt of the amounts advanced
partner shares not only in profits but also in being acknowledged in a document, executed
the losses of the firm. by her on November 10, 1938.
 If excellent relations exist among the partners  Defendant was not able to pay the loan in
at the start of business and all the partners 1938, as she had promised, she proposed to
are more interested in seeing the firm grow
take in plaintiff as a partner in her lumber
rather than get immediate returns, a business, plaintiff to contribute to the
deferment of sharing in the profits is perfectly partnership the said sum of P2,210 due him
plausible. It would be incorrect to state that if a
from defendant in addition to his personal
partner does not assert his rights anytime services; that plaintiff agreed to defendant's
within ten years from the start of operations,
proposal and, as a result, there was formed
such rights are irretrievably lost. The private
between them, under the provisions of the
respondent's cause of action is premised upon Civil Code, a partnership in which they were to
the failure of the petitioner to give him the share alike in the income or profits of the
agreed profits in the operation of Sun Wah
business, each to get one-half thereof.
Panciteria. In effect the private respondent
 10

 In accordance with said contract, plaintiff,

together with defendant, rendered services to
the partnership without compensation from Fallo.
June 15, 1938 to December, 1941
 In view of the foregoing, the order of dismissal
is affirmed, but on the ground that the
 Before the last World War, the partnership complaint states no cause of action and
sold to the United States Army 230,000 board without prejudice to the filing of an action for
feet of lumber for P13,800, for the collection of accounting or liquidation should that be what
which sum defendant, as manager of the plaintiff really wants. Without costs in this
partnership, filed the corresponding claim with instance. 1awphil.ne

the said army after the war; that the claim was
"finally" approved and the full amount paid — C10. G.R. No. L-47823 July 26, 1943
the complaint does not say when — but JOSE ORNUM and EMERENCIANA ORNUM,
defendant has persistently refused to deliver petitioners, vs. MARIANO, LASALA, et al.,
one-half of it, or P6,900, to plaintiff respondent.
notwithstanding repeated demands, investing
the whole sum of P13,800 for her own benefit. (Point: Without objecting to a statement of accounts, a
partner promised to sign the same after receiving his
Petitioners’ Allegation shares, and after he has been paid, refused to sign
and instead demanded a liquidation. Is he entitled for
 Plaintiff, therefore, prays for judgment further liquidation? SC HELD: No.)
declaring the existence of the alleged
partnership and requiring the defendant to pay
him the said sum of P6,900, in addition to FACTS:
damages and costs.  In 1908 Pedro Lasala, father of the
respondents, and Emerenciano Ornum
Defendant’s answer formed a partnership, whereby the former, as
capitalist, delivered the sum of P1,000 to
 Defendant filed a motion to dismiss on the the latter who, as industrial partner, was to
grounds that plaintiff's action had already conduct a business at his place of
prescribed, that plaintiff's claim was not residence in Romblon.
provable under the Statute of Frauds, and that  In 1912, when the assets of the partnership
the complaint stated no cause of action. consisted of outstanding accounts and old
stock of merchandise, Emerenciano Ornum,
Issue: Whether or not plaintiff is entitled of the following the wishes of his wife, asked for the
½ of the purchase price of the lumber sold in dissolution of the Lasala
the partnership?
 Emerenciano Ornum looked for some one
who could take his place and he suggested
Ruling: NO
the names of the petitioners who
accordingly became the new partners.
 Upon joining the business, the petitioners,
 Plaintiff seeks to recover from defendant one- contributed P505.54 as their capital
half of the purchase price of lumber sold by  With the result that in the new partnership
the partnership to the United States Army. But Pedro Lasala had a capital of P1,000,
his complaint does not show why he should appraised value of the assets of the former
be entitled to the sum he claims. partnership, plus the said P505.54 invested by
the petitioners who, as industrial partners,
were to run the business in Romblon.
 After the death of Pedro Lasala, his children
 It does not allege that there has been a (the respondents) succeeded to all his
liquidation of the partnership business and the rights and interest in the partnership.
said sum has been found to be due him as his  The partners never knew each other
share of the profits. The proceeds from the personally. No formal partnership agreement
sale of a certain amount of lumber cannot be was ever executed.
considered profits until costs and expenses  The petitioners, as managing partners, were
have been deducted. Moreover, the profits of received one-half of the net gains, and the
the business cannot be determined by taking other half was to be divided between them
into account the result of one particular and the Lasala group in proportion to the
transaction instead of all the transactions had. capital put in by each group.
Hence, the need for a general liquidation  During the course divided, but the partners
before a member of a partnership may claim a were given the election, to invest their
specific sum as his share of the profits. respective shares in such profits as additional
capital.
 11

 The petitioners accordingly let a greater part Praying for an accounting and final liquidation of the
of their profits as additional investment in assets of the partnership.
the partnership.
 After twenty years the business had grown to RULING OF THE COURT OF FIRST INSTANCE
such an extent that is total value, including MANILA
profits, amounted to P44,618.67. The last and final statement of accounts prepared by
 Statements of accounts were periodically the petitioners was tacitly approved and accepted
prepared by the petitioners and sent to the by the respondents who, by virtue of the above-
respondents who invariably did not make any quoted letter of Father Mariano Lasala, lost their right
objection thereto. Before the last statement to a further accounting from the moment they received
of accounts was made, the respondents had and accepted their shares as itemized in said
received P5,387.29 by way of profits. statement.
 The last and final statement of accounts,
dated May 27, 1932, and prepared by the RULING OF THE COURT OF APPEALS
petitioners after the respondents had REVERSED principally on the ground that as the final
announced their desire to dissolve the statement of accounts remains unsigned by the
partnership. (refer to FULLTEXT about the respondents, the same stands disapproved.
statements of accounts)
 After the receipt of the foregoing statement of DECISION APPEALED BY THE PETITIONER
accounts, Father Mariano Lasala, spokesman To support a plea of a stated account so as to
for the respondents, wrote the following letter conclude the parties in relation to all dealings between
to the petitioners on July 19, 1932: them, the accounting must be shown to have been
(TRANSLATED by Google: We already final. (1 Cyc. 366.) All the first nine statements which
manifest you frankly here, as a consort, and the defendants sent the plaintiffs were partial
we also authorize you to repeat it to your settlements, while the last, although intended to be
sister Mering, widow, that the reason why we final, has not been signed.
collect the capital and profits of our society in
all our business that is in your care, is that we ISSUE/S:
have a great commitment that we can hardly
avoid. For this we pray again that by any 1. Whether or not the accounting stated in the letter
means before the end of this month of July, including the last and final statement of account was
1932, we await your consideration. Thank tacitly accepted by the petitioners as the final
you. liquidation and accounting of the partnership?
2. Whether or not there are really mistakes and
Once we have received this, then we will sign misinterpretations made in the statement of accounts
the balance that you have made there, whose made?
copy you have left here. Regards all there and
send.) RULING
 Pursuant to the request contained in this
letter, the petitioners remitted and paid to the 1. We hold that the last and final statement of
respondents the total amount corresponding accounts hereinabove quoted, had been approved
to them under the above-quoted statement of by the respondents. This approval resulted, by virtue
accounts which, however, was not signed by of the letter of Father Mariano Lasala of July 19, 1932,
the latter. quoted in part in the appealed decision from the
 Thereafter the complaint in this case was filed failure of the respondents to object to the
by the respondents, praying for an statement and from their promise to sign the same
accounting and final liquidation of the as soon as they received their shares as shown in
assets of the partnership. said statement.

PETITIONER After such shares had been paid by the petitioners

The petitioners accordingly let a greater part of their and accepted by the respondents without any
profits as additional investment in the partnership. reservation, the approval of the statement of
After twenty years the business had grown to such an accounts was virtually confirmed and its signing
extent that is total value, including profits, amounted thereby became a mere formality to be complied with
to P44,618.67. Statements of accounts were by the respondents exclusively. Their refusal to sign,
periodically prepared by the petitioners and sent to after receiving their shares, amounted to a waiver
the respondents who invariably did not make any to that formality in favor of the petitioners who
objection thereto. has already performed their obligation.

Pursuant to the request contained in this letter, the This approval precludes any right on the part of the
petitioners remitted and paid to the respondents the respondents to a further liquidation, unless the latter
total amount corresponding to them under the above- can show that there was fraud, deceit, error or
quoted statement of accounts which, however, was mistake in said approval. (Pastor, vs. Nicasio, 6 Phil.,
not signed by the latter. 152; Aldecoa & Co., vs. Warner, Barnes & Co., 16
Phil., 423; Gonsalez vs. Harty, 32 Phil. 328.)
COMPLAINT BY THE RESPONDENTS
2. The pronouncement that the evidence tends to
prove that there were mistakes in the petitioners'
 12

statements of accounts, without specifying the cigarettes while Liwanag and Tabligan will act as her
mistakes, merely intimates as suspicion and is not agents with the corresponding 40% commission to her
such a positive and unmistakable finding of fact if the goods are sold. It was also agreed that in the
(Cf. Concepcion vs. People, G.R. No. 48169, event that the cigarettes are not sold, the proceeds of
promulgated December 28, 1942) as to justify a the sale or the said products shall be returned to
revision, especially because the Court of Appeals Rosales. Liwanag failed to comply with the above
has relied on the bare allegations of the parties. agreements and ceased to make periodic reports to
Rosales prompting the latter to file an estafa case
Even admitting that, as alleged by the petitioners in against her.
their counterclaim, they overpaid the respondents in
the sum of P575.12, this error is essentially fatal to The trial court found Liwanag guilty as charged. When
the latter's theory what the statement of accounts brought on appeal, the appellate court affirmed the
shows, and is therefore not the kind of error that decision.And when her motion for reconsideration
calls for another accounting which will serve the denied,the petitioner filed this petition.
purpose of the respondent's suit. Petitioner’s Contention:
FALLO She advances the theory that the parties intended to
enter into a contract of partnership, wherein Rosales
We are reversing the appealed decision on the would contribute the funds while she would buy and
legal ground that the petitioners' final statement of sell the cigarettes, and later divide the profits between
accounts had been approved by the respondents and them. She also argues that the transaction can also
no justifiable reason (fraud, deceit, error or mistake) be interpreted as a simple loan, with Rosales lending
has been positively and unmistakably found by the to her the amount stated on an installment basis.
Court of Appeals so as to warrant the liquidations
sought by the respondents.
ISSUE:
Indeed, we feel justified in stating that the petitioners
have here given a remarkable demonstration of the Whether or not a partner maybe sued for estafa
legendary honesty, good faith and industry with which for misappropriation of partnership funds?
the natives of Taal pursue business arrangements
similar to the partnership in question, and we would RULING:
hate, in the absence of any sufficient reason, to let YES.
such a beautiful legend have a distateful ending.
All the elements of estafa are attendant in the present
case: (1) that the accused defrauded another by
C.11 abuse of confidence or deceit; and (2) that damage or
prejudice capable of pecuniary estimation is caused to
G.R. No. 114398 October 24, 1997 the offended party or third party, and it is essential
that there be a fiduciary relation between them either
in the form of a trust, commission or administration.
CARMEN LIWANAG, petitioner,
vs.
THE HON. COURT OF APPEALS and THE PEOPLE The language of the receipt signed by petitioner could
OF THE PHILIPPINES, represented by the Solicitor not be any clearer. It indicates that the money
General, respondents. delivered to Liwanag was for a specific purpose, that
is, for the purchase of cigarettes, and in the event the
cigarettes cannot be sold, the money must be
Doctrine: WHEN MONEY OR PROPERTY HAVE
returned to Rosales. Thus, even assuming that a
BEEN RECEIVED BY A PARTNER FOR A
contract of partnership was indeed entered into
SPECIFIC PURPOSE, AND HE LATER
by and between the parties, we have ruled that
MISAPPROPRIATED IT, SUCH PARTNER IS
when money or property have been received by a
GUILTY OF ESTAFA. — Even assuming that a
partner for a specific purpose (such as that
contract of partnership was indeed entered into by
obtaining in the instant case) and he later
and between the parties, we have ruled that when
misappropriated it, such partner is guilty of
money or property have been received by a partner
estafa.
for a specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such
partner is guilty of estafa. Neither can the transaction be considered a loan,
since in a contract of loan once the money is received
by the debtor, ownership over the same is
transferred. Being the owner, the borrower can
FACTS:
dispose of it for whatever purpose he may deem
Petitioner Carmen Liwanag was charged with the proper. In the instant petition, however, it is evident
crime of estafa before the RTC of Quezon City. The that Liwanag could not dispose of the money as she
complaint alleged that petitioner Liwanag and certain pleased because it was only delivered to her for a
Thelma Tabligan went to the house of complainant single purpose, namely, for the purchase of
Isidora Rosales and offered her to join them in the cigarettes, and if this was not possible then to return
business of buying and selling of cigarettes. Rosales the money to Rosales. Since in this case there was no
agreed to give the money needed to buy the transfer of ownership of the money delivered, Liwanag
 13

is liable for conversion under Art. 315, par. l(b) of the the evidence, was the person who received the
Revised Penal Code. money directly from Larin.

FALLO: The P172 having been received by the partnership,

the business commenced and profits accrued, the
WHEREFORE. In view of the foregoing, the action that lies with the partner who furnished the
appealed decision of the Court of Appeals dated capital for the recovery of his money is not a criminal
November 29, 1993, is AFFIRMED. Cost against action for estafa, but a civil one arising from the
petitioner. partnership contract for a liquidation of the partnership
and a levy on its assets if there should be any.

No. 5 of article 535 of the Penal Code, according to

C12. G.R. No. 5840 September 17, 1910 which those are guilty of estafa "who, to the prejudice
of another, shall appropriate or misapply any money,
goods, or any kind of personal property which they
THE UNITED STATES, plaintiff-appellee, vs.
may have received as a deposit on commission for
EUSEBIO CLARIN, defendant-appellant
administration or in any other character producing the
obligation to deliver or return the same," (as, for
FACTS: example, in commodatum, precarium, and other
unilateral contracts which require the return of the
Pedro Larin delivered to Pedro Tarug P172, in order same thing received) does not include money
for Tarug, with Eusebio Clarin and Carlos de Guzman, received for a partnership; otherwise the result
to buy and sell mangoes, and, believing that he could would be that, if the partnership, instead of obtaining
make some money in this business. Larin made an profits, suffered losses, as it could not be held liable
agreement with the three men by which the profits civilly for the share of the capitalist partner who
were to be divided equally between him and them. reserved the ownership of the money brought in by
him, it would have to answer to the charge of estafa,
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman for which it would be sufficient to argue that the
did in fact trade in mangoes and obtained P203 from partnership had received the money under obligation
the business, but did not comply with the terms of the to return it.
contract by delivering to Larin his half of the profits;
neither did they render him any account of the capital. FALLO:

Larin charged them with the crime of estafa, but the We therefore freely acquit Eusebio Clarin, with the
provincial fiscal filed an information only against costs de oficio. The complaint for estafa is dismissed
Eusebio Clarin in which he accused him of without prejudice to the institution of a civil action.
appropriating to himself not only the P172 but also the
share of the profits that belonged to Larin, amounting
to P15.50. Pedro Tarug and Carlos de Guzman C13 - PEDRO MARTINEZ V. ONG PONG CO AND
appeared in the case as witnesses and assumed that
ONG LAY
the facts presented concerned the defendant and
themselves together. G.R. No. L-5236 January 10, 1910

FACTS: On the 12th of December, 1900, the plaintiff

ISSUE: WON a criminal action for estafa is proper
against a co-partner who failed to deliver half of the herein delivered P1,500 to the defendants who, in a
profits from the partnership venture. private document, acknowledged that they had
received the same with the agreement, as stated by
RULING: them, "that we are to invest the amount in a store, the
profits or losses of which we are to divide with the
When two or more persons bind themselves to former, in equal shares‖.
contribute money, property, or industry to a common
fund, with the intention of dividing the profits among The plaintiff filed a complaint on April 25, 1907, in
themselves, a contract is formed which is called order to compel the defendants to render him an
partnership. (Art. 1665, Civil Code.) accounting of the partnership as agreed to, or else to
refund him the P1,500 that he had given them for the
When Larin put the P172 into the partnership which
said purpose. Ong Pong Co alone appeared to
he formed with Tarug, Clarin, and Guzman, he
invested his capital in the risks or benefits of the answer the complaint wherein he admitted of the
business of the purchase and sale of mangoes, and, agreement and the delivery of the P 1,500 to him and
even though he had reserved the capital and Ong Lay. However, he alleged that it was Ong Lay
conveyed only the usufruct of his money, it would not who managed the business and that no profit was
devolve upon of his three partners to return his capital realized therefrom.
to him, but upon the partnership of which he himself
formed part, or if it were to be done by one of the The Trial Court rendered its decision ordering Ong
three specifically, it would be Tarug, who, according to Pong Co to return to plaintiff a total of P 840, with
legal interest from when the business was terminated
 14

until full payment thereof, representing ½ of the The agreement stipulates that they form a partnership
capital which the plaintiff contributed and ½ of the known by the name ―AM Pabalan and Company‖, with
profits calculated at the rate of 12 per cent per annum capital at P9,000; that Pabalan would contribute
for the six months that the store was supposed to P3,000 in cash while Fitton contribute real property;
have been open. that Pabalan would sell his two lots to Fitton for
P6,000; that Pabalan would receive P3,000 of the
Defendant’s allegation: The reason for the closing of purchase price and the remaining will be his
the store was the ejectment from the premises contribution to the capital; and that Fitton would
occupied by it in view of the losses incurred by it. contribute the said two lots as his agreed capital.

ISSUE: WON Ong Pong Co and Ong Lay are liable Pabalan received P3,000 of the purchase price. When
and up to what extent. Fitton died, he failed to pay the partnership funds the
remaining P3,000. Owing to the failure of Fitton to
HELD: YES. The partners are jointly liable. The comply with his obligation, the properties in question
whole action is based upon the fact that the had been entirely unproductive, resulting in losses
defendants received certain capital from the and damages to Pabalan. Plaintiff prayed for the
plaintiff for the purpose of organizing a company. rescission of the double contract (partnership and
With this, they are deemed as the apparent sale) entered into. Defendant Velez is the
administrators of the partnership and acted as agents administrator of Fitton’s estate.
for the capitalist partner (in this case, Martinez) and
Plaintiff-Appellant’s Contention:
by virtue thereof are bound to fulfill the contract which
implies the management of the business. As such
The plaintiff's claim is founded on the alleged fact that
administrators they were the agent of the company
the said Walter A. Fitton failed to comply with his
and incurred the liabilities peculiar to every agent, obligations as stipulated in the said double contract,
among which is that of rendering account to the inasmuch as he did not pay into the funds of the
principal of their transactions, and paying him company entitled "A. M. Pabalan and Company," as
everything they may have received by virtue of the capital of the partner Pabalan, the sum of P3,000,
the mandatum (A Contract of Mandatum requires that or the remainder of P6,000, the price of the properties
agents shall account to the principal for all their which he had purchased from the plaintiff, did not pay
transactions and pay him whatever sum they received to the latter the said amount, nor any part thereof, nor
by virtue thereof. By not accounting for it, or otherwise was such payment made, after the said Fitton's death,
justifying the investment of the money received and by the administrator of the latter's estate.
administered, the parties who received it become
debtors and are under obligation to make restitution of Defendant-Appellee’s Contention:
the money to the person who entrusted it to them.
As a special defense the defendant alleged that the
FALLO: In view of the foregoing judgment appealed action prosecuted by the plaintiff had prescribed; that
from is hereby affirmed, provided, however, that the the fact that the properties of the company known as
"A. M. Pabalan and Company" had been unproductive
defendant Ong Pong Co shall only pay the plaintiff the was exclusively due to the great negligence of the
sum of P750 with the legal interest thereon at the rate plaintiff, since he had had more than sufficient time,
of 6 per cent per annum from the time of the filing of from June 27, 1900, to the date of the death of Fitton,
the complaint, and the costs, without special ruling as to have demanded from his copartner the sum offered
to the costs of this instance. So ordered. by the latter and which he was to contribute to the
common assets, and that, notwithstanding all the time
that had elapsed since the execution of the articles of
partnership, up to the date of the presentation of the
C14_ EN BANC complaint the plaintiff had never required his
copartner to turn into the partnership funds the capital
G.R. No. L-5953 February 24, 1912 pledged.

ANTONIO M. PABALAN, plaintiff-appellant, ISSUE:

vs.
FELICIANO VELEZ, defendant-appellee. Whether or not Pabaln can have the rescission of
both the partnership and sales contract.
FACTS:
RULING:
Pabalan owned two lots, a rural estate devoted to
agricultural purposes and an urban lot. In his desire to YES. In bilateral contracts, when one of the parties
put the two lots to productive use, he agreed to enter failed to comply with the agreement, the party
into a regular mercantile partnership with Walter prejudiced is entitled to choose between enforcement
Fitton. of the obligation or a rescission of the contract, with
the payment of damages and interest in either case.
 15

In this case, enforcement cannot be done because 3. Mr. Teague will have charge of selling fish in
the defaulting party/partner is already dead. Justice Manila and purchasing supplies.
requires the dissolution of the Company and the 4. No salary until business is on paying basis,
rescission of the said sale. then the same as Maddy or Martin.

The Court of First Instance (CFI) issued the following

decision:
C15 - EN BANC
1. Dissolving the partnership and liquidating its
G.R. No. 30286 September 12, 1929 assets;
2. That the barge Lapu-Lapu as well as the Ford
M. TEAGUE, plaintiff-appellant,
vs. Truck and adding machine belong exclusively
H. MARTIN, J. T. MADDY and L.H. to Teague, but he must return to and
GOLUCKE, defendants-appellees. reimburse the partnership the amount which
was taken from its funds for the purchase of
FACTS: the Lapu-Lapu and the Ford Truck.

All the parties agreed that there was a partnership Upon appeal, the plaintiff further contended that he is
between them. What the plaintiff is asking is for the the managing partner of the partnership and that the
dissolution of the partnership and the appointment of three (3) properties (Lapu-Lapu, Ford Truck & the
a receiver pendente lite. adding machine) are the properties of the partnership
since they were paid from the partnership; thus does
Plaintiff-Appellant’s (TEAGUE) Allegation: not belong to him.

He alleged that he and the defendants formed a ISSUES:

partnership for the operation of a fish business and
similar commercial transactions, which was called 1. Whether or not Teague was the manager of
―Malangpaya Fish Co.‖ with a capital of P35,000 of the unregistered partnership.
which the plaintiff paid P25,000, the defendant Martin 2. Whether or not three properties are owned by
P5,000, Maddy P2,500, and Golucke P2,500. That the partnership.
they will share in the profits and losses of the
business in proportion to the amount of capital HELD:
contributed. That he was named the general manager
to take charge of the business, with full power to do 1. YES. The powers and duties of the three
and perform all acts necessary to carry out the partners are specifically defined, and that
purposes of the partnership. That the Lapu-Lapu each of them was more or less the general
(lighter – a ship) and Barracuda (motorship) are in the manager in his particular part of the business.
possession of the defendants who are making use of The plaintiff’s powers and duties were
them, to the damage and prejudice of the plaintiff. confined and limited to ―selling fish in Manila
and the purchase of supplies.‖
Defendant-AppelleesReply:
2. NO. The Lapu-Lapu, Barracuda, and the
Defendants agreed that they formed a partnership for adding machine, although paid for by the
the purpose of the equipment of the Manila Fish Co., partnership funds, are owned by plaintiff for it
Inc., and the conduct of a fish business. That the was registered in his own name. He is
partnership agreement was never signed but each of estopped from claiming otherwise. The
them received copies thereof. That by its terms the purchase of the properties in question are not
amount of capital was P45,000, of which the plaintiff within the authority of the plaintiff. It is but right
agreed to contribute P35,000. That P20,000 of the that the plaintiff reimburse the partnership for
capital was to be used for the purchase of equipment the use of its funds. However, it is to be noted
of the Manila Fish Co., Inc. and the balance placed to that the partnership also made use of the
the checking account of the new company. Lapu-Lapu. In the interest of justice, the
plaintiff should be compensated for such use.
That terms of the agreement were as follows:
FALLO:
1. Capt. Maddy will have charger of the
Barracuda and the navigating of the same All things considered, we are of the opinion that
salary P300 per month; P2,000 is a reasonable, amount which the plaintiff
2. Mr. Martin will have charge of the southern should receive for its use.
station, cold stores, commissary and
procuring fish. Salary P300 per month; In all things and respects, the judgment of the lower
court as to the merits is affirmed, with the modification
 16

only that P2,000 shall be deducted from the amount of Issue

the judgment which was awarded against the plaintiff,
such deduction to be made for and on account of Whether or not the consent of the partner is
such use of the Lapu-Lapu by the partnership, with necessary to bind the partnership.
costs against the appellant. So ordered.
Ruling

C.16. G.R. No. L-45624 April 25, The SC favored Litton. The appealed decision is
1939GEORGELITTON, petitioner-appellant, vs. reversed and the defendants are ordered to pay to the
HILL & CERON, ET AL., respondents-appellees. plaintiff, jointly and severally, the sum of P720, with
legal interest.
Facts
Based on the Articles of Partnership, business of the
On February 14, 1934, the plaintiff sold and delivered partnership has been entrusted to both partners
to Carlos Ceron, who is one of the managing partners thereof, but we dissent from the view of the Court of
of Hill & Ceron, a certain number of mining claims, Appeals that for one of the partners to bind the
and by virtue of said transaction, the defendant Carlos partnership the consent of the other is necessary.
Ceron delivered to the plaintiff a document that the Third persons, like the plaintiff, are not bound in
latter receives from the petitioner certificates Nos. entering into a contract with any of the two partners,
4428, 4429 and 6699 for 5,000, 5,000 and 7,000 to ascertain whether or not this partner with whom the
shares respectively — total 17,000 shares of Big transaction is made has the consent of the other
Wedge Mining Company, which we have sold at partner. The public need not make inquires as to the
P0.11 (eleven centavos) per share or P1,870.00 less agreements had between the partners. Its knowledge,
1/2 per cent brokerage. is enough that it is contracting with the partnership
which under Article 130 of the Code of Commerce,
may legally engage in the business of brokerage in
Ceron paid to the plaintiff the sum or P1,150 leaving
general as stock brokers, security brokers and other
an unpaid balance of P720. Plaintiff failed to collect
activities pertaining to the business of the partnership.
the sum of money from Hill & Ceron or from its surety
Ceron, therefore, could not have entered into the
Visayan Surety & Insurance Corporation. Litton filed
contract of sale of shares with Litton as a private
a complaint against the said defendants for the
individual, but as a managing partner of Hill & Ceron.
recovery of the said balance.

Robert Hill testified at the trial that he and Ceron,

during the partnership, had the same power to buy
and sell; that in said partnership Hill as well as Ceron C. 17. E. M. BACHRACH, plaintiff-appellee,
made the transaction as partners in equal parts; that vs. "LA PROTECTORA", ET AL., defendants-
on the date of the transaction, February 14, 1934, the appellants.
partnership between Hill and Ceron was in existence. G.R. No. L-11624. January 21, 1918. STREET, J.:

Argument of the Private Respondent Facts:

The respondent argues in its brief that even admitting  In the year 1913, the individuals named as
that one of the partners could not, in his individual defendants in this action formed a civil partnership,
capacity, engage in a transaction similar to that in called "La Protectora," for the purpose of engaging
which the partnership is engaged without binding the in the business of transporting passengers and
latter, nevertheless there is no law which prohibits a freight at Laoag, Ilocos Norte.
partner in the stock brokerage business for engaging  In order to provide the enterprise with means of
in other transactions different from those of the transportation, Marcelo Barba, acting as manager,
partnership, as it happens in the present case, came to Manila and upon June 23, 1913,
because the transaction made by Ceron is a mere negotiated the purchase of two automobile trucks
personal loan, and this argument, so it is said, is from the plaintiff, E. M. Bachrach, for the agree
corroborated by the Court of Appeals. price of P16,500. He paid the sum of 3,000 in
cash, and for the balance executed promissory
notes representing the deferred payments. Three
The CFI ordered Carlos Ceron personally to pay the
of these notes, for the sum of P3,375 each, have
amount claimed and absolved the partnership Hill & been made the subject of the present action, and
Ceron, Robert Hill and the Visayan Surety & there are exhibited with the complaint in the cause.
Insurance Corporation. One was signed by Marcelo Barba in the following
manner:
On appeal to the Court of Appeals, the latter P. P. La Protectora
affirmed the decision of the court on May 29, 1937, By Marcelo Barba
having reached the conclusion that Ceron did not Marcelo Barba.
intend to represent and did not act for the firm Hill
& Ceron in the transaction involved in this
 As preliminary to the purchase of these trucks, the
litigation.
defendants Nicolas Segundo, Antonio Adiarte,
Ignacio Flores, and Modesto Serrano, upon June
 17

12, 1913, 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 Did Catalan’s redemption of the properties make him the
its president full authority "in the name and absolute owner of thelands?
representation of said partnership to contract for
the purchase of two automobiles" (en nombre y
representacion de la mencionada sociedad HELD:
contratante la compra de dos automoviles).
 From time to time after this purchase was made, No. Under Article 1807 of the NCC every partner
Marcelo Barba purchased of the plaintiff various becomes a trustee for hiscopartner with regard to any
automobile effects and accessories to be used in benefits or profits derived from his act as a
the business of "La Protectora." Upon May 21, partner.Consequently, when Catalan redeemed the
1914, the indebtedness resulting from these properties in question, he became a trusteeand held the
additional purchases amounted to the sum of same in trust for his copartner Gatchalian, subject to his
P2,916.57 right to demandfrom the latter his contribution to the
 In May, 1914, the plaintiff foreclosed a chattel amount of redemption
mortgage which he had retained on the trucks in
order to secure the purchase price. The amount D. 2. G.R. No. 84197 July 28, 1989
realized from this sale was P1,000. This was
credited unpaid. To recover this balance, together PIONEER INSURANCE & SURETY
with the sum due for additional purchases, the CORPORATION, petitioner,
present action was instituted in the Court of First vs.
Instance of the city of Manila, upon May 29, 1914, THE HON. COURT OF APPEALS, BORDER
against "La Protectora" and the five individuals MACHINERY & HEAVY EQUIPMENT, INC.,
Marcelo Barba, Nicolas Segundo, Antonio Adiarte, (BORMAHECO), CONSTANCIO M. MAGLANA and
Ignacio Flores, and Modesto Serrano. No question JACOB S. LIM, respondents.
has been made as to the propriety of impleading
"La Protectora" as if it were a legal entity.
G.R. No. 84157 July 28, 1989
 At the hearing, judgment was rendered against all
of the defendants.
JACOB S. LIM, petitioner,
vs.
COURT OF APPEALS, PIONEER INSURANCE AND
SURETY CORPORATION, BORDER MACHINERY
Issue: and HEAVY EQUIPMENT CO., INC,, FRANCISCO
and MODESTO CERVANTES and CONSTANCIO
Whether or not these individuals are liable for the firm MAGLANA, respondents.
debts and if so to what extent.
Facts:
Held:
 In 1965, Jacob S. Lim (petitioner in G.R. No.
YES, they are liable for the firm debts. Their liability is 84157) was engaged in the airline business as
based on the fact that they are members of the civil owner-operator of Southern Air Lines (SAL) a
partnership and as such are liable for its debts. The single proprietorship.
appellants are severally liable (not solidary) for their
respective shares of the entire indebtedness found to  On May 17, 1965, at Tokyo, Japan, Japan
be due. Domestic Airlines (JDA) and Lim entered into
and executed a sales contract (Exhibit A) for
D. PROPERTY RIGHTS OF A PARTNER the sale and purchase of two (2) DC-3A Type
aircrafts and one (1) set of necessary spare
D1. CATALAN vs. GATCHALIAN parts for the total agreed price of US
$109,000.00 to be paid in installments.
105 Phil 1270, G.R. No. L-11648, April 22, 1959
 On May 22, 1965, Pioneer Insurance and
Surety Corporation (Pioneer, petitioner in G.R.
FACTS: No. 84197) as surety executed and issued its
Surety Bond No. 6639 (Exhibit C) in favor of
Catalan and Gatchalian are partners. They mortgaged JDA, in behalf of its principal, Lim, for the
two lots to Dr. Maravetogether with the improvements balance price of the aircrafts and spare parts.
thereon to secure a credit from the latter. Thepartnership
failed to pay the obligation. The properties were sold to  Border Machinery and Heavy Equipment
Dr. Marave at apublic auction. Catalan redeemed the Company, Inc. (Bormaheco), Francisco and
property and he contends that title should becancelled Modesto Cervantes (Cervanteses) and
and a new one must be issued in his name. Constancio Maglana (respondents in both
petitions) contributed some funds used in the
purchase of the above aircrafts and spare
ISSUE: parts. The funds were supposed to be their
 18

contributions to a new corporation proposed who failed to incorporate the entity in which
by Lim to expand his airline business. They they had chosen to invest?
executed two (2) separate indemnity 2. How are the losses to be treated in situations
agreements (Exhibits D-1 and D-2) in favor of where their contributions to the intended
Pioneer, one signed by Maglana and the other 'corporation' were invested not through the
jointly signed by Lim for SAL, Bormaheco and corporate form?
the Cervanteses.
Ruling:
 On June 10, 1965, Lim doing business under 1. While it has been held that as between
the name and style of SAL executed in favor themselves the rights of the stockholders in a
of Pioneer as deed of chattel mortgage as defectively incorporated association should be
security for the latter's suretyship in favor of governed by the supposed charter and the
the former. It was stipulated therein that Lim laws of the state relating thereto and not by
transfer and convey to the surety the two the rules governing partners (Cannon v. Brush
aircrafts. The deed (Exhibit D) was duly Electric Co., 54 A. 121, 96 Md. 446, 94 Am.
registered with the Office of the Register of S.R. 584), it is ordinarily held that persons
Deeds of the City of Manila and with the Civil who attempt, but fail, to form a corporation
Aeronautics Administration pursuant to the and who carry on business under the
Chattel Mortgage Law and the Civil corporate name occupy the position of
Aeronautics Law (Republic Act No. 776), partners inter se
respectively.
Thus, where persons associate themselves together
 Lim defaulted on his subsequent installment under articles to purchase property to carry on a
payments prompting JDA to request payments business, and their organization is so defective as to
from the surety. Pioneer paid a total sum of come short of creating a corporation within the statute,
P298,626.12. they become in legal effect partners inter se, and their
 Pioneer then filed a petition for the rights as members of the company to the property
extrajudicial foreclosure of the said chattel acquired by the company will be recognized.
mortgage before the Sheriff of Davao City.
The Cervanteses and Maglana, however, filed It is therefore clear that the petitioner never had
a third party claim alleging that they are co- the intention to form a corporation with the
owners of the aircrafts, respondents despite his representations to them.
This gives credence to the cross-claims of the
 On July 19, 1966, Pioneer filed an action for respondents to the effect that they were induced and
judicial foreclosure with an application for a lured by the petitioner to make contributions to a
writ of preliminary attachment against Lim and proposed corporation which was never formed
respondents, the Cervanteses, Bormaheco because the petitioner reneged on their agreement
and Maglana. (Lim in an undertaking sometime on or about August
9,1965, promised to incorporate his airline in
 In their Answers, Maglana, Bormaheco and accordance with their agreement and proceeded to
the Cervanteses filed cross-claims against acquire the planes on his own account. Since then up
Lim alleging that they were not privies to the to the filing of this answer, Lim has refused, failed and
contracts signed by Lim and, by way of still refuses to set up the corporation or return the
counterclaim, sought for damages for being money of Maglana.)
exposed to litigation and for recovery of the
sums of money they advanced to Lim for the Applying therefore the principles of law earlier cited to
purchase of the aircrafts in question. the facts of the case, necessarily, no de facto
partnership was created among the parties which
G.R. No. 84157 would entitle the petitioner to a reimbursement of the
supposed losses of the proposed corporation. The
PETITIONER: record shows that the petitioner was acting on his own
as a result of the failure of respondents Bormaheco, and not in behalf of his other would-be incorporators
Spouses Cervantes, Constancio Maglana and in transacting the sale of the airplanes and spare
petitioner Lim to incorporate, a de facto partnership parts.
among them was created, and that as a consequence
of such relationship all must share in the losses WHEREFORE, the instant petitions are DISMISSED.
and/or gains of the venture in proportion to their The questioned decision of the Court of Appeals is
contribution. The petitioner, therefore, questions the AFFIRMED
appellate court's findings ordering him to reimburse (Decision of CA:)
certain amounts given by the respondents to the Gipabayad si jacob lim kay respondents.
petitioner as their contributions to the intended
corporation.

Issues:
1. What legal rules govern the relationship
among co-investors whose agreement was to
do business through the corporate vehicle but
 19

D.3 partner by reason of the supposed fraudulent

management of he partnership referred to, it is first
G.R. No. L-45464 April 28, 1939 necessary that a liquidation of the business
thereof be made to the end that the profits and
JOSUE SONCUYA, plaintiff-appellant, losses may be known and the causes of the latter
vs. and the responsibility of the defendant as well as
CARMEN DE LUNA, defendant-appellee. the damages which each partner may have
suffered, may be determined. It is not alleged in the
complaint that such a liquidation has been effected
Doctrine:
nor is it prayed that it be made. Consequently, there is
no reason or cause for plaintiff to institute the action
GENERAL CIVIL PARTNERSHIP; CLAIMS OF for damages which he claims from the managing
PARTNERS AGAINST EACH OTHER.—For a partner Carmen de Luna (Po Yeng Cheo vs. Lim Ka
partner to be able to claim from another partner who Yam, 44 Phil., 172).
manages the general civil partnership, damages
allegedly suffered by him by reason of the fraudulent
Having reached the conclusion that the facts alleged
administration of the latter, a previous liquidation of
in the complaint are not sufficient to constitute a
said partnership is necessary.
cause of action on the part of plaintiff as member of
the partnership "Centro Escolar de Señoritas" to
FACTS: collect damages from defendant as managing partner
thereof, without a previous liquidation, we do not
On September 11, 1936, plaintiff Josue deem it necessary to discuss the remaining question
Soncuya filed with the Court of First Instance of of whether or not the complaint is ambiguous,
Manila and amended complaint against Carmen de unintelligible and vague.
Luna in her own name and as co-administratrix of the
intestate estate, of Librada Avelino, in which, upon the In view of the foregoing considerations, we are of the
facts therein alleged, he prayed that defendant be opinion and so hold that for a partner to be able to
sentenced to pay him the sum of P700,432 as claim from another partner who manages the
damages and costs. general copartnership, damages allegedly
suffered by him by reason of the fraudulent
In the amended complaint it is prayed that administration of the latter, a previous liquidation
defendant Carmen de Luna be sentenced to pay of said partnership is necessary.
plaintiff damages in the sum of P700,432 as a result
of the administration, said to be fraudulent, of the FALLO:
partnership, "Centro Escolar de Señoritas", of which
plaintiff, defendant and the deceased Librada Avelino
Wherefore, finding no error in the order appealed
were members.
from the same is affirmed in all its parts, with
costs against the appellant.
Defendant:

To the aforesaid amended complaint D4. AGUSTIN VS INOCENCIO

defendant Carmen de Luna interposed a demurrer EN BANC
based on the following grounds: (1) That the G.R. No. L-3745 October 26, 1907
complaint does not contain facts sufficient to JUAN AGUSTIN, ET AL., plaintiffs; VICTOR DEL
constitute a cause of action; and (2) that the complaint ROSARIO, appellant, vs. BARTOLOME
is ambiguous, unintelligible and vague. INOCENCIO, defendant-appellee.

Trial court found the same well-founded and (Point: Advances allowed managing partner - On the
sustained it, ordering the plaintiff to amend his adjustment of the accounts of a partnership, the
complaint. However the plaintiff manifested that he managing partner may be allowed funds borrowed or
would not prefer to amend his amended complaint. advanced and necessary to the completion of the
Carmen de Luna filed a motion to dismiss the said work, within the scope of the business and expressly
amended complaint which was granted by the Court provided for by agreement among the partners.)
of First Instance of Manila. Hence, this petition.
FACTS
ISSUE:
 The parties to this controversy, as industrial
Whether or not the plaintiff can claim damages partners without capital, contributed from its
against Carmen based on the complaint. profits the sum of P807.28 as a fund toward
the construction of a casco for use in their
RULING: business
 Bartolome Inocencio, he being the managing
NO. partner borrowed P3,500, borrowed from
Maria del Rosario, his wife.
For the purpose of adjudicating to plaintiff  It is admitted that this total, a little over
damages which he alleges to have suffered as a P4,300, was the estimated cost of the casco.
 20

The amount is necessary in order to complete entrusted to submit an accounting of his

the work undertaken. administration and to deliver to him his share as such
 Inocencio failed to notify his partners of the partner.
borrowing of money and payment of the
various items from time to time, but it was Defendant’s answer
shown that the books were at all times open
for their inspection. In his answer defendant expressed his
 Juan Agustin, representing all the partners, conformity to the dissolution of the partnership and
was also present at the construction of the the liquidation of its affairs; but by way of counterclaim
casco, in charge of the practical work and
cognizant of its needs and its progress. he asked that, having covered a deficit incurred by the
 The note was passed into the hands of partnership amounting to P4,000 with his own money,
Inocencio by reason of the successive deaths plaintiff reimburse him of one-half of said sum.
of his wife and their only child.
The plaintiff filed a petition for receivership
ISSUE and a liquidator is appointed to take charge of the
Whether or not Inocencio, in borrowing money and properties and business for the partnership while the
advancing funds, was acting within the scope of his same was not yet definitely dissolved. However, the
authority as a managing partner plaintiff executed a deed of mortgage in favor of the
intervenor mortgaging the said machines contributed
RULING
Yes. The work done in the casco having been within in the partnership. After a year, the intervenor
the scope of the association and necessary to carry (mortgagee) commence a case to collect his
out its express object, the borrowing of the money mortgage credit. The plaintiff did not take actual
required to carry it on, with the acquiescence if not possession of the machine due to the strong
with the affirmative consent of his associates, was opposition of the defendant and the machine is still in
not outside the powers of the managing partner
the possession of receivership.
and constitutes a debt for which all the associates
are liable.
Cfi’s ruling
The trial court treated his claim on this note, as well CFI of Manila rendered decision declaring the
as the sum of P2,024.49 furnished by him, as an
mortgage void executed by the plaintiff(Clemente) to
addition to his capital in the firm, rather than as a loan.
Echevarria citing that the has not adduced any
We do not deem it necessary to pass upon this evidence nor has he testified to show that the
objection, for the reason that, considered as a loan, machines mortgaged by him to the intervenor have
this sum would place the defendant as a creditor in a ever belonged to him, as well as the counterclaim filed
stronger position as against his associates than if by the defendant against the intervenor.
regarded as a mere contribution to capital. The error,
if it be an error, is not, therefore, prejudicial to the
plaintiff, but is rather beneficial to him. The
respondent did not except to it. Issue

Whether or not the plaintiff (clemente) can

mortgage the machine belonging to the partnership
under liquidation
D.5 ENRIQUE CLEMENTE, plaintiff-appellee, vs.
DIONISIO GALVAN, defendant-appellee. JOSE Ruling
ECHEVARRIA, appellant
The evidence of record shows that the
Facts machines in contention originally belonged to the
defendant and from him were transferred to the
Plaintiff and defendant organized a civil
partnership Galvan y Compania. This being the case,
partnership which they named "Galvan y Compañia"
said machines belong to the partnership and not to
to engage in the manufacture and sale of paper and
him, and shall belong to it until partition is effected
other stationery. They agreed to invest therein a
capital of P100,000, but as a matter of fact they did according to the result thereof after the liquidation.
not cover more than one-fifth thereof, each As properties of the partnership, the same
contributing P10,000. could not be disposed of by the party contributing the
same without the consent or approval of the
Plaintiff’s allegation
partnership or of the other partner.
After a year of organization, plaintiff
commenced the present case to ask for the FALLO
dissolution of the partnership and to compel
defendant to whom the management thereof was
 21

In view of all the foregoing, the judgment delivery and merely declared that Lastrilla was
appealed from is affirmed, with costs against the entitled to 17 per cent of the properties sold.
appellant. So ordered.
Issue:

Does Lastrilla have any proper claim to

D6. G.R. No. L-5963 May 20, 1953 the proceeds of the sale?

THE LEYTE-SAMAR SALES CO., and RAYMUNDO

Ruling: No
TOMASSI, petitioners,
vs.
SULPICIO V. CEA, in his capacity as Judge of the
Court of First Instance of Leyte and OLEGARIO  If he was a creditor of the FELCO, perhaps or
maybe. But he was not. The partner of a
LASTRILLA,respondents.
partnership is not a creditor of such partnership
for the amount of his shares. That is too...
Facts elementary to need elaboration.

 In civil case, of the Court of First Instance of  Why was it necessary to hear them on the merits
Leyte, which is a suit for damages by the of Lastrilla's motion?
Leyte-Samar Sales Co. (hereinafter called  Because Dorfe and Asturias might be unwilling
LESSCO) and Raymond Tomassi against the to recognize the validity of Lastrilla's purchase,
Far Eastern Lumber & Commercial Co. or, if valid, they may want him not to forsake the
(unregistered commercial partnership partnership that might have some obligations in
connection with the partnership properties. And
hereinafter called FELCO), Arnold Hall, Fred what is more important, if... the motion is
Brown and Jean Roxas, judgment against granted, when the time for redemption comes,
defendants jointly and severally for the Dorfe and Asturias will receive from
amount of P31,589.14 plus costs was redemptioners seventeen per cent (17%) less
than the amount they had paid for the same
rendered on October 29, 1948.
properties.

 The Court of Appeals confirmed the award in  The defendants Arnold Hall and Jean Roxas,
November 1950, minus P2,000 representing eyeing Lastrilla's financial assets, might also
oppose the substitution by Lastrilla of Fred
attorney's fees mistakenly included. Brown, the judgment against them being joint
and several. They might entertain misgivings
 The decision having become final, the sheriff about Brown's slipping out of their... common
sold at auction on June 9, 1951 to Robert predicament through the disposal of his shares.
Dorfe and Pepito Asturias "all the rights,  Now, these varied interests of necessity make
interests, titles and participation" of the Dorfe, Asturias and the defendants
defendants in certain buildings and properties indispensable parties to the motion of Lastrilla
described in the certificate, for a total price of granting it was a step allowable under our
regulations on execution. Yet these parties were
eight thousand and one hundred pesos. not notified, and obviously took no part in... the
proceedings on the motion.
ALLEGATION
 Wherefore, the orders of the court recognizing
Lastrilla's right and ordering payment to him of a
 On June 4, 1951 Olegario Lastrilla filed in the part of the proceeds were patently erroneous,
case a motion, wherein he claimed to be the because promulgated in excess or outside of its
owner by purchase on September 29, 1949, of jurisdiction. For this reason the respondents'
all the "shares and interests" of defendant argument resting on plaintiffs'... failure to appeal
Fred Brown in the FELCO, and requested from the orders on time, although ordinarily
decisive, carries no persuasive force in this
"under the law of preference of credits" that instance.
the sheriff be required to retain in his
possession so much of the deeds of the Fallo
auction sale as may be necessary "to pay his  In view of the foregoing,... we so hold, that all
right". Over the plaintiffs' objection the judge in orders of the respondent judge requiring delivery
his order of June 13, 1951, granted Lastrilla's of 17 per cent of the proceeds of the auction
motion by requiring the sheriff to retain 17 per sale to respondent Lastrilla are null and void.
cent of the money "for delivery to the
assignee, administrator or receiver" of the
FELCO. And on motion of Lastrilla, the court
on August 14, 1951, modified its order of
 22

E. RELATIONS AND DEALINGS WITH THIRD credit of P20,000 from PNB in 1921 and
PERSONS executed a chattel mortgage on certain
personal property belonging to the
E.1 partnership.

G.R. No. L-26937 October 5, 1927  Defendants had been using this commercial
credit in a current account with the plaintiff
PHILIPPINE NATIONAL BANK, plaintiff-appellee, bank from 1918 – 1922 and as of December
vs.
31, 1924 the debit balance of this account P
SEVERO EUGENIO LO, ET AL., defendants.
SEVERIO EUGENIO LO, NG KHEY LING and YEP 20, 239.
SENG, appellants.
 PNB claims in the complaint this amount and
FACTS: an interest of P16, 518.74.

On September 2,1916 – Severo Eugenio Lo and Ng Defendant Eugenio LO’s defense:

Khey Ling together with J.A. Say Lian Ping, Ko Tiao
Hun, On Yem Ke Lam and Co Sieng Peng formed a Defendant Eugenio Lo sets up, as a general
commercial partnership under the name of ―Tai Sing defense, that "Tai Sing & Co. was not a general
Co.,‖ with a capital of P40,000 contributed by said partnership, and that the commercial credit in current
partners. account which "Tai Sing & Co. obtained from the
plaintiff bank had not been authorized by the board of
Articles of Copartnership states that: directors of the company, nor was the person who
subscribed said contract authorized to make the
o Partnership was to last for 5 years same, under the article of copartnership. The other
from after the date of its organization defendants, Yap Sing and Ng Khey Ling, answered
the complaint denying each and every one of the
o Purpose: to do business in the City of allegations contained therein.
Iloilo or in any other part of the
After the hearing, the trial court rendered
Philippines the partners might desire;
its decision against the defendants.The latter
purchase and sale of merchandise, appealed.
goods, and native, as well as Chinese
and Japanese products Appellants allege that such of their property as is not
included in the partnership assets cannot-be seized
o J.A. Say Lian Ping was appointed for the payment of the debts contracted by the
general manager partnership until after the partnership property has
been exhausted. They also allege that trial court erred
 A. Say Lian Ping executed a power of attorney in finding that the death of J. A. Say Lian Ping cannot
in favor of A. Y. Kelam, authorizing him to act extinguish the defendants' obligation to the plaintiff
in his stead as manager and administrator of bank, because the last debt incurred by the
―Tai Sing & Co.‖ and to obtain a loan of commercial partnership "Tai Sing & Co., was that
evidence by Exhibit F, signed by Sy Tit as attorney-in-
P8,000 in current account from PNB.
fact of the members of "Tai Sing & Co.,
 Kelam mortgaged certain personal property of
ISSUE:
the partnership.

 The credit was renewed several times and Whether or not ―Tai Sing & Co.‖ is a general
partnership in that the appellants can be held liable to
Kelam, as attorney-in-fact of ―Tai Sing & Co., pay PNB.
executed a chattel mortgage in favor of PNB
as security as security for a loan P20,000. RULING:

 This mortgage was again renewed and Kelam Yes. “Tai Sing & Co.” is a general partnership.
as attorney-in-fact of ―Tai Sing & Co.‖
executed another chattel mortgage for the  Appellants admit and it appears from the
said sum of P20,000. articles of copartnership that ―Tai Sing & Co.‖
is a general partnership and it was registered
 1920 – Yap Seng, Severo Lo, Kelam and Ng
in the mercantile register of Iloilo.
Khey Ling, the latter represented by M.
Pineda Tayenko, executed a power of  The fact that the partners opt to use ―Tai Sing
attorney in favor of Sy Tit. & Co.‖ as the firm name does not affect the
liability of the general partners to third parties
 By virtue of the power of attorney, Sy Tit
under Article127 of the Code of Commerce.
representing ―Tai Sing & Co.‖ obtained a
Jurisprudence states that:
 23

o The object of article 126 of the Code E.3 (Pangit kaayo pagkasulat ni nga case yawa)
of Commerce in requiring a general G.R. No. L-3704 December 12, 1907
partnership to transact business under LA COMPAÑIA MARITIMA, plaintiff-appellant,
the name of all its members, of several vs.
of them, or of one only, is to protect FRANCISCO MUÑOZ, ET AL., defendants-
the public from imposition and fraud appellees.
o It is for the protection of the creditors
rather than of the partners themselves. The plaintiff brought this action in the Court of First
o The law must be unlawful and Instance of Manila against the partnership of Franciso
unenforceable only as between the Muñoz & Sons, and against Francisco Muñoz de
partners and at the instance of the Bustillo, Emilio Muñoz de Bustillo, and Rafael Naval to
violating party, but not in the sense of recover the sum of P26,828.30, with interest and
depriving innocent parties of their costs. Judgment was rendered in the court below
rights who may have dealt with the acquitting Emilio Muñoz de Bustillo and Rafael Naval
offenders in ignorance of the latter of the complaint, and in favor of the plaintiff and
having violated the law. against the defendant partnership, Francisco Muñoz &
o Contracts entered into by commercial Sons, and Francisco Muñoz de Bustillo form the sum
associations defectively organized are of P26,828.30 with interest at the rate of 8 per cent
valid when voluntarily executed by the per annum from the 31st day of March, 1905, and
parties, and the only question is costs. From this judgment the plaintiff appealed.
whether or not they complied with the
agreement. Therefore, the defendants Facts:
cannot invoke in their defense the
anomaly in the firm name which they  Appellees formed on ordinary general
themselves adopted. mercantile partnership under the name of
 As to the alleged death of the manager, Francisco Muñoz & Sons for the purpose of
Say Lian Ping before Kelam executed the carrying on the mercantile business in the
contracts of mortgage with PNB, this would Province of Albay which had formerly been
carried on by Francisco Muñoz. Francisco
not affect the liability of the partnership.
Muñoz was a capitalist partner and Emilio
o Kelam was a partner who contracted Muñoz and Rafael Naval were industrial
partners.
in the name of the partnership and the
 Paragraph 12 of the articles of partnership is
other partners did not object as follows:
o Lo, Khey Ling, and Yap Seng Twelfth. All profits arising from mercantile transactions
appointed Sy Tit as manager, and he carried on, as well as such as may be obtained from
obtained from PNB the credit in the sale of property and other assets which constitute
current account the corporate capital, shall be distributed, on
completion of the term of five years agreed to for the
 Trial Court correctly held defendants to be continuation of the partnership, in the following
jointly and severally liable to PNB. manner: Three-fourths thereof for the capitalist
partner Francisco Muñoz de Bustillo and one-eighth
 This is in accordance with Article 127 of the thereof for the industrial partner Emilio Muñoz de
Code of Commerce “all the members of a Bustillo y Carpiso, and the remaining one-eighth
general partnership, be they managing thereof for the partner Rafael Naval y Garcia. If, in lieu
partners thereof or not, shall be personally of profits, losses should result in the winding up of the
and solidarily liable with all their property, partnership, the same shall be for the sole and
for the results of the transactions made in exclusive account of the capitalist partner Francisco
the name and for the account of the Muñoz de Bustillo, without either of the two industrial
partnership, under the signature of the partners participating in such losses.
latter, and by a person authorized to use
it.” Appellees:

 the articles of partnership it was NOT

called an ordinary, general mercantile
FALLO: partnership;
 Emilio Muñoz contributed nothing to the
The judgment appealed from is in accordance partnership, either in property, money, or
with the law, and must therefore be, as it is industry
hereby, affirmed with costs against the appellants.  Emilio Muñoz was entirely excluded from
So ordered. the management of the business. It rather
should be said that he excluded himself
from such management, for he signed the
articles of partnership by the terms of
which the management was expressly
 24

conferred by him and the others upon the from liability as a partner. The argument of the
persons therein named. appellees seems to be that, because no
 article 141 fixes the liability of the yearly or monthly salary was assigned to
industrial partners to third persons for the Emilio Muñoz, he contributed nothing to the
obligations of the company. If it does, then partnership and received nothing from it. By
it also fixes the liability of the capitalist the articles themselves he was to receive at
partners to the same persons for the same the end of five years one-eighth of the profits.
obligations. If this article says that It can not be said, therefore, that he received
industrial partners are not liable for the nothing from the partnership. The fact that the
debts of the concern, it also says that the receipt of this money was postponed for five
capitalist partners shall be only liable for years is not important. If the contention of the
such debts in proportion to the amount of appellees were sound, it would result that,
the money which they have contributed to where the articles of partnership provided for
the partnership; that is to say, that if there a distribution of profits at the end of each year,
are only two capitalist partners, one of but did not assign any specific salary to an
whom has contributed two-thirds of the industrial partner during that time, he would
capital and the other one-third, the latter is not be a member of the partnership.
liable to a creditor of the company for only Industrial partners, by signing the articles,
one-third of the debt and the former for agree to contribute their work to the
only two-thirds. partnership and article 138 of the Code of
Commerce prohibits them from engaging
Issues: in other work except by the express
consent of the partnership. With reference
1. Whether or not the partnership is a to civil partnerships, section 1683 of the
general mercantile partnership? Civil Code relates to the same manner.
2. Whether or not Emilio Muñoz contributed
to the partnership? 3. AND 4.
3. Whether or not Emilio Muñoz as a general In limited partnership the Code of Commerce
partner, is liable to third persons for recognizes a difference between general and special
obligations contracted by the partnership? partners, but in a general partnership there is no such
4. or whether he relieved from such liability, distinction-- all the members are general partners.
either because he is an industrial partner The fact that some may be industrial and some
or because he was so relieved by the capitalist partners does not make the members of
express terms of the articles of either of these classes alone such general partners.
partnership. There is nothing in the code which says that the
industrial partners shall be the only general partners,
Ruling: nor is there anything which says that the capitalist
1. YES. In the articles of partnership signed by partners shall be the only general partners.
the partners it is expressly stated that they
have agreed to form, and do form, an ordinary, Article 127 of the Code of Commerce is as follows:
general mercantile partnership. The object of
the partnership, as stated in the fourth All the members of the general copartnership, be they
paragraph of the articles, is a purely or be they not managing partners of the same, are
mercantile one and all the requirements of the liable personally and in solidum with all their property
Code of Commerce in reference to such for the results of the transactions made in the name
partnership were complied with. The articles and for the account of the partnership, under the
of partnership were recorded in the mercantile signature of the latter, and by a person authorized to
registry in the Province of Albay. If it should be make use thereof.
held that the contract made in this case did
not create an ordinary, general mercantile (THE COURT CITED DIFF ARTICLES OF THE
partnership we do not see how one could be CODE OF COMMERCE RE. MANAGEMENT, USE
created. OF FIRM NAME, EXAMINATION OF BOOKS OF ALL
PARTNERS. It ruled that industrial partners also have
2. YES. . He contributed as much as did the all thes rights)
other industrial partner, Rafael Naval, the
difference between the two being that Rafael While this is a commercial partnership and must be
Naval was entitled by the articles of governed therefore by the rules of the Code of
agreement to a fixed salary of P2,500 as long Commerce, yet an examination of the provisions of
as he was in charge of the branch office the Civil Code in reference to partnerships may throw
established at Ligao. If he had left that branch some light upon the question here to be resolved.
office soon after the partnership was Articles 1689 and 1691 contain, in substance, the
organized, he would have been in the same provisions of articles 140 and 141 of the Code of
condition then that Emilio Muñoz was from the Commerce. It is to be noticed that these articles are
beginning. Such a change would have found in section 1 of Chapter II [Title VIII] of Book IV.
deprived him of the salary P2,500, but would That section treats of the obligations of the partners
not have affected in any way the partnership between themselves. The liability of the partners as to
nor have produced the effect of relieving him third persons is treated in a distinct section, namely,
section 2, comprising articles from 1697 to 1699.
 25

each one of the industrial partners is liable to third

If industrial partners in commercial partnerships are persons for the debts of the firm; that if he has paid
not responsible to third persons for the debts of the such debts out of his private property during the life of
firm, then industrial partners in civil partnerships are the partnership, when its affairs are settled he is
not. Waiving the question as to whether there can be entitled to credit for the amount so paid, and if it
a commercial partnership composed entirely of results that there is not enough property in the
industrial partners, it seems clear that there can be partnership to pay him, then the capitalist partners
such civil partnership, for article 1678 of the Civil must pay him. In this particular case that view is
Code provides as follows: strengthened by the provisions of article 12, above
quoted.
A particular partnership has for its object specified
things only, their use of profits, or a specified FALLO
undertaking, or the exercise of a profession or art.
The judgment of the court below is reversed and
It might very easily happen, therefor, that a civil judgment is ordered against all of the defendants for
partnership could be composed entirely of industrial
the sum of P26,828.30, with interest thereon at the
partners. If it were, according to the claim of the
rate of 8 per cent per annum since the 31st day of
appellees, there would be no personal responsibility
whatever for the debts of the partnership. Creditors March, 1905, and for the cost of this action. Execution
could rely only upon the property which the of such judgment shall not issue against the private
partnership had, which in the case of a partnership property of the defendants Francisco Muñoz, Emilio
organized for the practice of any art or profession Muñoz, or Rafael Naval until the property of the
would be practically nothing. In the case of Agustin vs. defendant Francisco Muñoz & Sons is exhausted. No
Inocencio, 1 just decided by this court, it was alleged costs will be allowed to their party in this court. So
in the complaint, and admitted by the answer — ordered.

That is partnership has been formed without articles

of association or capital other than the personal work
of each one of the partners, whose profits are to be
E. 4. GEORGE O. DIETRICH, Plaintiff-Appellee,
equally divided among themselves.
vs. O.K. FREEMAN, JAMES L. PIERCE, and
BURTON WHITCOMB, defendants.
Article 1675 of the Civil Code is as follows:
G.R. No. L-6252 January 28, 1911. TRENT, J.
General partnership of profits include all that the
partners may acquire by their by their industry or work Facts:
during the continuation of the partnership.
 Plaintiff was employed by defendants Freeman
Personal or real property which each of the partners and Whitcomb as owners and operators of the
may possess at the time of the celebration of the Manila Steam Laundry. He filed the actionto
agreement shall continue to be their private property, recover the sum of P952 alleged to be the balance
the usufruct only passing to the partnership. due the plaintiff for services performed during the
period from January 9, 1907, to December 31,
It might very well happen in partnership of this kind 1908.
that no one of the partners would have any private  Judgment was rendered in favor of the plaintiff and
property and that if they did the usufruct thereof would against Freeman and Whitcomb, jointly and
be inconsiderable. severally, for the sum of P752, with interest at the
rate of 6 per cent per annum.
Having in mind these different cases which may arise  Whitcomb appealed the decision insisting that he
in the practice, that construction of the law should should not be held jointly and severally liable with
be avoided which would enable two persons, each Freeman.
with a large amount of private property, to form
and carry on a partnership and, upon the Issue:
bankruptcy of the latter, to say to its creditors that
they contributed no capital to the company but WON the defendants are jointly and severally liable.
only their services, and that their private property
is not, therefore, liable for its debts. Held:
Our conclusion is upon this branch of the case
NO, the liability of the partners is pro-rata based on
that neither on principle nor on authority can the
the interest in the business.
industrial partner be relieved from liability to third
persons for the debts of the partnership.
The plaintiff was employed by and performed services
5. Re. the claim in Art 141 of Code of for the Manila Steam Laundry and was not employed
Commerce. by nor did he perform services for Freeman alone.
Our construction of the article is that it relates
exclusively to the settlement of the partnership affairs The public did not deal with Freeman and Whitcomb
among the partners themselves and has nothing to do personally, but with the Manila Steam Laundry. These
with the liability of the partners to third persons; that two partners were doing business under this name
 26

and, as we have said, it was not a commercial earlier deeded over by them to the
partnership. partnership, "Heirs of Hugo Lim," more
precisely, on March 30, 1959, hence, said
Therefore, by the express provisions of articles 1698 mortgage was void because executed by
and 1137 of the Civil Code the partners are not liable them without authority from the partnership.
individually for the entire amount due the plaintiff. The
liability is pro rata and in this case the appellant is
responsible to the plaintiff for only one-half of the ISSUE:
debt.

E-5 Whether the mortgage executed by the Lims

be attributable to their partnership
SANTIAGO SYJUCO, INC v. CASTRO
G.R. No. 70403; July 7, 1989
HELD:

Yes, the mortgage executed by the Lims is

FACTS: attributable to their partnership.

The Supreme Court held that the legal fiction of a

 Back in November 1964, the Lims, borrowed separate juridical personality and existence will not
from petitioner Santiago Syjuco, Inc., the sum shield it from the conclusion of having such
of P800,000.00. The loan was given on the knowledge which naturally and irresistibly flows from
security of a first mortgage on property the undenied facts. It would violate all precepts of
registered in the names of said borrowers as reason, ordinary experience and common sense to
owners in common under Transfer Certificates propose that a partnership, as such, cannot be held
of Title Numbered 75413 and 75415 of the
accountable with knowledge of matters commonly
Registry of Deeds of Manila. Thereafter
additional loans on the same security were known to all the partners or of acts in which all of the
obtained by the Lims from Syjuco, so that as latter, without exception, have taken part, where such
of May 8, 1967, the aggregate of the loans matters or acts affect property claimed as its own by
stood at P2,460,000.00, exclusive of interest, said partnership.
and the security had been augmented by
bringing into the mortgage other property, also
registered as owned pro indiviso by the Lims The silence and failure of the partnership to impugn
under two titles: TCT Nos. 75416 and 75418 said mortgage within a reasonable time, let alone a
of the Manila Registry.
space of more than seventeen years, brought into
play the doctrine of estoppel to preclude any attempt
 On November 8, 1967, the Lims failed to pay
to avoid the mortgage as allegedly unauthorized.
it despite demands therefore; that Syjuco
consequently caused extra-judicial
proceedings for the foreclosure of the
mortgage to be commenced by the Sheriff of The principles of equitable estoppel, sometimes called
Manila; and that the latter scheduled the estoppel in pais, are made part of our law by Art. 1432
auction sale of the mortgaged property on of the Civil Code. Coming under this class is estoppel
December 27, 1968. by silence, which obtains here and as to which it has
been held that:
 The attempt to foreclose triggered off a legal ... an estoppel may arise from silence as well as from
battle that has dragged on for more than words. 'Estoppel by silence' arises where a person,
twenty years now, fought through five (5) who by force of circumstances is under a duty to
cases in the trial courts, two (2) in the Court
another to speak, refrains from doing so and thereby
of Appeals, and three (3) more in the
leads the other to believe in the existence of a state of
Supreme Court.
facts in reliance on which he acts to his prejudice.
Silence may support an estoppel whether the failure
 One of the complaints filed by the Lims was
filed not in their individual names, but in the to speak is intentional or negligent.
name of a partnership of which they Inaction or silence may under some circumstances
themselves were the only partners: "Heirs of
amount to a misrepresentation and concealment of
Hugo Lim." The complaint advocated the
the facts, so as to raise an equitable estoppel. When
theory that the mortgage which they, together
with their mother, had individually constituted the silence is of such a character and under such
(and thereafter amended during the period circumstances that it would become a fraud on the
from 1964 to 1967) over lands standing in other party to permit the party who has kept silent to
their names in the Property Registry as deny what his silence has induced the other to believe
owners pro indiviso, in fact no longer and act on, it will operate as an estoppel. This
belonged to them at that time, having been doctrine rests on the principle that if one maintains
 27

silence, when in conscience he ought to speak, equity and consequently, those members' acts, declarations
will debar him from speaking when in conscience he and omissions cannot be deemed to be simply the
ought to remain silent. He who remains silent when he individual acts of said members, but in fact and in law,
ought to speak cannot be heard to speak when he those of the partnership.
should be silent.
E-6
And more to the point:
G.R. No. L-12164 May 22, 1959
A property owner who knowingly permits another to
sell or encumber the property, without disclosing his
BENITO LIWANAG and MARIA LIWANAG
title or objecting to the transaction, is estopped to set REYES, petitioners-appellants,
up his title or interest as against a person who has vs.
been thereby misled to his injury. WORKMEN'S COMPENSATION COMMISSION, ET
AL., respondents-appellees.
An owner of real property who stands by and sees a
third person selling or mortgaging it under claim of title
without asserting his own title or giving the purchaser
or mortgagee any notice thereof is estopped, as Facts:
against such purchaser or mortgagee, afterward to
assert his title; and, although title does not pass under Appellants Benito Liwanag and Maria Liwanag Reyes
these circumstances, a conveyance will be decreed are co-owners of Liwanag Auto Supply, a commercial
by a court of equity. Especially is the rule applicable guard who while in line of duty, was killed. His widow
where the party against whom the estoppel is Ciriaca Vda. de Balderama and minor children
claimed, in addition to standing by, takes part in Genara, Carlos and Leogardo, all surnamed
malting the sale or mortgage. Balderama, in due time filed a claim for compensation
with the Workmen's Compensation Commission,
More specifically, the concept to which that species of which was granted in an award.
estoppel which results from the non-disclosure of an
estate or interest in real property has ordinarily been Contention of the appellant
referred is fraud, actual or constructive. ... Although Appellants do not question the right of appellees to
fraud is not an essential element of the original compensation nor the amount awarded. They only
conduct working the estoppel, it may with perfect claim that, under the Workmen's Compensation Act,
property be said that it would be fraudulent for the
the compensation is divisible, hence the commission
party to repudiate his conduct, and to assert a right or erred in ordering appellants to pay jointly and
claim in contravention thereof. severally the amount awarded. They argue that there
Equally or even more preclusive of the respondent is nothing in the compensation Act which provides
partnership's claim to the mortgaged property is the that the obligation of an employer arising from
last paragraph of Article 1819 of the Civil Code, which compensable injury or death of an employee should
contemplates a situation duplicating the be solidary obligation, the same should have been
circumstances that attended the execution of the specifically provided, and that, in absence of such
mortgage in favor of Syjuco and therefore applies clear provision, the responsibility of appellants should
foursquare thereto: not be solidary but merely joint.

Where the title to real property is in the names of all Issue: Are the co-partners liable solidarily or jointly?
the partners a conveyance executed by all the Ruling:
partners passes all their rights in such property. The
term "conveyance" used in said provision, which is Wherefore, finding no error in the award appealed
taken from Section 10 of the American Uniform from, the same is hereby affirmed, THERE IS
Partnership Act, includes a mortgage. SOLIDARY LIABILITY. Although the Workmen's
Compensation Act does not contain any provision
Interpreting Sec. 10 of the Uniform Partnership Act, it expressly declaring solidary obligation of business
has been held that the right to mortgage is included in partners like the herein appellants, there are other
the right to convey. This is different from the rule in provisions of law from which it could be gathered that
agency that a special power to sell excludes the their liability must be solidary. Arts. 1711 and 1712 of
power to mortgage (Art. 1879). the new Civil Code provide: ART. 1711. Owners of
There is no reason to distinguish between the Lims, enterprises and other employers are obliged to pay
as individuals, and the partnership itself, since the compensation for the death of or injuries to their
former constituted the entire membership of the latter. laborers, workmen, mechanics or other employees,
In other words, despite the concealment of the even though the event may have been purely
existence of the partnership, for all intents and accidental or entirely due to a fortuitous cause, if the
purposes and consistently with the Lims' own theory, death or personal injury arose out of and in the course
it was that partnership which was the real party in of the employment.
interest in all the actions; it was actually represented
in said actions by all the individual members thereof,
 28

ART. 1712. If the death or injury is due to the necessary spare parts for the total agreed price of US
negligence of a fellow-worker, the latter and the $109,000.00 to be paid in installments.
employer shall be solidarily liable for compensation. . .
. .And section 2 of the Workmen's Compensation Act, On May 22, 1965, Pioneer Insurance and Surety
as amended reads in part as follows: executed and issued its Surety Bond in favor of JDA, in
. . . The right to compensation as provided in this Act behalf of its principal, Lim, for the balance price of the
shall not be defeated or impaired on the ground that aircrafts and spare parts. It appears that Border
the death, injury or disease was due to the negligence Machinery and Heavy Equipment Company, Inc.
of a fellow servant or employee, without prejudice to (Bormaheco), Francisco and Modesto Cervantes
the right of the employer to proceed against the (Cervanteses) and Constancio Maglana (respondents in
negligence party. both petitions) contributed some funds used in the
purchase of the above aircrafts and spare parts. The
The provisions of the new Civil Code above quoted funds were supposed to be their contributions to a new
taken together with those of Section 2 of the corporation proposed by Lim to expand his airline
Workmen's Compensation Act, reasonably indicate business.
that in compensation cases, the liability of business
partners, like appellants, should be solidary; They executed two (2) separate indemnity
otherwise, the right of the employee may be defeated,
agreements in favor of Pioneer, one signed by Maglana
or at least crippled. If the responsibility of appellants
and the other jointly signed by Lim for SAL, Bormaheco
were to be merely joint and solidary, and one of them
happens to be insolvent, the amount awarded to the and the Cervanteses. The indemnity agreements
appellees would only be partially satisfied, which is stipulated that the indemnitors principally agree and
evidently contrary to the intent and purposes of the bind themselves jointly and severally to indemnify and
Act. hold and save harmless Pioneer from and against
any/all damages, losses, costs, damages, taxes,
Moreover, Art. 1207 of the new Civil Code provides: . .
. . There is solidary liability only when the obligation penalties, charges and expenses of whatever kind and
expressly so states, or when the law or the nature of nature which Pioneer may incur in consequence of
the obligation requires solidarity. having become surety upon the bond/note and to pay,
reimburse and make good to Pioneer, its successors and
Since the Workmen's Compensation Act was enacted
assigns, all sums and amounts of money which it or its
to give full protection to the employee, reason
representatives should or may pay or cause to be paid
demands that the nature of the obligation of the
employers to pay compensation to the heirs of their or become liable to pay on them of whatever kind and
employee who died in line of duty, should be solidary; nature.
otherwise, the purpose of the law could not be
On June 10, 1965, Lim doing business under the
attained.
name and style of SAL executed in favor of Pioneer as
deed of chattel mortgage as security for the latter's
suretyship in favor of the former. It was stipulated
E-7
therein that Lim transfer and convey to the surety the
PIONEER INSURANCE & SURETY CORPORATION, two aircrafts.
petitioner, vs. THE HON. COURT OF APPEALS, BORDER
Lim defaulted on his subsequent installment
MACHINERY & HEAVY EQUIPMENT, INC.,
payments prompting JDA to request payments from the
(BORMAHECO), CONSTANCIO M. MAGLANA and
surety. Pioneer paid a total sum of P298,626.12.
JACOB S. LIM, respondents. and
PETITIONER(PIONEER) ALLEGATIONS/ACTIONS
JACOB S. LIM, petitioner, vs. COURT OF APPEALS,
PIONEER INSURANCE AND SURETY CORPORATION, Pioneer then filed a petition for the extrajudicial
BORDER MACHINERY and HEAVY EQUIPMENT CO., foreclosure of the said chattel mortgage before the
INC,, FRANCISCO and MODESTO CERVANTES and Sheriff of Davao City and subsequently filed an action
CONSTANCIO MAGLANA, respondents. for judicial foreclosure with an application for a writ of
preliminary attachment against Lim and respondents,
FACTS
the Cervanteses, Bormaheco and Maglana.
Jacob S. Lim was engaged in the airline business
as owner-operator of Southern Air Lines (SAL) a single Petitioner also alleged that as a result of the
proprietorship. failure of respondents Bormaheco, Spouses Cervantes,
Constancio Maglana and petitioner Lim to incorporate,
On May 17, 1965, at Tokyo, Japan, Japan a de facto partnership among them was created, and
Domestic Airlines (JDA) and Lim entered into and that as a consequence of such relationship all must
executed a sales contract for the sale and purchase of share in the losses and/or gains of the venture in
two (2) DC-3A Type aircrafts and one (1) set of proportion to their contribution.
 29

RESPONDENTS ANSWER partnership was created among the parties which would
entitle the petitioner to a reimbursement of the
In their Answers, Maglana, Bormaheco and the
supposed losses of the proposed corporation. The
Cervanteses filed cross-claims against Lim alleging that
record shows that the petitioner was acting on his own
they were not privies to the contracts signed by Lim
and not in behalf of his other would-be incorporators in
and, by way of counterclaim, sought for damages for
transacting the sale of the airplanes and spare parts.
being exposed to litigation and for recovery of the sums
of money they advanced to Lim for the purchase of the FALLO
aircrafts in question.
WHEREFORE, the instant petitions are
RTC RULINGS DISMISSED. The questioned decision of the Court of
Appeals is AFFIRMED.
RTC rendered a decision holding Lim liable to
pay Pioneer but dismissed Pioneer's complaint against
all other defendants.
E8 - EN BANC
CA RULINGS
G.R. No. L-29182 October 24, 1928
CA modified the trial court's decision in that the
plaintiffs(PIONEER) complaint against all the defendants LEONCIA VIUDA DE CHAN DIACO (alias LAO
was dismissed. In all other respects the trial court's LIONG NAW) appellee,
decision was affirmed. vs.
JOSE S. Y. PENG, assignee, appellant.
ISSUE
OSTRAND, J.:
Whether or not formed a de facto partnership

RULINGS
FACTS:
NO. While it has been held that as between
themselves the rights of the stockholders in a San Miguel Brewery, Porta Pueco & Co., and Ruiz &
defectively incorporated association should be Rementaria S. en C. alleged, among other things, that
governed by the supposed charter and the laws of the Leoncia, owner of a grocery store on Calle Nueva,
Binondo, known as the store of "La Viuda de G. G.
state relating thereto and not by the rules governing
Chan Diaco,‖ was indebted to them in the sum of
partners, it is ordinarily held that persons who attempt,
P26,234.47. It further appears that other creditors
but fail, to form a corporation and who carry on have filed claims against the estate to the amount of
business under the corporate name occupy the position P50,000.
of partners inter se. Thus, where persons associate
themselves together under articles to purchase After hearing, the insolvent Leoncia was ordered to
property to carry on a business, and their organization is deliver to the assignee (Jose Peng) the following:
so defective as to come short of creating a corporation
within the statute, they become in legal effect partners (a) The sum of P56,000 more or less that the
"encargado" (in charge) of the insolvent's
inter se, and their rights as members of the company to
business, Chan Chiao Wa, had delivered to
the property acquired by the company will be her on the 18th of April, 1925, which amount
recognized. was in fact, on the 19th day of April, 1925,
about P56,102.65.
However, such a relation does not necessarily
exist, for ordinarily persons cannot be made to assume (b) The accounts receivable as of June 19,
the relation of partners, as between themselves, when 1925, or that is to say, two months after the
their purpose is that no partnership shall exist and it insolvent took charge of her store, amounting
should be implied only when necessary to do justice to P40,000.
between the parties; thus, one who takes no part except
(c) The amount taken for her own use and out
to subscribe for stock in a proposed corporation which is of the business on June 8, 1925, to wit,
never legally formed does not become a partner with P2,000.
other subscribers who engage in business under the
name of the pretended corporation, so as to be liable as (d) Another P2,000 that on June 5, 1925, and
such in an action for settlement of the alleged being already insolvent, the widow of Chan
Diaco had taken from the China Banking
partnership and contribution.
corporation for her personal use.
Applying therefore the principles of law cited to
the facts of the case, necessarily, no de facto (e) Certain books of account.
 30

F4. ABONG VS CA
FIRST DIVISION
G.R. No. L-32347-53. December 26, 1973.
Appellee’s Allegation: AGUSTIN ABONG, Petitioner, v. THE WORKMEN’S
COMPENSATION COMMISSION, NELLY BALLARES,
Leoncia alleged that the proceedings should have ANACORITA DAHIL-DAHIL, MANUEL LAHAO-LAHAO,
been brought against the partnership "Lao Liong Naw CONCHITA MONTEROYO, SHIRLEY LOZADA and
& Co.," of which she was only a member. The alleged ROSARIO ALOVA, Respondents.
partnership was evidenced by an agreement dated
July 22, 1922, and from which it appeared that on that FACTS
date Lao Liong Naw (Leoncia), Chan Chiaco Wa, Cua  Aladino Dionson, Filomeno Umbria, Noel Lahao-
Yuk, Chan Bun Suy, Cahn Bun Le, and Juan lahao, Juanito Monteroyo and Wilfredo
Maquitan Chan had formed a partnership with a Monteroyo and Demetrio Escoreal, all
capital of P21,000, of which only P4,000 was deceased, were members of a fishing outfit, the
contributed by Leoncia. IWAG or more popularly called the "ALEX",
owned by the petitioner herein, Dr. Agustino R.
Abong.
Referee’s Findings:
 May 15, 1966, this fishing outfit set out to sea
somewhere the coast of Northern Negros.
He found as facts that the alleged partnership
 While they were, thus, fishing, typhoon "IRMA"
between the insolvent and some of her relatives and
passed along their way, scattering the boats and
employees was only a fictitious organization created
blowing them far out into the open sea. The
for the purpose of deceiving the Bureau of Customs
tragedy netted eight (8) dead while some sixty
and enable some of the aforesaid relatives, who were
(60) men survived the disaster.
mere coolies, to come to the Philippines under the
 As a consequence of the incident seven (7)
status of merchants. He, therefore, recommended that
notices and claims for death compensation
the motion of the insolvent to dismiss the proceedings were filed with the Bacolod Sub-Regional Office
against her be denied. (or Regional Office No. VII) of the Department
of Labor by herein private respondents on June
ISSUE: Whether or not the creditors can collect 1, 1966.
individually from the partners the amount of debt of
 A copy of the notices and claims were sent to
the insolvent partnership
petitioner Dr. Agustino R. Abong but the
envelopes containing said notices and claims
HELD:
were returned unclaimed, although petitioner
was personally notified thrice.
YES. All the partners of the general co-partnership,
whether they or not a managing partner of the same,  Counsel for private respondents on July 6, 1966,
are personally and severally liable with all their and July 14, 1966, respectively, filed an ex-parte
properties as a result of the transactions made in the motion with the Bacolod Sub-Regional Office of
name and for the account of the partnership, under the Workmen’s Compensation Commission to
the signature of the latter, and by the person declare petitioner in default, which motion was
authorized to make use thereof. granted.

It is further to be noted that both the partnership and ACTING REFEREE, BERTITO D. DADIVAS' DECISION
the separate partners thereof may be joined in the "In the light of the testimonies of herein claimants and
same action, though the private property of the latter their principal witness, Filomeno Pason, who is a
cannot be taken in payment of the partnership debts survivor of that unfortunate tragedy and who personally
until the common property of the concern is witnessed the deaths of all eight (8) deceased workers
exhausted (Comapnia Maritima vs. Munoz, 9 Phil., of respondent, there is no doubt at all that their deaths
326) and, under this rule, it seems clear that the
arose out of and in the course of their employment as
alleged partnership here in question may, if
necessary, be included in the case by amendments to ‘washing’ or helpers and light tenders of respondent Dr.
the insolvency petition. Agustino R. Abong. Under Sections 2 and 8 of the
Workmen’s Compensation Act, as amended, the deaths
FALLO: of above deceased persons are, therefore,
compensable.
The decision appealed from is hereby reversed, the
reports and recommendations of the referee are "Section 4-A of the Workmen’s Compensation Act
approved, the order for the dismissal of the case is set provides for payment of an additional compensation
aside, and the decision of Judge Simplicio Del equal to fifty percentum of the compensation to be
Rosario dated July 23, 1926, will remain in full force awarded, in case of failure of the employer to comply
and effect. No costs will be allowed. So ordered. with any order, rule or regulation of the Workmen’s
 31

Compensation Act in the event of the death of the

employee or employees concerned. ACTION BY PETITIONER
Appeal by certiorari from the decision of the
"Wherefore, under the law, the claimants are entitled Workmen’s compensation Commission, awarding
to compensation and respondent is hereby ordered” compensation to the private respondents.

 September 14, 1966 petitioner filed a (1) PIVOTAL ISSUE

motion to set aside the order declaring him in Who is the statutory employer of the decedents and
default and a (2) separate motion to set aside who should be liable for their death compensation?
the Decision of the Acting Referee, to which
seasonable oppositions were interposed by OTHER ISSUES
private respondents on September 26, 1966. 1. Commission erred in holding that there was Existence
 October 25, 1966 Acting Referee Bertito D. of Ee-Er Rel.
Dadivas issued an Order denying both motions 2. Commission erred in not declaring itself without
of petitioner. jurisdiction over claims of death benefits
 November 4, 1966, a motion for 3. Commission erred in finding that death of the
reconsideration was then filed by petitioner deceased crew member is compensable under the
raising, inter alia, the fundamental question of Workmen's Compensation Act, as amended.
jurisdiction and denial of due process.
 An opposition thereto was interposed by CONTENTION OF PETITIONER
private respondents on November 10, 1966 As regards the first three interrelated assigned errors,
 March 23, 1970, Associate (Medical) there is a faint attempt by petitioner Agustino R. Abong
Commissioner Herminia Castelo-Sotto, M.D., of to evade liability by advancing the theory that he had
the Workmen’s Compensation Commission absolutely no voice or intervention in the choice, hiring,
rendered a decision affirming the earlier dismissing, control, supervision and compensation of
decision of the referee. the fishermen-crew members, and that these matters,
 April 17, 1970 petitioner sought the review of which are the essence of employer-employee
the decision of Associate (Medical) relationship, are the sole responsibility of the team-
Commission Castelo-Sotto by the respondent leader, Simplicio Panganiban, and the team-members or
Workmen’s Compensation Commission sitting crew pursuant to their Agreement.
en banc, but the latter however affirmed the
decision with the modification that the 50% COURT
additional compensation earlier imposed as The contention of petitioner is devoid of merit. In this
penalty was eliminated, in its resolution of July class of proceedings, only questions of law should be
7, 1970. raised, the findings of facts made by the Commission
 Dissatisfied with the verdict, petitioner came to being conclusive and binding upon this Court. In the
this Court for reversal of the adverse decision case at bar, however, this Court finds the findings of
against him. fact made by Associate (Medical) Commissioner
Herminia Castelo-Sotto M.D., and concurred in by the
COMMISSION’S RULING Commission en banc to be fully supported by the
After a careful review of the evidence and the records, evidence on record which clearly points out that
We are inclined to agree with the proposition, advanced petitioner Agustino R. Abong is the statutory employer
by the claimant’s counsel that there existed an of the decedents.
employer-employee relationship between the
respondent and the decedents. Not only that the said "The proposition, on the other hand, of the
deceased workers worked for and in the interest of the respondent’s counsel, that Dr. Abong was not the
business of the herein Respondent. But that they were employer of the decedents, simply because of an
subject to the control, supervision, and dismissal of the alleged partnership agreement, executed on March 23,
respondent, thru its agent, Simplicio Panganiban, the 1962, between the respondent, Dr. Agustino R. Abong,
alleged ‘partner’ of herein Respondent. And while these as ‘Financier’ and Simplicio Panganiban, as his
workers were paid in kind, or by ‘pakiao basis’ still that ‘Teamleader’, is intended certainly as a very clever
fact did not alter the character of their relationship with device designed primarily to exempt the employer
the respondent as employees of the latter. The from answering any liability under the provisions of
intervention of Simplicio Panganiban, in this case, is the Workmen’s Compensation Act, as amended.
merely that of an agent or intermediary between the
owner of the fishing boat and the members of its crew. Nowhere in that said agreement did the decedents or
In short, Panganiban is merely the person charged by their heirs in interests take any participation or
Dr. Abong to recruit the said fishermen to work for and manifested their conformity to the said covenant. Thus,
for the enforcement of the business venture of herein even if we consider this contract as valid and
Respondent. enforceable between them, it cannot bind the non-
signatories thereto, like the deceased fishermen.
 32

For here, the contract of partnership, if valid, only binds

the parties thereto, and the decedents in this case, as F. 7. COMMISSIONER OF INTERNAL
the records will show, were never a party signatory REVENUE, petitioner,
thereto. How then can we tie them to that partnership vs. WILLIAM J. SUTER and THE COURT OF TAX
APPEALS, respondents.
agreement when it only holds the two-party, Abong and
G.R. No. L-25532. February 28, 1969. REYES,
Panganiban, as the sole `partners’ in that agreement? J.B.L.

As pointed out by the Commission’s findings, the Facts:

fundamental bases showing that petitioner, Dr.
Agustino R. Abong, is the employer, are present,  A limited partnership, named "William J. Suter
namely, the selection and engagement of the employee; 'Morcoin' Co., Ltd.," was formed on 30 September
the payment of wages; the power of dismissal and the 1947 by herein respondent William J. Suter as the
employer’s power to control the employees’ conduct. general partner, and Julia Spirig and Gustav
13 These powers were lodged in petitioner Abong, thru Carlson, as the limited partners.
his agent, Simplicio Panganiban, whom he alleges to be  The firm engaged, among other activities, in the
importation, marketing, distribution and operation
his "partner."
of automatic phonographs, radios, television sets
and amusement machines, their parts and
RELATIONSHIP OF THE DECEDENTS AND ABONG accessories
Employer-employee  In 1948, general partner Suter and limited partner
Spirig got married and, thereafter, on 18 December
PETITIONER’S ARGUMENT/4th ISSUE 1948, limited partner Carlson sold his share in the
4. Petitioner also argues that he was denied his right to partnership to Suter and his wife.
be heard.
Issue:
COURT
The assigned error merits scant consideration. Proper Whether or not the partnership was dissolved after the
marriage of the partners, respondent William J. Suter
notices and claims for compensation together with a
and Julia Spirig.
formal letter to accomplish WCC Form No. 3 —
Employer’s Report of Accident or Sickness — were duly
Held:
served upon petitioner at his place of business in Sagay,
Negros Occidental. His failure to claim his mail and to The marriage of Suter and limited partner Spirig and
answer the claims or controvert the same, and to their acquisition of Carlson's interests in the
accomplish WCC Form No. 3, are fatal errors which partnership is not a ground for dissolution of the
cannot be repaired at this time. partnership, either in the Code of Commerce or in the
New Civil Code.
Clearly, there was no error in sending petitioner’s mails
to his place of business at Sagay, Negros Occidental. Since the type of partnership that they have is that of
a limited partnership, it was not a partnership that
PETITIONER ON COMMISSION GRANTING EXCESSIVE spouses were forbidden to enter under the NCC.
CLAIMS/ 5th ISSUE
5. Commission erred in granting excessive awards to the It is also a basic tenet of the Spanish and Philippine
law that the partnership has a juridical personality of
claimants
its own, distinct and separate from that of its partners.
COURT ON 5th ISSUE F8 - G.R. No. L-27010 April 30, 1969
We, therefore, find no cogent reason to disturb the
Commission’s findings on this point. MARLENE DAUDEN-HERNAEZ, petitioner,
vs.
CONCLUSION HON. WALFRIDO DE LOS ANGELES, Judge of the
Private respondents’ claim should be upheld not only Court of First Instance of Quezon City,
because they are supported by the evidence on record, HOLLYWOOD FAR EAST PRODUCTIONS, INC.,
but also because the Workmen’s Compensation Act is a and RAMON VALENZUELA, respondents.
social legislation designed to give relief to the workman
who has been the victim of an accident in the pursuit of FACTS: Marlene Dauden-Hernaez, a motion picture
his employment, and the law must be liberally actress, filed a complaint against herein private
respondents to recover P 14,700 representing a
construed to attain the purpose for which it was
balance allegedly due said petitioner for her services
enacted. as leading actress in two motion pictures produced by
the company, and to recover damages. The
FALLO respondent court ordered the complaint dismissed,
ACCORDINGLY, the assailed decision is hereby fully mainly because the "claim of plaintiff was not
affirmed. Costs against the petitioner. evidenced by any written document, either public or
 33

private", and the complaint "was defective on its face" remanded to the court of origin for further proceedings
for violating Articles 1356 and 1358 of the Civil, Code not at variance with this decision.
of the Philippines. Herein petitioner sought for
reconsideration but was denied by the court. Costs to be solidarity paid by private respondents
Hollywood Far East Productions, Inc., and Ramon
Respondent’s allegation: The complaint holds no Valenzuela.
water since the contract sued upon was not alleged to
be in writing; that by Article 1358 the writing was F12. G.R. No. L-22493 July 31, 1975
absolute and indispensable, because the amount
involved exceeds five hundred pesos ISLAND SALES, INC., plaintiff-appellee,
vs.
ISSUE: WON the contract between herein petitioner UNITED PIONEERS GENERAL CONSTRUCTION
and private respondents (with regards to the COMPANY, ET. AL defendants. BENJAMIN C.
DACO, defendant-appellant.
petitioner’s services as leading actress in two motion
pictures) be in writing for it to be valid and
Facts:
enforceable.
 On April 22, 1961, the defendant company, a
HELD: NO. The trial court’s ruling herein contested
general partnership duly registered under the
betrays a basic and lamentable misunderstanding of laws of the Philippines, purchased from the
the role of the written form in contracts, as ordained in plaintiff a motor vehicle on the installment
the present Civil Code. In the matter of formalities, the basis and for this purpose executed a
contractual system of our Civil Code still follows that promissory note for P9,440.00, payable in
of the Spanish Civil Code of 1889 and of the twelve (12) equal monthly installments of
"Ordenamiento de Alcala" 2 of upholding the spirit and P786.63, the first installment payable on or
before May 22, 1961 and the subsequent
intent of the parties over formalities: hence, in
installments on the 22nd day of every month
general, contracts are valid and binding from their thereafter, until fully paid, with the condition
perfection regardless of form whether they be oral that failure to pay any of said installments as
or written. This is plain from Articles 1315 and 1356 they fall due would render the whole unpaid
of the present Civil Code balance immediately due and demandable.

ART. 1315. Contracts are perfected by mere consent, Point of controversy

and from that moment the parties are bound not only
to the fulfillment of what has been expressly stipulated  Having failed to receive the installment due on
but also to all the consequences which, according to July 22, 1961, the plaintiff sued the defendant
their nature, may be in keeping with good faith, usage company for the unpaid balance amounting to
P7,119.07. Benjamin C. Daco, Daniel A.
and law. (Emphasis supplied)
Guizona, Noel C. Sim, Romulo B. Lumauig,
ART. 1356. Contracts shall be obligatory in whatever and Augusto Palisoc were included as co-
defendants in their capacity as general
form they may have been entered into, provided all partners of the defendant company.
the essential requisites for their validity are present....
(Emphasis supplied)

To this general rule, the Code admits exceptions, set

 Daniel A. Guizona failed to file an answer and
forth in the second portion of Article 1356, namely: (a) was consequently declared in default.1
Contracts for which the law itself requires that they be
in some particular form (writing) in order to make
them valid and enforceable (the so-
called solemn contracts); and (b) Contracts that the  Subsequently, on motion of the plaintiff, the
law requires to be proved by some writing complaint was dismissed insofar as the
(memorandum) of its terms, as in those covered by defendant Romulo B. Lumauig is concerned.2
the old Statute of Frauds, now Article 1403(2) of the
Civil Code.

The contract sued upon by petitioner herein  When the case was called for hearing, the
(compensation for services) does not come under defendants and their counsels failed to appear
either exception. Hence, the contract between herein notwithstanding the notices sent to them.
petitioner and private respondents could be sued
upon.

 Consequently, the trial court authorized the

FALLO: WHEREFORE, the order dismissing the
plaintiff to present its evidence ex-parte3 , after
complaint is set aside, and the case is ordered
 34

which the trial court rendered the decision partnership. Since the liability of the partners
appealed from. 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
Defendants’ defense the defendant Romulo B. Lumauig was
dismissed, upon motion of the plaintiff, does
not unmake the said Lumauig as a general
The defendants Benjamin C. Daco and Noel C. Sim
partner in the defendant company. In so
moved to reconsider the decision claiming that since
moving to dismiss the complaint, the plaintiff
there are five (5) general partners, the joint and
merely condoned Lumauig's individual liability
subsidiary liability of each partner should not exceed
to the plaintiff.
one-fifth (1/5 ) of the obligations of the defendant
company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit Fallo
the liability of the defendants Daco and Sim to only
one-fifth (1/5 ) of the obligations of the defendant WHEREFORE, the appealed decision as thus clarified
company.4 is hereby AFFIRMED, without pronouncement as to
costs.
Issue

Whether or not the dismissal of the complaint to favor

one of the general partners of a partnership increases F15 - G.R. No. L-3518 February 29, 1952
the joint and subsidiary liability of each of the
remaining partners for the obligations of the URBANO LOTA (Substituted by SOLOMON LOTA
partnership? in his capacity as Administrator of the Estate of
URBANO LOTA), plaintiff-appellant,
Ruling: No. vs.
BENIGNO TOLENTINO, defendant-appellee.
Article 1816 of the Civil Code provides:
FACTS: On March 3, 1937, plaintiff filed an action
Art. 1816. All partners including against defendant to order the latter (a) to render an
industrial ones, shall be liable pro accounting of his management of their partnership,
rata with all their property and after all and (b) to deliver the plaintiff whatever share he may
the partnership assets have been have in the assets of the partnership after the
exhausted, for the contracts which liquidation has been approved by the Court.
may be entered into in the name and
for the account of the partnership, The said partnership was entered into by and
under its signature and by a person between the plaintiff and defendant in 1918 whereby
authorized to act for the partnership. both agreed to engage in general business in
However, any partner may enter into a Batangas and to divide the profits and losses share
separate obligation to perform a alike and defendant to be manager of the partnership.
partnership contract.
The plaintiff alleges that from 1929 to 1937, defendant
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this has refused to rendered annual accounting which
Court held: prompted the plaintiff to file the abovementioned
complaint.
The partnership of Yulo and Palacios
was engaged in the operation of a In 1938, the plaintiff died. He was eventually
sugar estate in Negros. It was, substituted by the administrator of his estate,
therefore, a civil partnership as Solomon Lota
distinguished from a mercantile
partnership. Being a civil partnership, In 1939, the defendant died. As a consequence of
by the express provisions of articles such, the Court, on January 9, 1940, gave the plaintiff
l698 and 1137 of the Civil Code, the 30 days to amend the complaint by substituting for the
partners are not liable each for the deceased defendant the administrator of his estate or
whole debt of the partnership. The his legal representative. However, from the
liability is pro rata and in this case defendant’s death to almost ten years thereafter no
Pedro Yulo is responsible to plaintiff administrator or legal representative had been
for only one-half of the debt. The fact actually substituted to take the place of said
that the other partner, Jaime Palacios, defendant. It was only on April 6, 1949, that plaintiff
had left the country cannot increase made another try to substitute said deceased praying
the liability of Pedro Yulo. that defendant's heirs be substituted for him as parties
defendant.
 In the instant case, there were five (5) general
partners when the promissory note in question ISSUE: Whether or not, after the death of the
was executed for and in behalf of the defendant Benigno Tolentino, plaintiff's action for
 35

accounting and liquidation of the partnership formed Plaintiffs also seek the annulment of the assignment
between Urbano Lota and Benigno Tolentino may be of right with chattel mortgage entered into by the
continued against the heirs of Benigno Tolentino withdrawing partner and the remaining partners.

HELD: NO. The applicable authority is the case of Po The appellants contend that the chattel mortgage may
Yeng Cheo vs. Lim Ka Yam which held that, ―it is well no longer be nullified because it had been judicially
settled that when a member of a mercantile approved and said chattel mortgage had been
partnership dies, the duty of liquidating its affairs judicially foreclosed.
devolves upon the surviving member, or
members, of the firm, not upon the legal
representatives of the deceased partner.” Henc,
Issue: Whether the withdrawal of one of the partners
the action for accounting and liquidation can no
dissolved the partnership.
longer be pursued after Tolentino’s death.

Re: Additional Ground for Dismissing the present

action for accounting Ruling:

On dissolution, the partnership is not terminated

Another ground — equally decisive against the
but continues until the winding up of the
appellant — correctly advanced by the lower court in
dismissing the present action for accounting, is lack of business.
prosecution on the part of the appellant. If the plaintiff It does not appear that the withdrawal of the partner
was genuinely interested in substituting the proper was not published in the newspapers. The appellees
party, assuming that plaintiff's action may still be
and the public in general had a right to expect that
pursued after Tolentino's death, he should have taken
timely measures to have the administratrix appointed whatever, credit they extended to the remaining
on August 8, 1941, qualify or, in case of her failure or partners could be enforced against the properties of
refusal, to procure the appointment of another the partnership. The withdrawing partner cannot be
administrator. Certainly, inaction for almost eight relieved from her liability to the creditor of the
years (after the issuance of letters of administration) partnership due to her own fault by not insisting on the
on the part of the appellant, sufficiently implies liquidation of the partnership. Though she had acted
indifference to or desistance from its suit. in good faith, the appellees also acted in good faith in
extending credit to the partnership. Where one of two
FALLO: The resolution herein complained of will innocent persons must suffer, that person who gave
therefore be as it is hereby affirmed, with costs occasion for the damages to be caused must bear the
against the appellant. So ordered. consequences. Technically, the partnership was
dissolved by the withdrawal of one of the partners.
F-21 Through her acts of entering into a memorandum with
the remaining partners misled the creditors that they
G.R. No. L-27343 February 28, 1979
were doing business with the partnership. Hence,
MANUEL G. SINGSONG, JOSE BELZUNCE, from the order of the lower court ordering the
AGUSTIN E. TONSAY, JOSE L. ESPINOS, withdrawing partner to pay the plaintiffs, she is thus
BACOLOD SOUTHERN LUMBER YARD, and entitled for reimbursement from the remaining
OPPEN, ESTEBAN, INC., plaintiffs-appellees, partners.
vs.
WHEREFORE, the decision appealed from is hereby
ISABELA SAWMILL, MARGARITA G. SALDAJENO
affirmed with the elimination of the portion ordering
and her husband CECILIO SALDAJENO LEON
appellants to pay attorney's fees and with the
GARIBAY, TIMOTEO TUBUNGBANUA, and THE
modification that the defendsants, Leon Garibay and
PROVINCIAL SHERIFF OF NEGROS
Timoteo Tubungbanua, should reimburse the
OCCIDENTAL, defendants, MARGARITA G.
defendants-appellants, Margarita G. Saldajeno and
SALDAJENO and her husband CECILIO
her husband Cecilio Saldajeno, whatever they shall
SALDAJENO, defendants-appellants.
pay to the plaintiffs-appellees, without pronouncement
as to costs.

Facts:
F. 22. G.R. No. L-18707 December 9, 1922
In 195, defendants entered into a contract of
partnership under the firm name ―Isabela Sawmill‖. PO YENG CHEO, plaintiff-appellee,
vs.
In 1956 the plaintiff sold to the partnership a motor LIM KA YAM, defendant-appellant.
truck and two tractors. The partnership was not able
to pay their whole balance even after demand was Facts
made. One of the partners withdrew from the
partnership but instead of terminating the said The plaintiff, Po Yeng Cheo, is the sole heir of one
partnership it was continued by the two remaining Po Gui Yao, deceased, and as such Po Yeng Cheo
partners under the same firm name. inherited the interest left by Po Gui Yao in a business
 36

conducted in Manila under the style of Kwong Cheong partner's individual interest; and a liquidation of
Tay. This business had been in existence in Manila the business is an essential prerequisite. In the
for many years prior to 1903, as a mercantile present case, the shares referred to--constituting the
partnership engaged in the import and export trade; only assets of Kwong Cheong Tay--have not been
and after the death of Po Gui Yao the following seven converted into ready money and doubtless still remain
persons were interested therein as partners in the in the name of Kwong Cheong Tay as owner. Under
amounts set opposite their respective names, to wit: these circumstances it is impossible to sustain a
Po Yeng Cheo, P60,000; Chua Chi Yek, P50,000; judgment in favor of the plaintiff for his aliquot
Lim Ka Yam, P10,000; Lee Kom Chuen, P10,000; Ley part of the par value of said shares, which would
Wing Kwong, P10,000; Chan Liong Chao, P10,000; be equivalent to allowing one of several coowners
Lee Ho Yuen, P10,000. The manager of Kwong to recover from another, without process of
Cheong Tay, for many years prior of its complete division, a part of an undivided property.
cessation from business in 1910, was Lim Ka
Yam, the original defendant herein. In the first place, it is well settled that when a member
of a mercantile partnership dies, the duty of liquidating
Among the properties pertaining to Kwong Cheong its affair devolves upon the surviving member, or
Tay and consisting part of its assets were ten shares members, of the firm, not upon the legal
of a total par value of P10,000 in an enterprise representative of the deceased partner. Upon the
conducted under the name of Yut Siong Chyip Konski death of Lim Ka Yam it therefore became the duty of
and certain shares to the among of P1,000 in the his surviving associates to take the proper steps to
Manila Electric Railroad and Light Company, of settle the affairs of the firm, and any claim against
Manila. him, or his estate, for a sum of money due to the
partnership by reason of any misappropriation of its
In the year 1910 (exact date unstated) Kwong Cheong funds by him, or for damages resulting from his
Tay ceased to do business, owing principally to the wrongful acts as manager, should be prosecuted
fact that the plaintiff ceased at that time to transmit against his estate in administration in the manner
merchandise from Hongkong, where he then resided. pointed out in sections 686 to 701, inclusive, of the
Lim Ka Yam appears at no time to have submitted Code of
to the partners any formal liquidation of the
business, though repeated demands to that effect F. 24. GREGORIO MAGDUSA, ET AL., petitioners,
have been made upon him by the plaintiff. vs. GERUNDIO ALBARAN, ET AL., respondents.
G.R. No. L-17526. June 30, 1962. REYES, J.B.L.
RTC Decision
Facts:
In view of the facts above stated, the trial judge
rendered judgment in favor of the plaintiff, Po Yeng Appeal from a decision of the Court of Appeals (G.R.
Cheo, to recover of the defendant Lim Yock Tock, as No. 24248-R) reversing a judgment of the Court of
administrator of Lim Ka Yam, the sum of sixty First Instance of Bohol and ordering appellant
thousand pesos (P60,000). Gregorio Magdusa to pay to appellees, by way of
refund of their shares as partners, the following
Issue amounts: Gerundio Albaran, P8,979.10; Pascual
Albaran, P5,394.78; Zosimo Albaran, P1,979.28; and
Whether or not one partner can recover to the Telesforo Bebero, P3,020.27; plus legal interests from
managing partner the values of the latter’s individual the filing of the complaint, and costs.
interest.
Facts:
Ruling
 Appellant and appellees, together with various
other persons, had verbally formed a
NO, the petition is denied. The SC ruled in favor of
partnership de facto, for the sale of general
the defendant, Lim Ka Yam. In the first place, it was
merchandise in Surigaoto which appellant
erroneous in any event to give judgment in favor of
contributed P2,000 as capital, and the others
the plaintiff to the extent of his share of the capital of
contributed their labor, under the condition that out
Kwong Cheong Tay. The managing partner of a
of the net profits of the business 25% would be
mercantile enterprise is not a debtor to the
added to the original capital, and the remaining
shareholders for the capital embarked by them in the
75% would be divided among the members in
business; and he can only be made liable for the
proportion to the length of service of each.
capital when, upon liquidation of the business, there
 Sometime in 1953 and 1954, the appellees
are found to be assets in his hands applicable to
expressed their desire to withdraw from the
capital account. in no wise chargeable to the
partnership, and appellant thereupon made a
negligence or misfeasance of the manager.
computation to determine the value of the partners'
shares to that date.
Under the circumstances revealed in this case, it was  The results of the computation were embodied in
erroneous to give judgment in favor of the plaintiff for the document drawn in the handwriting of
his aliquot part of the par value of said shares. It is appellant.
elementary that one partner, suing alone, cannot  Appellees thereafter made demands upon
recover of the managing partner the value of such appellant for payment, but appellant having
 37

refused, they filed the initial complaint in the court In addition, unless a proper accounting and liquidation
below. of the partnership affairs is first had, the capital shares
 Appellant defended by denying any partnership of the appellees, as retiring partners, can not be
with appellees, whom he claimed to be mere repaid, for the firm's outside creditors have preference
employees of his. over the assets of the enterprise (Civ. Code, Art.
 The Court of First Instance of Bohol dismissed the 1839), and the firm's property can not be diminished
complaint on the ground that the other were to their prejudice.
indispensable parties but hid not been impleaded.
 Upon appeal, the Court of Appeals reversed the F26 - G.R. No. L-5837 May 31, 1954
decision, ruling that it is not an action for a
dissolution of a partnership and winding up of its CRISTOBAL BONNEVIE, ET AL., plaintiffs-
affairs or liquidation of its assets in which the appellants,
interest of other partners who are not brought into vs.
the case may be affected. JAIME HERNANDEZ, defendant-appellee.
 The action of the plaintiffs is one for the recovery of
a sum of money with Gregorio Magdusa as the
FACTS: Prior to January, 1947, plaintiffs with other
principal defendant.
associates formed a syndicate or secret partnership
for the purpose of acquiring the plants, franchises and
Issue: other properties of the Manila Electric Co. No formal
articles were drawn for it was the purpose of the
WON the appellees' action can be entertained and a members to incorporate once the deal had been
decree of distribution can be validly entered without consummated. But in the meantime they elected
the intervention of all the indispensable parties. Pedro Serranzana and David Serrano general
manager and secretary-treasurer, respectively, of the
Held: partnership.

NO, it cannot be entertained and a decree of Negotiation for the purchase was commenced, but as
distribution cannot be validly entered without the it made no headway, defendant was taken in as a
intervention of all the indispensable parties. member of the partnership so that he could push the
deal through, and to that end he was given the
This is not an action for a dissolution of a partnership necessary power of attorney.
and winding up of its affairs or liquidation of its assets
in which the interest of other partners who are not Using partnership funds, defendant was able to buy
brought into the case may be affected. the Meralco properties. Although defendant was the
one named vendee in the deed of sale, there is no
The action of the plaintiffs is one for the recovery of a question that the transaction was in penalty made for
sum of money with Gregorio Magdusa as the principal the partnership so that the latter assumed control of
defendant. The partnership, with Gregorio Magdusa the business the day following the sale.
as managing partner, was brought into the case as an
alternative defendant only. Plaintiffs' action was based About the latter half of the following month the
on the allegation, substantiated in evidence, that members of the partnership proceeded with the
Gregorio Magdusa, having taken delivery of their formation of the proposed corporation, apportioning
shares, failed and refused and still fails and refuses to among themselves its shares of stock in proportion to
pay them their claims. The liability, therefore, is their respective contributions to the capital of the
personal to Gregorio Magdusa, and the judgment partnership and their individual efforts in bringing
should be against his sole interest, not against the about the acquisition of the Meralco properties. But
partnership's although the judgment creditors may before the incorporation, Judge Jaime Reyes and the
satisfy the judgment against the interest of Gregorio plaintiffs withdrew from the partnership for the reason
Magdusa in the partnership subject to the condition that the business was not going well which caused the
imposed by Article 1814 of the Civil Code. dissolution of the partnership. Following the
dissolution of the partnership, the members who
A partner's share cannot be returned without first preferred to remain in the business went ahead with
dissolving and liquidating the partnership, for the the formation of the corporation, taking in new
return is dependent on the discharge of the creditors, associates as stockholders. And defendant, on his
whose claims enjoy preference over those of the part, in fulfillment of his trust, made a formal
partners; and it is self-evident that all members of the assignment of the Meralco properties to the treasurer
partnership are interested in his assets and business, of the corporation, giving them a book value of
and are entitled to be heard in the matter of the firm's P365,000, in return for which the corporation issued,
liquidation and the distribution of its property. The to the various subscribers to its capital stock, shares
liquidation is not signed by the other members of the of stock of the total face value of P225,000 and
partnership besides appellees and appellant; it does assumed the obligation of paying what was still due
not appear that they have approved, authorized, or the Meralco on the purchase price.
ratified the same, and, therefore, it is not binding upon
them. At the very least, they are entitled to be heard Two years from their withdrawal from the partnership,
upon its correctness. when the corporate business was already in a
prosperous condition, plaintiffs brought the present
 38

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. 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. The trial court held against the
plaintiffs.

ISSUE: WON, assuming that the partnership realized

profit out of the Meralco properties, the plaintiffs are
entitled for their share out of such profit.

HELD: NO. 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.

There is evidence that the partnership was at that

time operating its business at a loss and that the
partnership did not have necessary funds to meet its
obligation to Meralco for the balance of the purchase
price. Because of these circumstances there is every
reason to believe that plaintiffs together with Judge
Jaime Reyes, withdrew from the partnership for fear
that they might lose their entire investment should
they choose to remain. As testified to by Judge
Reyes, one of the withdrawing partners, it was
clearly understood that upon their withdrawal and
return to them of their investment they would
have nothing more to do with the association. It
must, therefore, have been the intention or
understanding of the parties that the withdrawing
partners were relinquishing all their rights and
interest in the partnership upon the return to them
of their investment. It is, therefore, our conclusion
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

FALLO: In view of the foregoing, we find plaintiffs'

claim against defendant to be without legal basis so
that the judgment of dismissal rendered by the court
below should be, as it is hereby, affirmed, with costs
against the appellants.