Agency, Trust & Partnership

I. Partnership

Kee v CA
Facts:
 The heirs of Tan Eng Kee (6 children and the spouse) filed suit against the decedent's brother TAN ENG LAY in RTC of Baguio for
accounting, liquidation and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay.
 The complaint was amended impleading private respondent herein BENGUET LUMBER COMPANY.
 It was alleged that Kee and Lay, pooling their resources and industry together, entered into a partnership engaged in the business of
selling lumber and hardware and construction supplies. It was called Benguet Lumber. Jointly managed until the death of Kee.

Petitioners' Argument:
 Petitioners herein averred that the business prospered due to the hard work and thrift of the alleged partners. However, in 1981, Lay and
his children caused the conversion of the partnership into a corporation called "Benguet Lumber Company” to deprive Kee and his
heirs of their rightful participation of the profits.
Respondent's Argument:
 Tan Eng Lay consistently testified that he had his business and his brother had his, that it was only later on that his said brother, Tan
Eng Kee, came to work for him. Be that as it may, co-ownership or co-possession (specifically here, of the G.I. sheets) is not an
indicium of the existence of a partnership
RTC Ruling:
 Declared that the deceased Kee and Lay are joint adventurers and/or partners in a business venture and as such should share in the
profits and/or losses of the business venture or particular partnership;
 Declared that the assets of Benguet Lumber are the same assets turned over to Benguet Lumber Co. Inc. and as such the heirs of Kee
have a right thereto.
CA Ruling:
 The respondent appealed and the RTC's decision was reversed. The Motion for Reconsideration was denied.
Issue: Whether there is partnership between Lay and Kee
SC Ruling:
 We note that the Court a quo over extended the issue because while the plaintiffs mentioned only the existence of a partnership, the
Court in turn went beyond that by justifying the existence of a joint venture
CA Ruling…
(Lee and Lay were not partners before the war. During the war, the entire stocks of the pre-war Benguet Lumber were confiscated if
not burned by the Japanese.
After the war, because of the absence of capital to start a lumber and hardware business, Lay and Kee pooled the proceeds of their
individual businesses earned from buying and selling military supplies, so that the common fund would be enough to form a
partnership, both in the lumber and hardware business
That the father of the plaintiffs and Lay were partners, is obvious from the fact that: (1) they conducted the affairs of the business
during Kee's lifetime, jointly, (2) they were the ones giving orders to the employees, (3) they were the ones preparing orders from the
suppliers, (4) their families stayed together at the Benguet Lumber compound, and (5) all their children were employed in the
business in different capacities.)
 It is obvious that there was no partnership whatsoever. There was no firm account, no firm letterheads submitted as evidence, no
certificate of partnership, no agreement as to profits and losses, and no time fixed for the duration of the partnership. There was even
no attempt to submit an accounting corresponding to the period after the war until Kee's death in 1984. It had no business book, no
written account nor any memorandum for that matter and no license mentioning the existence of a partnership. Also, the exhibits
support the establishment of only a proprietorship. The certification dated March 4, 1971, mentioned co-defendant Lay as the only
registered owner of the Benguet Lumber and Hardware.
 The deceased, Kee, on the other hand, was merely an employee of the Benguet Lumber Company, on the basis of his SSS coverage
effective 1958 and he was even listed in the payroll as an employee.
 NCC provides that if the capitalization exceeds P3,000.00, in which case a public instrument is also necessary, and which is to be
recorded with the Securities and Exchange Commission. In this case, it exceeded however the execution of a public instrument was
never established.
 Petitioners point out that the New Civil Code was not yet in effect when the partnership was allegedly formed sometime in 1945,
although the contrary may well be argued that nothing prevented the parties from complying with the provisions of the New Civil
Code when it took effect on August 30, 1950

1
 Thus, in order to constitute a partnership, it must be established that
(1) two or more persons bound themselves to contribute money, property, or industry to a common fund, and (2) they intend to divide
the profits among themselves. The agreement need not be formally reduced into writing, since statute allows the oral constitution of a
partnership, save in two instances:
(1) when immovable property or real rights are contributed, and
(2) when the partnership has a capital of three thousand pesos or more.
In both cases, a public instrument is required. An inventory to be signed by the parties and attached to the public instrument is also
indispensable to the validity of the partnership whenever immovable property is contributed to the partnership.
 Under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnerships. The Supreme
Court has however recognized a distinction between these two business forms, and has held that although a corporation cannot
enter into a partnership contract, it may however engage in a joint venture with others. (In foreign teachings, joint venture is
somewhat temporary while the other is permanent)
 Undoubtedly, the best evidence would have been the contract of partnership itself, or the articles of partnership but there is none. The
alleged partnership, though, was never formally organized.
 The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership
 Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from Tan Eng Lay, could have expounded on the precise
nature of the business relationship between them.
 It should be noted that it is not with the number of witnesses wherein preponderance lies; the quality of their testimonies is to be
considered. None of petitioners' witnesses could suitably account for the beginnings of Benguet Lumber Company, except perhaps
for Peralta whose deceased wife was related to Matilde Abubo
 Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Kee never asked for
an accounting. The essence of a partnership is that the partners share in the profits and losses. Each has the right to demand an
accounting as long as the partnership exists
 A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan Eng Kee appeared never to have made any
such demand for accounting from his brother, Tang Eng Lay.
 In determining whether a partnership exists, these rules shall apply:
1. persons who are not partners as to each other are not partners as to third persons;
2. Co-ownership or co-possession does not of itself establish a partnership,
3. The sharing of gross returns does not of itself establish a partnership,
4. The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business, but
no such inference shall be drawn if such profits were received in payment:
As a debt by installment or otherwise;
As wages of an employee or rent to a landlord;
As an annuity to a widow or representative of a deceased partner;
As interest on a loan, though the amount of payment vary with the profits of the business;
As the consideration for the sale of a goodwill of a business or otherwise.
 We conclude that Tan Eng Kee was only an employee, not a partner
 Nevertheless, petitioners would still insist: that Lay and Kee were commanding supervising the employees; that both were the ones
who determined the price at which the stocks were to be sold; and that both placed orders to the suppliers of the Benguet Lumber
Company. They also point out that the families of the brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet Lumber Company
compound, a privilege not extended to its ordinary employees (close personal relations existed between them because they were
brothers).
Side Note:
 As a side-bar to the proceedings, petitioners filed Criminal Case against Lay and Wilborn Tans for the use of allegedly falsified
documents in a judicial proceeding.
 The documents showed that Kee was a mere employee. There were discrepacies on the signatures, therefore making them fake.
There were also falsification of commercial documents by a private individual against the Tans.
 Well, these were all dismissed for insuficient of evidence.
AFFIRMED

Saludo Jr. v PNB

 Petitioner Aniceto G. Saludo, Jr. (Saludo) filed this petition for review on certiorari assailing the decision of the CA which affirmed the
Omnibus Order issued by the RTC and ruled that respondent Philippine National Bank's (PNB) counterclaims against Saludo and the
Saludo Agpalo Fernandez and Aquino Law Office (SAFA Law Office) should be reinstated in its answer.

2
 Facts
 In 1998, SAFA Law Office entered into a Contract of Lease with PNB, whereby the latter agreed to lease 632 square meters of the
second floor of the PNB Financial Center Building in Quezon City for a period of three years and for a monthly rental fee of
P189,600.00. The rental fee is subject to a yearly escalation rate of 10%. SAFA Law Office then occupied the leased premises and
paid advance rental fees and security deposit (1M).
 On August 1, 2001, the Contract of Lease expired. According to PNB, SAFA Law Office continued to occupy the leased premises until
February 2005, but discontinued paying its monthly rental obligations after December 2002.
 Consequently, PNB sent a demand letter dated July 17, 2003 for SAFA Law Office to pay its outstanding unpaid rents 4M. There was
also another demand letter for (second) 5M unpaid debt. It was receieved by the SAFA Law Office.
 In the letter to the PNB, the firm rented the place because of the agreement between the former management of the PNB and the firm.
When new management took over, it allegedly agreed to uphold this agreement to facilitate rental payments. However, not a single
case of significance was referred to the firm. SAFA Law Office then asked PNB to review and discuss its billings, evaluate the
improvements in the area and agree on a compensatory sum to be applied to the unpaid rents, make good its commitment to
endorse or refer cases to SAFA Law Office.
 The firm also asked PNB to give a 50% discount on its unpaid rents, noting that while waiting for case referrals, it had paid an amount
of 13M.
 In February 2005, SAFA Law Office vacated the leased premises.
 Then another (third) demand letter to pay its rental arrears of 10.9M
 SAFA Law Office sent a letter dated June 8, 2006, proposing a settlement by providing a range of suggested computations with
deductions for the value of improvements it introduced and professional fees due from Macroasia Company and the 50% discount
allegedly promised by Dr. Lucio Tan.
 It was declined and said that it cannot assume the liabilities of Macroasia Corporation because it has personality distinct and separate
from the bank
 Then a (fourth) final demand leter for 25M
 Saludo, in his capacity as managing partner of SAFA Law Office, filed an amended complaint for accounting and/or recomputation of
unpaid rentals and damages against PNB in relation to the Contract of Lease
 PNB filed a motion to include SAFA Law Office as principal plaintiff because the lessee in the Contract of Lease is not Saludo but
SAFA Law Office and that Saludo merely signed the Contract of Lease as the managing partner of the law firm
 PNB argued that as a matter of right and equity, it can claim that amount from SAFA Law Office in solidum with Saludo
 Saludo filed his motion to dismiss counterclaims mainly arguing that SAFA Law Office is neither a legal entity nor party litigant. As it is
only a relationship or association of lawyers in the practice of law and a single proprietorship which may only be sued through its
owner or proprietor, no valid counterclaims may be asserted against it.
RTC Ruling:
 RTC issued an Omnibus Order denying PNB's motion to include an indispensable party as plaintiff and granting Saludo's motion to
dismiss counterclaims
 Plaintiff has shown by documents attached to his pleadings that indeed SAFA Law Offices is a mere single proprietorship and not a
commercial and business partnership. plaintiff has admitted and shown sole responsibility in the affairs entered into by the SAFA Law
Office. PNB has even admitted that the SAFA Law Office, being a partnership in the practice of law, is a non-legal entity. Being a
non-legal entity, it cannot be a proper party, and therefore, it cannot sue or be sued.

CA Ruling: (SAFA Law Office is a partnership but has no legal personality.)

 The CA ruled that an order granting Saludo's motion to dismiss counterclaim, being interlocutory in nature, is not appealable until after
judgment shall have been rendered on Saludo's complaint. Since the Omnibus Order is interlocutory, and there was an allegation of
grave abuse of discretion, a petition for certiorari is the proper remedy
 SAFA Law Office is a partnership
 Here, SAFA Law Office was the one that entered into the lease contract and not Saludo. In fact, the latter signed the contract as the
firm's managing partner. The alleged Memorandum of Understanding (MOU) executed by the partners of SAFA Law Office, .which
states, among others, that Saludo alone would be liable for the firm's losses and liabilities, and the letter of Saludo to PNB confirming
that SAFA Law Office is his single proprietorship did not convert the firm to a single proprietorship. Moreover, SAFA Law Office sent
a letter to PNB regarding its unpaid rentals which Saludo signed as a managing partner. The firm is also registered as a partnership
with the Securities and Exchange Commission (SEC).
 On the question of whether SAFA Law Office is an indispensable party, the CA held that it is not. As a partnership, it may sue or be
sued in its name or by its duly authorized representative. Saludo, as managing partner, may execute all acts of administration,
including the right to sue. Furthermore, the CA found that SAFA Law Office is not a legal entity. A partnership for the practice of law

3
 is not a legal entity but a mere relationship or association for a particular purpose. Thus, SAFA Law Office cannot file an action in
court
 While SAFA Law Office is not a legal entity, it can still be sued under Rules of Court considering that it entered into the Contract of
Lease
 CA emphasized that PNB's counterclaims are compulsory, as they arose from the filing of Saludo's complaint. It cannot be made
subject of a separate action but should be asserted in the same suit involving the same transaction
SC Ruling:
 Contrary to Saludo's submission, SAFA Law Office is a partnership and not a single proprietorship
 Article 1767 of the Civil Code provides that by a contract of partnership, two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also
form a partnership for the exercise of a profession
 SAFA Law Office was constituted as a partnership at the time its partners signed the Articles of Partnership wherein they bound
themselves to establish a partnership for the practice of law, contribute capital and industry for the purpose, and receive
compensation and benefits in the course of its operation. The opening paragraph of the Articles of Partnership reveals the
unequivocal intention of its signatories to form a partnership, "voluntarily associated ourselves for the purpose of forming a
partnership engaged in the practice of law."
 The subsequent registration of the Articles of Partnership with the SEC, on the other hand, was made in compliance with Article 1772
of the Civil Code, since the initial capital of the partnership was P500,000.00
 The other provisions of the Articles of Partnership also positively identify SAFA Law Office as a partnership. It constantly used the
words "partners" and "partnership.
 Moreover, it provided for the cause and manner of dissolution of the partnership. These provisions would not have been necessary if
what had been established was a sole proprietorship
 Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of the MOU executed by the partners of the firm. (that
Agpalo, Fernandez and Aquino shall not contribute to the capital and not liable for any loss or liablity and that all liabilities and assets
belong to Saludo).
 This MOU, however, does not serve to convert SAFA Law Office into a sole proprietorship. As discussed, SAFA Law Office was
manifestly established as a partnership based on the Articles of Partnership. The MOU, from its tenor, reinforces this fact. It did not
change the nature of the organization of SAFA Law Office but only excused the industrial partners from liability
 The MOU is an agreement forged under the foregoing provision. Consequently, the sole liability being undertaken by Saludo serves to
bind only the parties to the MOU, but never third persons like PNB
 Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have
been exhausted, for the contract which may be entered into in the name and for the account of the partnership, under its signature
and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a
partnership contract.
 The foregoing provision does not prevent partners from agreeing to limit their liability, but such agreement may only be valid as among
them. Thus, Article 1817 of the Civil Code provides:
 Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except as among the partners.
 Having settled that SAFA Law Office is a partnership, we hold that it acquired juridical personality by operation of law. The perfection
and validity of a contract of partnership brings about the creation of a juridical person separate and distinct from the individuals
comprising the partnership
 In holding that SAFA Law Office, a partnership for the practice of law, is not a legal entity, the CA cited the case of Petition for Authority
to Continue Use of the Firm Name "Sycip, Salazar, Feliciano, Hernandez & Castillo" (Sycip case) wherein the Court held that "[a]
partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose. x x x It is not a
partnership formed for the purpose of carrying on trade or business or of holding property." These are direct quotes from the US case
of In re Crawford's Estate.61 We hold, however, that our reference to this US case is an obiter dictum which cannot serve as a
binding precedent
 Second, our law on partnership does not exclude partnerships for the practice of law from its coverage
 Finally, we stress that unlike Philippine law, American law does not treat of partnerships as forming a separate juridical personality for
all purposes.
 Having settled that SAFA Law Office is a juridical person, we hold that it is also the real party-in-interest in the case filed by Saludo
against PNB.
 Rules of Court defines a real party-in-interest as the one "who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit
 SAFA Law Office is the party that would be benefited or injured by the judgment in the suit before the RTC. Particularly, it is the party
interested in the accounting and/or recomputation of unpaid rentals and damages in relation to the contract of lease. It is also the
4
 party that would be liable for payment to PNB of overdue rentals, if that claim would be proven. This is because it is the one that
entered into the contract of lease with PNB
 The court cited Aguila, Jr. v. Court of Appeals where it ruled that partners cannot be held liable for the obligations of the partnership
unless it is shown that the legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes.
 In this case, there is likewise no showing that SAFA Law Office, as a separate juridical entity, is being used for fraudulent, unfair, or
illegal purposes. Hence, its partners cannot be held primarily liable for the obligations of the partnership.
 Accordingly, the complaint filed by Saludo should be amended to include SAFA Law Office as plaintiff
DENIED

Tech Seing v Pacific Commercial

Facts:
 Teck Seing filed an application to be declared insolvent. And its creditors (Pacific Commercial Company, Piñol & Company, Riu
Hermanos, and W. H. Anderson & Company) filed a motion to declare the partners party to this case, to require the partners to file
inventory of their property and to declare each partner as insolvent debtor.
 RTC initially granted the motion but then it was denied subsequently on opposition.
Issue;
 Whether Teck Seing is a general copartnership, notwithstanding the failure of the firm name to include the name of one of the partners.
Respondents Argument:
 The contention of the creditors and appellants is that the partnership contract established a general partnership.
Petitioner's Argument:
 Teck Seing & Co., Ltd., is "una sociedad mercantil "de facto" solamente" (only a de facto commercial association), and that the
decision of the Supreme court in the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng, is controlling
 In Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, discloses that
a. the firm Kieng-Chiong-Seng was not organized by means of any public document;
b. that the partnership had not been recorded in the mercantile registry; and
c. that Kieng-Chiong-Seng was not proven to be the firm name, but rather the designation of the partnership.
The conclusion then was, that the partnership in question was merely de facto and that, therefore, giving effect to the provisions of
article 120 of the Code of Commerce, the right of action was against the persons in charge of the management of the association
SC Ruling:
 Through the documents creating the Teck Seing & Co., Ltd., it has been found that it is not a corporation. Neither is it contended by any
one that Teck Seing & Co., Ltd., is accidental partnership denominated cuenta en participacion (joint account association)
 Counsel for the petitioner and appellee described his client in once place in his opposition to the motion of the creditors as "una
verdadera sociedad anonima
 However provisions relating to sociedades anonimas were, by section 191 of the Corporation Law, with the exceptions the sociedades
anonimas lawfully organized at the time of the passage of the Corporation Law were recognized, which is not our case.
 The document providing for the partnership contract purported to form "una sociedad mercantil limitada," and counsel for the
petitioner's first contention was that Teck Seing & Co., Ltd. was not "una sociedad regular colectiva, ni siquiera comanditaria, sino
una sociedad mercantil limitada."
 Let us see if the partnership contract created a "sociedad en comandita," or, as it is known in English, and will hereafter be spoken of,
"a limited partnership."
 To establish a limited partnership there must be, at least, one general partner and the name of the least one of the general partners
must appear in the firm name. But neither of these requirements have been fulfilled.
 The general rule is, that those who seek to avail themselves of the protection of laws permitting the creation of limited partnerships
must show a substantially full compliance with such laws. A limited partnership that has not complied with the law of its creation is not
considered a limited partnership at all, but a general partnership in which all the members are liable.
 Article 125 of the Code of Commerce provides that the articles of general co-partnership must
a. state the names, surnames, and domiciles of the partners; the firm name; the names, and surnames of the partners to whom the
management of the firm and the use of its signature is instrusted;
b. the capital which each partner contributes in cash, credits, or property, stating the value given the latter or the basis on which
their appraisement is to be made;
c. the duration of the copartnership;
d. and the amounts which, in a proper case, are to be given to each managing partner annually for his private expenses,
 while the succeeding article of the Code (Article 126) provides that the general copartnership must transact business under the name of
all its members, of several of them, or of one only. Turning to the document before us, it will be noted that all of the requirements of

5
 the Code have been met, with the sole exception of that relating to the composition of the firm name. We leave consideration of this
phase of the case for later discussion.
 In the cited case Hung-Man-Yoc vs. Kieng-Chiong-Seng,
a. the organization of the partnership was not evidenced by any public document; here, it is by a public document.
b. the partnership is not recorded in the mercantile registry; here, the contract of partnership has been duly registered.
c. But the two cases are similar in that the firm name failed to include the name of any of the partners
 Article 119 of the Code of Commerce requires every commercial association before beginning its business to state its article,
agreements, and conditions in a public instrument, which shall be presented for record in the mercantile registry.
 Article 120, next following, provides that the persons in charge of the management of the association who violate the provisions of the
foregoing article shall be responsible in solidum to the persons not members of the association with whom they may have transacted
business in the name of the association. Applied to the facts before us, it would seem that Teck Seing & Co., Ltd. has fulfilled the
provisions of article 119. Moreover, to permit the creditors only to look to the person in charge of the management of the association,
the partner Lim Yogsing, would not prove very helpful to them
 What is said in article 126 of the Code of Commerce relating to the general copartnership transacting business under the name of all its
members or of several of them or of one only, is wisely included in our commercial law. It would appear, however, that this provision
was inserted more for the protection of the creditors than of the partners themselves
 The supreme court of Spain has repeatedly held that notwithstanding the obligation of the members to register the articles of
association in the commercial registry, agreements containing all the essential requisites are valid as between the contracting
parties, whatever the form adopted, and that, while the failure to register in the commercial registry necessarily precludes the
members from enforcing rights acquired by them against third persons, such failure cannot prejudice the rights of third persons.
 The common law is to the same effect. The State of Michigan had a statute prohibiting the transaction of business under an assumed
name or any other than the real name of the individual conducting the same, unless such person shall file with the county clerk a
certificate setting forth the name under which the business is to be conducted and the real name of each of the partners, with their
residences and post-office addresses, and making a violation thereof a misdemeanor.
 The early decision of our Supreme Court in the case of Prautch Scholes & Co. vs. Hernandez, contains the following pertinent
observations:
A partnership is organized for commercial purposes. It fails to comply with the requirements of article 119. A creditor sues the
partnership for a debt contracted by it, claiming to hold the partners severally. They answer that their failure to comply with the Code
of Commerce makes them a civil partnership and that they are in accordance with article 1698 of the Civil Code only liable jointly. To
allow such liberty of action would be to permit the parties by a violation of the Code to escape a liability which the law has seen fit to
impose upon persons who organized commercial partnership; "Because it would be contrary to all legal principles that the
nonperformance of a duty should redound to the benefit of the person in default either intentional or unintentional."
 On the question of whether the fact that the firm name "Teck Seing & Co., Ltd." does not contain the name of all or any of the partners
as prescribed by the Code of Commerce prevents the creation of a general partnership,
 Professor Jose A. Espiritu, as amicus curiæ, states "
a. such a fact alone cannot and will not be a sufficient cause of preventing the formation of a general partnership, especially if the
other requisites are present and which is complied in this present case
b. The requirement on the name is merely a formal not necessarily an essential one.
c. third, because the failure of the partners herein to adopt the correct name prescribed by law cannot shield them from their
personal liabilities,
 The legal intention deducible from the acts of the parties controls in determining the existence of a partnership. If they intend to do a
thing which in law constitutes a partnership, they are partners, although their purpose was to avoid the creation of such relation.
Here, the intention of the persons making up Teck Seing & co., Ltd. was to establish a partnership which they erroneously
denominated a limited partnership
 The partners who have disguised their identity under a designation distinct from that of any of the members of the firm should be
penalized, and not the creditors who presumably have dealt with the partnership in good faith
 Articles 127 and 237 of the Code of Commerce make all the members of the general copartnership liable personally and in solidum
with all their property for the results of the transactions made in the name and for the account of the partnership. Section 51 of the
Insolvency Law, likewise, makes all the property of the partnership and also all the separate property of each of the partners liable
 In other words, if a firm be insolvent, but one or more partners thereof are solvent, the creditors may proceed both against the firm and
against the solvent partner or partners, first exhausting the assets of the firm before seizing the property of the partners
 We reach the conclusion that the contract of partnership found in the document hereinbefore quoted established a general partnership
or, to be more exact, a partnership as this word is used in the Insolvency Law.

6
 Sunga v Chua
 On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan (hereafter petitioner
Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of the deceased Jacinto L. Sunga (hereafter
Jacinto), for "Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of
Preliminary Attachment" with the RTC, Sindagan, of Zamboanga del Norte
 Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane Liquefied Petroleum
Gas (LPG) in Manila. For business convenience, respondent and Jacinto allegedly agreed to register the business name of their
partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole proprietorship
 Each of them had contributed 100,000 with the intention that the profits would be equally divided between them. The partnership
allegedly had Jacinto as manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife respondent, Erlinda Sy. As
compensation, Jacinto would receive a manager's fee or remuneration of 10% of the gross profit and Josephine would receive 10%
of the net profits, in addition to her wages and other remuneration from the business.
 While Jacinto furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989,
respondent however suspected that the amount indicated in these documents were understated and undervalued by Jacinto and
Josephine for their own selfish reasons and for tax avoidance.
 Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner Cecilia and particularly his daughter, petitioner Lilibeth, took
over the operations, control, custody, disposition and management of Shellite without respondent's consent. Despite respondent's
repeated demands upon petitioners for accounting, inventory, appraisal, winding up and restitution of his net shares in the
partnership, petitioners failed to comply. Petitioner Lilibeth allegedly continued the operations of Shellite, converting to her own use
and advantage its properties
 On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out the alibis and reasons to evade respondent's demands,
she disbursed out of the partnership funds the amount of P200,000.00 and partially paid the same to respondent. Petitioner Lilibeth
allegedly informed respondent that the P200,000.00 represented partial payment of the latter's share in the partnership, with a
promise that the former would make the complete inventory and winding up of the properties of the business establishment. Despite
such commitment, petitioners allegedly failed to comply with their duty to account, and continued to benefit from the assets and
income of Shellite to the damage and prejudice of respondent.
Petitioners' Argument:
 1. they are not liable for partnership shares, unreceived income/profits, interests, damages and attorney's fees,
 2. that respondent does not have a cause of action against them, and that
 3. the trial court has no jurisdiction over the nature of the action, the SEC being the agency that has original and exclusive jurisdiction
over the case.
 4. there was no any written document to show such partnership, hence the courts cannot hear the testimonies of the respondents to
prove the alleged partnership three years after Jacinto's death.
 5. petitioners invoke the "Dead Man's Statute' or "Survivorship Rule" under Section 23, Rule 130 of the Rules of Court that provides
 6. Laches
 7. The registration in SEC
RTC Ruling:
 Petitioners filed two motions to dismiss;
 1. on the ground of lack of jurisdiction
 2. on the ground that the claim for winding up and accounting should be prosecuted against the estate of the deceased Jacinto in a
probate or intestate proceeding
 RTC denied both motions
 RTC ruled in favor of the the plaintiff-respondent
CA Ruling: (Petition for Certiorari because the RTC dimissed the motions)
 The CA denied it for the lack of merit
 CA dismissed the appeal and affirm the RTC
Issue:
 Whether a partnership existed between Jancito and Lamberto
SC Ruling:
 Denied the Petition(motions) because there was no reversible error committed by the appellate court
 The case was Remanded to the Trial Court
 A partnership may be constituted in any form, except where immovable property of real rights are contributed thereto, in which case a
public instrument shall necessary
 6 Hence, based on the intention of the parties, as gathered from the facts and ascertained from their language and conduct, a verbal
contract of partnership may arise.
7
 The essential profits that must be proven to that a partnership was agreed upon are (1) mutual contribution to a common stock, and (2)
a joint interest in the profits.
 Two reasons forestall the application of the "Dead Man's Statute" to this case.
 First, petitioners filed a compulsory counterclaim against respondents in their answer before the trial court, and with the filing of their
counterclaim, petitioners themselves effectively removed this case from the ambit of the "Dead Man's Statute." Well entrenched is
the rule that when it is the executor or administrator or representatives of the estates that sets up the counterclaim, the plaintiff,
herein respondent, may testify to occurrences before the death of the deceased to defeat the counterclaim
 Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for the simple reason that she is not "a party or
assignor of a party to a case or persons in whose behalf a case is prosecuted
 Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's claim cannot prevail over the factual findings of the trial
court and the Court of Appeals that a partnership was established between respondent and Jacinto.
 Notably, petitioners did not present any evidence in their favor during trial. By the weight of judicial precedents, a factual matter like the
finding of the existence of a partnership between respondent and Jacinto cannot be inquired into by this Court on review
 With regard to petitioners' insistence that laches and/or prescription should have extinguished respondent's claim, we agree with the
trial court and the Court of Appeals that the action for accounting filed by respondents three (3) years after Jacinto's death was well
within the prescribed period. The Civil Code provides that an action to enforce an oral contract prescribes in six (6) years while the
right to demand an accounting for a partner's interest as against the person continuing the business accrues at the date of
dissolution, in the absence of any contrary agreement
 It bears stressing that while Jacinto's death dissolved the partnership, the dissolution did not immediately terminate the partnership.
The Civil Code23 expressly provides that upon dissolution, the partnership continues and its legal personality is retained until the
complete winding up of its business, culminating in its termination
 petitioners maintain that said partnership that had initial capital of P200,000.00 should have been registered with the Securities and
Exchange Commission (SEC) since registration is mandated by the Civil Code, True, Article 1772 of the Civil Code requires that
partnerships with a capital of P3,000.00 or more must register with the SEC, however, this registration requirement is not mandatory.
 Article 1768 of the Civil Code25 explicitly provides that the partnership retains its juridical personality even if it fails to register
 The failure to register the contract of partnership does not invalidate the same as among the partners, so long as the contract has the
essential requisites, because the main purpose of registration is to give notice to third parties, and it can be assumed that the
members themselves knew of the contents of their contract.26 In the case at bar, non-compliance with this directory provision of the
law will not invalidate the partnership considering that the totality of the evidence proves that respondent and Jacinto indeed forged
the partnership in question.
AFFIRMED

Afisco Insurance Corp v CTA

 The petitioners are 41 non-life insurance corporations, organized and existing under the laws of the Philippines
 Upon issuance by them of Erection, Machinery Breakdown, Boiler Explosion and Contractors' All Risk insurance policies, the
petitioners on August 1, 1965 entered into a Quota Share Reinsurance Treaty and a Surplus Reinsurance Treaty with the Munchener
Ruckversicherungs-Gesselschaft (hereafter called Munich), a non-resident foreign insurance corporation. The reinsurance treaties
required petitioners to form a [p]ool. Accordingly, a pool composed of the petitioners was formed on the same day.
 On April 14, 1976, the pool of machinery insurers submitted a financial statement and filed an "Information Return of Organization
Exempt from Income Tax" for the year ending in 1975, on the basis of which it was assessed by the Commissioner of Internal
Revenue deficiency corporate taxes in the amount of P1,843,273.60, and withholding taxes in the amount of P1,768,799.39 and
P89,438.68 on dividends paid to Munich and to the petitioners, respectively. These assessments were protested by the petitioners
through its auditors Sycip, Gorres, Velayo and Co.
 On January 27, 1986, the Commissioner of Internal Revenue denied the protest and ordered the petitioners, assessed as "Pool of
Machinery Insurers," to pay deficiency income tax, interest, and with [h]olding tax
Court of Tax Appeals
 The CA ruled in the main that the pool of machinery insurers was a partnership taxable as a corporation, and that the latter's collection
of premiums on behalf of its members, the ceding companies, was taxable income. It added that prescription did not bar the Bureau
of Internal Revenue (BIR) from collecting the taxes due, because "the taxpayer cannot be located at the address given in the
information return filed." Hence, this Petition for Review before us.
 Issues:
 May the "clearing house" or "insurance pool" so formed be deemed a partnership or an association that is taxable as a corporation
under the National Internal Revenue Code (NIRC)? Should the pool's remittances to the member companies and to the said foreign
firm be taxable as dividends?

8
 SC Ruling:
First Issue:
Pool Taxable as a Corporation
 Petitioners contend that the Court of Appeals erred in finding that the pool of clearing house was an informal partnership, which was
taxable as a corporation under the NIRC. They point out that the reinsurance policies were written by them "individually and
separately," and that their liability was limited to the extent of their allocated share in the original risk thus reinsured
 Petitioners belie the existence of a partnership in this case, because (1) they, the reinsurers, did not share the same risk or solidary
liability, 14 (2) there was no common fund; 15 (3) the executive board of the pool did not exercise control and management of its
funds, unlike the board of directors of a corporation; 16 and (4) the pool or clearing house "was not and could not possibly have
engaged in the business of reinsurance from which it could have derived income for itself
 This Court rules that the Court of Appeals, in affirming the CTA which had previously sustained the internal revenue commissioner,
committed no reversible error. Section 24 of the NIRC (Sec. 24. Rate of tax on corporations. — (a) Tax on domestic corporations. —
A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every corporation
organized in, or existing under the laws of the Philippines, no matter how created or organized, but not including duly registered
general co-partnership (compañias colectivas), general professional partnerships, private educational institutions, and building and
loan associations )
 Ineludibly, the Philippine legislature included in the concept of corporations those entities that resembled them such as unregistered
partnerships and associations.
 Sec. 22. — Definition.
(B) The term "corporation" shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts
(cuentas en participacion), associations, or insurance companies, but does not include general professional partnerships [or] a joint
venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and
other energy operations pursuant to an operating or consortium agreement under a service contract without the Government.
"General professional partnerships" are partnerships formed by persons for the sole purpose of exercising their common profession,
no part of the income of which is derived from engaging in any trade or business.
 in Evangelista v. Collector of Internal Revenue 22. held that Section 24 covered these unregistered partnerships and even associations
or joint accounts, which had no legal personalities apart from their individual members. The Court of Appeals astutely applied
Evangelista. The term "partnership" includes a syndicate, group, pool, joint venture or other unincorporated organization, through or
by means of which any business, financial operation, or venture is carried on.
 Under Civil Code requisites of partnership are: "(1) mutual contribution to a common stock, and (2) a joint interest in the profits." 26 In
other words, a partnership is formed when persons contract "to devote to a common purpose either money, property, or labor with
the intention of dividing the profits between
 themselves." Meanwhile, an association implies associates who enter into a "joint enterprise . . . for the transaction of business."
 In the case before us, the ceding companies entered into a Pool Agreement 29 or an association 30 that would handle all the insurance
businesses covered under their quota-share reinsurance treaty 31 and surplus reinsurance treaty32 with Munich
 The following unmistakably indicates a partnership or an association covered by Section 24 of the NIRC:
 The pool has a common fund, consisting of money and other valuables that are deposited in the name and credit of the pool. 33 This
common fund pays for the administration and operation expenses of the pool. 24
 The pool functions through an executive board, which resembles the board of directors of a corporation, composed of one
representative for each of the ceding companies. 35
 True, the pool itself is not a reinsurer and does not issue any insurance policy; however, its work is indispensable, beneficial and
economically useful to the business of the ceding companies and Munich, because without it they would not have received their
premiums. The ceding companies share "in the business ceded to the pool" and in the "expenses" according to a "Rules of
Distribution" annexed to the Pool Agreement. 36 Profit motive or business is, therefore, the primordial reason for the pool's formation.
 Profit motive or business is, therefore, the primordial reason for the pool's formation. As aptly found by the CTA:
 . . . The fact that the pool does not retain any profit or income does not obliterate an antecedent fact, that of the pool being used in the
transaction of business for profit. It is apparent, and petitioners admit, that their association or coaction was indispensable [to] the
transaction of the business, . . . If together they have conducted business, profit must have been the object as, indeed, profit was
earned. Though the profit was apportioned among the members, this is only a matter of consequence, as it implies that profit actually
resulted
 The petitioners' reliance on Pascuals v. Commissioner 38 is misplaced, because the facts obtaining therein are not on all fours with the
present case. In Pascual, there was no unregistered partnership, but merely a co-ownership which took up only two isolated
transactions. 39 The Court of Appeals did not err in applying Evangelista, which involved a partnership that engaged in a series of
transactions spanning more than ten years, as in the case before us.
On the Second Issue

9
 Petitioners are clutching at straws. Double taxation means taxing the same property twice when it should be taxed only once. That is, ".
. . taxing the same person twice by the same jurisdiction for the same thing" 46 In the instant case, the pool is a taxable entity distinct
from the individual corporate entities of the ceding companies. The tax on its income is obviously different from the tax on the
dividends received by the said companies. Clearly, there is no double taxation here.
 The tax exemptions claimed by petitioners cannot be granted, since their entitlement thereto remains unproven and unsubstantiated. It
is axiomatic in the law of taxation that taxes are the lifeblood of the nation. Hence, "exemptions therefrom are highly disfavored in law
and he who claims tax exemption must be able to justify his claim or right."
On the Third Issue (prescription)
 We cannot sustain the petitioners. The CA and the CTA categorically found that the prescriptive period (5 years) was tolled under then
Section 333 of the NIRC.
DENIED

Angeles v Secretary of Justice

Facts:
 Angeles spouses (Oscar and Emerita Angeles) filed a criminal complaint for estafa against Mercado before the Provincial Prosecution
Office. Mercado is the brother-in-law of the Angeles spouses, being married to Emerita Angeles’ sister Laura
 Angeles spouses claimed that in November 1992, Mercado convinced them to enter into a contract of antichresis,5 colloquially known
as sanglaang-perde, covering eight parcels of land ("subject land") planted with fruit-bearing lanzones trees located in Nagcarlan,
Laguna and owned by Juana Suazo. The contract of antichresis was to last for five years with ₱210,000 as consideration
 As the Angeles spouses stay in Manila during weekdays and go to Laguna only on weekends, the parties agreed that Mercado would
administer the lands and complete the necessary paperwork
 After three years, the Angeles spouses asked for an accounting from Mercado. Mercado explained that the subject land earned
₱46,210 in 1993, which he used to buy more lanzones trees. Mercado also reported that the trees bore no fruit in 1994. Mercado
gave no accounting for 1995
 The Angeles spouses discover that Mercado had put the contract of sanglaang-perde over the subject land under Mercado and his
spouse’s names
 Mercado claimed that there exists an industrial partnership, colloquially known as sosyo industrial, between him and his spouse as
industrial partners and the Angeles spouses as the financiers
 Mercado attached bank receipts showing deposits in behalf of Emerita Angeles and contracts under his name for the Angeles spouses.
Mercado also attached the minutes of the barangay conciliation proceedings
 During the barangay conciliation proceedings, Oscar Angeles stated that there was a written sosyo industrial agreement: capital would
come from the Angeles spouses while the profit would be divided evenly between Mercado and the Angeles spouses
Provincial Prosecution Office respectfully recommended that the complaint for estafa be dismissed. and denied the motion for
reconsideration
Secretary of Justice Ruling;
 On appeal to the Secretary of Justice, the Angeles spouses emphasized that the document evidencing the contract of sanglaang-perde
with Juana Suazo was executed in the name of the Mercado spouses, instead of the Angeles spouses. The Angeles spouses allege
that this document alone proves Mercado’s misappropriation of their ₱210,000.
 The Angeles spouses] failed to show sufficient proof that [Mercado] deliberately deceived them in the "sanglaang perde" transaction
 These deposits represented their share in the profits of their business venture
 Although the [Angeles spouses] deny the existence of a partnership, they, however, never disputed that the deposits made by
[Mercado] were indeed for their account.
 The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado] during the hearing of their barangay conciliation
case reveals that the [Angeles spouses] acknowledged their joint business ventures with [Mercado] although they assailed the
manner by which [Mercado] conducted the business and handled and distributed the funds
 Although the legal formalities for the formation of a partnership were not adhered to, the partnership relationship of the [Angeles
spouses] and [Mercado] is evident in this case
 Consequently, there is no estafa where money is delivered by a partner to his co-partner on the latter’s representation that the amount
shall be applied to the business of their partnership. In case of misapplication or conversion of the money received, the co-partner’s
liability is civil in nature (People v. Clarin, 7 Phil. 504)
SC Ruling:
 The Angeles spouses’ position that there is no partnership because of the lack of a public instrument indicating the same and a lack of
registration with the Securities and Exchange Commission ("SEC") holds no water. First, the Angeles spouses contributed money to
the partnership and not immovable property. Second, mere failure to register the contract of partnership with the SEC does not
invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the contract of partnership is to

10
 give notice to third parties. Failure to register the contract of partnership does not affect the liability of the partnership and of the
partners to third persons. Neither does such failure to register affect the partnership’s juridical personality. A partnership may exist
even if the partners do not use the words "partner" or "partnership."
 Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract showing a sosyo industrial or industrial
partnership, contribution of money and industry to a common fund, and division of profits between the Angeles spouses and
Mercado.

Lim v Phil. Fishing Gear Industries Inc

Facts
 On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract for the purchase of fishing nets
of various sizes from the Philippine Fishing Gear Industries, Inc. (herein respondent
 They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was not a signatory to the
agreement.
 The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a collection suit against Chua,
Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment
 The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation"
was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission
 the lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes
which was then docked at the Fisheries Port, Navotas, Metro Manila
RTC Ruling;
 the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was entitled to the Writ of Attachment and that Chua,
Yao and Lim, as general partners, were jointly liable to pay respondent
 The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses presented and
(2) on a Compromise Agreement executed by the three in a civil case
a)That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold including the fishing net, to be applied as full
payment in favor of JL Holdings Corporation and/or Lim Tong Lim;
b) If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5,750,000.00 whatever will be the excess will be
divided into 3
c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the deficiency shall be shouldered and paid to JL
Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao
 The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that joint liability could be
presumed from the equal distribution of the profit and loss
CA affirmed the RTC
SC Ruling
 Lim disclaims any direct participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only,
and that he has not even met the representatives of the respondent company
 Petitioner further argues that he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease." He was a lessee of the
fishing boat F/B Lourdes for 6 months
 From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a fishing business, which
they started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim who was petitioner's brother. In their
Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to
divide equally among them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed
money, fell under the term "common fund" under Article 1767.
 The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed
that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed
formed a partnership
 Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. The
fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business. It would have been
inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment, without
which the business could not have proceeded.
 In implying that the lower courts have decided on the basis of one piece of document alone, petitioner fails to appreciate that the CA
and the RTC delved into the history of the document and explored all the possible consequential combinations in harmony with law,
logic and fairness.

11
 We are not convinced by petitioner's argument that he was merely the lessor of the boats to Chua and Yao. In effect, he would like this
Court to believe that he consented to the sale of his own boats to pay a debt of Chua and Yao, with the excess of the proceeds to be
divided among the three of them. No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a
preexisting partnership among all three.
 The sale of the boats, as well as the division among the three of the balance remaining after the payment of their loans, proves beyond
cavil that F/B Lourdes, though registered in his name, was not his own property but an asset of the partnership. It is not uncommon
to register the properties acquired from a loan in the name of the person the lender trusts, who in this case is the petitioner himself.
After all, he is the brother of the creditor, Jesus Lim.
 We stress that it is unreasonable — indeed, it is absurd — for petitioner to sell his property to pay a debt he did not incur, if the
relationship among the three of them was merely that of lessor-lessee, instead of partners.
 Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him.
Again, we disagree
Sec. 21. Corporation by estoppel. — All persons who assume to act as a corporation knowing it to be without authority to do so shall
be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof
 There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the nets it sold. The only question
here is whether petitioner should be held jointly 18 liable with Chua and Yao. Petitioner contests such liability, insisting that only
those who dealt in the name of the ostensible corporation should be held liable. Since his name does not appear on any of the
contracts and since he never directly transacted with the respondent corporation, ergo, he cannot be held liable
 Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which has earlier been proven to be an
asset of the partnership. He in fact questions the attachment of the nets, because the Writ has effectively stopped his use of the
fishing vessel.
 It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation. Although it was never legally
formed for unknown reasons, this fact alone does not preclude the liabilities of the three as contracting parties in representation of it.
Clearly, under the law on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without valid
existence, are held liable as general partners
 Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped the benefits of the contract
entered into by persons with whom he previously had an existing relationship, he is deemed to be part of said association and is
covered by the scope of the doctrine of corporation by estoppel

Evangelista v Santos
Facts:
 On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co
 On June 7, 1955 the Articles of Co-partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial
partner, with herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original
capitalist partners, remaining in that capacity, with a contribution of P17,500 each
 The amended Articles provided, inter alia, that "the contribution of Estrella Abad Santos consists of her industry being an industrial
partner", and that the profits and losses "shall be divided and distributed among the partners ... in the proportion of 70% for the first
three partners and 30% for the fourth partner Estrella Abad Santos."
 respondent filed suit against the three other partners alleging that the partnership had been paying dividends to the partners except to her
 Notwithstanding her demands the defendants had refused and continued to refuse and let her examine the partnership books or to give
her information regarding the partnership affairs to pay her any share in the dividends declared by the partnership.
 She therefore prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her
corresponding share in the partnership profits after such accounting, plus attorney's fees and costs
Defendant's Argument:
 The defendants denied the that they had distributed profits of the partnership and that the plaintiff ever demanded
 The defendants argued that the amended Articles of Co-partnership did not express the true agreement of the parties
 which was that the plaintiff was not an industrial partner; that she did not in fact contribute industry to the partnership; and that her share
of 30% was to be based on the profits which might be realized by the partnership only until full payment of the loan which it had
obtained in December, 1955 from the Rehabilitation Finance Corporation in the sum of P30,000, for which the plaintiff had signed a
promisory note as co-maker and mortgaged her property as security.
 At pages 32-33 of appellants' brief, they did not contemplate to make the appellee Estrella Abad Santos, an industrial partner.
 the fact that the respondent has been, and up to the present time still is, one of the judges of the City Court of Manila, devoting all her
time to the performance of the duties of her public office, before the execution of the amended articles of partnership, Exhibit "A", the

12
 appellee Estrella Abad Santos proves that it was never contemplated between the parties, for she could not lawfully contribute her full
time and industry which is the obligation of an industrial partner pursuant to Art. 1789 of the Civil Code
Issue:
 the main issue in this case is "whether the plaintiff-appellee (respondent here) is an industrial partner or merely a profit sharer entitled to
30% of the net profits that may be realized by the partnership until the mortgage loan shall be fully paid, as claimed by appellants
CFI Ruling:
 It declared Santos as an industrial partner, ordering the defendants to render an accounting of the business operations of the (said)
partnership
CA Ruling:
 It affirmed the jufgment of the CFI
SC Ruling:
 It should be observed, that the Court of Appeals did not hold that the Articles of Co-partnership was conclusive evidence that the
respondent was an industrial partner of the said company, but considered it together with other factors, consisting of both testimonial
and documentary evidences, in arriving at the factual conclusion expressed in the decision
 The lower court relied on the (Exhibit A, B, C, K, K-1, J, N and S),
 first, because appellants have admitted their genuineness and due execution
 secondly the said exhibits indubitably show the appellee is an industrial partner of appellant company
 Appellants are virtually estopped from attempting to detract from the probative force of the said exhibits because they all bear the imprint
of their knowledge and consent, and there is no credible showing that they ever protested against or opposed their contents prior of the
filing of their answer to appellee's complaint
 The argument of the petitioner that the respondent is a profit sharer is discredited not only by the aforesaid documentary evidence
brought forward by the appellee, but also by the fact that a period of over eight (8) years — appellants did nothing to correct the alleged
false agreement of the parties contained in Exhibit "A".
 It is thus reasonable to suppose that, had appellee not filed the present action, appellants would not have advanced this obvious
afterthought that Exhibit "A" does not express the true intent and agreement of the parties thereto.
 On the second argument of the petitioners, the court replied that even as she was and still is a Judge of the City Court of Manila, she has
rendered services for appellants without which they would not have had the wherewithal to operate the business for which appellant
company was organized.
 Article 1767 of the New Civil Code 'does not specify the kind of industry that a partner may thus contribute, hence the said services may
legitimately be considered as appellee's contribution to the common fund
 'ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he
should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have
obtained in violation of this provision, with a right to damages in either case.'
 There is no pretense, however, even on the part of the appellee is engaged in any business antagonistic to that of appellant company,
since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business
 That appellee has faithfully complied with her prestation with respect to appellants is clearly shown by the fact that it was only after filing
of the complaint in this case and the answer thereto appellants exercised their right of exclusion under the law - instead she has been
and still is a judge of the City Court (formerly Municipal Court) of the City of Manila, devoting her time to performance of her duties as
such judge and enjoying the privilege and emoluments appertaining to the said office, aside from teaching in law school in Manila,
without the express consent of the herein defendants'
 What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant company, with the right
to demand for a formal accounting and to receive her share in the net profit that may result from such an accounting, based on Article
1899.
 'ART. 1899. Any partner shall have the right to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable.
 The SC AFFIRMED the CA Ruling in toto. (all of these are CA's decision)

In the Matter of the Petition for Authority to Continue Use of Firm Name 'Sycip Salazar, etc'
Facts

13
 Two separate Petitions were filed before this Court 1) by the surviving partners of Atty. Alexander Sycip and 2) by the surviving partners
of Atty. Herminio Ozaeta, praying that they be allowed to continue using, in the names of their firms, the names of partners who had
passed away
 These were consolidated
 Petitioners Argument:
 Under the law, a partnership is not prohibited from continuing its business under a firm name which includes the name of a deceased
partner, in fact, Article 1840 of the Civil Code
 The use by the person or partnership continuing the business of the partnership name, or the name of a deceased partner as part
thereof, shall not of itself make the individual property of the deceased partner liable for any debts contracted by such person or
partnership
 In accountancy and engineering, the legislature has authorized the adoption of firm names without any restriction as to the use, in such
firm name, of the name of a deceased partner; — a profession requiring the same degree of trust and confidence in respect of clients
as that implicit in the relationship of attorney and client
 The Canons of Professional Ethics are not transgressed by the continued use of the name of a deceased partner in the firm name of a
law partnership because Canon 33 of the Canons of Professional Ethics adopted by the American Bar Association declares that
 ... The continued use of the name of a deceased or former partner when permissible by local custom, is not unethical but care should be
taken that no imposition or deception is practiced through this use. ...
 There is no possibility of imposition or deception because the deaths of their respective deceased partners were well-publicized in all
newspapers of general circulation for several days. petitioners will notify all leading national and international law directories of the fact
of their respective deceased partners' deaths
 No local custom prohibits the continued use of a deceased partner's name in a professional firm's name; there is no custom or usage in
the Philippines
 The continued use of a deceased partner's name in the firm name of law partnerships has been consistently allowed by U.S. Courts and
is an accepted practice in the legal profession of most countries in the world
SC Ruling:
 The Deen's Case and Perkin’s case were mentioned. In those cases the SC ordered the law firms ( Perkins & Ponce Law frim - and that
of Alfred P. Deen and Eddy A. Deen of Cebu City) (Perkins - D.C. Johnson) to desist from including in their firm designation, the name
of the deceased, in view of the personal and confidential nature of the relations between attorney and client, and the high standards
demanded in the canons of professional ethics, no practice should be allowed which even in a remote degree could give rise to the
possibility of deception
 The Court finds no sufficient reason to depart from the rulings thus laid down
A.
 Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and Reyes" are partnerships,
the use in their partnership names of the names of deceased partners will run counter to Art. 1815 of the Civil Code
Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners.
Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability, of a partner
 It is clearly tacit in the above provision that names in a firm name of a partnership must either be those of living partners and in the case
of non-partners, should be living persons who can be subjected to liability
 Article 1825 of the Civil Code prohibits a third person from including his name in the firm name under pain of assuming the liability of a
partner. The heirs of a deceased partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly
where they are non-lawyers.
 Canon 34 of the Canons of Professional Ethics "prohibits an agreement for the payment to the widow and heirs of a deceased lawyer of a
percentage, either gross or net, of the fees received from the future business of the deceased lawyer's clients, both because the
recipients of such division are not lawyers and because such payments will not represent service or responsibility on the part of the
recipient
 The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the
profession
B.
 Firstly, the last paragraph of Article 1840 of the Civil Code cited by petitioners, supra, the first factor to consider is that it is within Chapter
3 of Title IX of the Code entitled "Dissolution and Winding Up." The Article primarily deals with the exemption from liability in cases of a
dissolved partnership, of the individual property of the deceased partner for debts contracted by the person or partnership which
continues the business using the partnership name or the name of the deceased partner as part thereof. What the law contemplates
therein is a hold-over situation preparatory to formal reorganization.
 Secondly, Article 1840 treats more of a commercial partnership with a good will to protect rather than of a professional partnership

14
 As a general rule, upon the dissolution of a commercial partnership the succeeding partners or parties have the right to carry on the
business under the old name, in the absence of a stipulation forbidding it, (s)ince the name of a commercial partnership is a partnership
asset inseparable from the good will of the firm
 On the other hand, a professional partnership the reputation of which depends or; the individual skill of the members
C.
 A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business.
 A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose
 Dean Pound, in his recently published contribution to the Survey of the Legal Profession, (The Lawyer from Antiquity to Modern Times, p.
5) defines a profession as "a group of men pursuing a learned art as a common calling in the spirit of public service, — no less a public
service because it may incidentally be a means of livelihood."
 Primary characteristics which distinguish the legal profession from business are:
1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the highest eminence without making
much money.
2. A relation as an "officer of court" to the administration of justice involving thorough sincerity, integrity, and reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current business methods of
advertising and encroachment on their practice, or dealing directly with their clients
 The right to practice law is not a natural or constitutional right but is in the nature of a privilege or franchise. The right does not only
presuppose in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and
partaking of the nature of a public trust.
D.
 It is true that Canon 33 does not consider as unethical the continued use of the name of a deceased in the firm name of a law
partnership when such a practice is permissible by local custom but the Canon warns that care should be taken that no imposition or
deception is practiced through this use
 However, no local custom permits or allows the continued use of a deceased or former partner's name in the firm names of law
partnerships.
 The possibility of deception upon the public, real or consequential, where the name of a deceased partner continues to be used cannot
be ruled out. A person in search of legal counsel might be guided by the familiar ring of a distinguished name appearing in a firm title
E. U.S. Courts have consistently allowed the continued use of a deceased partner's name in the firm name of law partnerships. But that
is so because it is sanctioned by custom and did not offend any statutory provision.
 Not so in this jurisdiction where there is no local custom that sanctions the practice. Custom has been defined as a rule of conduct formed
by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory.
 Courts take no judicial notice of custom. A custom must be proved as a fact, according to the rules of evidence
 Moreover, judicial decisions applying or interpreting the laws form part of the legal system.
 When the Supreme Court in the Deen and Perkins cases issued its Resolutions directing lawyers to desist from including the names of
deceased partners in their firm designation, it laid down a legal rule against which no custom or practice to the contrary, even if proven,
can prevail. This is not to speak of our civil law which clearly ordains that a partnership is dissolved by the death of any partner
 Custom which are contrary to law, public order or public policy shall not be countenanced
 The practice of law is intimately and peculiarly related to the administration of justice and should not be considered like an ordinary
"money-making trade."

Pacific Commercial Co. v Aboitiz & Martinez GR No. L-25007

Facts:
 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a "regular, collective, merchantile partnership" with a
capital of P40,000 of which each of the partners Aboitiz and De Silva furnished one-third
 Jose Martinez was an industrial partner and furnished no capital; it was provided in the partnership article that he was to receive 30 per
cent of the profits and that his responsibility for losses should not exceed the amount of the profits received by him
 the partnership, through its duly authorized representative, Guillermo Aboitiz, executed a promissory note in favor of the plaintiff the
Pacific Commercial Company for the sum of P23,168.71, with interest at 12 per cent per annum
 As security for the payment of the note, the partnership executed a chattel mortgage in favor of the plaintiff on certain personal property
therein described
 For failure of the partnership to pay the debt the chattel mortgage was foreclosed the mortgages property sold and the proceeds of the
sale, P2,000 was paid over to the plaintiff no further payment on the note appears to have been made and
 the present action was brought for the recovery of the unpaid balance with interest
15
 Trial Court Ruling:
 trial the court below rendered judgment in favor of the plaintiff and against the partnership for the sum of P27,951.68 and for the payment
of interest on the capital of P21,168.71 at the rate of 10 per cent per annum from the 31st October, 1924, until paid, together with 10
per cent on the amount due for fees for collection in accordance with the terms of the aforesaid note
 The judgment further provided that execution should first issue against the property of the partnership should first issue against the
insolvency of the partnership, it might issue against the property of the partners De Silva and Aboitiz and in the event of their
insolvency, then against the property of the industrial partner Jose Martinez.
 Respondents' Argument:
 Martinez appealed to this court and here maintains that under article 141 of the Code of Commerce he, as a mere industrial partner,
cannot be held responsible for the partnership's debt
 On the strength of the vigorous dissenting opinion of Chief Justice Arellano in the case of Munoz, the appellant argues that the decision
therein was erroneous and should now be overruled
SC Ruling:
 The case is practically identical with that of the Compania Maritima vs. Munoz in which this court held the industrial partners secondarily
liable for the debts of the partnership
 we are still of the opinion that the case was correctly decided. Article 127 of the Code of Commerce reads as follows
 All the members of the general copartnership, be they or be they not managing partners of the same are liable personally and in solidum
with all their property for the results of the transaction made in the name and for the account of the partnership, under the signature of
the later, and by a person authorized to make use thereof
 On the other hand, article 141, upon which the appellants relies and which provides that "losses shall be computed in the same
proportion among the capitalist partners without including the industrial partners, unless by special agreement the latter have been
constituted as participants therein.
 Article 141 relates merely to the distribution of losses among the partners themselves in the settlement of the partnership affairs and has
no reference to partnership obligations to third parties
 There is a marked distinction between a liability and a loss and the inability of a partnership to pay a debt to a third party at a particular
time does not necessarily mean that the partnership business as a whole, has been operated at a loss. The partnership may have
outstanding credits which for the moment may have be unavailable for the payment of debts, but which eventually may be realized
upon and yield profits more than sufficient to cover all losses. Bearing this in mind it will be found that there in reality is no conflict
between the two articles quoted; one speaks of liabilities, the other of losses.

Munasque v CA GR no L-39780
 Muñasque filed a complaint for payment of sum of money and damages against respondents Celestino Galan, Tropical Commercial, Co.,
Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a contract with respondent Tropical through its Cebu Branch
Manager Pons for remodelling a portion of its building without exchanging or expecting any consideration from Galan although the latter
was casually named as partner in the contract
Facts:
 Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor entered into a written contract with respondent Tropical for
remodelling the respondent's Cebu branch building
 A total amount of P25,000.00 was to be paid under the contract for the entire services of the Contractor
 The terms of payment were as follows: thirty percent (30%) of the whole amount upon the signing of the contract and the balance thereof
divided into three equal installments at (P6,000.00) every (15) working days
 The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of the petitioner. Petitioner,
however, indorsed the check in favor of respondent Galan to enable the latter to deposit it in the bank and pay for the materials and
labor used in the project
 Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the second check in the amount of
P6,000.00 came and Galan asked the petitioner to indorse it again, the petitioner refused
 Since Galan informed the Cebu branch of Tropical that there was a"misunderstanding" between him and petitioner, respondent Tropical
changed the name of the payee in the second check from Muñasque to "Galan and Associates" which was the duly registered name of
the partnership between Galan and petitioner and under which name a permit to do construction business was issued by the mayor of
Cebu City. This enabled Galan to encash the second check.
 the construction continued through his sole efforts. He stated that he borrowed some P12,000.00 from his friend, Mr. Espina and although
the expenses had reached the amount of P29,000.00 because of the failure of Galan to pay what was partly due the laborers and partly
due for the materials, the construction work was finished ahead of schedule with the total expenditure reaching P34,000.00
 The two remaining checks, each in the amount of P6,000.00,were subsequently given to the petitioner alone with the last check being
given pursuant to a court order
16
 the petitioner filed a complaint for payment of sum of money and damages against the respondents,seeking to recover the following: the
amounts covered by the first and second checks (P13k) which fell into the hands of respondent Galan
 Petitioner's Allegations:
 that by virtue of his having introduced the petitioner to the employing company, Galan would receive some kind of compensation in the
form of some percentages or commission
 that Tropical, under the terms of the contract, agreed to give petitioner the amount of P7,000.00 soon after the construction began and
thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of P25,000.00
 Petitioner's Argument:
 Petitioner contends that the appellate court erred in holding that he and respondent Galan were partners, the truth being that Galan was a
sham and a perfidious partner who misappropriated the amount of P13,000.00 due to the petitioner
 Issues:
 Whether or not there existed a partners between Celestino Galan and Elmo Muñasque
Trial Court Ruling:
 The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to intervene, both having legal
interest in the matter in litigation
 It ordered Muñasque and Galan to pay jointly and severally the intervenors Cebu and Southern Hardware Company and Blue Diamond
Glass Palace (P6,229.34 and P2,213.51, respectively)
 It was later amended because of an intervenor, Tan Siu.
 It ordered Muñasque and Galan to pay jointly and severally CSHC abd Tan interest at 12% per annum of P6,229.34 until the amount is
fully paid - and P500 for attorney's fees - absolving the defendants Tropical Commercial Company and Ramon Pons from any liability
 CA Ruling:
 It affirmed the judgment of the trial court with the sole modification that the liability imposed was changed from "jointly and severally" to
"jointly."
SC Ruling:
 Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager, Pons, from any liability but they also
held the petitioner together with respondent Galan, are liable to the intervenors Cebu Southern Hardware Company and Blue Diamond
Glass Palace for the credit which the intervenors extended to the partnership of petitioner and Galan
 The records will show that the petitioner entered into a con-tract with Tropical for the renovation of the latter's building on behalf of the
partnership of "Galan and Muñasque
 There is nothing in the records to indicate that the partner-ship organized by the two men was not a genuine one. If there was a falling out
or misunderstanding between the partners, such does not convert the partnership into a sham organization
 When Muñasque indorsed the first check in favor of Galan, respondent Tropical therefore, had every right to presume that the petitioner
and Galan were true partners
 No error was committed by the appellate court in holding that the payment made by Tropical to Galan was a good payment which binds
both Galan and the petitioner. Since the two were partners when the debts were incurred, they, are also both liable to third persons
who extended credit to their partnership.
 In George Litton v. Hill, the court ruled that there is a general presumption that each individual partner is an authorized agent for the firm
and that he has authority to bind the firm in carrying on the partnership transactions
 In Le Roy vs. Johnson, the presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of
members of the firm acting apparently in its behalf and within the scope of his authority
 Although the petitioner made allegations as to the alleged malversations of Galan, these were the same allegations in his original
complaint
 Petitioner could have asked at least for a modification of the issues if he really wanted to include the determination of Galan's personal
liability to their partnership but he chose not to do so, as he vehemently denied the existence of the partnership
 At any rate, the issue raised in this petition is the contention of Muñasque that the amounts payable to the intervenors should be
shouldered exclusively by Galan.
 The records show that there is an existing judgment against respondent Galan, holding him liable for the total amount of P7,000.00 in
favor of Eden Hardware which extended credit to the partnership aside from the P2, 000. 00 he already paid to Universal Lumber
 While the liability of the partners are merely joint in transactions entered into by the partnership, a third person who transacted with said
partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or
1823.
 The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner, whether such authority is
real or apparent. That is why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the legal entity
which is the partnership, are solidarily liable

17
 Tropical had every reason to believe that a partnership existed between the petitioner and Galan and no fault or error can be imputed
against it for making payments to "Galan and Associates" and delivering the same to Galan because as far as it was concerned, Galan
was a true partner with real authority to transact on behalf of the partnership with which it was dealing.
 This is even more true in the cases of other creditors
 justice also dictates that Muñasque be reimbursed by Galan for the payments made by the former representing the liability of their
partnership to herein intervenors, as it was satisfactorily established that Galan acted in bad faith in his dealings with Muñasque as a
partner.

PNB v Lo GR No. L-26937

Facts:
 Severo Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a
commercial partnership under the name of "Tai Sing and Co.," with a capital of P40,000 contributed by said partners
 It appears from the articles of copartnership that the partnership was to last for five years from after the date of its organization, and that
its purpose was to do business in the City of Iloilo or in any other part of the Philippine Islands under the name of "Tai Sing & Co.," for
the purchase and sale of merchandise, goods, and native, as well as Chinese and Japanese, products, and to carry on such business
and speculations as they might consider profitable
 J. A. Say Lian Ping was appointed general manager of the partnership
 Ping executed a power of attorney in favor of A. Y. Kelam, authorizing him to act in his stead as manager and administrator of "Tai Sing
& Co.," for, and obtained a loan of P8,000 in current account from the plaintiff bank As security for said loan, he mortgaged certain
personal property of "Tai Sing & Co.,
 This credit was renew several times and in March 1919 A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co., executed a chattel mortgage
in favor of plaintiff bank as security for a loan of P20,000 with interest
 This mortgage was again renewed in April 1920 and A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co., executed another chattel
mortgage for the said sum of P20,000 in favor of plaintiff bank.
 Seng, Lo, Kelam, Ling, the latter represented by M. Pineda Tayenko, executed a power of attorney in favor of Sy Tit representing "Tai
Sing & Co., obtained a credit of P20,000 from plaintiff bank, executing a chattel mortgage on certain personal property belonging to
"Tai Sing & Co
 --So the loaned 4 times (First 8k - Second 20k - Third 20k - Fourth 20k)-- I dont get it?????
 Defendants had been using this commercial credit in a current account with the plaintiff bank, from the year 1918, to May 22, 1921, and
the debit balance of this account, with interest to December 31, 1924, is as follows xxx P20, 239.00
 This is the sum claimed in the complaint, together with interest on the P16,518.74 debt, at 9 per cent per annum from January 1, 1925
until fully paid, with the costs of the trial.
 Defendants' Argument:
 that "Tai Sing & Co. was not a general partnership, and that the commercial credit in current account which "Tai Sing & Co. obtained from
the plaintiff bank had not been authorized by the board of directors of the company, nor was the person who subscribed said contract
authorized to make the same, under the article of copartnership.
RTC Ruling:
 The court ordered the defendants to pay jointly and severally
SC Ruling;
 the defendant association formed by the defendants is a general partnership, as defined in article 126 of the Code Commerce. This
partnership was registered in the mercantile register of the Province of Iloilo. The only anomaly noted in its organization is that instead
of adopting for their firm name the names of all of the partners, of several of them, or only one of them, to be followed in the last two
cases, by the words "and to be followed in the last two cases, by the words "and company" the partners agreed upon "Tai Sing & Co."
as the firm name
 The anomalous adoption of the firm name above noted does not affect the liability of the general partners to third parties under article 127
of the Code of Commerce
 The court cited Kwong-Wo-Sing vs. Kieng-Chiong-Seng where it ruled that, as the company formed by defendants had existed in fact,
though not in law due to the fact that it was not recorded in the register, and having operated and contracted debts in favor of the
plaintiff, the same must be paid by someone.
 This applies more strongly to the obligations contracted by a partnership which was registered in the mercantile registe
 article 126 is for the protection of the creditors rather than of the partners themselves. And consequently the doctrine was enunciated that
the law must be unlawful and unenforceable only as between the partners and at the instance of the violating party, but not in the
sense of depriving innocent parties of their rights who may have dealt with the offenders in ignorance of the latter having violated the
law
18
 contracts entered into by commercial associations defectively organized are valid when voluntarily executed by the parties, and the only
question is whether or not they complied with the agreement. Therefore, the defendants cannot invoke in their defense the anomaly in
the firm name which they themselves adopted
 As to the alleged death in China of the manager of the company, Say Lian Ping, before the attorney-in-fact Ou Yong Kelam executed
Exhibits C, D and E, they are still liable.
 Because Ou Yong Kelam was a partner who contracted in the name of the partnership, without any objection of the other partners; and
(2) because it appears in the record that the appellant-partners Severo Eugenio Lo, Ng Khey Ling and Yap Seng, appointed Sy Tit as
manager, and he obtained from the plaintiff bank the credit in current account
 The judgment against the appellants is in accordance with article 127 of the Code of Commerce which provides that all the members of a
general partnership, be they managing partners thereof or not, shall be personally and solidarily liable with all their property, for the
results of the transactions made in the name and for the account of the partnership, under the signature of the latter, and by a person
authorized to use it.

Tocao v CA
Facts:
 Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand, private respondent Nenita A. Anay met petitioner William T.
Belo, then the vice-president for operations of Ultra Clean Water Purifier, through her former employer in Bangkok
 Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the importation and
local distribution of kitchen cookwares.
 Belo volunteered to finance the joint venture and assigned to Anay the job of marketing the product considering her experience and
established relationship with West Bend Company, a manufacturer of kitchen wares in Wisconsin, U.S.A.
 Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the marketing
department and later, vice-president for sales
 The parties agreed that Belo’s name should not appear in any documents relating to their transactions with West Bend Company.
Instead, they agreed to use Anay’s name in securing distributorship of cookware from that company
 parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the business; (2) overriding
commission of six percent (6%) of the overall weekly production; (3) thirty percent (30%) of the sales she would make; and (4) two
percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belo’s assurances that he
was sincere, dependable and honest when it came to financial commitments
 They operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao’s name
 Thereafter, Roger Muencheberg of West Bend Company invited Anay to the distributor/dealer meeting in West Bend, Wisconsin, U.S.A
 Anay accepted the invitation with the consent of Marjorie Tocao who even wrote a letter to the Visa Section of the U.S. Embassy in
Manila on July 13, 1987 acknowleging Anay as a business partner of their company
 Anay arrived from the U.S.A and immediately undertook the task of saving the business on account of the unsatisfactory sales record in
the Makati and Cubao offices.
 in the presence of Anay, Belo signed a memo entitling her to a thirty-seven percent (37%) commission for her personal sales "up Dec
31/87." Belo explained to her that said commission was apart from her ten percent (10%) share in the profits
 Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect that she was no longer the vice-
president of Geminesse Enterprise.
 Marjorie Tocao had barred her from holding office and conducting demonstrations in both Makati and Cubao offices
 Anay attempted to contact Belo. She wrote him twice to demand her overriding commission but her letters were not answered, Anay
consulted her lawyer, who, in turn, wrote Belo a letter. Still, that letter was not answered.
 Anay still received her five percent (5%) overriding commission up to December 1987
 In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally.
 The plaintiff also prayed for an audit of the finances of Geminesse Enterprise from the inception of its business operation until she was
"illegally dismissed" to determine her ten percent (10%) share in the net profits
 Petitioners' Argument:
 Tocao and Belo asserted that the "alleged agreement" with Anay that was "neither reduced in writing, nor ratified," was "either
unenforceable or void or inexistent
 There could not have been a partnership because, as Anay herself admitted, Geminesse Enterprise was the sole proprietorship of
Marjorie Tocao
 such complaint should have been lodged with the Department of Labor and not with the regular court
 Instead, Anay had acted like she owned the enterprise because of her experience and expertise. Hence, petitioners were the ones who
suffered actual damages
19
 Belo denied that Anay was supposed to receive a share in the profit of the business. He, however, admitted that the two had agreed that
Anay would receive a three to four percent (3-4%) share in the gross sales of the cookware
 Belo denied contributing capital as he merely served as a guarantor of Marjorie Tocao,
 He attended and/or presided over business meetings of the venture in his capacity as a guarantor but he never participated in decision-
making. He claimed that he wrote the memo granting the plaintiff thirty-seven percent (37%) commission upon her dismissal from the
business venture at the request of Tocao, because Anay had no other income
 Tocao denied having entered into an oral partnership agreement with Anay. However,
 They agreed to grant her the following commissions: thirty-seven percent (37%) on personal sales;
 Because she treated Anay as her "co-equal," Marjorie received the same amounts of commissions as her
RTC Ruling:
 The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the defendants
 The fact that Geminesse Enterprise was registered in Marjorie Tocao’s name is not determinative of whether or not the business was
managed and operated by a sole proprietor or a partnership
 The trial court finally held that a partner who is excluded wrongfully from a partnership is an innocent partner. Hence, the guilty partner
must give him his due upon the dissolution of the partnership as well as damages or share in the profits "realized from the appropriation
of the partnership business and goodwill."
CA dismissed the appeal
SC Ruling:
 Private respondent contributed such expertise to the partnership and hence, under the law, she was the industrial or managing partner. It
was through her reputation with the West Bend Company that the partnership was able to open the business
 petitioner Belo’s denial that he financed the partnership rings hollow in the face of the established fact that he presided over meetings
regarding matters affecting the operation of the business
 As an industrial partner, private respondent had the right to demand for a formal accounting of the business and to receive her share in
the net profit
 What was registered with the Bureau of Domestic Trade on August 19, 1987 was merely the name of that enterprise
 The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up stage), were the unsold
goods and uncollected receivables, which were presented to the trial court
 Thus, as petitioner Tocao became adept in the business operation, she started to assert herself to the extent that she would even shout
at private respondent in front of other people
 However, a mere falling out or misunderstanding between partners does not convert the partnership into a sham organization
 Since the partnership created by petitioners and private respondent has no fixed term and is therefore a partnership at will predicated on
their mutual desire and consent, it may be dissolved by the will of a partner
 The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued
existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner’s capability to give it, and the absence
of cause for dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the
partnership but that it can result in a liability for damages.
 An unjustified dissolution by a partner can subject him to action for damages because by the mutual agency that arises in a partnership,
the doctrine of delectus personae allows the partners to have the power, although not necessarily the right to dissolve the partnership.
 By that memo, petitioner Tocao effected her own withdrawal from the partnership and considered herself as having ceased to be
associated with the partnership in the carrying on of the business. Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business
 The winding up of partnership affairs has not yet been undertaken by the partnership.1âwphi1 This is manifest in petitioners’ claim for
stocks that had been entrusted to private respondent in the pursuit of the partnership business.

20