PARTNERSHIP

1. HEIRS OF TAN ENG KEE VS CA (EXISTENCE OF PARTNERSHIP DISPUTED)

341 SCRA 740

FACTS: After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry together,
entered into a partnership engaged in the business of selling lumber and hardware and construction supplies.
They named their enterprise "Benguet Lumber" which they jointly managed until Tan EngKee's death. Petitioners
herein averred that the business prospered due to the hard work and thrift of the alleged partners. However, they
claimed that in 1981, Tan Eng Lay and his children caused the conversion of the partnership "Benguet Lumber"
into a corporation called "Benguet Lumber Company." The incorporation was purportedly a ruse to deprive Tan
EngKee and his heirs of their rightful participation in the profits of the business. Petitioners prayed for accounting
of the partnership assets, and the dissolution, winding up and liquidation thereof, and the equal division of the
net assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint
venture which is akin to a particular partnership. The Court of Appeals rendered the assailed decision reversing
the judgment of the trial court.

ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a business
venture and/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses
of the business venture or particular partnership

HELD: There was no partnership whatsoever. Except for a firm name, 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 trial court
determined that Tan EngKee and Tan Eng Lay had entered into a joint venture, which it said is akin to a particular
partnership. A particular partnership is distinguished from a joint adventure, to wit:(a) A joint adventure (an
American concept similar to our joint accounts) is a sort of informal partnership, with no firm name and no legal
personality. In a joint account, the participating merchants can transact business under their own name, and can
be individually liable therefor. (b) Usually, but not necessarily a joint adventure is limited to a SINGLE
TRANSACTION, although the business of pursuing to a successful termination maycontinue for a number of years;
a partnership generally relates to a continuing business of various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint co-ventures or partners, in which each party has an
equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in
the conduct of the business. The evidence presented by petitioners falls short of the quantum of proof required
to establish a partnership. In the absence of evidence, we cannot accept as an established fact that Tan EngKee
allegedly contributed his resources to a common fund for the purpose of establishing a partnership. Besides, it is
indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan EngKee
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 EngKee appeared never to have made any such demand for
accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee was only an employee, not a partner
since they did not present and offer evidence that would show that Tan EngKee received amounts of money
allegedly representing his share in the profits of the enterprise. There being no partnership, it follows that there
is no dissolution, winding up or liquidation to speak of.
2. ONA VS COMMISSIONER OF INTERNAL REVENUE (CO-OWNERSHIP OR CO-POSSESSION)
45 SCRA 74

FACTS: Julia Buñales died leaving as heirs her surviving spouse, Lorenzo Oña and her five children. A civil case was
instituted for the settlement of her state, in which Oña was appointed administrator and later on the guardian of
the three heirs who were still minors when the project for partition was approved. This shows that the heirs have
undivided ½ interest in 10 parcels of land, 6 houses and money from the War Damage Commission. Although the
project of partition was approved by the Court, no attempt was made to divide the properties and they remained
under the management of Oña who used said properties in business by leasing or selling them and investing the
income derived therefrom and the proceeds from the sales thereof in real properties and securities. As a result,
petitioners’ properties and investments gradually increased. Petitioners returned for income tax purposes their
shares in the net income but they did not actually receive their shares because this left with Oña who invested
them. Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore,
subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners asked for reconsideration,
which was denied hence this petition for review from CTA’s decision.

ISSUE: (1) Whether or not there was a co-ownership or an unregistered partnership (2) Whether or not the
petitioners are liable for the deficiency corporate income tax

HELD: Unregistered partnership. The Tax Court found that instead of actually distributing the estate of the
deceased among themselves pursuant to the project of partition, the heirs allowed their properties to remain
under the management of Oña and let him use their shares as part of the common fund for their ventures, even
as they paid corresponding income taxes on their respective shares.

Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into an unregistered
partnership the moment the said common properties and/or the incomes derived therefrom are used as a
common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance
as determined in a project partition either duly executed in an extrajudicial settlement or approved by the court
in the corresponding testate or intestate proceeding. The reason is simple. From the moment of such partition,
the heirs are entitled already to their respective definite shares of the estate and the incomes thereof, for each of
them to manage and dispose of as exclusively his own without the intervention of the other heirs, and,
accordingly, he becomes liable individually for all taxes in connection therewith. If after such partition, he allows
his share to be held in common with his co-heirs under a single management to be used with the intent of making
profit thereby in proportion to his share, there can be no doubt that, even if no document or instrument were
executed, for the purpose, for tax purposes, at least, an unregistered partnership is formed.

For purposes of the tax on corporations, our National Internal Revenue Code includes these partnerships —

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… (8 Merten’s Law of
Federal Income Taxation, p. 562 Note 63; emphasis ours.)

with the exception only of duly registered general copartnerships — within the purview of the term “corporation.”
It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said Code is
concerned, and are subject to the income tax for corporations. Judgment affirmed.
3. GATCHALIAN VS COLLECTOR OF INTERNAL REVENUE (CO-OWNERSHIP OR CO-POSSESSION)
67 PHIL 666

FACTS: Plaintiffs are all residents of the municipality of Pulilan, Bulacan, and that defendant is the Collector of
Internal Revenue of the Philippines; The plaintiffs, decided to share and amount of the ticket, immediately
thereafter, plaintiffs purchased from one of the duly authorized agents of the National Charity Sweepstakes Office
one ticket bearing No. 178637 and that the said ticket was registered in the name of Jose Gatchalian and Company
as a result, the above-mentioned ticket bearing No. 178637 won one of the third prizes in the amount of P50,000
and which check was cashed by Jose Gatchalian & Company. Gatchalian was required by income tax examiner
Alfredo David to file the corresponding income tax return covering the prize won by Jose Gatchalian & Company
and that the said return was signed by Gatchalian defendant made an assessment against requesting the payment
of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan. Plaintiffs, through their attorney,
sent to defendant a reply requesting exemption from the payment of the income tax to which reply there were
enclosed fifteen (15) separate individual income tax returns filed separately by each one of the plaintiffs defendant
denied plaintiffs' request for exemption from the payment of tax in view of the failure of the plaintiffs to pay the
amount of tax demanded by the defendant, notwithstanding subsequent demand issued a warrant of distraint
and levy against the property of the plaintiffs. Plaintiffs, through Gregoria Cristobal, Maria C. Legaspi and Jesus
Legaspi, paid under protest the sum of P601.51 as part of the tax and requested defendant that plaintiffs be
allowed to pay under protest the balance plaintiffs demanded upon defendant the refund of the total sum of
P1,863.44 paid under protest by them but that defendant refused and still refuses to refund the said amount
notwithstanding the plaintiffs' demands.

ISSUE: Whether the plaintiffs formed a partnership, or merely a community of property without a personality of
its own

HELD: There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from
the payment of income tax under the law. But according to the stipulated facts the plaintiffs organized a
partnership of a civil nature because each of them put up money... to buy a sweepstakes ticket for the sole purpose
of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil
Code). The partnership was not only formed, but upon the organization thereof and the winning of... the prize,
Jose Gatchalian personally appeared in the office of the Philippine Charity Sweepstakes, in his capacity as co-
partner, as such collected the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and
company, and the said partner, in the same capacity, collected the said check. All these circumstances repel the
idea that the plaintiffs organized and formed a community of property only. Having organized and constituted a
partnership of a civil nature, the said entity is the one bound to pay the income tax which the defendant collected.

There is no merit in plaintiffs' contention that the tax should be prorated among them and paid individually,
resulting in their exemption from the tax.
4. LIWANAG VS CA (FAILURE TO RETURN PARTNERSHIP MONEY RECEIVED)
281 SCRA 1225

FACTS: Petitioner Carmen Liwanag was charged with the crime of estafa before the RTC of Quezon City. The
complaint alleged that petitioner Liwanag and certain Thelma Tabligan went to the house of complainant Isidora
Rosales and offered her to join them in the business of buying and selling of cigarettes. Rosales agreed to give the
money needed to buy the cigarettes while Liwanag and Tabligan will act as her agents with the corresponding 40%
commission to her if the goods are sold. It was also agreed that in the event that the cigarettes are not sold, the
proceeds of the sale or the said products shall be returned to Rosales. Liwanag failed to comply with the above
agreements and ceased to make periodic reports to Rosales prompting the latter to file an estafa case against her.
The trial court found Liwanag guilty as charged. When brought on appeal, the appellate court affirmed the
decision. Hence, this petition where Liwanag advances the theory that the parties intended to enter into a contract
of partnership, wherein Rosales would contribute the funds while she would buy and sell the cigarettes, and later
divide the profits between them. She also argues that the transaction can also be interpreted as a simple loan,
with Rosales lending to her the amount stated on an installment basis.

ISSUE: May a partner be sued for estafa for misappropriation of partnership funds? YES

RULING: All the elements of estafa are attendant in the present case: (1) that the accused defrauded another by
abuse of confidence or deceit; and (2) that damage or prejudice capable of pecuniary estimation is caused to the
offended party or third party, and it is essential that there be a fiduciary relation between them either in the form
of a trust, commission or administration.
The language of the receipt signed by petitioner could not be any clearer. It indicates that the money delivered to
Liwanag was for a specific purpose, that is, for the purchase of cigarettes, and in the event the cigarettes cannot
be sold, the money must be returned to Rosales. Thus, even assuming that a contract of partnership was indeed
entered into by and between the parties, we have ruled that when money or property have been received by a
partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it, such
partner is guilty of estafa.

Neither can the transaction be considered a loan, since in a contract of loan once the money is received by the
debtor, ownership over the same is transferred. Being the owner, the borrower can dispose of it for whatever
purpose he may deem proper. In the instant petition, however, it is evident that Liwanag could not dispose of the
money as she pleased because it was only delivered to her for a single purpose, namely, for the purchase of
cigarettes, and if this was not possible then to return the money to Rosales. Since in this case there was no transfer
of ownership of the money delivered, Liwanag is liable for conversion under Art. 315, par. l(b) of the Revised Penal
Code.
5. EVANGELISTA & CO. V. ABAD SANTOS (PROHIBITION AGAINST ENGAGING IN BUSINESS/ FORMAL ACCOUNTING)
51 SCRA 416

FACTS: On October 9, 1954, a co-partnership with herein petitioners as capitalist partners was formed under the
name “Evangelista & Co.” The Articles of Co-partnership was, however, amended on June 7, 1955 so as to
include herein respondent, Estrella Abad Santos, as an industrial partner.

Consequently, on December 17, 1963, Abad Santos filed suit against the three (3) capitalist partners, alleging
that the partnership, which was also made a party-defendant, had been paying dividends to the partners except
to her. It was further alleged that despite her requests that she be allowed to examine partnership books, to give
her information regarding the partnership affairs and to receive her share in the dividends declared by the
partnership, the petitioners refused and continued to refuse. She therefore prayed that the petitioners be ordered
to render an accounting of the partnership business and to pay her the corresponding share in the dividends.

ISSUE: Whether or not the Articles of Co-partnership shall be considered as a conclusive evidence of respondent’s
status as a limited partner?

HELD: NO. The Court held that despite the genuineness of the Articles of Co-partnership the same did not express
the true intent and agreement of the parties, however, as the subsequent events and testimonial evidences
indicate otherwise, the Court upheld that respondent is an industrial partner of the company.

Article 1789 provides that ‘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.’ Since 1954 and until after the promulgation of the decision of the appellate court, Abad
Santos has served as a judge of the City Court of Manila and had been paid for services rendered allegedly
contributed by her to the partnership. Though being a judge of the City Court of Manila cannot be characterized
a business and/or may be considered an antagonistic business to the partnership, the petitioners, subsequent of
petitioners’ answer to the complaint, petitioners reached the decision that respondent be excluded from and
deprived of her alleged share in the interest or participation as an alleged industrial partner in the net profits or
income of the partnership.

Having always known the respondent is a City Judge even before she joined the partnership, why did it take
petitioners so many years before excluding her from said company? Furthermore, the act of exclusion is premised
on the ground that respondent has always been a partner, an industrial partner. In addition, the Court further
held that with the consideration of Article 1767 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 profits
among themselves’, the services rendered by respondent may legitimately be considered the respondent’s
contribution to the common fund.
6. RAMNANI VS CA (DISTRIBUTION OF PROFITS AND LOSSES)
196 SCRA 731

FACTS: Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood. Ishwar and
his spouse Sonya had their main business based in New York. Realizing the difficulty of managing their investments
in the Philippines they executed a general power of attorney on January 24, 1966 appointing Navalrai and
Choithram as attorneys-in-fact, empowering them to manage and conduct their business concern in the
Philippines. On February 1, 1966 and on May 16, 1966, Choithram entered into two agreements for the purchase
of two parcels of land located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership. A building
was constructed thereon by Choithram in 1966. Three other buildings were built thereon by Choithram through a
loan of P100,000.00 obtained from the Merchants Bank as well as the income derived from the first building.

Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these properties
during the period 1967 to 1970. Choithram failed and refused to render such accounting. Thereafter, Ishwar
revoked the general power of attorney. Choithram and Ortigas were duly notified of such revocation on April 1,
1971 and May 24, 1971, respectively. Said notice was also registered with the Securities and Exchange Commission
on March 29, 1971 and was published in the April 2, 1971 issue of The Manila Times for the information of the
general public. Nevertheless, Choithram, transferred all rights and interests of Ishwar and Sonya in favor of his
daughter-in-law, Nirmla Ramnani, on February 19, 1973. On October 6, 1982, Ishwar and Sonya filed a complaint
against Choitram and/or spouses Nirmla and Moti and Ortigas for reconveyance of said properties or payment of
its value and damages.

ISSUE: Whether Ishram can recover the entire properties subject in the ligitation

HELD: No, Ishram cannot recover the entire properties subject.

The Supreme Court held that despite the fact that Choithram, et al., have committed acts which demonstrate their
bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties in litigation,
the Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the
industrial partner in the acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist
partner in the joint venture.

Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question
from Ortigas as attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he paid in installments and used
the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the buildings were burned
later, Choithram was able to build two other buildings on the property. He rented them out and collected the
rentals. Through the industry and genius of Choithram, Ishwar's property was developed and improved into what
it is now.

Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this
Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end
up the loser. After all, blood is thicker than water.
7. PHILIPPINE NATIONAL BANK VS LO (INDIVIDUAL LIABILITY OF PARTNERS)
52 PHIL 802

FACTS: In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam and Peng formed a
commercial partnership under the name of “Tai Sing and Co.,” with a capital of P40,000 contributed by said
partners. The firm name was registered in the mercantile registrar in the Province of Iloilo. Ping, in the articles of
partnership, was assigned as the general manager. However, in 1917, he executed a special power of attorney in
favor of Lam to act in his behalf as the manager of the firm. Subsequently, Lam obtained a loan from PNB – the
loan was under the firm’s name. In the same year, Ping died in China. From 1918 to 1920, the firm, via GM Lam,
incurred other loans from PNB. The loans were not objected by any of the partners. Later, PNB sued the firm for
non-payment. Lo, in his defense, argued that he cannot be liable as a partner because the partnership, according
to him, is void; that it is void because the firm’s name did not comply with the requirement of the Code of
Commerce that a firm name should contain the “names of all of the partners, of several of them, or only one of
them”. Lo also argued that the acts of Lam after the death of Ping is not binding upon the other partners because
the special power of attorney shall have already ceased.

ISSUE: Whether or not Lo is correct in both arguments.

HELD: No. 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 object of the Code of Commerce in
requiring a general partnership to transact business under the name of all its members, of several of them, or of
one only, is to protect the public from imposition and fraud; it is for the protection of the creditors rather than of
the partners themselves. It is unenforceable 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; and that contracts entered into by a partnership firm defectively
organized are valid when voluntarily executed by the parties, and the only question is whether or not they
complied with the agreement. Therefore, Lo cannot invoke in his defense the anomaly in the firm name which
they themselves adopted. Lo was not able to prove his second argument. But even assuming arguendo, his second
contention does not deserve merit because (a) Lam, in acting as a GM, is also a partner and his actions were never
objected to by the partners, and (b) it also appeared from the evidence that Lo, Lam and the other partners
authorized some of the loans.
8. COMPANIA MARITAMA VS MUNOZ (LIABILITY FOR DEBTS OF AN INDUSTRIAL PARTNER)
9 PHIL 326

FACTS: Francisco Munoz, Emilio Munoz, and Rafael Naval formed an ordinary general commercial partnership,
Francisco Munoz & Sons, for the purpose of carrying a mercantile business. Francis was a capitalist partner while
Emilio and Rafael were industrial partners. Plaintiff La Compania Maritima brought an action to recover a sum of
money against the partnership and the partners in their own individual capacity. Emilio and Rafael were absolved
from liability. In their brief, it is claimed that it is not an ordinary general commercial partnership while in their
article of partnership it is expressly stated that they have agreed and do form an ordinary general commercial
partnership. The object of the partnership is purely mercantile and all requirements under the Code of Commerce
were complied with. The articles of partnership were even recorded in the mercantile registry of Albay. There is
no doubt that there is a partnership.

Appellees claimed that Emilio is not a partner because 1) he contributed nothing to the partnership, 2) he has no
salary and 3) he is excluded from the management. The Supreme court in upholding that he is a partner stated
that 1) he contributed as much as Rafael, 2) he receives a salary, the only difference between him and Rafael is
that the latter was entitled to a fixed salary while he is not and 3) that the partners can validly do the exclusion
from management in accordance with the provision of Art. 125 of the Code of Commerce.

Doctrine: In an ordinary general partnership an industrial partner is liable to third parties for debts and obligations
of partnership. The construction of the law should be avoided which would enable two persons, each with a large
amount of private property, to form and carry on a partnership and, upon the bankruptcy of the latter, to say to
its creditors that they contributed no capital to the company but only their services, and that their private property
is not, therefore, liable for its debts. It should be noted, however, that the execution of the judgment should not
issue against the private property of the partners until the property of the partnership is exhausted.

Issue: Knowing now that Emilio is a general partner, can he be held liable to third persons for the obligations
contracted by the partnership despite his status as an industrial partner in an ordinary, general mercantile
partnership? YES!

HELD: Art. 127 of the Code of Commerce All the members of the general co-partnership, be they or be they not
managing partners of the same, are liable personally and in solidum with all their property for the results of the
transactions made in the name and for the account of the partnership, under the signature of the latter, and by a
person authorized to make use thereof. The controlling law is Article 127. There is no injustice in imposing this
liability upon the industrial partners. They have a voice in the management of the business, if no manager has
been named in the articles; they share in the profits and as to third persons it is no more than right that they
should share in the obligations. Article 141 relates exclusively to the settlement of the partnership affairs among
the partners themselves and has nothing to do with the liability of the partners to third persons; that each one of
the industrial partners is liable to third persons for the debts of the firm; that if he has paid such debts out of his
private property during the life of the partnership, when its affairs are settled he is entitled to credit for the
amount so paid, and if it results that there is not enough property in the partnership to pay him, then the capitalist
partners must pay him. In relation to this, the Supreme Court noted that partnerships under the Civil Code
provides for a scenario where all partners are industrial partners (like when it is a partnership for the exercise of
a profession). In such case, if it is permitted that industrial partners are not liable to third persons then such third
persons would get practically nothing from such partnerships if the latter is indebted.
9. SANTIAGO SYJUCO VS CASTRO (CONVEYANCE OF REAL PROPERTY BELONGING TO THE PARTNERSHIP)
175 SCRA 171

FACTS: Back in November 1964, the Lims, borrowed from petitioner Santiago Syjuco, Inc., the sum of P800,000.00.
The loan was given on the security of a first mortgage on property registered in the names of said borrowers as
owners in common under Transfer Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of
Manila. Thereafter additional loans on the same security were obtained by the Lims from Syjuco, so that as of May
8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the security had been
augmented by bringing into the mortgage other property, also registered as owned pro indiviso by the Lims under
two titles: TCT Nos. 75416 and 75418 of the Manila Registry.

On November 8, 1967, the Lims failed to pay it despite demands therefore; that Syjuco consequently caused extra-
judicial proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of Manila; and that the
latter scheduled the auction sale of the mortgaged property on December 27, 1968. The attempt to foreclose
triggered off a legal battle that has dragged on for more than twenty years now, fought through five (5) cases in
the trial courts, two (2) in the Court of Appeals, and three (3) more in the Supreme Court.

One of the complaints filed by the Lims was filed not in their individual names, but in the name of a partnership
of which they themselves were the only partners: "Heirs of Hugo Lim." The complaint advocated the theory that
the mortgage which they, together with their mother, had individually constituted (and thereafter amended
during the period from 1964 to 1967) over lands standing in their names in the Property Registry as owners pro
indiviso, in fact no longer belonged to them at that time, having been earlier deeded over by them to the
partnership, "Heirs of Hugo Lim," more precisely, on March 30, 1959, hence, said mortgage was void because
executed by them without authority from the partnership.

ISSUE: Whether the mortgage executed by the Lims be attributable to their partnership

HELD: Yes, the mortgage executed by the Lims is attributable to their partnership.

The Supreme Court held that the legal fiction of a separate juridical personality and existence will not shield it
from the conclusion of having such knowledge which naturally and irresistibly flows from the undenied facts. It
would violate all precepts of reason, ordinary experience and common sense to propose that a partnership, as
such, cannot be held accountable with knowledge of matters commonly known to all the partners or of acts in
which all of the latter, without exception, have taken part, where such matters or acts affect property claimed as
its own by said partnership.

The silence and failure of the partnership to impugn said mortgage within a reasonable time, let alone a space of
more than seventeen years, brought into play the doctrine of estoppel to preclude any attempt to avoid the
mortgage as allegedly unauthorized.

There is no reason to distinguish between the Lims, as individuals, and the partnership itself, since the former
constituted the entire membership of the latter. In other words, despite the concealment of the existence of the
partnership, for all intents and purposes and consistently with the Lims' own theory, it was that partnership which
was the real party in interest in all the actions; it was actually represented in said actions by all the individual
members thereof, and consequently, those members' acts, declarations and omissions cannot be deemed to be
simply the individual acts of said members, but in fact and in law, those of the partnership.
10. MUNASQUE VS CA
139 SCRA 533
(LIABILITY OF PARTNER FOR WRONGFUL ACT OF BREACH OF TRUST – OBLIGATIONS OF THE PARTNERS WITH
REGARD TO THIRD PERSONS)

FACTS: Elmo Muñasque, in behalf of “Galan and Muñasque” partnership as Contractor, entered into a written
contract with Tropical Commercial Co., through its branch manager Ramon Pons, for remodelling of Tropical’s
building in Cebu. The consideration for the entire services is P25,000 to be paid: 30% upon signing of contract,
and balance on 3 equal instalments of P6,000 every 15 working days.

First payment of check worth P7,000 was payable to Muñasque, who indorsed it to Galan for purposes of
depositing the amount and paying the materials already used. But since Galan allegedly misappropriated
P6,183.37 of the check for personal use, Muñasque refused to indorse the second check worth P6,000. Galan
then informed Tropical of the “misunderstanding” between him and Muñasque and this prompted Tropical to
change the payee of the second check from Muñasque to “Galan and Associates” (the duly registered name of
Galan and Muñasque partnership). Despite the misappropriation, Muñasque alone was able to finish the project.
The two remaining checks were properly issued to Muñasque.

Muñasque filed a complaint for payment of sum of money plus damages against Galan, Tropical and Pons for the
amount covered by the first and second checks. Cebu Southern Hardware Co and Blue Diamond Glass Palace were
allowed as intervenors having legal interest claiming against Muñasue and Galan for materials used.

Issue:
1. Whether or not Muñasque and Galan are partners?
2. Whether or not payment made by Tropical to Galan was “good payment”?
3. Whether or not Galan should shoulder exclusively the amounts payable to the intervenors (granting he
misappropriated the amount from the two checks)?

Held: 1. YES. Tropical had every right to presume the existence of the partnership:
a. Contract states that agreement was entered into by “Galan and Muñasque”
b. The first check issue in the name of Muñasque was indorsed to Galan
The relationship was made to appear as a partnership.

2. YES. Muñasque and Galan were partners when the debts to the intervenors were incurred, hence, they are also
liable to third persons who extended credit to their partnership.

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. The presumption is sufficient to permit
third persons to hold the firm liable on transactions entered into by one of the members of the firm acting
apparently in its behalf and within the scope of his authority

3. NO. Article 1816 BUT construed together with Article 1824.

Art. 1816. “All partners, including industrial ones, shall be liable pro rata x x x for the contracts which may be
entered into the name and for the account of the partnership, under its signature and by a person authorized x x
x”

Art. 1824. “All partners are liable solidarily with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823”
Art. 1822. “Where, by any wrongful act or omission of any partner acting in the ordinary course of the business x
x x or with the authority of his co-partners, loss or injury is caused to any person x x x”

Art. 1823. “The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent authority receives money or property of a third
person and misapplies it, and
(2) Where the partnership in the course of its business receives money or property of a third person x x x is
misapplied by any partner while it is in the custody of the partnership.”

GR: In transactions entered into by the partnership, the liability of the partners is merely joint
Exception: In transactions involving third persons falling under Articles 1822 and 1823, such third person may hold
any partner solidarily liable for the whole obligation with the partnership.

Reason for exception: the law protects him, who in good faith relied upon the authority if a partner, whether real
or apparent.

However, as between Muñasque and Galan, justice also dictates reimbursement in favour of Muñasque as Galan
was proven to be in bad faith in his dealings with his partner.
11. DELUAO VS CASTEEL (DISSOLUTION OF PARTNERSHIP)
26 SCRA 475

FACTS: In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy land, 178.76 hectares,
in the then sitio of Malalag, municipality of Padada, Davao for 3 consecutive times because the Bureau of Fisheries
did not act upon his previous applications. Despite the said rejection, Casteel did not lose interest. Because of the
threat poised upon his position by the other applicants who entered upon and spread themselves within the area,
Casteel realized the urgent necessity of expanding his occupation thereof by constructing dikes and cultivating
marketable fishes. But lacking financial resources at that time, he sought financial aid from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were already occupied by rival applicants,
Casteel immediately filed a protest. Consequently, two administrative cases ensued involving the area in question.

However, despite the finding made in the investigation of the above administrative cases, the Director of Fisheries
nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the improvements
which he had introduced on the land, and ordered that the land be leased through public auction

On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor Casteel as
party of the second part, executed a contract — denominated a "contract of service". On the same date the above
contract was entered into, Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa. On
November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on November 17,
1948. Unfazed by this rejection, Deluao reiterated his claim over the same area in the two administrative cases
and asked for reinvestigation of the application of Nicanor Casteel over the subject fishpond. The Secretary of
Agriculture and Natural Resources rendered a decision ordering Casteel to be reinstated in the area and that he
shall pay for the improvement made thereupon. Sometime in January 1951 Nicanor Casteel forbade Inocencia
Deluao from further administering the fishpond, and ejected the latter's representative (encargado), Jesus
Donesa, from the premises.

ISSUE: Whether the reinstatement of Casteel over the subject land constitute a dissolution of the partnership
between him and Deluao

HELD: Yes, the reinstatement of Casteel dissolved his partnership with Deluao.

The Supreme Court ruled that the arrangement under the so-called "contract of service" continued until the
decision both dated Sept. 15, 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR
Cases 353 and 353-B.

This development, by itself, brought about the dissolution of the partnership. Since the partnership had for its
object the division into two equal parts of the fishpond between the appellees and the appellant after it shall have
been awarded to the latter, and therefore it envisaged the unauthorized transfer of one half thereof to parties
other than the applicant Casteel, it was dissolved by the approval of his application and the award to him of the
fishpond.

The approval was an event which made it unlawful for the members to carry it on in partnership. Moreover,
subsequent events likewise reveal the intent of both parties to terminate the partnership because each refused
to share the fishpond with the other.
12. TOCAO VS CA (POWER TO DISSOLVE PARTNERSHIP)
342 SCRA 20

FACTS: 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. 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. Anay having secured the distributorship of cookware products from the West Bend Company and
organized the administrative staff and the sales force, the cookware business took off successfully. They operated
under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name.
The 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.

On October 9, 1987, 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. Anay attempted to contact Belo.
She wrote him twice to demand her overriding commission for the period of January 8, 1988 to February 5, 1988
and the audit of the company to determine her share in the net profits. Anay still received her five percent (5%)
overriding commission up to December 1987. The following year, 1988, she did not receive the same commission
although the company netted a gross sales of P 13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against
Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140. The trial court held that
there was indeed an "oral partnership agreement between the plaintiff and the defendants. The Court of Appeals
affirmed the lower court’s decision.

ISSUE: Whether the parties formed a partnership

HELD: Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these requisites:

(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and

(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form;
a public instrument is necessary only where immovable property or real rights are contributed thereto.

This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a
written one. In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay
as head of the marketing department and later, vice-president for sales. Furthermore, Anay was entitled to a
percentage of the net profits of the business.

Therefore, the parties formed a partnership.

13. YU VS NLRC
224 SCRA 75
(CREDITORS OF THE OLD PARTNERSHIP ARE ALSO CREDITORS OF THE NEW PARTNERSHIP WHICH CONTINUES THE
BUSINESS)

FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain Products Company Limited primarily
responsible for the overall operations of marble quarrying and export business of said partnership. He was hired
by a virtue of a Partnership Resolution in 1985 with a monthly salary of P4,000.00. Initially he received only half
of his stipulated monthly salary and was promised by the partners that the balance would be paid upon securing
additional operating funds from abroad. However, in 1988 without his knowledge the general partners as well as
one of the limited partners sold and transferred their interest to Willy Co and Emmanuel Zapanta. Thus the new
major partners decided to transfer the firm’s main office but opted to continue the operation of the old
partnership under its old firm name and with all its employees and workers except for the petitioner. Upon
knowing of the changes in the partnership, petitioner went to the new main office to meet the new partners and
demand the payment of his unpaid salaries, but the latter refused to pay him and instead informed him that since
he bought the business from the original partners, it was for him to decide whether or not he was responsible for
the obligations of the old partnership including petitioners unpaid salaries. Hence, petitioner was dismissed from
said partnership.

ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General Manager had been extinguished
and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment contract as against the new partnership

HELD:
1. Yes. The legal effect of the changes in the membership of the partnership was the dissolution of the old
partnership which had hired the petitioner in 1984 and the emergence of the new firm composed of Willy Co and
Emmanuel Zapanta in 1988. This is based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused by any partner ceasing
to be associated in the carrying on as a distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when no definite term or particular
undertaking is specified.
2. in contravention of the agreement between the partners, where the circumstances do not permit a
dissolution under any other provision of this article, by the express will of any partner at any time;

However, the legal consequence of dissolution of a partnership do not automatically result in the termination of
the legal personality of the old partnership as according to Art. 1829, “ on dissolution of the partnership is not
terminated, but continues until the winding up of the partnership affairs is completed. The new partnership simply
continued the operations of the old partnership under its old firm name without winding up the business affairs
of the old partnership.

2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of the new partnership which
continued the business of former without liquidation of the partnership affairs. Thus, creditor of the old Jade
Mountain, such as the petitioner is entitled to enforce his claim for unpaid salaries, as well as other claims relating
to his employment with the old partnership against the new Jade Mountain.
14. LIM TANHU VS RAMOLETE (LIQUIDATION)
66 SCRA 425

FACTS: Private respondent Tan Put alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a partner
and practically the owner who has controlling interest of Glory Commercial Company and a Chinese Citizen until
his death. Defendant Antonio Lim Tanhu and Alfonso Leonardo Ng Sua were partners in name but they were mere
employees of Po Chuan and were naturalized Filipino Citizens. Tan Put filed complaint against spouses-petitoner
Lim Tanhu and Dy Ochay including their son Tech Chuan and the other spouses-petitoner Ng Sua and Co Oyo
including also their son Eng Chong Leonardo, that through fraud and machination took actual and active
management of the partnership and that she alleged entitlement to share not only in the capital and profits of
the partnership but also in the other assets, both real and personal, acquired by the partnership with funds of the
latter during its lifetime."
According to the petitioners, Ang Siok Tin is the legitimate wife, still living, and with whom Tee Hoon had four
legitimate children, a twin born in 1942, and two others born in 1949 and 1965, all presently residing in Hong
Kong. Tee Hoon died in 1966 and as a result of which the partnership was dissolved and what corresponded to
him were all given to his legitimate wife and children.

Tan Put prior of her alleged marriage with Tee Hoon on 1949, was engaged in the drugstore business; that not
long after her marriage, upon the suggestion of the latter sold her drugstore for P125,000.00 which amount she
gave to her husband as investment in Glory Commercial Co. sometime in 1950; that after the investment of the
above-stated amount in the partnership its business flourished and it embarked in the import business and also
engaged in the wholesale and retail trade of cement and GI sheets and under huge profits.

Defendants interpose that Tan Put knew and was are that she was merely the common-law wife of Tee Hoon. Tan
Put and Tee Hoon were childless but the former had a foster child, Antonio Nunez.

ISSUE: Whether Tan Put, as she alleged being married with Tee Hoon, can claim from the company of the latter’s
share.

HELD: Under Article 55 of the Civil Code, “the declaration of the contracting parties that they take each other as
husband and wife "shall be set forth in an instrument" signed by the parties as well as by their witnesses and the
person solemnizing the marriage. Accordingly, the primary evidence of a marriage must be an authentic copy of
the marriage contract”. While a marriage may also be proved by other competent evidence, the absence of the
contract must first be satisfactorily explained. Surely, the certification of the person who allegedly solemnized a
marriage is not admissible evidence of such marriage unless proof of loss of the contract or of any other
satisfactory reason for its non-production is first presented to the court. In the case at bar, the purported
certification issued by a Mons. Jose M. Recoleto, Bishop, Philippine Independent Church, Cebu City, is not,
therefore, competent evidence, there being absolutely no showing as to unavailability of the marriage contract
and, indeed, as to the authenticity of the signature of said certifier, the jurat allegedly signed by a second assistant
provincial fiscal not being authorized by law, since it is not part of the functions of his office. Besides, inasmuch as
the bishop did not testify, the same is hearsay.
An agreement with Tee Hoon was shown and signed by Tan Put that she received P40,000 for her subsistence
when they terminated their relationship of common-law marriage and promised not to interfere with each other’s
affairs since they are incompatible and not in the position to keep living together permanently. Hence, this
document not only proves that her relation was that of a common-law wife but had also settled property interests
in the payment of P40,000.
IN VIEW OF ALL THE FOREGOING, the petition is granted. All proceedings held in respondent court in its Civil Case
No. 12328 subsequent to the order of dismissal of October 21, 1974 are hereby annulled and set aside, particularly
the ex-parte proceedings against petitioners and the decision on December 20, 1974. Respondent court is hereby
ordered to enter an order extending the effects of its order of dismissal of the action dated October 21, 1974 to
herein petitioners Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua and Co Oyo. And respondent court is
hereby permanently enjoined from taking any further action in said civil case gave and except as herein indicated.
Costs against private respondent.