II. Obligations of Partners Amongst Themselves: o Begins at The Execution of The Contract
II. Obligations of Partners Amongst Themselves: o Begins at The Execution of The Contract
II. Obligations of Partners Amongst Themselves: o Begins at The Execution of The Contract
§1785
Article 1785. When a partnership for a fixed term or particular undertaking is continued
after the termination of such term or particular undertaking without any express
agreement, the rights and duties of the partners remain the same as they were at such
termination, so far as is consistent with a partnership at will.
A continuation of the business by the partners or such of them as habitually acted
therein during the term, without any settlement or liquidation of the partnership affairs, is
prima facie evidence of a continuation of the partnership. (n)
Rule on duration of a P
o No fixed period
o Lifetime may be expressly stipulated
Fixed or
Implied
Conduct of partners
Nature
Ends of the business undertaken
o Firm is dissolved as soon as its purpose/s have been accomplished
o Dissolution is not termination
There is still winding up of P affairs authorized by law
After this, P is terminated
Applicability
o Applies when P has a fixed term but is continued after the end of term
o Partners have undertaken a particular business but is continued after the
termination or the accomplishment of such business
Prima facie evidence of continuation of a P; P at will
o Actual continuation of the affairs of P after termination of period and
accomplishment of purposes by habitual managers is prima facie
evidence of its continuation as P
o P at will because existence depends on the will of the partners or the will
in any one of them
Renewal of P contract
o Agreement to renew is legal
o By oral or tacit agreement
Rights and duties of partners; same
o Remains the same in continued P
o Same at the time of termination
Subject to condition that they are not inconsistent with subsequent
agreement
Express or implied
Page 3 of 40
§1786
Article 1786. Every partner is a debtor of the partnership for whatever he may have
promised to contribute thereto.
He shall also be bound for warranty in case of evictiobn with regard to specific and
determinate things which he may have contributed to the partnership, in the same cases
and in the same manner as the vendor is bound with respect to the vendee. He shall
also be liable for the fruits thereof from the time they should have been delivered,
without the need of any demand. (1681a)
Partner is a debtor
o Debtor of the firm for whatever he promised to contribute
MPI
o When MPI is contributed, firm is the owner
Cannot be withdrawn without the consent/approval of the P / others
Contributing partner is a warrantor
o When specific and determinate things are contributed
P bound to warrant things against eviction (same vendor-vendee)
Seller has the right to sell the thing at the time when the
ownership is to pass
Thing shall be free from any hidden faults or defects or any
charge not declared
o XPN person professing to sell by virtue of authority or
law
Sheriff
Mortgagee
Pledgee
Vendor shall answer for the eviction even though nothing
has been said in the contract
o Parties may modify legal obligations of vendor
o Eviction shall take place whenever by final judgement
based on the right prior to the sale or an act imputable
to the vendor
o Warranty not applicable to industrial partner
Personal services
Liable for damages if he refuses/neglects to render services
without valid justification
o Cannot be compelled by specific performance, it
would be involuntary servitude
Obligation of warranty may be modified
o By agreement ______ obligation of warranty
Increase
Diminish suppress
Page 4 of 40
Fraud
Negligence
Delay
Contravenes the tenor of obligation
§1787
Article 1787. When the capital or a part thereof which a partner is bound to contribute
consists of goods, their appraisal must be made in the manner prescribed in the
contract of partnership, and in the absence of stipulation, it shall be made by experts
chosen by the partners, and according to current prices, the subsequent changes
thereof being for account of the partnership. (n)
Rule when the contribution is in goods
o Amount determined by proper appraisal of value at the time of contribution
o Comply with mode of appraisal agreed upon
If none, determined by experts chosen by partners
o Appraisal necessary to determine how much in terms of money had been
contributed
o Inventory is useful
Subsequent changes in the value
o Account of the firm
§1788
Article 1788. A partner who has undertaken to contribute a sum of money and fails to do
so becomes a debtor for the interest and damages from the time he should have
complied with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers,
and his liability shall begin from the time he converted the amount to his own use.
(1682)
Coverage
o 1st – failure of partner to contribute sum of money he has undertaken
o 2nd – conversion of money taken from P’s coffers for personal use of the
partner
Sanctions
o Partner becomes a debtor of the firm for the interest + damages from
time of
his failure to contribute or
conversion
o Payment of 12% interest
Since partner is a debtor, this is forbearance of money
Illustrative Cases
Page 6 of 40
o Partner who used money of the firm for personal should account to his
partners for the money which he used in such purchase
o Mere failure of managing partner to return to other partners their shares in
capital does not automatically constitute estafa
Civil action for recovery of money
If fraudulent, estafa
o Managing partner who failed to account for the money received must
return the co-partners’ shares + 6% legal interest
In absence of any proof of actual loss
§1789
Article 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. (n)
Industrial partner cannot engage in business for himself; exception
o Capitalist + limited contribute MP they own to P,
MP become property of P
o Industrial partners contribute I or labor
o P will be prejudiced if the industrial partner will be allowed to engage in
separate business
Diminution of time needed to render services
o Even if IP contributes MP and I, capitalist-industrial partner, cannot
engage in another business for himself
Exception
o Express permission to do so
Reason for prohibition
o Prevent IP from exploiting his services for his own personal benefit without
permission of the firm
o Conflict of interest
o Ensure that IP will faithfully comply with his commitment
Nature of prohibition
o Absence of permission, the prohibition is absolute
o Covers all kinds of business, even if the firm is only engaged in 1 trade
o IP’s time and expertise are intended exclusively for the firm
Being a judge can hardly be characterized as business
Prohibition compared with one against capitalist partners
o Prohibition against capitalist – engaging in business similar to the firm
Unless stipulation to contrary
o Prevent business competition which may prejudice firm
Page 7 of 40
§1794
Article 1794. Every partner is responsible to the partnership for damages suffered by it
through his fault, and he cannot compensate them with the profits and benefits which he
may have earned for the partnership by his industry. However, the courts may equitably
lessen this responsibility if through the partner's extraordinary efforts in other activities
of the partnership, unusual profits have been realized. (1686a)
Liability for damages by reason of fault of partner
o Partner who caused damage to P shall be liable
Damages cannot be offset with profits and benefits
o Damages cannot be offset or compensated with the profits and benefits he
earned for P by industry
o Compensation cannot apply because
Partner is a debtor
In his duty to secure profits and benefits to P
Duty to observe diligence in the performance of his
obligations as a partner
o In compensation, 2 persons are creditors and debtors of each other
Requisites for compensation
Each 1 of the obligors bound principally and that he be at the
same time a principal creditor of the other
Both debts consist in a sum of money
o If consumable, same kind and quality
Page 10 of 40
2 debts be due
Liquidated and demandable
Over neither of them, there be any retention or
controversy communicated by 3rd persons
Liquidation necessary to determine amount of damages
o Previous liquidation of said P is necessary
Remedy when faulting partner died
o Recovery against estate
Mitigation of liability allowed
o Extraordinary efforts in other activities in P
Unusual profits have been realized
Rules of equity applied
§1795
Article 1795. The risk of specific and determinate things, which are not fungible,
contributed to the partnership so that only their use and fruits may be for the common
benefit, shall be borne by the partner who owns them.
If the things contribute are fungible, or cannot be kept without deteriorating, or if they
were contributed to be sold, the risk shall be borne by the partnership. In the absence of
stipulation, the risk of the things brought and appraised in the inventory, shall also be
borne by the partnership, and in such case the claim shall be limited to the value at
which they were appraised. (1687)
Who bears the risk of loss
o If only use and fruits of specific and determinate things had been
contributed, ownership is retained by partner-owner
o In case of loss, owner bears the loss (res perit domino)
o If what is contributed is a fungible thing, or one that is contributed to be
sold, the P bears the loss
There is an impending transfer of ownership of the fungible thing to
the partnership
Things contributed and appraised in the inventory
o When things are appraised in inventory, there is implied sale to P
o In case of loss, P shall bear
Claim cannot exceed the appraised value
§1796
Article 1796. The partnership shall be responsible to every partner for the amounts he
may have disbursed on behalf of the partnership and for the corresponding interest,
from the time the expense are made; it shall also answer to each partner for the
obligations he may have contracted in good faith in the interest of the partnership
business, and for risks in consequence of its management. (1688a)
Page 11 of 40
§1799
Article 1799. A stipulation which excludes one or more partners from any share in the
profits or losses is void. (1691)
Prohibited stipulation of exclusion; effect
o Does not prohibit stipulation where the shares of partners will not be
proportionate to their contribution
o PROHITS EXCLUSION OF A PARTNER from the profits and losses
XPN IP
o If there is, void but P may exist
o Existence of P does not depend on the validity of stipulation of exclusion
Is a stipulation to make an industrial partner liable for losses valid (YES)
o IP exempted from loss
Right may be WAIVED if there is a stipulation that he shall be liable
Effect when there is no stipulation on the profits and losses
o In proportion to what they have contributed
o IP share as may be just and equitable under the circumstances
§1800
Article 1800. The partner who has been appointed manager in the articles of partnership
may execute all acts of administration despite the opposition of his partners, unless he
should act in bad faith; and his power is irrevocable without just or lawful cause. The
vote of the partners representing the controlling interest shall be necessary for such
revocation of power.
A power granted after the partnership has been constituted may be revoked at any time.
(1692a)
Applicability
o Acts of administration
Page 14 of 40
o Acts of ownership – cannot perform them without the consent of the other
partners
Power of appointed MP
o Has all the powers pertaining to a general agent
o Incidental powers essential for carrying on the purposes of the firm
Cannot exercise powers that have been restricted or denied to him
o MP can execute all acts of administration despite opposition
XPN: he acts in bad faith
o MP’s power us irrevocable without just or lawful cause
o Acts of administration – not acts of strict ownership
o Acts of ownership
Assigning property rights
Disposition of good will of the firm
Confession of judgement
Compromising a partnership claim or liability
Submission to arbitration
Renunciation of claim of the firm
Any other act which makes it impossible to carry on ordinary
business of a partnership
Illustrative acts of administration
o Authority to sue debtors of partnership
o Power to appoint and to dismiss an employee for valid reason
o Employ bookkeeper, although the contract is not in writing
o Secure loans to complete construction of a casco for the use of the firm in
its business
Necessary for carrying on of the express object of the firm
MAY NOT mortgage a property of the firm to secure debt of
loan of a 3rd person from which the firm has nothing to do
o Issue receipts for accounts delivered to the firm
o Execute a contract for services
o As a manager of a firm engaged in buying and selling, he has the authority
to purchase on credit because it is customary to buy and sell in credit
Even without the approval of the other partners
Power of MP is generally irrevocable
o Power of MP appointed in Articles of P = GENERALLY IRREVOCABLE
o Revoked only (XPN)
Showing of a just and lawful cause
Vote of the partners representing the controlling interest
Power granted after constitution of partnership; revocable at any time
o May be revoked at any time and for any cause
Page 15 of 40
o 3rd persons are not required to inquire if there is consent of all because
there is a presumption that he acts with due authority and can bind the
partnership
o APPLIED only when they innocently deal with a partner apparently
carrying on in the usual way of business because it is imperative that
unanimity is required
Consent of CP not required in routinary transactions
o Requirement of written authority refers obviously to formal and unusual
contracts in writing
o Routine transactions come within the scope of the general authority of the
manager of the business
§1803
Article 1803. When the manner of management has not been agreed upon, the
following rules shall be observed:
(1) All the partners shall be considered agents and whatever any one of them may do
alone shall bind the partnership, without prejudice to the provisions of article 1801.
(2) None of the partners may, without the consent of the others, make any important
alteration in the immovable property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other partners is manifestly prejudicial to
the interest of the partnership, the court's intervention may be sought. (1695a)
Applicability
o Applies only when the articles of partnership made no provision for the
management of the business of the firm
o No managers appointed, all partners are considered as agents of the
partnership
o Each partner is empowered/authorized to contract in the name of the firm
o § does not apply if the partner had been appointed and given the power to
manage the business in articles of P
o GR: all are agents
Authority if partners as agents, scope
o When no M are designated, authority of partners to represent P applies
only to acts of administration
o Act of the partner is binding to the P without prejudice to § 1801
Solidary management
o Each one may separately execute acts of administration
Important alteration in an immovable property of the P requires unanimity
o No important alteration to immovable prop of the firm WITHOUT
unanimous consent of all the partners
Even if alteration may be an improvement useful to the firm
Page 18 of 40
§1805
Article 1805. The partnership books shall be kept, subject to any agreement between
the partners, at the principal place of business of the partnership, and every partner
shall at any reasonable hour have access to and may inspect and copy any of them. (n)
Who is in charge of keeping P books
o Primarily rests on MP or active partner
o Partners are presumed to know the contents of the book
Presumed that the books accurately state the P accounts
Books are open to inspection to all partners
o To enable them to have true and full information of all things and acts
affecting the partnership affairs
Place where the books are kept
o Place agreed by partners
o Absence of agreement, principal place of business of firm where each
partner may
Come
Have access
Inspect
Copy entries in the books for valid purposes
o Books cannot be removed from principal place of business
Without consent of all partners
Access to books must be at reasonable hour
o Reasonable hours on business days throughout the year
o Not during some arbitrary period of a few days chosen by MP
P book useful as evidence
o Books being kept by partners like the book of accounts, constitute
evidence of the facts entered therein against the keeper or maker thereof
o If book contains errors but were not alleged = books considered entirely
correct insofar as the keeper is concerned
Keeper under estoppel
o Plaintiff partner cannot complain of the alleged inaccuracy of the books if
he made entries and the books are placed in his disposition
Lack of books
o Absence of formal books does not affect the validity of contract of P nor its
contracts
o Books are more concerned with the internal arrangement of the partners
as regards their finances and related matters
§1806
Article 1806. Partners shall render on demand true and full information of all things
affecting the partnership to any partner or the legal representative of any deceased
partner or of any partner under legal disability. (n)
Page 20 of 40
management of the Subic National Shipyard, Inc. [SNS which became Philippine
Shipyard and Engineering Corporation (PHILSECO)]. NIDC and KAWASAKI will
contribute ₱330 million for the capitalization of PHILSECO (60 NIDC/40 KAWASAKI).
Under agreement, neither shall sell or transfer any part of its interest in
PHILSECO to a 3rd party without giving the other under the same terms the right
of first refusal (shall not apply if the transferee is a corporation owned or
controlled by the GOVERNMENT or by a KAWASAKI affiliate). NIDC transferred
rights to PNB. Transferred to national government because of AO14. Committee on
Privitization (COP); Asset Privatization Trust (APT) was named as the trustee of govt.’s
share in PHILSECO.
PHILSECO’s obligations to PNB, the national government’s share increased to 97.4%.
Interest of national economy, government decided to sell PHILSECO to private entities.
After negotiations between APT and KAWASAKI, KAWASAKI’s right of first refusal shall
be exchanged with the right to top by 5% the highest bid for the shares, allowed to
name a company which would exercise its right to top – Philyards Holdings, Inc. (PHI).
During pre-conference bidding, bidders were given copies of the JVA between NIDC
and KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the
National Government's 87.6% equity share in PHILSECO (1.3B). The highest qualified
bid will be submitted to the APT Board of Trustees at its regular meeting following the
bidding, for the purpose of determining whether or not it should be endorsed by the APT
Board of Trustees to the COP, and the latter approves the same.
JG Summit was declared the highest bidder, the COP approved the sale on
December 3, 1993 "subject to the right of Kawasaki Heavy Industries,
Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding
rules." (2.3B)
Protesting the offer of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI
consortium violated the ASBR because the last four (4) companies were the losing
bidders thereby circumventing the law and prejudicing the weak winning bidder; (b)
only KAWASAKI could exercise the right to top; (c) giving the same option to top to
PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be
exercised in a public bidding or auction sale. PHI paid in full.
MANDAMUS.
CA – Right to top and right to first refusal are legal
SC - Shipyard like PHILSECO is a public utility whose capitalization must be sixty
percent (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI
under the Asset Specific Bidding Rules (ASBR) drafted for the sale of the 87.67% equity
of the National Government in PHILSECO is ILLEGAL
Page 25 of 40
ISSUE: Whether or not PHILSECO, a shipyard, is a public utility and hence Kawasaki, a
foreign corporation, can acquire only a maximum of 40% of its capital (NO)
hereby GRANTED. The impugned Decision and Resolution of the Court of Appeals are
AFFIRMED.
No law disqualifies a person from purchasing shares in a landholding corporation
even if the latter will exceed the allowed foreign equity, what the law disqualifies
is the corporation from owning land. To be sure, a lease to an alien for a reasonable
period is valid. So is an option giving an alien the right to buy real property on condition
that he is granted Philippine citizenship. As this Court said in Krivenko vs. Register of
Deeds. But if an alien is given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of
his property, this to last for 50 years, then it becomes clear that the arrangement is a
virtual transfer of ownership whereby the owner divests himself in stages not only of the
right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also
of the right to dispose of it (jus disponendi) — rights the sum total of which make up
ownership. It is just as if today the possession is transferred, tomorrow, the use, the
next day, the disposition, and so on, until ultimately all the rights of which ownership
(NOTE: Two motions were filed for resolution of this decision. The decision appealed
from was affirmed upholding the status of non-public utility of shipyards. It held that the
prohibition in the Constitution applies to the ownership of land; the fact that PHILSECO
owns land cannot deprive Kawasaki of its right of first refusal reiterating the basic
corporate law principle that the corporation and its stockholders are separate juridical
entities. In this vein, the right of first refusal over shares pertains to the shareholders
whereas the capacity to own land pertains to the corporation. Hence, no law disqualifies
a person from purchasing shares in a landholding corporation even if the latter will
exceed the allowed foreign equity, what the law disqualifies is the corporation from
owning land. (J.G. Summit Holdings, Inc. vs CA; 450 SCRA 169; January 31, 2005))
There is nothing in the ASBR that bars the losing bidders from joining either the
winning bidder (should the right to top is not exercised) or KAWASAKI/PHI
(should it exercise its right to top as it did), to raise the purchase price. The
petitioner did not allege, nor was it shown by competent evidence, that the participation
of the losing bidders in the public bidding was done with fraudulent intent. Absent any
proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in a free
enterprise system
2. Tocao, et. al vs. CA, 342 SCRA 20
FACTS: Nenita Anay, marketing adviser of Technolux in Bangkok, met William T. Belo,
VP for operations of Ultra Clean Water Purifier, through her former employer in
Bangkok. Belo introduced Anay to Marjorie Tocao (CAPITALIST), who conveyed her
desire to enter into a joint venture with her for the importation and local distribution of
kitchen cookwares.
Page 27 of 40
Belo (CAPILTALIST) volunteered to finance the joint venture and assigned to Anay the
job of marketing (INDUSTRIAL); USA West Bend Company. 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. 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. 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.
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 VP of Geminesse
Enterprise. 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 P13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of
money with damagesagainst Marjorie D. Tocao and William Belo before RTC. In her
complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the
following: (1) P32,00.00 as unpaid overriding commission from January 8, 1988 to
February 5, 1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 as
exemplary damages. 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. She further prayed that she
be paid the five percent (5%) “overriding commission“ on the remaining 150 West Bend
cookware sets before her “dismissal.”
In their answer,[9] Marjorie 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.” As far as Belo was concerned, his only role was to introduce Anay to
Marjorie Tocao. There could not have been a partnership because, as Anay herself
admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao.
Anay merely acted as marketing demonstrator of Geminesse Enterprise for an agreed
remuneration.
Page 28 of 40
RTC – PAY. There was indeed an "oral partnership agreement between the plaintiff and
the defendants," based on the following: (a) there was an intention to create a
partnership; (b) a common fund was established through contributions consisting
of money and industry, and (c) there was a joint interest in the profits. The testimony
of Elizabeth Bantilan, Anay’s cousin and the administrative officer of Geminesse
Enterprise from August 21, 1986 until it was absorbed by Royal International, Inc.,
buttressed the fact that a partnership existed between the parties.
INNOCENT PARTNER. 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." An innocent partner thus possesses
"pecuniary interest in every existing contract that was incomplete and in the trade name
of the co-partnership and assets at the time he was wrongfully expelled."
CA – AFFIRMED, modified the damages
ISSUE: WON partnership exists between Anay, Tocao and Belo (YES)
employer-employee relationship. She admitted that, like her who owned Geminesse
Enterprise,[27] private respondent received only commissions and transportation
and representation allowances and not a fixed salary.
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.[42] In this case, Tocao’s unilateral exclusion of Anay from the
partnership is shown by her memo to the Cubao office plainly stating that Anay was, as
of October 9, 1987, no longer the vice-president for sales of Geminesse Enterprise. [43]
By that memo,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. This is manifest in Tocao’s claim for stocks that had
been entrusted to Anay in the pursuit of the partnership business.
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
What was registered with the Bureau of Domestic Trade on August 19, 1987 was
merely the name of that enterprise. While it is true that in her undated application for
renewal of registration of that firm name, petitioner Tocao indicated that it would be
engaged in retail of "kitchenwares, cookwares, utensils, skillet,"34 she also admitted
that the enterprise was only "60% to 70% for the cookware business," while 20% to
30% of its business activity was devoted to the sale of water sterilizer or purifier.35
Indubitably then, the business name Geminesse Enterprise was used only for
practical reasons - it was utilized as the common name for petitioner Tocao’s
various business activities, which included the distributorship of cookware.
There was no agreement as to the duration of the partnership; but he wants to dissolve
it, however, the defendants refused to do so; It was alleged that it is the best interest of
the parties to have a receiver appointed pending this litigation, to take possession of the
properties, and he prays that the Philippine Trust Company be appointed receiver,
and for judgment dissolving the partnership, with costs.
Each of the defendants filed a separate answer, but of the same nature. It is then
alleged, among others, that Maddy will have charge of the Barracuda and the
navigating of the same, salary P300 per month; Martin will have charge of the
southern station, cold stores, commissary and procuring fish, salary P300 per month;
Teague will have charge of selling fish in Manila and purchasing supplies. No
salary until business is on paying basis.
CFI: (1) dissolving the partnership and liquidating its assets;
(2) that the barge Lapu-Lapu as well as the Ford truck and adding machine belong
exclusively to Teague, but he must return to and reimburse the partnership the
amount which was taken from its funds for the purchase of the Lapu-Lapu and the Ford
truck.
Defendant Martin specificaly denies the "plaintiff was named general manager of
the partnership," and alleged "that all the duties and powers of the said plaintiff were
specifically set forth in the above quoted written agreement and that no further or
additional powers were ever given the said plaintiff
Upon appeal, the plaintiff further contended that he is the managing partner of the
partnership and the three properties (Lapu-Lapu, Barracuda & Ford truck) are
properties of the partnership since they were paid from the profits of the
partnership thus do not belong to him.
ISSUES:
1. WON the plaintiff was the manager of the unregistered partnership of
Malangpaya Fish Company (YES)
2. WON the three properties are owned by the partnership (NO)
RULING:
1. Yes, the powers and duties of the three partners are specifically defined, and that
each of them was more or less the general manager in his particular part of the
business. The plaintiff’s powers and duties were confined and limited to "selling
fish in Manila and the purchase of supplies."
2. No, the Lapu-Lapu, Barracuda, and the adding machine, although paid for by the
partnership funds, are owned by petitioner for it was registered in his own
Page 31 of 40
In this case, nothing appears other than the failure to fulfill an obligation on the
part of a partner who acted as agent in receiving money for a given purpose, for
which he has rendered no accounting. Thus, such agent is responsible only for the
losses which, by a violation of the provisions of the law, he incurred. This being an
obligation to pay in cash, there are no other losses than the legal interest, which interest
is not due except from the time of the judicial demand (see art 2212), or, in the present
case, from the filing of the complaint.
2. No. We do not consider that article 1688 is applicable in this case, in so far as it
provides "that the partnership is liable to every partner for the amounts he may have
disbursed on account of the same and for the proper interest," for the reason that no
other money from the other partners than that contributed by Martinez was
involved. As in the partnership, there were two administrators or agents liable for the
above-named amount, Article 1138 (NOT 1688)of the Civil Code has been invoked.
This Art deals with debts of a partnership where the obligation is not a joint one, as
is likewise provided by Article 1723 of said code with respect to the liability of two or
more agents with respect to the return of the money that they received from their
principal.
EJECTMENT. Fact that the store was closed by virtue of ejectment proceedings is
of no importance for the effects of the suit. The whole action is based upon the fact
that the defendants received certain capital from the plaintiff for the purpose of
organizing a company; they, according to the agreement
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
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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 (NO)
HELD:
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.
6. Moran, Jr. vs. Court of Appeals, 133 SCRA 88
FACTS:
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Moran Jr. and Pecson entered into a partnership agreement for the distribution of
colored posters of the Constitutional Commission wherein each would contribute
P15,000.00 as capital, and that Moran Jr. will print colored posters in the amount of
95,000. Moreover, Pecson will receive a commission of P1,000 a month starting April
15, 1971, up to December 15, 1971 (8 months). Ultimately, Pecson contributed only
P10,000.00 of the P15,000.00 promised, with Moran Jr. failing to contribute any amount
at all and only printing 2,000 copies of the 95,000.
After the liquidation of accounts, Pecson filed for an action to recover the payment
of his share in the profits that the partnership would have earned and payment of
unpaid commission.
The CA awarded P47,500.00 to Pecson for his share in unrealized profits and
P8,000.00 commission. Thus, Moran Jr. appealed that the award his highly
speculative and should be avoided and that the award of the commission has no
basis in law.
ISSUES:
Is the amount of the award for unrealized profits proper? (NO)
Is the amount of Pecson’s commission proper? (NO)
HELD:
1. No. The Court held that while Pecson does indeed deserve an award for
unrealized profits, the Court agreed that the amount is highly speculative. In
applying Art. 1786 and Art. 2200, the Court held that an assessment should be made on
how profitable the business venture would be. In the case at hand, there is no evidence
that the partnership would have been a profitable venture – as in fact it was considered
“doomed from the start”.
Furthermore, the Court made notice of the fact that: 1) There was a mutual breach of
the agreement since Pecson merely paid P10,000.00 of the P15,000; 2) The
COMELEC failed to proclaim all 320 Constitutional Commission candidates on time and
3) The existence of hidden risks as with any business venture.
Thus, the Court further applied Art. 1797 and that each partner must share in the
profits and the losses of the venture. Moreover, even with the assurance made by
one of the partners that they would earn a huge amount of profits, in the absence of
fraud, a partner cannot recover highly speculative profits.
Nevertheless, the partnership earned P6,000.00 as net profit should be divided
between Pecson and Moran, Jr. And since only P4,000.00 was undesirable by the
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petitioner in printing the 2,000 copies, the remaining P6,000.00 should be returned to
Pecson
2. No. The Court held that while the agreement did indeed stipulate a P1,000.00
commission every month, which would make the P8,000.00 award proper in theory, the
agreement does not state the basis of commission. Thus, the payment of the
commission could only have been predicated on extravagant profits. The
partnership could not have intended the giving of commission despite loss or failure of
the venture. Thus, since the partnership was a failure, Pecson is not entitled to the said
commission.
Commercial prayed that Pow Sun gee be ordered to indemnify Sugbu Commercial for
whatever is adjudged against the latter in favor of plaintiff Ng Ya.
TC decided in favor of Ng Ya and sentenced Sugbu to pay plaintiff the sum of P9,400
and condemning Pow Sun Gee to reimburse Sugbu Commercial Company. *
Sugbu Commercial appealed.
Issue W/N Sugbu Commercial should not be held liable because Pow Sun Gee, as the
one who received the payments and issued receipts to Ng Ya, is not authorized to do so
(NO)
Provision was also made in the notes for the payment of 25 per cent of the amount due
if it should be necessary to place the notes in the hands of an attorney for
collection. Three of these notes, for the sum of P3,375 each, have been made the
subject of the present action, and there are exhibited with the complaint in the cause.
One was signed by Marcelo Barba in the following manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word "By" omitted before the
name of Marcelo Barba in the second line of the signature. It is obvious that in thus
signing the notes Marcelo Barba intended to bind both the partnership and himself.
In the body of the note the word "I" (yo) instead of "we" (nosotros) is used before
the words "promise to pay" (prometemos) used in the printed form. It is plain that
the singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants Nicolas Segundo,
Antonio Adiarte, Ignacio Flores, and Modesto Serrano, upon June 12, 1913, executed in
due form a document in which they declared that they were members of the firm "La
Protectora" and that they had granted to its president full authority "in the name and
representation of said partnership to contract for the purchase of two automobiles" This
document was apparently executed in obedience to the requirements of subsection 2 of
article 1697 of the Civil Code, for the purpose of evidencing the authority of Marcelo
Barba to bind the partnership by the purchase. The document in question was delivered
by him to Bachrach at the time the automobiles were purchased.
From time to time after this purchase was made, Marcelo Barba purchased of the
plaintiff various automobile effects and accessories to be used in the business of "La
Protectora." Upon May 21, 1914, the indebtedness resulting from these additional
purchases amounted to the sum of P2,916.57
In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained on the
trucks in order to secure the purchase price. The amount realized from this sale was
P1,000. This was credited unpaid.
To recover this balance, together with the sum due for additional purchases, the
present action was instituted in the Court of First Instance of the city of Manila,
upon May 29, 1914, against "La Protectora" and the five individuals Marcelo
Barba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano.
No question has been made as to the propriety of impleading "La Protectora" as if it
were a legal entity. At the hearing, judgment was rendered against all of the defendants.
From this judgment no appeal was taken in behalf either of "La Protectora" or Marcelo
Barba; and their liability is not here under consideration. The four individuals who signed
the document to which reference has been made, authorizing Barba to purchase the
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two trucks have, however, appealed and assigned errors. The question here to be
determined is whether or not these individuals are liable for the firm debts and if so to
what extent.
The amount of indebtedness owing to the plaintiff is not in dispute, as the principal of
the debt is agreed to be P7,037. Of this amount it must now be assumed, in view of the
finding of the trial court, from which no appeal has been taken by the plaintiff, that the
unpaid balance of the notes amounts to P4,121, while the remainder (P2,916)
represents the amount due for automobile supplies and accessories.
ISSUE: WON Barba has the authority to bind the partnership? (YES)
HELD:
The business conducted under the name of "La Protectora" was evidently that of a civil
partnership; and the liability of the partners to this association must be determined
under the provisions of the Civil Code. The authority of Marcelo Barba to bind the
partnership, in the purchase of the trucks, is fully established by the document
executed by the four appellants upon June 12, 1913. The transaction by which
Barba secured these trucks was in conformity with the tenor of this document.
The promissory notes constitute the obligation exclusively of "La Protectora" and of
Marcelo Barba; and they do not in any sense constitute an obligation directly binding on
the four appellants. Their liability is based on the fact that they are members of the civil
partnership and as such are liable for its debts. It is true that article 1698 of the Civil
Code declares that a member of a civil partnership is not liable in solidum
(solidariamente) with his fellows for its entire indebtedness; but it results from this
article, in connection with article 1137 of the Civil Code, that each is liable with the
others (mancomunadamente) for his aliquot part of such indebtedness. And so it has
been held by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)
As to so much of the indebtedness as is based upon the claim for automobile supplies
and accessories, it is obvious that the document of June 12, 1913, affords no authority
for holding the appellants liable. Their liability upon this account is, however, no less
obvious than upon the debt incurred by the purchase of the trucks; and such liability is
derived from the fact that the debt was lawfully incurred in the prosecution of the
partnership enterprise.
There is no proof in the record showing what the agreement, if any, was made with
regard to the form of management. Under these circumstances it is declared in article
1695 of the Civil Code that all the partners are considered agents of the
partnership. Barba therefore must be held to have had authority to incur these
expenses. But in addition to this he is shown to have been in fact the president or
manager, and there can be no doubt that he had actual authority to incur this obligation.
Page 39 of 40
ISSUE:
WON the private respondent is a partner of the petitioner in the establishment of Sun
Wah Panciteria (YES)
HELD:
In essence, the private respondent alleged that when Sun Wah Panciteria was
established, he gave P4,000.00 to the petitioner with the understanding that he
would be entitled to twenty-two percent (22%) of the annual profit derived from
the operation of the said panciteria. These allegations, which were proved, make the
private respondent and the petitioner partners in the establishment of Sun Wah
Panciteria because Article 1767 of the Civil Code provides that "By the 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". Therefore, the lower courts did not err in construing the complaint as one
wherein the private respondent asserted his rights as partner of the petitioner in the
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establishment of the Sun Wah Panciteria, notwithstanding the use of the term financial
assistance therein.
SC affirmed appellate court's decision and ordered the dissolution of the partnership.