Busorg1(2ndset) Case Digest

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1 - G.R. No. 109248 July 3, 1995 GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners, vs. HON. COURT OF APP EALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA,respondents.

partner. 6 Among partners, 7 mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified unjustified dissolution by the partner can subject him to a possible action for damages.

FACTS: The law f irm of ROSS, LAWRENCE, SELPH and CARRASCOSO, its name, was changed to BITO, MISA & LOZADA on June 7, 1977. On 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondentsappellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD) a petition for dissolution and liquidation of partnership. On 31 March 1989, the hearing officer rendered a decision against their favor. On appeal, the SEC en banc reversed the decision of the Hearing Officer. The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC decision.

The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up of, the business. 8 Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination.

ISSUE: 1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will. No.

2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith. No. Ruling:  (1) A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. The partnership agreement does not provide for a specified period or undertaking. The "DURATION" clause simply states, "The partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners."

The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all partnerships, which necessarily must have a purpose, would all be considered as partnerships for a definite undertaking. There would therefore be no need to provide for articles on partnership at will as none would so exist. Apparently what the law contemplates, is a specific undertaking or "project" which has a definite or definable period of completion. (2) The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself.  Verily, any one of the partners partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership 4 but that it can result in a liability for damages. In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a

2   WILLIAM UY v BARTOLOME PUZON (GR No. L-19819 Oct. 26 1977)  – 

FACTS: Bartolome Puzon had a contract with the Republic of the Philippines for the construction of the Ganyangan Bato Section of the Pagadian Zamboanga City Road, province of Zamboanga del Sur and of five (5) bridges in the Malangas-Ganyangan Road. Finding difficulty in accomplishing both projects, Bartolome Puzon sought the financial assistance of the plaintiff, William Uy. It resulted in the formation of the "U.P. Construction Company" which was subsequently engaged as subcontractor of the construction construction projects.

The partners agreed that the capital of the partnership would be P100,000.00 of which each partner shall contribute the amount of P50,000.00 in cash. But, as heretofore stated, Puzon was short of cash and he promised to contribute his share in the partnership capital as soon as his application for a loan with the Philippine National Bank in the amount of P150,000.00 shall have been approved. However, before his loan application could be acted upon, he had to clear his collaterals of its incumbrances first. For this purpose, on October 24, 1956, William Uy gave Bartolome Puzon the amount of P10,000.00 as advance contribution of his share in the partnership to be organized between them under the firm name U.P. CONSTRUCTION COMPANY which amount mentioned above will be used by Puzon to pay his obligations with the Philippine National Bank to effect the release of his mortgages with the said Bank. On October 29, 1956, William Uy again gave Puzon the amount of P30,000.00 as his partial contribution to the proposed partnership and which the said Puzon was to use in payment of his obligation to the Rehabilitation Finance Corporation. Puzon promised William Uy that the amount of P150,000.00 would be given to the partnership to be applied thusly: P40,000.00, as reimbursement of the capital contribution of William Uy which the said Uy had advanced to clear the title of Puzon's property; P50,000.00, as Puzon's contribution to the partnership; and the balance of P60,000.00 as Puzon's personal loan to the partnership.  As time passed and the financial demands of the projects increased, William Uy, who supervised the said projects, found difficulty in obtaining the necessary funds with which to pursue the construction projects. William Uy correspondingly called on Bartolome Puzon to comply with his obligations under the terms of their partnership agreement and to place, at lest, his capital contribution at the disposal of the partnership. Despite several promises, Puzon, however, failed to do so. Realizing that his verbal demands were to no avail, William Uy consequently wrote Bartolome Puzon formal letters of demand, to which Puzon replied that he is unable to put in additional capital to continue with the projects. 3MANRESA 2014 - 2015

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Failing to reach an agreement with William Uy, Bartolome Puzon, as prime contractor of the construction projects, wrote the subcontractor, U.P. Construction Company, on November 20, 1957, advising the partnership, of which he is also a partner, that unless they presented an immediate solution and capacity to prosecute the work effectively, he would be constrained to consider the sub-contract terminated and, thereafter, to assume all responsibilities in the construction of the projects in accordance with his original contract with the Bureau of Public Highways. 20 On November 27, 1957, Bartolome Puzon again wrote the U.P.Construction Company finally terminating their subcontract agreement as of December 1, 1957. ISSUE:  W/N Puzon is liable to the partnership thus must reimburse Uy. YES HELD:  The findings of the trial court that the appellant failed to contribute his share in the capital of the partnership is clear incontrovertible. The record shows that after the appellant's loan the amount of P150,000.00 was approved by the Philippin National Bank in November, 1956, he gave the amount P60,000.00 to the appellee who was then managing the construction projects. Of this amount, P40,000.00 was to be applied a reimbursement of the appellee's contribution to the partnership which was used to clear the title to the appellant's property, and th balance of P20,000.00, as Puzon's contribution to the partnership. Thereafter, the appellant failed to make any further contributions the partnership funds as shown in his letters to the appellee wherein he confessed his inability to put in additional capital to continue with the projects.

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is of record that the appellant assigned to the Philippine National Bank all the payments to be received on account of the contracts with the Bureau of Public Highways for the construction of the aforementioned projects to guarantee the repayment of the bank. By virtue of the said appellant's personal loan with the said bank assignment, the Bureau of Public Highways paid the money due on the partial accomplishments on the construction projects in question to the Philippine National Bank who, in turn, applied portions of it in payment of the appellant's loan. That the assignment to the Philippine National Bank prejudicial to the partnership cannot be denied. The record show that during the period from March, 1957 to September, 1959, the appellant Bartolome Puzon received from the Bureau of Public highways, in payment of the work accomplished on the construction projects, the amount of P1,047,181.01, which amount rightfully and legally belongs to the partnership by virtue of the subcontract agreements between the appellant and the U.P. Construction Company. In view of the assignemt made by Puzon to the Philippine National Bank, the latter withheld and applied the amount of P332,539,60 in payment of the appellant's personal loan with the said bank. The balance was deposited in Puzon's current account and only the amount of P27,820.80 was deposited in the current account of the partnership. For sure, if the appellant gave to the partnership all that were earnd and due it under the subcontract agreements, the money would have been used as a safe reserve for the discharge of all obligations of the firm and the partnership would have been able to successfully and profitably prosecute the projects it subcontracted. When did the appellant make the reimbursement claimed by him?

Parenthetically, the claim of the appellant that the appellee is equally guilty of not contributing his share in the partnership capital inasmuch as the amount of P40,000.00, allegedly given to him in October, 1956 as partial contribution of the appellee is merely a personal loan of the appellant which he had paid to the appellee, is plainly untenable. The terms of the receipts signed by the appellant are clear and unequivocal that the sums of money given by the appellee are appellee's partial contributions to the partnership capital. Thus, in the receipt for P10,000.00 dated October 24, 1956, 25 the appellant stated: Received from Mr. William Uy the sum of TEN THOUSAND PESOS (P10,000.00) in Check No. SC 423285 Equitable Banking Corporation, dated October 24, 1956, as advance contribution of the share of said William Uy in the partnership to be organized between us under the firm name U.P. CONSTRUCTION COMPANY which amount mentioned above will be used by the undersigned to pay his obligations with the Philippine National Bank to effect the release of his mortgages with the said bank. (Emphasis supplied) In the receipt for the amount of P30,000.00 dated October 29, 1956, 26 the appellant also said: Received from William Uy the sum of THIRTY THOUSAND PESOS (P30,000.00) in Check No. SC423287, of the Equitable Banking Corporation, as partial contribution of the share of the said William Uy to the U.P. CONSTRUCTION COMPANY for which the undersigned will use the said amount in payment of his obligation to the Rehabilitation Finance Corporation. (Emphasis supplied) The findings of the trial court that the appellant misapplied partnership funds is, likewise, sustained by competent evidence. It

For the same period, the appellant actually disbursed for the partnership, in connection with the construction projects, the amount of P952,839.77. 31 Since the appellant received from the Bureau of Public Highways the sum of P1,047,181.01, the appellant has a deficit balance of P94,342.24. The appellant, therefore, did not make complete restitution. The findings of the trial court that the appellee has been ousted from the management of the partnership is also based upon persuasive evidence. The appellee testified that after he had demanded from the appellant payment of the latter's contribution to the partnership capital, the said appellant did not allow him to hold office in the U.P. Construction Company and his authority to deal with the Bureau of Public Highways was revoked by the appellant. Since the defendant appellant was at fault, the trial court properly ordered him to reimburse the plaintiff-appellee whatever amount latter had invested in or spent for the partnership on account of construction projects. 3   ISABELO MORAN, JR v. THE HON. COURT OF APPEALS and MARIANO E. PECSON  – 

FACTS: On February 22, 1971 Pecson and Moran entered into an agreement whereby both would contribute P15,000 each for the purpose of printing 95,000 posters (featuring the delegates to the 1971 Constitutional Convention), with Moran actually supervising the work; that Pecson would receive a commission of P l,000 a month starting on April 15, 1971 up to December 15, 1971; that on December 15, 1971, a liquidation of the accounts in the distribution and printing of the 95,000 posters would be made, 3MANRESA 2014 - 2015

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that Pecson gave Moran P10,000 for which the latter issued a receipt; that only a few posters were printed; that on or about May 28, 1971, Moran executed in favor of Pecson a promissory note in the amount of P20,000 payable in two equal installments, the whole sum becoming due upon default in the payment of the first installment on the date due, complete with the costs of collection. Private respondent Pecson filed with the CFI an action for the recovery of a sum of money and alleged in his complaint: (1) on the alleged partnership agreement, the return of his contribution of P10,000.00, payment of his share in the profits that the partnership would have earned, and, payment of unpaid commission; (2) on the alleged promissory note, payment of the sum of P20,000.00; Court of First Instance ruled that by virtue of the partnership agreement entered into by the parties-plaintiff and defendant the plaintiff did contribute 10k, and another sum of 7kfor the Voice of the Veteran or Delegate Magazine. Of the expected 95,000 copies of the posters, the defendant was able to print 2,000 copies only authorized of which, however, were sold at P5.00 each. Nothing more was done after this and it can be said that the venture did not really get off the ground. On the other hand, the plaintiff failed to give his full contribution of P15,000.00. Thus, each party is entitled to rescind the contract. CFI ordered defendant Moran to return to plaintiff Mariano E. Pecson the sum of 17k. Both parties appealed to CA. CA ordered Moran to pay Pecson: a) P47,500 (the amount that could have accrued to Pecson under their agreement);(b) P8,000, (the commission for eight months);(c) P7,000 (as a return of Pecson's investment for the  Veteran's Project); ISSUES: 1. W/N Moran is liable to Pecson in the sum of P47,500 as the supposed expected profits due him.

2. W/N Moran is liable to Pecson in the sum of 8k as supposed commission in the partnership arising out of Pecson’s investment. NO 3. W/N Moran is liable to Pecson in the sum of 7k as a supposed return of investment in a magazine venture. RULING:  The first question raised in this petition refers to the award of P47,500.00 as the private respondent's share in the unrealized profits of the partnership. The petitioner contends that the award is highly speculative. The petitioner maintains that the respondent court did not take into account the great risks involved in the business undertaking.

We agree with the petitioner that the award of speculative damages has no basis in fact and law. There is no dispute over the nature of the agreement between the petitioner and the private respondent. It is a contract of partnership. The latter in his complaint alleged that he was induced by the petitioner to enter into a partnership with him. The petitioner on the other hand admitted in his answer the existence of the partnership.

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The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of the partnership for whatever he may have promised to contribute (Art. 1786, Civil Code) and for interests and damages from the time he should have complied with his obligation (Art. 1788, Civil Code). Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of the Civil Code of the Philippines, we allowed a total of P200,000.00 compensatory damages in favor of the appellee because the appellant therein was remiss in his obligations as a partner and as prime contractor of the construction projects in question. This case was decided on a particular set of facts. We awarded compensatory damages in the Uy case because there was a finding that the constructing business is a profitable one and that the UP construction company derived some profits from its contractors in the construction of roads and bridges despite its deficient capital." Besides, there was evidence to show that the partnership made some profits during the periods from July 2, 1956 to December 31, 1957 and from January 1, 1958 up to September 30, 1959. The profits on two government contracts worth P2,327,335.76 were not speculative. In the instant case, there is no evidence whatsoever that the partnership between the petitioner and the private respondent would have been a profitable venture. In fact, it was a failure doomed from the start. There is therefore no basis for the award of speculative damages in favor of the private respondent. Furthermore, in the Uy case, only Puzon failed to give his full contribution while Uy contributed much more than what was expected of him. In this case, however, there was mutual breach. Private respondent failed to give his entire contribution in the amount of P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any of the amount expected of him. He further failed to comply with the agreement to print 95,000 copies of the posters. Instead, he printed only 2,000 copies.  Article 1797 of the Civil Code provides: The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion. Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership. And even with an assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim a right to recover the highly speculative profits. It is a rare business venture guaranteed to give 100% profits. In this case, on an investment of P15,000.00, the respondent was supposed to earn a guaranteed P1,000.00 a month for eight months and around P142,500.00 on 95,000 posters costing P2.00 each but 2,000 of which were sold at P5.00 each. The fantastic nature of expected profits is obvious. We have to take various factors into account. The failure of the Commission on Elections to proclaim all the 320 candidates of the Constitutional Convention on time was a major factor. The petitioner undesirable his best business judgment and felt that it would be a losing venture to go on with the printing of the agreed 95,000 copies of the posters. Hidden risks in any business venture have to be considered. It does not follow however that the private respondent is not entitled to recover any amount from the petitioner. This net profit of P6,000.00 should be divided between the petitioner and the private respondent. And since only P4,000.00 was undesirable by 3MANRESA 2014 - 2015

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the petitioner in printing the 2,000 copies, the remaining P6,000.00 should therefore be returned to the private respondent. We agree with the petitioner that the award of P8,000.00 as Pecson's supposed commission has no justifiable basis in law. The partnership agreement stipulated that the petitioner would give the private respondent a monthly commission of Pl,000.00 from April 15, 1971 to December 15, 1971 for a total of eight (8) monthly commissions. The agreement does not state the basis of the commission. The payment of the commission could only have been predicated on relatively extravagant profits. The parties could not have intended the giving of a commission inspite of loss or failure of the venture. Since the venture was a failure, the private respondent is not entitled to the P8,000.00 commission.  Anent the third assigned error, the petitioner maintains that the respondent Court of Appeals erred in holding him liable to the private respondent in the sum of P7,000.00 as a supposed return of investment in a magazine venture. In this case, there is misapprehension of facts. The evidence of the private respondent himself shows that his investment in the "Voice of Veterans" project amounted to only P3,000.00. The remaining P4,000.00 was the amount of profit that the private respondent expected to receive.

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partnership books or to give her information regarding the partnership affairs to pay her any share in the dividends declared by the partnership. She therefore prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her corresponding share in the partnership profits after such accounting, plus attorney's fees and costs. The defendants, among others, denied ever having declared dividends or distributed profits of the partnership; denied likewise that the plaintiff ever demanded that she be allowed to examine the partnership books; and alleged that the amended Articles of Co-partnership did not express the true agreement of the parties, which was that the plaintiff was not an industrial partner; that she did not in fact contribute industry to the partnership; They also claimed that since before the execution of the amended articles of partnership, Estrella Abad Santos has been, and up to the present time still is, one of the judges of the City Court of Manila, devoting all her time to the performance of the duties of her public office. This fact proves beyond peradventure that it was never contemplated between the parties, for she could not lawfully contribute her full time and industry which is the obligation of an industrial partner pursuant to Art. 1789 of the Civil Code. Issue: WON Estrella Abad Santos is an industrial partner. YES.

The respondent court erred when it concluded that the project never left the ground because the project did take place. Only it failed. It was the private respondent himself who presented a copy of the book entitled "Voice of the Veterans" in the lower court as Exhibit "L". Therefore, it would be error to state that the project never took place and on this basis decree the return of the private respondent's investment.  As already mentioned, there are risks in any business venture and the failure of the undertaking cannot entirely be blamed on the managing partner alone, specially if the latter exercised his best business judgment, which seems to be true in this case. 4  EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD SABTOS, petitioners, vs. ESTRELLA ABAD SANTOS, respondent.  – 

Facts: On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955, the Articles of Co-partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with a contribution of P17,500 each. The amended  Articles provided, inter alia, that "the contribution of Estrella Abad Santos consists of her industry being an industrial partner", and that the profits and losses "shall be divided and distributed among the partners ... in the proportion of 70% for the first three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos to be divided among them equally; and 30% for the fourth partner Estrella Abad Santos."

On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance of Manila, alleging that the partnership, which was also made a partydefendant, had been paying dividends to the partners except to her; and that notwithstanding her demands the defendants had refused and continued to refuse and let her examine the

Held: One cannot read appellee's testimony just quoted without gaining the very definite impression that, even as she was and still is a Judge of the City Court of Manila, she has rendered services for appellants without which they would not have had the wherewithal to operate the business for which appellant company was organized.

 Article 1767 of the New Civil Code which provides that "By 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, 'does not specify the kind of industry that a partner may thus contribute, hence the said services may legitimately be considered as appellee's contribution to the common fund.  Another article of the same Code relied upon appellants reads:  ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in either case.' It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner with this prestation. There is no pretense, however, even on the part of the appellee is engaged in any business antagonistic to that of appellant company, since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business. That appellee has faithfully complied with her prestation with respect to appellants is clearly shown by the fact that it was only after filing of the complaint in this case and the answer thereto appellants exercised their right of exclusion under the codal art  just mentioned by alleging in their Supplemental Answer dated June 29, 1964  — or after around nine (9) years from June 7, 1955  — subsequent to the filing of defendants' answer to the complaint, 3MANRESA 2014 - 2015

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defendants reached an agreement whereby the herein plaintiff been excluded from, and deprived of, her alleged share, interests or participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits or income, on the ground plaintiff has never contributed her industry to the partnership, instead she has been and still is a judge of the City Court (formerly Municipal Court) of the City of Manila, devoting her time to performance of her duties as such judge and enjoying the privilege and emoluments appertaining to the said office, aside from teaching in law school in Manila, without the express consent of the herein defendants. Thus, appellee is an industrial partner of appellant company, with the right to demand for a formal accounting and to receive her share in the net profit that may result from such an accounting. 5   MARTINEZ v. ONG PONG COArellano, CJ (1910) http://www.scribd.com/doc/111188629/Agency-and-PartnershipDigests-8  – 

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 To be sure, the whole action is based upon the fact that the

ONGS received capital from MARTINEZ for the purpose of organizing a store. The ONGS, according to the agreement, were to handle the said money and invest it in a store which was the object of the association  The ONGS had no special agreement vesting in one sole person

the management of the business. Thus, both ONGS were the actual administrators thereof; and as such administrators, they were the agents of the company and incurred the liabilities peculiar to every agent, among which is that of rendering account to the principal of their transactions, and paying him everything they may have received by virtue of the mandatum  Since neither of them has rendered such account nor proven the

losses, they are therefore obliged to refund the money that they received for the purpose of establishing the said store  There is no evidence presented that the entire capital or any

thesum of P1,500. The ONGS, in a private document, acknowledgedthat they had received the money with the agreement that theywill invest it in a store, and the profits or losses therefrom was tobe divided with MARTINEZ in equal shares

part thereof was lost. Without proof, the allegation that the effects of the store were ejected is, as earlier mentioned, of no moment. Even if we assume this to be true, it could still not be inferred that the ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the partnership

 Later, MARTINEZ filed a complaint in order to compel the ONGSto

With regard to the CFI’s finding of profits, it appears that the 

render him an accounting of the partnership, or else to refundhim the P1,500 that he had given them

same was based on the statements of Ong Pong Co, to the effect that "there were some profits, but not large ones."

 Ong

 This, however, was never proven. And even we admit the same, such statement still does not make it possible to estimate the alleged ―profits.‖ As such, the CFI ruling on this point is REVERSED

 MARTINEZ delivered to Ong Pong Co and Ong Lay (ONGS)

Pong Co alone appeared to answer the complaint. Headmitted the fact of the agreement, but he alleged that Ong Lay(deceased) was the one who had managed the business, and that nothing had resulted therefrom except the loss of the capital of P1,500, to which loss MARTINEZ agreed to bear  CFI

rendered decision ordering Ong Pong Co to return toMARTINEZ one-half of the capital of P1,500 (P750) plus P90 asone-half of the profits, calculated at the rate of 12% per annumfor the six months that the store was supposed to have been open(total of P840) with legal interest of 6% until the full payment,with costs. Hence, this appeal by Ong Pong Co ISSUE: WON MARTINEZ is entitled to the capital hecontributed to the partnership HELD:  YES. The ONGS failed to fulfill their obligation as partners who, acting as MARTINEZ’s agents in receiving money,  did not render proper accounting therefor. Such renders them jointly liable for the losses, solidarity not having been established.CFI decision is  AFFRIMED in this regard but REVERSED inasmuchas it f ound that the capital invested earned profits. Thus, the CFIruling awarding MARTINEZ another P840 is DELETED. Ong PongCo is only liable to pay MARTINEZ half of the capital, or P750, representing half of the loss which both ONGS should jointly be ar due to their omission, to earn legal interest of 6% from time of filing this complaint, and costs RATIO:  In his defense, Ong Pong Co raised the issue of the closure/failureof the store by virtue of ejectment proceedings instituted against them. THIS, however, has no real significance in the determination of the merits of this case

 Inasmuch as 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, 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, or, in the present case, from the filing of the complaint   Art. 1688 is NOT 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 than that contributed as is involved Art. 1138, CC is also NOT applicable here as this deals with debts of a partnership where the obligation is NOT  joint. Likewise, Art 1723 regarding the liability of two or more agents with respect to the return of the money that they received from their principal is NOT applicable. No showing of solidarity having been established, their liability is JOINT! 6 - G.R. No. L-2484 April 11, 1906 JOHN FORTIS,Plaintiff-Appellee, vs. GUTIERREZ HERMANOS,Defendants-Appellants. Facts:  The plaintiff worked for the defendants during the year 1902 under a contract by which he was to receive as compensation 5 per cent of the net profits of the business. The contract was made on the part of the defendants by Miguel Alonzo 3MANRESA 2014 - 2015

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Gutierrez. By the provisions of the articles of partnership he was made one of the managers of the company, with full power to transact all of the business thereof. As such manager he had authority to make a contract of employment with the plaintiff. Issue: W/N plaintiff was a co-partner Ruling: No. It is claimed by the appellants that the contract alleged in the complaint made the plaintiff a copartner of the defendants in the business which they were carrying on. This contention can not be sustained. It was a mere contract of employnent. The plaintiff had no voice nor vote in the management of the affairs of the company. The fact that the compensation received by him was to be determined with reference to the profits made by the defendants in their business did not in any sense make by a partner therein. The articles of partnership between the defendants provided that the profits should be divided among the partners named in a certain proportion. The contract made between the plaintiff and the then manager of the defendant partnership did not in any way vary or modify this provision of the articles of partnership. The profits of the business could not be determined until all of the expenses had been paid. A part of the expenses to be paid for the year 1902 was the salary of the plaintiff. That salary had to be deducted before the net profits of the business, which were to be divided among the partners, could be ascertained. It was undoubtedly necessary in order to determine what the salary of the plaintiff was, to determine what the profits of the business were, after paying all of the expenses except his, but that determination was not the final determination of the net profits of the business. It was made for the purpose of fixing the basis upon which his compensation should be determined. Furthermore, the court rules that it was not necessary that the contract between the plaintiff and the defendants should be made in writing (Thunga Chui vs. Que Bentec). 7 - TAI TONG CHUACHE vs. THE INSURANCE COMMISSION G.R. No. L-55397 February 29, 1988 GANCAYCO, J.

On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. Arsenio Chua, representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity Corporation for P100,000.00. On July 31, 1975, the building and the contents were totally razed by fire. Demand was made from respondent Travellers Multi-Indemnity for its share in the loss but the same was refused. Travellers Insurance alleged that Thai Tong Chuache & Co. is not entitled to indemnity under its Fire Insurance Policy for lack of insurable interest before the loss of the insured premises. It was based on the inference that the credit secured by the mortgaged property was already paid by the Palomos before the said property was gutted down by fire. Now, the Insurance Commission supported this contention. Its foregoing conclusion was arrived at on the basis of the certification issued by the then Court of First Instance of Davao, Branch II that

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in a certain civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and not petitioner Tai Tong Chuache & Company. However, it was proven in the Court, later on that petitioner's claim that the loan extended to the Palomos has not yet been paid. Moreover, Travellers failed to prove the lack of insurable interest of Tai Tong. The former argues, now, that if the civil case really stemmed from the loan granted to Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by its representative in its own behalf. From the above premise respondent concluded that the obligation secured by the insured property must have been paid. The premise is correct but the conclusion is wrong. Citing Rule 3, Sec. 2 10 respondent pointed out that the action must be brought in the name of the real party in interest. We agree. However, it should be borne in mind that petitioner being a partnership may sue and be sued in its name or by its duly authorized representative. The fact that Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated by respondent insurance company. 11 Thus Chua as the managing partner of the partnership may execute all acts of administration 12 including the right to sue debtors of the partnership in case of their failure to pay their obligations when it became due and demandable. Or at the very least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is understood that he acted for and in behalf of the firm. 13 Public respondent's allegation that the civil case flied by Arsenio Chua was in his capacity as personal creditor of spouses Palomo has no basis. The respondent insurance company having issued a policy in favor of herein petitioner which policy was of legal force and effect at the time of the fire, it is bound by its terms and conditions. Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner, respondent insurance company is and must be held liable. 8 - E. M. BACHRACH vs. "LA P ROTECTORA", ET AL.

Barba, with 4 other individuals formed a civil partnership, called "La Protectora," for the purpose of engaging in the business of transporting passengers and freight. Barba, acting as manager, negotiated the purchase of two automobile trucks from the plaintiff Bachrach. The other four partners executed a document in which they declared that they were members of the firm "La Protectora" and that they had granted to its president (Barba) full authority "in the name and representation of said partnership to contract for the purchase of two automobiles". This document was apparently executed for the purpose of evidencing the authority of Barba to bind the partnership by the purchase. Later, Bachrach foreclosed a chattel mortgage which he had retained on the trucks in order to secure the purchase price. This was insufficient to cover the entire debt so Bachrach filed a collection case against the partnership (La Protectora), Barba, and the other four partners. The 4 partners alleged that they are not liable as the document they executed was intended merely as an authority to enable Barba to bind the partnership and not to confer upon Barba an authority to bind them personally. 3MANRESA 2014 - 2015

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ISSUE: WON the 4 partners are liable for the partnership debt.  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. 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.

No member of the partnership can bind the others by a personal act if they have not given him authority to do so. We think that the document referred to was intended merely as an authority to enable Barba to bind the partnership and that the parties to that instrument did not intend thereby to confer upon Barba an authority to bind them personally. It is obvious that the contract which Barba in fact executed in pursuance of that authority did not by its terms profess to bind the appellants personally at all, but only the partnership and himself. It follows that the four partners cannot be held to have been personally obligated by that instrument; but, as we have already seen, their liability rests upon the general principles underlying partnership liability. 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. From what has been said it results that the appellants are severally liable for their respective shares of the entire indebtedness found to be due. SC said that each of the four partners shall be liable only for the one-fifth part of the remainder unpaid. 9   FULLTEXT G.R. No. 1011 May 13, 1903 JOSE MACHUCA, plaintiff-appellee, vs. CHUIDIAN, BUENAVENTURA & CO., defendants-appellants. LADD, J.:   – 

Most of the allegations of the complaint were admitted by the defendant at the hearing, and the judgment of the court below is based on the state of facts appearing from such admissions, no evidence having been taken.

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The defendants are a regular general partnership, organized in Manila, December 29, 1882, as a continuation of a prior partnership of the same name. The original partners constituting the partnership of 1882 were D. Telesforo Chuidian, Doña Raymunda Chuidian, Doña Candelaria Chuidian, and D. Mariano Buenaventura. The capital was fixed in the partnership agreement at 16,000 pesos, of which the first three partners named contributed 50,000 pesos each, and the last named 10,000 pesos, and it was stipulated that the liability of the partners should be "limited to the amounts brought in by them to form the partnership stock." In addition to the amounts contributed by the partners to the capital, it appears from the partnership agreement that each one of them had advanced money to the preexisting partnership, which advances were assumed or accounts-current aggregated something over 665,000 pesos, of which sum about 569,000 pesos represented the advances from the Chuidians and the balance that balance that from D. Mariano Buenaventura. Doña Raymunda Chuidian retired from the partnership November 4, 1885. On January 1, 1888, the partnership went into liquidation, and it does not appear that the liquidation had been terminated when this action was brought. Down to the time the partnership went into liquidation the accounts-current of D. Telesforo Chuidian and Doña Candelaria Chuidian had been diminished in an amount aggregating about 288,000 pesos, while that of D. Mariano Buenaventura had been increased about 51,000 pesos. During the period from the commencement of the liquidation down to January 1, 1896, the account-current of each of the Chuidians had been still further decreased, while that of D. Mariano Buenaventura had been still further increased. On January 1, 1894, D. Mariano Buenaventura died, his estate passing by will to his children, among whom was D. Vicente Buenaventura. Upon the partition of the estate the amount of the interest of D. Vicente Buenaventura in his father's account-current and in the capital was ascertained and recorded in the books of the firm. On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which for a valuable consideration he "assigns to D. Jose Gervasio Garcia . . . a 25 per cent share in all that may be obtained by whatever right in whatever form from the liquidation of the partnership of Chuidian, Buenaventura & Co., in the part pertaining to him in said partnership, . . . the assignee, being expressly empowered to do in his own name, and as a part owner, by virtue of this assignment in the assets of the partnership, whatever things may be necessary for the purpose of accelerating the liquidation, and of obtaining on judicially or extrajudicially the payment of the deposits account-current pertaining to the assignor, it being understood that D. Jose Gervasio Garcia is to receive the 25 per cent assigned to him, in the same form in which it may be obtained from said partnership, whether in cash, credits, goods, movables or immovables, and on the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have effected the operations necessary in order to satisfy the credits and the share in the partnership capital hereinbefore mentioned."

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The plaintiff claims under Garcia by virtue of a subsequent assignment, which has been notified to the liquidator of the partnership. The liquidator of the partnership having declined to record in the books of the partnership the plaintiff's claim under the assignment as a credit due from the concern to him this action is brought to compel such record to be made, and the plaintiff further asks that he be adjudicated to be a creditor of the partnership in an amount equal to 25 per cent of D. Vicente Buenaventura's share in his father's account-current, as ascertained when the record was made in the books of the partnership upon the partition of the latters estate, with interest, less the liability to which the plaintiff is subject by reason of his share in the capital; that the necessary liquidation being first had, the partnership pay to the plaintiff the balance which may be found to be due him; and that if the partnership has no funds with which to discharge this obligation an adjudication of bankruptcy be made. He also asks to recover the damages caused by reason of the failure of the liquidator to record his credit in the books of partnership. The judgment of the court below goes beyond the relief asked by the plaintiff in the complaint, the plaintiff being held entitled not only to have the credit assigned him recorded in the books of the partnership but also to receive forthwith 25 per cent of an amount representing the share of D. Vicente Buenaventura in the accountcurrent at the time of the partition of his father's estate, with interest, the payment of the 25 percent of Buenaventura's share in the capital to be postponed till the termination of the liquidation. This point has not, however, been taken by counsel, and we have therefore considered the case upon its merits. The underlying question in the case relates to the construction of clause 19 of the partnership agreement, by which it was stipulated that "upon the dissolution of the company, the pending obligations in favor of outside parties should be satisfied, the funds of the minors Jose and Francisco Chuidian [it does not appear what their interest in the partnership was or when or how it was acquired] should be taken out, and afterwards the resulting balance of the account-current of each one of those who had put in money (imponentes ) should be paid." Our construction of this clause is that it establishes a a basis for the final adjustment of the affairs of the partnership; that that basis is that the liabilities to noncompartners are to be first discharged; that the claims of the Chuidian minors are to be next satisfied; and that what is due to the respective partners on account of their advances to the firm is to be paid last of all, leaving the ultimate residue, of course, if there be any, to be distributed, among the partners in the proportions in which they may be entitled thereto.  Although in a sense the partners, being at the same time creditors, were "outside parties," it is clear that a distinction is made in this clause between creditors who were partners and creditors who were not partners, and that the expression "outside parties" refers to the latter class. And the words "pending obligations," we think, clearly comprehend outstanding obligations of every kind in favor of such outside parties, and do not refer merely, as claimed by counsel for the plaintiff, to the completion of mercantile operations unfinished at the time of the dissolution of the partnership, such as consignments of goods and the like. As respects the claims of the Chuidian minors, the suggestion of counsel is that the clause in question means that their accounts are to be adjusted before

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those of the partners but not paid first. Such a provision would have been of no practical utility, and the language used  — that the funds should be "taken out"  — (se dedujeran ) does not admit of such a construction. Such being the basis upon which by agreement of the partners the assets of the partnership are to be applied to the discharge of the various classes of the firm's liabilities, it follows that D. Vicente Buenaventura, whose rights are those of his father, is in no case entitled to receive any part of the assets until the creditors who are nonpartners and the Chuidian minors are paid. Whatever rights he had either as creditor or partner, he could only transfer subject to this condition. And it is clear, from the language of the instrument under which the plaintiff claims, that this conditional interest was all that D. Vicente Buenaventura ever intended to transfer. By that instrument he undertakes to assign to Garcia not a present interest in the assets of the partnership but an interest in whatever "may be obtained from the liquidation of the partnership," which Garcia is to receive "in the same form in which it may be obtained from said partnership," and "on the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have effected the operations necessary in order to satisfy" the claims of D. Vicente Buenaventura. Upon this interpretation of the assignment, it becomes unnecessary to inquire whether article 143 of the Code of Commerce, prohibiting a partner from transferring his interest in the partnership without the consent of the other partners, applies to partnerships in liquidation, as contended by the defendant. The assignment by its terms is not to take effect until all the liabilities of the partnership have been discharged and nothing remains to be done except to distribute the assets, if there should be any, among the partners. Meanwhile the assignor, Buenaventura, is to continue in the enjoyment of the rights and is to remain subject to the liabilities of a partner as though no assignment had been made. In other words, the assignment does not purport to transfer an interest in the partnership, but only a future contingent right to 25 per cent of such portion of the ultimate residue of the partnership property as the assignor may become entitled to receive by virtue of his proportionate interest in the capital. There is nothing in the case to show either that the nonpartner creditors of the partnership have been paid or that the claims of the Chuidian minors have been satisfied. Such rights as the plaintiff has acquired against the partnership under the assignment still remain, therefore, subject to the condition which attached to them in their origin, a condition wholly uncertain of realization, since it may be that the entire assets of the partnership will be exhausted in the payment of the creditors entitled to preference under the partnership agreement, thus extinguishing the plaintiff's right to receive anything from the liquidation. It is contended by the plaintiff that, as the partnership was without authority to enter upon new mercantile operations after the liquidation commenced, the increase in D. Mariano Buenaventura's account-current during that period was the result of a void transaction, and that therefore the plaintiff is entitled to withdraw at once the proportion of such increase to which he is entitled under the assignment. With reference to this contention, it is sufficient to say that it nowhere appears in the case that the increase in D. Mariano Buenaventura's account-current during the period of liquidation was the result of new advances to the firm, and the figures would appear to indicate that it resulted from the accumulation of interest. 3MANRESA 2014 - 2015

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Counsel for the plaintiff have discussed at length in their brief the meaning of the clause in the partnership agreement limiting the liability of the partners to the amounts respectively brought into the partnership by them, and the effect of this stipulation upon their rights as creditors of the firm. These are questions which relate to the final adjustment of the affairs of the firm, the distribution of the assets remaining after all liabilities have been discharged, or, on the other hand, the apportionment of the losses if the assets should not be sufficient to meet the liabilities. They are in no way involved in the determination of the present case. The plaintiff having acquired no rights under the assignment which are now enforceable against the defendant, this action can not be maintained. The liquidator of the defendant having been notified of the assignment, the plaintiff will be entitled to receive from the assets of the partnership, if any remain, at the termination of the liquidation, 25 per cent of D. Vicente's resulting interest, both as partner and creditor. The judgment in this case should not affect the plaintiff's right to bring another action against the partnership when the affairs of the same are finally wound up. The proper  judgment will be that the action be dismissed. The judgment of the court below is reversed and the case is remanded to that court with directions to enter a judgment of dismissal. So ordered. 10 - 42 Phil. 282-283, G.R. No. L-16318, October 21, 1921 PANG LIM and BENITO GALVEZ, plaintiffs-appellees, vs. LO SENG, defendant-appellant. (pp. 134, 138, De Leon) FACTS: Lo Seng and Pang Lim were partners under the firm name of Lo Seng and Co., in the business of running a distillery. The land on which said distillery is located as well as the buildings and improvements originally used in the business were the property Lo Yao, who leased the same to the firm of Lo Seng and Co. Upon the expiration of the original contract of lease, a new contract of lease was executed by the partners Lo Seng and Pang Lim, on behalf of the partnership as lessee.

Later, Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus placing the latter in the position of sole owner. Thereafter, Lo Yao, executed and acknowledged before a notary public a deed purporting to convey to Pang Lim and one Benito Galvez, the entire distillery plant including the land used in connection therewith(in other words, there was a sale). Later, Pang Lim and Benito Galvez demanded possession from Lo Seng, but the latter refused to yield; hence an unlawful detainer was initiated by Pang Lim and Benito Galvez in the court of the  justice of the peace of Paombong to recover possession of the premises. ISSUE: Does Pang Lim have the right to terminate the lease? NO (For the purpose of discussion, what is the nature of a relation in a partnership? FIDUCIARY) HELD: Pang Lim has occupied a double role in the transactions namely, first, as one of the lessees; and secondly, as one of the purchasers now seeking to terminate the lease. These two positions are essentially antagonistic and incompatible. Every competent person is by law bond to maintain in all good faith the integrity of his own obligations; and no less certainly is he bound to respect the rights of any person whom he has placed in his own shoes as regards any contract previously entered into by himself.

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While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this lease, and when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo Seng of Pang Lim's interest in the firm assets, including the lease; and Pang Lim cannot now be permitted, in the guise of a purchaser of the estate, to destroy an interest derived from himself, and for which he has received full value. The bad faith of Pang Lim and Galvez in seeking to deprive Lo Seng of this lease is strikingly revealed in the circumstance that prior to the acquisition of this property Pang Lim had been partner with Lo Seng and Benito Galvez an employee. Both therefore had been in relations of confidence with Lo Seng and in that position had acquired knowledge of the possibilities of the property and possibly an experience which would have enabled them, in case they had acquired possession, to exploit the distillery with profit. On account of his status as partner in the firm of Lo Seng and Co., Pang Lim knew that the original lease had been extended for fifteen years; and he knew the extent of valuable improvements that had been made thereon. Certainly, it would be shocking to the moral sense if the condition of the law were found to be such that Pang Lim, after profiting by the sale of his interest in a business, worthless without the lease, could intervene as purchaser of the property and confiscate for his own benefit the property which he had sold for a valuable consideration to Lo Seng. The sense of justice recoils before the mere possibility of such eventuality.  Above all other persons in business relations, PARTNERS ARE REQUIRED TO EXHIBIT TOWARDS EACH OTHER THE HIGHEST DEGREE OF GOOD FAITH. In fact the relation between partners is essentially FIDUCIARY, each being considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply exclusively to his own benefit the results of the knowledge and information gained in the character of partner. Thus, it has been held that if one partner obtains in his own name and for his own benefit the renewal of a lease on property used by the firm, to commence at a date subsequent to the expiration of the firm's lease, the partner obtaining the renewal is held to be a constructive trustee of the firm as to such lease. And this rule has even been applied to a renewal taken in the name of one partner after the dissolution of the firm and pending its liquidation. 11 - Lim Tanhu v Ramolete FACTS: Tan Put filed a complaint against several defendants for accounting of the real and personal properties of the Glory Commercial Company including those registered in the names of the defendants and other persons, which properties are located in the Philippines and in Hong Kong.These defendants included  Antonio Lim Tanhu and Dy Ochay, their son Lim Teck Chuan and the other spouses-petitioners Alfonso Leonardo Ng Sua and Co Oyo and their son Eng Chong Leonardo.

Tan Put is the widow of Tee Hoon Lim Po Chuan who is a partner and manager of Glory Commercial Company along with the defendants. She alleged in her complaint that defendants, through fraud and machination, took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Company, defendants managed to use the funds of the partnership to purchase lands and buildings. 3MANRESA 2014 - 2015

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Furthermore , she alleged that after the death of Tee Hoon Lim Po Chuan, the defendants, without liquidation continued the business of Glory Commercial Company by purportedly organizing a corporation known as the Glory Commercial Company, Incorporated, with paid up capital in the sum of P125,000.00, which money and other assets of the said Glory Commercial Company, Incorporated are actually the assets of the defunct Glory Commercial Company partnership, of which the Tan Put has a share equivalent to one third (¹/ 3) thereof. Finally, through fraud, she was asked to sign a quitclaim. (The case is mostly on procedural matters, it was too long I only included the relevant portion as stated in De Leon, p. 139 ) ISSUE: Whether or not Tan Put, as widow of deceased partner in a partnership, may demand an accounting from the other partners. NO HELD: If Po Chuan was in control of the affairs and the running of the partnership, how could the defendants have defrauded him of such huge amounts as plaintiff insists . Upon the other hand, since Po Chuan was in control of the affairs of the partnership, the more logical inference is that if defendants had obtained any portion of the funds of the partnership for themselves, it must have been with the knowledge and consent of Po Chuan, for which reason no accounting could be demanded from them therefor, considering that Article 1807 of the Civil Code refers only to what is taken by a partner without the consent of the other partner or partners. Incidentally again, this theory about Po Chuan having been actively managing the partnership up to his death is a substantial deviation from the allegation in the amended complaint to the effect that "defendants Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan and Eng Chong Leonardo, through fraud and machination, took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Co., defendants managed to use the funds of the partnership to purchase lands and buildings etc. and should not have been permitted to be proven by the hearing officer, who naturally did not know any better.

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Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4,000.00 to its initial establishment. LEUNG argues: "The complaint avers that private respondent extended 'financial assistance' to herein petitioner at the time of the establishment of the Sun Wah Panciteria, in return of which private respondent allegedly will receive a share in the profits of the restaurant. The same complaint did not claim that private respondent is a partner of the business. It was, therefore, a serious error for the lower court and the Hon. Intermediate  Appellate Court to grant a relief not called for by the complaint. It was also error for the Hon. Intermediate Appellate Court to interpret or construe 'financial assistance' to mean the contribution of capital by a partner to a partnership;" ISSUE: WON YIU is a partner of the LEUNG in the establishment of Sun Wah Panciteria? YES HELD: 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 establishment of the Sun Wah Panciteria, notwithstanding the use of the term financial assistance therein. We agree with the appellate court's observation to the effect that "... given its ordinary meaning, financial assistance is the giving out of money to another without the expectation of any returns therefrom'. It connotes an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under which the P4,000.00 was given to the petitioner does not obtain in this case.' (p. 99, Rollo) The complaint explicitly stated that "as a return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two percentum (22%) of the annual profit derived from the operation of the said panciteria.' (p. 107, Rollo) The well-settled doctrine is that the '"... nature of the action filed in court is determined by the facts alleged in the complaint as constituting the cause of action." 13  G.R. No. 126334, November 23, 2001 EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO  VARELA, ROSELA TABANAO and VINCENT TABANAO, respondents.  YNARES-SANTIAGO, J.:  – 

Moreover, it is very significant that according to the very tax declarations and land titles listed in the decision, most if not all of the properties supposed to have been acquired by the defendants Lim Tanhu and Ng Sua with funds of the partnership appear to have been transferred to their names only in 1969 or later, that is, long after the partnership had been automatically dissolved as a result of the death of Po Chuan. Accordingly, defendants have no obligation to account to anyone for such acquisitions in the absence of clear proof that they had violated the trust of Po Chuan during the existence of the partnership. 12 - G.R. No. 70926 January 31, 1989 DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE  APPELLATE COURT and LEUNG YIU, respondents. Facts:  YIU filed a complaint with CFI to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue LEUNG.

The Sun Wah Panciteria, a restaurant, was established sometime in October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to and in favor of petitioner

FACTS: - Petitioner Emnace, Tabanao and Divinagracia were partners in a fishing business. - In 1986, they decided to dissolve their partnership and executed an agreement of partition and distribution of the partnership properties (fishing boats, vehicles, parcels of land and cash deposits) among them, consequent to Divinagracia's withdrawal from the partnership. - Throughout the existence of the partnership, and even after Tabanao's untimely demise in 1994, Emnace failed to submit to Tabanao's heirs, the respondents herein, any statement of assets and liabilities of the partnership, to render an accounting of the partnership's finances and t o turn over to said heirs the deceased's 1/3 share in the total assets of the partnership, amounting to P30M, or the sum of P10M, despite formal demand for payment 3MANRESA 2014 - 2015

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thereof. - Consequently, Tabanao' s heirs, filed against Emnace an action for accounting, payment of shares, division of assets and damages. - Emnace filed a motion to dismiss the complaint with prescription as one of his grounds. He argued that the heirs’ action has prescribed four 4 years after it accrued in 1986. - RTC denied said motion. CA affirmed. ISSUE: WON the respondent heirs’ action for accounting has already prescribed. NO. HELD: The three 3 final stages of a partnership are: 1) dissolution; 2) winding-up; and 3) termination. The partnership, although dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs, including the partitioning and distribution of the net partnership assets to the partners. For as long as the partnership exists, any of the partners may demand an accounting of the partnership's business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done. Contrary to Emnace’s protestations that the heirs' right to inquire into the business affairs of the partnership accrued in 1986, prescribing four (4) years thereafter, prescription had not even begun to run in the absence of a final accounting. Article 1842 of the Civil Code provides: The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary.

 Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the above-cited provision states that the right to demand an accounting accrues at the date of dissolution in the absence of any agreement to the contrary. When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has been made, and that is precisely what respondents are seeking in their action before the trial court, since petitioner has failed or refused to render an accounting of the partnership's business and assets. Hence, the said action is not barred by prescription. NATURE OF ACTION FOR ACCOUNTING - IN PERSONAM Emnace, insists that venue was improperly laid since the action is a real action involving a parcel of land that is located outside the territorial jurisdiction of the court a quo. This contention is not well-taken. The records indubitably show that the heirs are asking that the assets of the partnership be accounted for, sold and distributed according to the agreement of the partners. The fact that two of the assets of the partnership are parcels of land does not materially change the nature of the action. It is an action IN PERSONAM because it is an action against a person, namely, petitioner Emnace, on the basis of his personal liability. It is not an action in rem where the action is against the thing itself instead of against the person. Furthermore, there is no showing that the parcels of land involved in this case are being disputed. In fact, it is only incidental that part of the assets of the partnership under liquidation happen to be parcels of land.

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14 - G.R. No. L-6304 Sison v. McQuaid, 94 Phil. 201 Facts: - The plaintiff was made a partner in the defendant’s lumber business with the plaintiff to contribute the sum due him from defendant (defendant previously owed the plaintiff) in addition to his personal services. A partnership was made in which they were to share alike in the income or profits of the business, each to get one-half thereof.

-The the partnership sold to the United States Army board feet of lumber for P13,800 but the defendant has persistently refused to deliver one-half of it to the plaintiff after repeated demands. Plaintiff now prays for judgment declaring the existence of the alleged partnership and requiring the defendant to pay him the said sum of P6,900, in addition to damages and costs. -Defendant filed a motion to dismiss on the grounds that plaintiff's action had already prescribed, that plaintiff's claim was not provable under the Statute of Frauds, and that the complaint stated no cause of action. Issue:  W/N ½ of the proceeds of the sale could be recovered without a liquidation of the business. Ruling: -His complaint does not show why he should be entitled to the sum he claims. It does not allege that there has been a liquidation of the partnership business and the said sum has been found to be due him as his share of the profits. The proceeds from the sale of a certain amount of lumber cannot be considered profits until costs and expenses have been deducted. The profits of the business cannot be determined by taking into account the result of one particular transaction instead of all the transactions had. Hence, the need for a general liquidation before a member of a partnership may claim a specific sum as his share of the profits.

-Moreover, it is not clear from the allegations of the complaint just when plaintiff's cause of action accrued. Consequently, it cannot be determined with certainty whether that action has already prescribed or not. The defense of prescription then cannot be sustained on a mere motion to dismiss based on what appears on the face of the complaint. -The order of dismissal should be upheld since complaint states no cause of action. 15 - JOSE ORNUM and EMERENCIANA ORNUM vs. MARIANO, LASALA, et al. GR No. L-47823 July 26, 1943 FACTS: • Plaintiffs and defendants are natives of Taal, Batangas but the defendants resided in Romblon. • In 1908, Pedro Lasala and Emerenciano Ornum formed a partnership. Lasala, as capitalist, delivered P1,000 to Ornum, the industrial partner. Ornum would conduct a business in Romblon. • In 1912, Ornum asked for the dissolution of the partnership and suggested present petitioners, to become the new partners in his place. • Pedro Lasala died and his children succeeded to the rights and interest in the partnership. The partners never knew each other personally and no formal partnership agreement was ever executed. 3MANRESA 2014 - 2015

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• Petitioners, as managing partners, received ½ of the net gains, while the other ½ was divided between them and the Lasala group in proportion to the capital put in by each group. • After 20 years, the business grew to the value of P44,618.67. • Subsequently, respondents announced their desire to dissolve the partnership. • Respondents filed a CMP, praying fo r an accounting and final liquidation of the assets of the partnership. • According to petitioners, they already remitted and paid to respondents the total amount corresponding to them under the last statement of accounts, which however, was not signed by respondents. • According to petitioners, respondents tacitly approved and accepted the final statement of accounts, thereby losing their right to a further accounting, from the moment they accepted their shares without objection. • CFI ruled in favor of petitioners. CA reversed on the ground that the final statement of accounts was unsigned and stand disapproved. ISSUE: • WON respondents may request for further accounting and liquidation in dissolving the partnership?  – NO. HELD: • NO. respondents were already given the final statement of accounts, which they tacitly approved. • We hold that the last and final statement of accounts, had been approved by the respondents. This approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932, quoted in part in the appealed decision from the failure of the respondents to object to the statement and from their promise to sign the same as soon as they received their shares as shown in said statement. • After such shares had been paid by the petitioners and accepted by the respondents without any reservation, the approval of the statement of accounts was virtually confirmed and its signing thereby became a mere formality to be complied with by the respondents exclusively. • Their refusal to sign, after receiving their shares, amounted to a waiver to that formality in favor of the petitioners who has already performed their obligation. • This approval precludes any right on the part of the respon dents to a further liquidation, unless the latter can show that there was fraud, deceit, error or mistake in said approval. • In our opinion, the pronouncement that the evidence tends to prove that there were mistakes in the petitioners' statements of accounts, without specifying the mistakes, merely intimates as suspicion and is not such a positive and unmistakable finding of fact as to justify a revision, especially because the CA has relied on the bare allegations of the parties. • SC reversed the CA de cision decision on the legal ground that the petitioners' final statement of accounts had been approved by the respondents and no justifiable reason (fraud, deceit, error or mistake) has been positively and unmistakably found by the CA so as to warrant the liquidations sought by the respondents.

3MANRESA 2014 - 2015