1.

FERNANDO SANTOS, petitioner, vs. SPOUSES ARSENIO and NIEVES

Held: By the contract of partnership, two or more persons bind themselves to

REYES, respondents.

contribute money, property or industry to a common fund, with the intention of

Facts: Sometime in June 1986, [Petitioner] Fernando Santos and [Respondent] Nieves
Reyes were introduced to each other by one Meliton Zabat regarding a lending
business venture and verbally agreed that [petitioner would] act as financier and
would receive 70% of the profits while [Nieves] and Zabat [would] take charge of
solicitation of members and collection of loan payments with the share of 15% each.
In July, 1986, Nieves introduced Cesar Gragera, chairman of the Monte Maria
Development Corporation who sought short-term loans for members of the
corporation to [petitioner] and thereby agreement was executed with commission for
Gragera and Nieves as credit investigator. On August 6, 1986, [petitioner], Nieves]
and Zabat executed the 'Article of Agreement' which formalized their earlier verbal

dividing the profits among themselves.12 The "Articles of Agreement" of petitioner

and respondents stipulated that the signatories shall share the profits of the business
in a 70-15-15 manner, with petitioner getting the lion's share is clearly a partnership
and continued its operation notwithstanding the expulsion of Zabat which later on
changed its business name to Private Association for Community Development.
Nieves was not merely petitioner's employee because she discharged her bookkeeping
duties in accordance with the agreement. Partnership was established to engage in a
money-lending business, despite the fact that the verbal agreement was formalized
only after the Memorandum of Agreement had been signed by petitioner and
Gragera.

arrangement but they eventually discovered that their partner Zabat engaged in the

Gragera on the other hand is not a partner. The money-lending activities undertaken

same lending business in competition with their partnership and was thereby

with Monte Maria was done in pursuit of the business for which the partnership

expelled with the operations with Monte Maria continued.

between [petitioner], Nieves and Zabat (later Arsenio) was organized. Gragera who

On June 5, 1987, [Petitioner] charged [respondents], allegedly in their capacities as

employees of [petitioner], with having misappropriated funds upon Gragera's
complaint that his commissions were inadequately remitted. [Respondents] asserted
that they were partners and not mere employees and alleged that the complaint was

represented Monte Maria was merely paid commissions in exchange for the collection
of loans. The commissions were fixed on gross returns, regardless of the expenses
incurred in the operation of the business. The sharing of gross returns does not in
itself establish a partnership.

filed to preempt and prevent them from claiming their rightful share to the profits of

Regarding the award of the partnership share, as computed by the trial court and

the partnership. [Petitioner] on the other hand insisted that [respondents] were his

adopted by the CA, to be incomplete and not binding on this Court.

mere employees and not partners with respect to the agreement with Gragera. He
claimed that after he discovered Zabat's activities, he ceased infusing funds, thereby
causing the extinguishment of the partnership. The agreement with Gragera was a
distinct partnership where respondents were merely salaried employees [from] that of
[respondent] and Zabat.
Trial court held that respondents were partners, not mere employees, of petitioner
and Gragera was only a commission agent of petitioner, not his partner. Respondents'
counterclaim for their share in the partnership and for damages was granted. CA
upheld the decision of trial court but originally held that respondents' counterclaim
was premature, pending an accounting of the partnership. However, in its assailed
Resolution the trial court's ruling on the counterclaim was affirmed.

2.

DAN FUE LEUNG, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG
YIU, respondents.

Facts: This case originated from a complaint filed by respondent Leung Yiu to recover
the sum equivalent to twenty-two percent of the annual profits derived from the
operation of Sun Wah Panciteria from petitioner Dan Fue Leung.The Sun Wah
Panciteria, a restaurant, located at Sta. Cruz, Manila, was registered as a single
proprietorship with Dan Fue Leung as the sole proprietor. Respondent Leung Yiu
adduced evidence 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

Issue: Whether the parties' relationship was one of partnership or of employer

establishment. Furthermore, the private respondent received from the petitioner the

employee

amount of P12,000.00 covered by the latter's Equitable Banking Corporation rom the
profits of the operation of the restaurant for the year 1974.

Petitioner denied having received from the private respondent the amount of
P4,000.00. He contested and impugned the genuineness of the receipt and presented
various government licenses and permits showing the Sun Wah Panciteria were and
still is a single proprietorship solely owned and operated by himself alone.
Both the trial court and the appellate court found that the private respondent is a
partner of the petitioner in the setting up and operations of the panciteria and entitled
to a share of the annual profits of the restaurant. The petitioner, however, argues: it is
an error to construe 'financial assistance' to mean the contribution of capital by a
partner to a partnership and thus file petition for review.
Issue: Whether or not the private respondent is a partner of the petitioner in the
establishment of Sun Wah Panciteria.
Held: Yes. The private respondent is a partner of the petitioner in Sun Wah Panciteria.
The requisites of a partnership which are 1) two or more persons bind themselves
to contribute money, property, or industry to a common fund; and 2) intention on the
part of the partners to divide the profits among themselves. The lower courts did not
err in construing the complaint financial assistance is the giving out of money to
another without the expectation of any returns therefrom'. The complaint explicitly
stated that "as a return for such financial assistance, plaintiff (private respondent)
would be entitled to twenty-two percentum (22%). Cheng, 106 Phil. 110)-have been
established. As stated by the respondent, a partner shares not only in profits but also
in the losses of the firm. If excellent relations exist among the partners at the start of
business and all the partners are more interested in seeing the firm grow rather than
get immediate returns, a deferment of sharing in the profits is perfectly plausible. It
would be incorrect to state that if a partner does not assert his rights anytime within
ten years from the start of operations, such rights are irretrievably lost. The private
respondent's cause of action is premised upon the failure of the petitioner to give him
the agreed profits in the operation of Sun Wah Panciteria. In effect the private
respondent was asking for an accounting of his interests in the partnership.
Prescription begins to run only upon the dissolution of the partnership when the final
accounting is done. There shall be a liquidation and winding up of partnership
affairs, return of capital, and other incidents of dissolution because the continuation
of the partnership has become inequitable. WHEREFORE, the petition for review is
hereby DISMISSED for lack of merit.
3.

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,

vs.

THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO

S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.
Facts: A contract was entered into by and between Mrs. Segundina Noguera and the
Tourist World Service, Inc., represented by Mr. Eliseo Canilao where former leased
the premises to latter for use as branch office. In the said contract LINA O. SEVILLA
held herself solidarily liable with the party of the part for the prompt payment of the
monthly rental agreed on. When the branch office was opened, the same was run by
the herein appellant payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was
to be withheld by the Tourist World Service, Inc. Later, Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist
World Service considered closing down its office firmed up by two resolutions of the
board of directors abolishing the office of the manager and vice-president of the
Tourist World Service, Inc., Ermita Branch, and the second, authorizing the corporate
secretary to receive the properties of the Tourist World Service then located at the said
branch office and to comply with the mandate of the Tourist World Service, the
corprate secretary Gabino Canilao went over to the branch office padlocked the
premises where neither the appellant Lina Sevilla nor any of her employees could
enter the locked premises.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita branch
office and that she was not an employee of the TWS to the end that her relationship
with TWS was one of a joint business venture appellant made declarations showing:
1. She has her own clientele, coming mostly from her own social circle
2. Signatory to a lease agreement holding herself 'solidarily' liable
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World
Service, Inc., which had its own, separate office located at the Trade & Commerce
Building; nor was she an employee thereof,
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own
bookings her own business. She shared the 7% commissions given by the airline
companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for
herself
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A.
Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other
sundry expenses, aside from desicion the office furniture and supplying some of fice
furnishings

6. It was the understanding between them that appellant Mrs. Sevilla would be given
the title of branch manager for appearance's sake only
Upon the other hand, appellee TWS contend that the appellant was an employee of
the appellee Tourist World Service, Inc. and as such was designated manager. 1
The trial court 2 held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the premises. 3 It likewise found the
petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and
as such, she was bound by the acts of her employer. 4 The respondent Court of
Appeal 5 rendered an affirmance.
Issue: Whether or not the relationshio of appellants and appellee are one of a joint
venture.
Held: No. It is a contract of agency.
TWS is was wrong, Sevilla was not an employee. Records will show that the
petitioner, Lina Sevilla, was not subject to control by the Tourist World Service, Inc.,
either as to the result of the enterprise or as to the means used in connection
therewith.In the contract of lease covering the Tourist Worlds Ermita office, she had
bound herself in solidumas and for rental payments, certainly not arrangement of
employment.The fact that Sevilla had been designated 'branch manager" does not
make her, ergo, Tourist World's employee because titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a
joint venture or otherwise, a partnership. And apparently, Sevilla herself did not
recognize the existence of such a relation. In her letter she expressly 'concedes your
[Tourist World Service, Inc.'s] right to stop the operation of your branch office 14 in
effect, accepting Tourist World Service, Inc.'s control over the manner in which the
business was run. A joint venture, including a partnership, presupposes generally a of
standing between the joint co-venturers or partners, in which each party has an equal
proprietary interest in the capital or property contributed and furthermore, the parties
did not hold themselves out as partners, and the building itself was embellished with
the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must
have done so pursuant to a contract of agency. It is the essence of this contract that the
agent renders services "in representation or on behalf of another. 18 In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept

of commissions. And as we said, Sevilla herself based on her letter pre-assumed her
principal's authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court's recital of facts, that
the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to
be compatible with the intent of the parties, cannot be revoked at will. Revocation
complained of should entitle the petitioner, Lina Sevilla, to damages based on ART.
21. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage. 24 ART. 2219. Moral damages 25 may be recovered in the following and
analogous cases: (10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34,
and 35.
4.

ELIGIO ESTANISLAO, JR., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO,
EMILIO and LEOCADIO SANTIAGO,respondents.

Facts: Petitioner and private respondents are brothers and sisters who are co-owners
of certain lots which were then being leased to SHELL. They agreed to open and
operate a gas station thereat to be known as Estanislao Shell Service Station with an
initial investment of P 15,000.00 to be taken from the advance rentals due to them
from SHELL where a joint affidavit was executed. For practical purposes and in order
not to run counter to the company's policy of appointing only one dealer, it was
agreed that petitioner would apply for the dealership. Respondent Remedios helped
in managing the bussiness Subsequently, parties herein entered into an Additional
Cash Pledge Agreement with SHELL wherein it was reiterated that the P 15,000.00
advance rental shall be deposited with SHELL to cover advances of fuel to petitioner
as dealer with a proviso that said agreement "cancels and supersedes the Joint
Affidavit. For sometime, the petitioner submitted financial statements but therafter
petitioner failed to render subsequent accounting. Trial court rendered decision in
favor of said respondents then a motion for reconsideration of said decision filed by
petitioner
Issue: Whether a partnership exists between members of the same family arising from
their joint ownership of certain properties.
Held: Yes. The contention of Petitioner that stipulation cancelling and superseding
that previous Joint Affidavit, whatever partnership agreement there was in said
previous agreement had thereby been abrogated is without merit. Said cancelling
provision was necessary for the Joint Affidavit speaks of P 15,000.00 advance rentals
starting May 25, 1966 while the latter agreement also refers to advance rentals of the

same amount starting May 24, 1966. There is, therefore, a duplication of reference to
the P 15,000.00 hence the need to provide in the subsequent document that it "cancels
and supersedes" the previous one. True it is that in the latter document, it is silent as
to the statement in the Joint Affidavit that the P 15,000.00 represents the "capital
investment" of the parties in the gasoline station business and it speaks of petitioner
as the sole dealer, but this is as it should be for in the latter document SHELL was a
signatory and it would be against its policy if in the agreement it should be stated that
the business is a partnership with private respondents and not a sole proprietorship
of petitioner.Moreover other evidence in the record shows that there was in fact such
partnership agreement between the parties. Petitioner submitted to private
respondents periodic accounting of the business. 4 Petitioner gave a written authority
to private respondent Remedies Estanislao, his sister, to examine and audit the books
of their "common business'.Respondent Remedios assisted in the running of the
business. There is no doubt that the parties hereto formed a partnership when they
bound themselves to contribute money to a common fund with the intention of
dividing the profits among themselves. 6 The sole dealership by the petitioner and the
issuance of all government permits and licenses in the name of petitioner was in
compliance with the afore-stated policy of SHELL.
5.

LILIBETH
SUNGA-CHAN
and
vs.
LAMBERTO T. CHUA, respondent.

CECILIA

SUNGA, petitioners,

Facts: Respondent alleged that he verbally entered into a partnership with Jacinto in
the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila. For business
convenience, respondent and Jacinto allegedly agreed to register the business name of
their partnership, SHELLITE GAS APPLIANCE CENTER under the name of Jacinto
as a sole proprietorship. Respondent allegedly delivered his initial capital
contribution of P100,000.00 to Jacinto while the latter in turn produced P100,000.00 as
his counterpart contribution, with the intention that the profits would be equally
divided between them. The business operation went quite and was profitable. Upon
Jacinto's death his surviving wife, petitioner Cecilia and particularly his daughter,
petitioner Lilibeth, took over the operations, control, custody, disposition and
management of Shellite without respondent's consent. Despite respondent's repeated
demands upon petitioners for accounting, inventory, appraisal, winding up and
restitution of his net shares in the partnership, petitioners failed to comply. Petitioner
Lilibeth allegedly continued the operations of Shellite, converting to her own use and
advantage its properties. In a desperate bid to cast doubt on the validity of the oral
partnership between respondent and Jacinto, petitioners maintain that said
partnership that had initial capital of P200,000.00 should have been registered with
the Securities and Exchange Commission (SEC) since registration is mandated by the
Civil Code, True, Article 1772 of the Civil Code requires that partnerships with a
capital of P3,000.00 or more must register with the SEC

Issue: Whether or not partnership exist between respondents and petitioners.

Held: Yes. Registration requirement is not mandatory. Article 1768 of the Civil
Code25 explicitly provides that the partnership retains its juridical personality even if
it fails to register. The failure to register the contract of partnership does not invalidate
the same as among the partners, so long as the contract has the essential requisites,
because the main purpose of registration is to give notice to third parties, and it can
be assumed that the members themselves knew of the contents of their contract. 26 In
the case at bar, non-compliance with this directory provision of the law will not
invalidate the partnership considering that the totality of the evidence proves that
respondent and Jacinto indeed forged the partnership in question.
6.

PEDRO R. PALTING, petitioner,

vs.
SAN JOSE PETROLEUM INCORPORATED, respondent.

Facts: SAN JOSE PETROLEUM filed with the Philippine Securities and Exchange
Commission a sworn registration statement, for the registration and licensing for sale
in the Philippines Voting Trust Certificates. It was alleged that the entire proceeds of
the sale of said securities will be devoted or used exclusively to finance the operations
of San Jose Oil. Pedro R. Palting and others, allegedly prospective investors in the
shares of SAN JOSE PETROLEUM, filed with the Securities and Exchange
Commission an opposition to registration and licensing of the securities on the
grounds that tie-up between the issuer, SAN JOSE PETROLEUM, a Panamanian
corporation and SAN JOSE OIL, a domestic corporation, violates the Constitution of
the Philippines. It is respondent's theory, on the other hand, that far from violating
the Constitution; such relationship between the two corporations is in accordance
with the Laurel-Langley Agreement which implemented the Ordinance Appended to
the Constitution. Re-stated, the privilege to utilize, exploit, and develop the natural
resources of this country was granted, by Article XIII of the Constitution, to
Filipino citizens or to corporations or associations 60% of the capital of which is owned
by such citizens. With the Parity Amendment to the Constitution, the same right was
extended to citizens of the United States and business enterprises owned or controlled
directly or indirectly, by citizens of the United States.
Issue: Assuming that 60% of partnership or corporation is controlled by American
citizens does it necessarily follows that entity can engage in the exploitation and
development of our natural resources.
Held: No, it is still essential to prove that particular States in US of which members or
stockholders are citizens allow reciprocal rights to Filipino citizens and corporations
in said State.

Can we consider SAN JOSE PETROLEUM an American business enterprise entitled

to parity rights in the Philippines? The answer must be in the negative, for the
following reasons:
Firstly It is not owned or controlled directly by citizens of the United States, because
it is owned and controlled by a foreign (Panamanian) corporation.
Secondly Neither can it be said that it is indirectly owned and controlled by
American citizens through the OIL INVESTMENTS, for this latter corporation is in
turn owned and controlled by two foreign (Venezuelan) corporations.
Thirdly Although it is claimed that these two last corporations are owned and
controlled respectively by 12,373 and 9,979 stockholders residing in the different
American states, there is no showing that the stockholders of PANCOASTAL are
citizens of the United States.
Fourthly Granting that these individual stockholders are American citizens, it is yet
necessary to establish that the different states of which they are citizens, allow
Filipino citizens or corporations or associations owned or controlled by Filipino
citizens, to engage in the exploitation, etc. of the natural resources of these states (see
paragraph 3, Article VI of the Laurel-Langley Agreement, supra). Respondent has
presented no proof to this effect.
Fifthly But even if the requirements mentioned in the two immediately preceding
paragraphs are satisfied, nevertheless to hold that the set-up disclosed in this case,
with a long chain of intervening foreign corporations, comes within the purview of
the Parity Amendment regarding business enterprises indirectly owned or controlled
by citizens of the United States, is to unduly stretch and strain the language and intent
of the law. For, to what extent must the word "indirectly" be carried? Must we trace
the ownership or control of these various corporationsad infinitum for the purpose of
determining whether the American ownership-control-requirement is satisfied?
What, then, would be the Status of SAN JOSE OIL, about 90% of whose stock is
owned by SAN JOSE PETROLEUM? This is a query which we need not resolve in this
case as SAN JOSE OIL is not a party and it is not necessary to do so to dispose of the
present controversy.
7.

JOHN FORTIS, plaintiff-appellee,

vs.
GUTIERREZ HERMANOS, defendants-appellants.

Facts: Plaintiff, an employee of defendants brought this action to recover a balance

due him as salary alleged that he was entitled, as salary, to 5 per cent of the net profits
of the business of the defendants for said year.Plaintiff worked for the defendants
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 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. 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.
Issue: Is he a partner?
Held: This contention cannot bo 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.
8.

E. S. LYONS, plaintiff-appellant,
vs.
C. W. ROSENSTOCK, Executor of the Estate of Henry W. Elser,
deceased, defendant-appellee.

Facts: Prior to his death, Henry W. Elser had been a resident of the City of Manila
where he was engaged during the years with which we are here concerned in buying,
selling, and administering real estate. In several ventures which he had made in
buying and selling property of this kind the plaintiff, E. S. Lyons whose regular
vocation was that of a missionary, or missionary agent, of the Methodist Episcopal
Church , had joined with him, the profits being shared by the two in equal parts.
Lyons, went on leave to the United States. In the spring, the attention of Elser was
drawn to a piece of land near the City of Manila, and he discerned therein a fine
opportunity for the promotion and development of a suburban improvement. This
property, which will be herein referred to as the San Juan Estate, he was able from his
own means, and with the assistance which he obtained from others, to acquire said
estate. For the purpose of the further development of the property a limited
partnership had, about this time, been organized by Elser and three associates, under
the name of J. K. Pickering & Company; and when the transfer of the property was

effected the deed was made directly to this company. As Elser was the principal
capitalist in the enterprise he received by far the greater number of the shares issued.
While these negotiations were coming to a head, Elser contemplated and hoped that
Lyons might be induced to come in with him and supply part of the means necessary
to carry the enterprise through. One source of embarrassment which had operated on
Lyson to bring him to the resolution to stay out of this venture, was that the board of
mission was averse to his engaging in business activities other than those in which the
church was concerned; and some of Lyons' missionary associates had apparently been
criticizing his independent commercial activities. This fact was dwelt upon in the
letter above-mentioned. Upon receipt of this letter Elser was of course informed that it
would be out of the question to expect assistance from Lyons in carrying out the San
Juan project. No further efforts to this end were therefore made by Elser. We now turn
to the incident which supplies the main basis of this action. It will be remembered
that, when Elser obtained the loan to complete the amount needed for the first
payment on the San Juan Estate, the lender, Uy Siuliong, insisted that he should
procure the signature of the Fidelity & Surety Co. on the note to be given for said
loan. But before signing the note with Elser and his associates, the Fidelity & Surety
Co. insisted upon having security for the liability thus assumed by it. To meet this
requirements Elser mortgaged to the Fidelity & Surety Co. the equity of redemption
in the property owned by himself and Lyons on Carriedo Street. This mortgage was
executed on time Elser expected that Lyons would come in on the purchase of the San
Juan Estate. But when he learned from the letter from Lyons that the latter had
determined not to come into this deal, Elser began to cast around for means to relieve
the Carriedo property of the encumbrance which he had placed upon it. For this
purpose he addressed a letter to the Fidelity & Surety Co., asking it to permit him to
substitute a property owned by himself where it agreed to the proposition; and on
September 15, 1920, Elser executed in favor of the Fidelity & Surety Co. a new
mortgage on the M. H. del Pillar property and delivered the same, with 1,000 shares
of J. K. Pickering & Company, to said company. The latter thereupon in turn executed
a cancellation of the mortgage on the Carriedo property and delivered it to Elser. But
notwithstanding the fact that these documents were executed and delivered, the new
mortgage and the release of the old were never registered. Lyons had arrived in
Manila told Elser to let the Carriedo mortgage remain on the property in view of the
further fact that Elser had given to Lyons 200 shares of the stock of the J. K. Pickering
& Co., having a value of nearly P8,000 in excess of the indebtedness which Elser had
owed to Lyons upon statement of account. As the development of the San Juan Estate
was a success from the start it will thus be seen that the mortgaging of the Carriedo
property never resulted in damage to Lyons to the extent of a single cent. The purpose
of the action is to recover four hundred forty-six and two thirds shares of the stock of
J. K. Pickering & Co., Ltd., together with the sum of about representing the dividends
which accrued on said stock.
Issue: Whether they are partners.

Held: In the purely legal aspect of the case, the position of the appellant is, in our
opinion, untenable. If Elser had used any money actually belonging to Lyons in this
deal, he would under article 1724 of the Civil Code and article 264 of the Code of
Commerce, be obligated to pay interest upon the money so applied to his own use.
Under the law prevailing in this jurisdiction a trust does not ordinarily attach with
respect to property acquired by a person who uses money belonging to another. Of
course, if an actual relation of partnership had existed in the money used, the case
might be difference; and much emphasis is laid in the appellant's brief upon the
relation of partnership which, it is claimed, existed. But there was clearly no general
relation of partnership, under article 1678 of the Civil Code. It is clear that Elser, in
buying the San Juan Estate, was not acting for any partnership composed of himself
and Lyons, and the law cannot be distorted into a proposition which would make
Lyons a participant in this deal contrary to his express determination.
9.

ENCARNACION MAGALONA, ET AL., plaintiffs-appellees,

vs.
JUAN PESAYCO, defendant-appellant.

Facts: Plaintiffs, Encarnacion Magalona, Juan Sermeno, and the defendant, Juan
Pesayco, formed a partnership for the purpose of catching "semillas de bagus o aua"
in the sea and rivers within San Jose, Antique Province. It was agreed that the
defendant should put in a bid for this privilege and that the partners should each
supply one third of the capital in case the defendant was awarded the desired
privilege. The defendant, having had experience in this line, was to be the manager in
case his bid was accepted. Their bid, being the highest, was accepted by the
municipality and the privilege was awarded to the defendant. The defendant
managed the business and never gave any account of his catches or sales to his
partners, the plaintiffs. In view of this it was prayed that a receiver be appointed by
the court to take charge of the funds of the partnership and the defendant be ordered
to render an account of his management and to pay to the plaintiff their participation
in the profits thereof. In his two counter-complaints the defendant prays that he be
awarded damages and denies that there was a partnership and depends principally
upon the fact that the partnership agreement was not in writing.
Issue: Whether they are partners.
Held: Yes. The partnership was conclusively proven by the oral testimony of the
plaintiffs and other witnesses, two of whom were Attorneys Lutero and Maza. The
defense made no objection to the questions asked with regard to the forming of this
partnership. This court has held that if a party permits a contract, which the law
provides shall be in writing, to be proved, without objection as to the form of the
proof, it is just as binding as if the statute had been complied with. However, we

cannot agree with the appellant that one of the requisites of a partnership agreement
such as the one under consideration, is that it should be in writing and no real
properties had been contributed.
10.
FRANCISCO BASTIDA, plaintiff-appellee,
vs.
MENZI & Co., INC., J.M. MENZI and P.C. SCHLOBOHM, defendants.
MENZI & CO., appellant.
Facts: According to the plaintiff, defendant J.M. Menzi, together with his wife and
daughter, owns ninety-nine per cent (99%) of the capital stock of the defendant Menzi
& Co., Inc., entered into a contract with the plaintiff to engage in the business of
exploiting prepared fertilizers where plaintiff and defendant Menzi & Co., Inc., began
to manufacture prepared fertilizers, the former superintending the work of actual
preparation, and the latter, managing the business and opening an account. Plaintiff
had no intervention in the preparation of these yearly balances, nor was he permitted
to have any access to the books of account; and when the balance sheets were shown
him, he, believing in good faith that they contained the true statement of the
partnership business. Defendants denied all the allegations and according to them,
they entered into an employment agreement with the plaintiff, who represented that
he had much experience in the mixing of fertilizers, to superintend the mixing of the
ingredients in the manufacture of prepared fertilizers in its fertilizer department and
to obtain orders for such prepared fertilizers subject to its approval, for a
compensation of only 35 per cent of the net profits derived from the sale of the
fertilizers prepared by him.
Issue: Whether plaintiff and defendants are partners.
Held: No. After considering the evidence and the arguments of counsel, we are
unanimously of the opinion that under the facts of this case the relationship
established between Menzi & Co. and by the plaintiff was to receive 35 per cent of the
net profits of the fertilizer business of Menzi & Co., Inc., in compensation for his
services of supervising the mixing of the fertilizers. Neither the provisions of the
contract nor the conduct of the parties prior or subsequent to its execution justified
the finding that it was a contract of copartnership. Plaintiff never made any objection
to defendants manner of keeping the accounts or to the charges. The business was
continued in the same manner under the written agreement and he approved and
signed every year the balance sheet and the profit and loss statement. It was only
when plaintiffs contract was about to expire and the defendant corporation had
notified him that it would not renew it that the plaintiff began to make objections.
The trial court relied on article 116 of the Code of Commerce, which provides that
articles of association by which two or more persons obligate themselves to place in a

common fund any property, industry, or any of these things, in order to obtain profit,
shall be commercial, no matter what its class may be, provided it has been established
in accordance with the provisions of this Code; but in the case at bar there was no
common fund, that is, a fund belonging to the parties as joint owners or partners. The
business belonged to Menzi & Co., Inc. The plaintiff was working for Menzi & Co.,
Inc. and instead of receiving a fixed salary or a small percentage of the net profits, he
was to receive 35 per cent of the net profits as compensation for his services. and
advanced him to P300 a month on account of his participation in the profits should
there be no net profits at the end of the year where no same provision was made for
Menzi & Co., Inc., while well settled that the old rule that sharing profits as profits
made one a partner is overthrown. Great stress in laid by the trial judge and plaintiffs
attorneys on phrase en sociedad con as used in providing that defendant
corporation not engage in the business of prepared fertilizers except in association
with the plaintiff (en sociedad con). The fact is that en sociedad con as there used
merely means en reunion con or in association with, and does not carry the meaning
of
in
partnership
with.
ADRIANO ARBES, ET AL., plaintiffs-appellees,
vs.
VICENTE POLISTICO, ET AL., defendants-appellants.
Facts: This is an action to bring about liquidation of the funds and property of the
association called "Turnuhan Polistico & Co." The plaintiffs were members or
shareholders, who wants to get their profits and capital, and the defendants were
designated as president-treasurer, directors and secretary of said association.
Issue: If the partnership has no valid existence, if it is considered juridically nonexistent, the contract entered into can have no legal effect; and in that case, how can it
give rise to an action in favor of the partners to judicially demand from the manager
or the administrator of the partnership capital, each one's contribution?
Held: Distinction must be made in the second paragraph of this article of this Code,
providing that the profits obtained by unlawful means shall not enrich the partners,
but shall upon the dissolution of the partnership, be given to the charitable
institutions of the domicile of the partnership, or, in default of such, to those of the
province. This is a new rule, unprecedented by our law, introduced to supply an
obvious deficiency of the former law, which did not describe the purpose to which
those profits denied the partners were to be applied, nor state what to be done with
them. The profits are so applied, and not the contributions, because this would be an
excessive and unjust sanction for, as we have seen, there is no reason, in such a case,
for depriving the partner of the portion of the capital that he contributed, the
circumstances of the two cases being entirely different. Our Code does not state
whether, upon the dissolution of the unlawful partnership, the amounts contributed

are to be returned by the partners, because it only deals with the disposition of the
profits; but the fact that said contributions are not included in the disposal prescribed
profits, shows that in consequences of said exclusion, the general law must be
followed, and hence the partners should reimburse the amount of their respective
contributions. Any other solution is immoral, and the law will not consent to the
latter remaining in the possession of the manager or administrator who has refused to
return them, by denying to the partners the action to demand them.