Partnership Session 1 June 23, 2015

PARTNERSHIP, AGENCY AND TRUST LAWS
PART ONE: PARTNERSHIP LAW
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I.
HISTORICAL CONSIDERATIONS
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A. The Evolution of Partnership
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1. Development of Partnership
- Earliest form of conducting business: single
entrepreneur.
- To permit combinations of capital, or capital and
experience, and to secure economy by eliminating
some of the overhead costs of individual
enterprises, the partnership plan of business
association was develop.
- Can be traced back to ancient history
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2. Ancient origin of partnership as business organization

a. Romans: capitals, good, talents, and credit of two
or more individuals might best be combined to
carry on trade or business.
b. Babylonian period: Hammurabi (King of Babylon)
2300 B.C., provided for the regulation of the
relation called partnership (single transactions or
undertakings).
c. Jewish Law: partnership as bus. org. concerned
with the holding of title to land by two or more
persons.
o hutolin joint ownership of land
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3. The relative newness of the law of partnership

- Partnership had been well and generally
established in British commerce.
- Disputes between merchants were considered and
disposed of by special courts (Courts Staple,
Admiralty Courts and Courts of Piepoudre).
a. The law of merchants:
- Special courts established- the merchants moved
more rapidly than the law and they required that
justice be more speedy and that it be in accord
with their custom,
b. English law of partnership
- Special courts was discontinued and their function
were taken over by the law courts (Chief Justice
Lord Mansfield)
- Establish common law for commercial matters.
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Business Organization 1 (Partnership, Agency and Trust Laws)
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c. Beginning of law of partnership: the increased use

of the partnership as bus. org., together with the
increase in the complexity of business, generally
has brought forth a rapid succession of decisions
involving partnership.
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4. America Uniform Act

Purpose: to achieve uniformity of decisions in this field
of law (partnership).
a. Uniform Partnership Act (enacted: 1914)
b. Uniform Limited Partnership Act
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B. Sources of Philippine Partnership Law
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1. Code of Commerce (Arts. 116-238) Commercial and

mercantile partnerships deal with mercantile
transactions.
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2. Old Spanish Civil Code (Arts. 1665-1708) noncommercial or civil partnerships engaged in civil
purposes; difference was in the desired purpose not
the manner of organization.
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3. New Civil Code (Title IX, Arts. 1767-1867) no more

distinction
between
commercial
and
civil
partnerships; govern all transactions of all
partnership whether the object be civil or mercantile
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a. Uniform Partnership Act (Sources of Arts.

1769, 1774, 1785, 1805 to 1907, 1809, 1810
to 1814, 1819 to 1826)
b. Uniform Limited Partnership Act
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II.
NATURE AND ATTRIBUTES
A. Concept
Art. 1767, 1st par, CC established by a contract but
the law fixes the conditions under which it shall
operate once established.
Art. 1767. By the contract of partnership two or more

persons bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the profits among themselves
Two or more persons may also form a partnership for

the exercise of a profession.
B. Partnership as a Contractual Relation

Art. 1769 In determining whether a partnership exists,
these rules shall apply:
1. Except as otherwise provided by Art. 1825, persons
who are not partners as to each other are not partners
as to third persons;
2. Co-ownership or co-possession does not of itself
establish a partnership, whether such co-owners or copossessors do or do not share any profits made by the
use of the property;
3. The sharing of gross returns does not of itself
establish a partnership, WON the persons sharing
them have a joint or common right or interest in any
property from which the returns are derived;
4. The receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in
the business, but no such inference shall be drawn if
such profits were received in payment:
a. As a debt by installment of otherwise;
b. As wages of an employee or rent to a
landlord;
c. As an annuity to a widow or representative of
a deceased partner;
d. As interest on a loan, though the amount of
payment vary with the profits of the business;
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e. As the consideration for the sale of a goodwill of a business or other property by

instalments or otherwise.
1. Essential Elements Art.1767
- Valid contract
- Parties (two or more persons)
- Mutual contribution (money, property or industry)
- Profit
- Lawful
a. Necessity of Contract
Art. 1318 There is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
b. Parties who may become a partner
UNEMANCIPATED AND INSANE

Art. 1327 The following cannot give consent to a contract:
1. Unemancipated minors;
2. Insane or demented persons, and deaf-mutes who do not know how to read or write;
Art. 1329 The incapacity declared in Art. 1327 is subject to the modifications determined by
law, and is understood to be without prejudice to special disqualifications established in the
laws.
Art. 234 FC Emancipation takes place by the attainment of majority. Unless otherwise
provided, majority commences at the age of 18 y/o.
Art. 34 RPC Civil Interdiction Civil interdiction shall deprive the offender during the time of
his sentence of the right of parental authority, or guardianship, either as to the person or
property of any ward, or marital authority, of the right to manage his property, and of the
right to dispose of such property by any act or any conveyance inter vivos.
Rule 93 - Appointment of Guardians Rule 94 Bonds of Guardians
DONATION
Art. 1782 Persons who are prohibited from giving each other any donation or advantage
cannot enter into universal partnership.
ARTICLE 739. The following donations shall be void:
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(1) Those made between persons who were guilty of

adultery or concubinage at the time of the donation;
(2) Those made between persons found guilty of the
same criminal offense, in consideration thereof;
(3) Those made to a public officer or his wife,
descendants and ascendants, by reason of his office.
In the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of
the donor or donee; and the guilt of the donor and
donee may be proved by preponderance of evidence in
the same action. (n)
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c. Consent or Intention to become a partner 1769 (1)

1804
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Art. 1769 In determining whether a partnership exists,

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1. Except as otherwise provided by Art. 1825, persons

who are not partners as to each other are not partners
as to third persons;
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ARTICLE 1825. When a person, by words spoken or
written or by conduct, represents himself, or consents
to another representing him to anyone, as a partner in
an existing partnership or with one or more persons not
actual partners, he is liable to any such persons to
whom such representation has been made, who has,
on the faith of such representation, given credit to the
actual or apparent partnership, and if he has made
such representation or consented to its being made in
a public manner he is liable to such person, whether
the representation has or has not been made or
communicated to such person so giving credit by or
with the knowledge of the apparent partner making the
representation or consenting to its being made:
(1) When a partnership liability results, he is liable as
though he were an actual member of the partnership;
(2) When no partnership liability results, he is liable pro
rata with the other persons, if any, so consenting to the
contract or representation as to incur liability,
otherwise separately.
When a person has been thus represented to be a
partner in an existing partnership, or with one or more
persons not actual partners, he is an agent of the
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persons consenting to such representation to bind them

to the same extent and in the same manner as though
he were a partner in fact, with respect to persons who
rely upon the representation. When all the members of
the existing partnership consent to the representation,
a partnership act or obligation results; but in all other
cases it is the joint act or obligation of the person acting
and the persons consenting to the representation. (n)
NOTES:
ARTICLE 1804.
Every partner may associate
another person with him in his share, but the associate
shall not be admitted into the partnership without the
consent of all the other partners, even if the partner
having an associate should be a manager. (1696)
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d. Lawful subject matter and Cause 1347, 1348, 1770

Art. 1306 The contracting parties may establish such
stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary
to law, morals, good customs, public order, or public
policy.
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Art. 1347 All things which are not outside the

commerce of men, including future things, may be the
object of a contract. All rights which are not
intransmissible may also be the object of contracts.
No contract may be entered into upon future
inheritance except in case expressly authorized by law.
Art. 1348 Impossible things or services cannot be the
object of contracts.
Art. 1349 The object of every contract must be
determinate as to its kind. The fact that the quantity is
not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to
determine the same, without the need of a new contract
between the parties.
Art. 1409 The following contracts are inexistent and
void from the beginning:
1. Those whose cause, object of purpose is contrary to
law, morals, good customs, public order or public
policy;
2. Those which are absolutely simulated or fictitious;
3. Those whose cause or object did not exist at the
time of the transaction;
4. Those whose object is outside the commerce of men;
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5. Those which contemplate an impossible service;

6. Those where the intention of the parties relative to
the principal object of the contract cannot be
ascertained
7. Those expressly prohibited or declared void by law;
These contracts cannot be ratified. Neither can the right
to set up the defense of illegality be waived.
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Art. 1770 A partnership must have a lawful object of

purpose, and must established for the common benefit
or interest of the partners.
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When an unlawful partnership is dissolved by a judicial

decree, the profits shall be confiscated in favor of the
State, without prejudice to the provisions of the Penal
Code governing the confiscation of the instruments and
effects of a crime.
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The pursuit of a particular business for profit; except

where the law requires a specific form of business
organization such as banking or insurance which only
corporations can undertake.
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e. Contribution to a common fund 1767

(1) Existence of proprietary interest must contribute
MPI
a. Money currency which is legal tender in the PH.
- Nego. Ints.: no contribution until encashed.
b. Property real or personal, corporeal or
incorporeal.
- Promissory note, evidence of obligation or goodwill
may be contributed.
c. Industry means active cooperation, the work of
the party associated, which may be either
personal ir manual efforts or intellectual, and for
which he receives a share in the profits.
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(2) Proof of contribution necessary in partnership.
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f. Purpose: Business or profession - 1767

Cause of obligation Art. 1350 for each contracting
party, the prestation or promise of a thing or service by
the other; the undertaking of the other to contribute
money, property or industry.
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Art. 1350 In onerous contracts the cause is understood to

be, for each contracting party, the prestation or promise of
a thing or service by the other, in remuneratory ones, the
service of benefit which is remunerated; and in contracts of
pure beneficence, the mere liberality of the benefactor
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PURPOSE:
(1) The very reason for existence of partnership
- A partnership is formed to carry on a business. The
idea of obtaining pecuniary profit or gain directly
through or as a result of the business to be carrid
on is the very reason for the existence of a
partnership.
(2) Need only be principal, not exclusive aim.
- It is sufficient that the principal purpose of the
partnership is sharing
of profits in certain
proportions even if there are incidentally, moral,
social or spiritual ends.
- Sharing of profits:
o Not necessarily in equal shares
o Not conclusive evidence of partnership
- Sharing of losses:
o Necessary corollary of sharing in profits
o Agreement not necessary
-sharing of profit shall be in the same
proportion as the sharing of losses.
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g. Community of Interest 1767, 1770, 1769 (3), (4)

i.
co-ownership of capital or property
ii.
Joint management and control
iii.
Co-ownership of profits and participation in
profits and losses
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Art. 1770 A partnership must have a lawful object of

purpose, and must established for the common benefit
or interest of the partners.
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When an unlawful partnership is dissolved by a judicial

decree, the profits shall be confiscated in favor of the
State, without prejudice to the provisions of the Penal
Code governing the confiscation of the instruments and
effects of a crime.
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Art. 1769. xxx

3. The sharing of gross returns does not of itself establish
a partnership, WON the persons sharing them have a
joint or common right or interest in any property from
which the returns are derived;
business is prima facie evidence that he is a partner in
the business, but no such inference shall be drawn if
such profits were received in payment:
NOTES:
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b. As wages of an employee or rent to a landlord;
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c. As an annuity to a widow or representative of

a deceased partner;
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d. As interest on a loan, though the amount of

payment vary with the profits of the business;
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e. As the consideration for the sale of a goodwill

of a business or other property by instalments or
otherwise.
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2. Principles Governing Partnership
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a. Contractual in nature 1767, 1784
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Art. 1784 A partnership begins from the moment of

execution of the contract, unless it is otherwise
stipulated.
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b. Separate Juridical Personality 1768, 46, 51, 1775
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Article 1768. The partnership has a juridical personality

separate and distinct from that of each of the partners,
even in case of failure to comply with the requirements of
article 1772, first paragraph.
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Article 1772. Every contract of partnership having a capital of three thousand pesos or more,
in money or property, shall appear in a public instrument,
which must be recorded in the Office of the Securities and NOTES:
Exchange Commission.
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Failure to comply with the requirements of the preceding
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paragraph shall not affect the liability of the partnership
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and the members thereof to third persons.
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ARTICLE 46. Juridical persons may acquire and possess
property of all kinds, as well as incur obligations and
bring civil or criminal actions, in conformity with the laws
and regulations of their organization. (38a)
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ARTICLE 51. When the law creating or recognizing them,

or any other provision does not fix the domicile of juridical
persons, the same shall be understood to be the place
where their legal representation is established or where
they exercise their principal functions. (41a)
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ARTICLE 1775.
Associations and societies, whose
articles are kept secret among the members, and wherein
any one of the members may contract in his own name
with third persons, shall have no juridical personality,
and shall be governed by the provisions relating to coownership. (1669)
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c. Delectus Personae 1804, 1813
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Means choice of the person or choice of the persons.

Partnership relation fiduciary in nature. Partnership
is a form of voluntary association entered into by the
associates. It is a personal relation in which the
element of delectus personae exists, involving as it
does trust and confidence between the partners.
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ARTICLE 1804.
Every partner may associate another
person with him in his share, but the associate shall not
be admitted into the partnership without the consent of all
the other partners, even if the partner having an associate
should be a manager. (1696)
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ARTICLE 1813.
A conveyance by a partner of his
whole interest in the partnership does not of itself dissolve
the partnership, or, as against the other partners in the
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absence of agreement, entitle the assignee, during the

continuance of the partnership, to interfere in the
management or administration of the partnership
business or affairs, or to require any information or
account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to
receive in accordance with his contract the profits to which
the assigning partner would otherwise be entitled.
However, in case of fraud in the management of the
partnership, the assignee may avail himself of the usual
remedies.
In case of a dissolution of the partnership, the assignee is
entitled to receive his assignor's interest and may require
an account from the date only of the last account agreed
to by all the partners. (n)
NOTES:
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CASE:
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ORTEGA vs. CA
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G.R. No. 109248, July 3, 1995, Vitug, J;p
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FACTS:
Ortega, then a senior partner in the law firm Bito, Misa,
and Lozada withdrew in said firm. He filed with SEC a
petition for dissolution and liquidation of partnership.
SEC en banc ruled that withdrawal of Misa from the firm
had dissolved the partnership. Reason: since it is
partnership at will, the law firm could be dissolved by
any partner at anytime, such as by withdrawal there
from, regardless of good faith or bad faith, since no
partner can be forced to continue in the partnership
against his will.
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ISSUE:
1. WON the partnership of Bito, Misa & Lozada (now Bito,
Lozada, Ortega & Castillo) is a partnership at will;
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2. WON the withdrawal of Misa dissolved the partnership

regardless of his good or bad faith;
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HELD:
1. Yes. The partnership agreement of the firm provides
that [t]he 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.
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2. Yes. Any one of the partners may, at his sole pleasure,

dictate a dissolution of the partnership at will (e.g. by way
of withdrawal of a partner). He must, however, act in
good faith, not that the attendance of bad faith can
prevent the dissolution of the partnership but that it can
result in a liability for damages.
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d. Mutual Agency 1803, 1818, 1822
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ARTICLE 1803.
When the manner of management
has not been agreed upon, the following rules shall be
observed:
(1)
All the partners shall be considered agents and
whatever any one of them may do alone shall bind the
partnership, without prejudice to the provisions of article
1801.
(2)
None of the partners may, without the consent of
the others, make any important alteration in the
immovable property of the partnership, even if it may be
useful to the partnership. But if the refusal of consent by
the other partners is manifestly prejudicial to the interest
of the partnership, the court's intervention may be sought.
(1695a)
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ARTICLE 1818.
Every partner is an agent of the
partnership for the purpose of its business, and the act of
every partner, including the execution in the partnership
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name of any instrument, for apparently carrying on in the

usual way the business of the partnership of which he is
a member binds the partnership, unless the partner so
acting has in fact no authority to act for the partnership in
the particular matter, and the person with whom he is
dealing has knowledge of the fact that he has no such
authority.
NOTES:
An act of a partner which is not apparently for the carrying

on of business of the partnership in the usual way does
not bind the partnership unless authorized by the other
partners.
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Except when authorized by the other partners or unless

they have abandoned the business, one or more but less
than all the partners have no authority to:
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(1)
Assign the partnership property in trust for
creditors or on the assignee's promise to pay the debts of
the partnership;
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(2)
(5)
Enter into a compromise concerning a partnership
claim or liability; meiriw
(7)
partnership
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Confess a judgment;
(6)
Submit
arbitration;
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Dispose of the good-will of the business;
(3)
Do any other act which would make it impossible
to carry on the ordinary business of a partnership;
(4)
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claim
or
liability
to
Renounce a claim of the partnership.
No act of a partner in contravention of a restriction on

authority shall bind the partnership to persons having
knowledge of the restriction. (n)
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ARTICLE 1822.
Where, by any wrongful act or
omission of any partner acting in the ordinary course of
the business of the partnership or with the authority of his
co-partners, loss or injury is caused to any person, not
being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same
extent as the partner so acting or omitting to act. (n)
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e. Unlimited Liability 1816, 1817, 1824, 1826, 1827,

1839 (4), (7)
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NOTES:
ARTICLE 1816.
All partners, including industrial
ones, shall be liable pro rata with all their property and
after all the partnership assets have been exhausted, for
the contracts which may be entered into in the name and
for the account of the partnership, under its signature and
by a person authorized to act for the partnership.
However, any partner may enter into a separate
obligation to perform a partnership contract. (n)
ARTICLE 1817.
Any stipulation against the liability
laid down in the preceding article shall be void, except as
among the partners. (n)
ARTICLE 1824.
All partners are liable solidarily with
the partnership for everything chargeable to the
partnership under articles 1822 and 1823. (n)
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ARTICLE 1826.
A person admitted as a partner into
an existing partnership is liable for all the obligations of
the partnership arising before his admission as though he
had been a partner when such obligations were incurred,
except that this liability shall be satisfied only out of
partnership property, unless there is a stipulation to the
contrary. (n)
ARTICLE 1827.
The creditors of the partnership shall
be preferred to those of each partner as regards the
partnership property. Without prejudice to this right, the
private creditors of each partner may ask the attachment
and public sale of the share of the latter in the partnership
assets. (n)
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ARTICLE 1839.
In settling accounts between the
partners after dissolution, the following rules shall be
observed, subject to any agreement to the contrary:
wItwsi
(1)
The assets of the partnership are:
(a)
The partnership property,
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(b)
The contributions of the partners necessary for the
payment of all the liabilities specified in No. 2.
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(2)
The liabilities of the partnership shall rank in order
of payment, as follows:
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(a)
Those owing to creditors other than partners,
(b)
Those owing to partners other than for capital and
profits,
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(c)
Those owing to partners in respect of capital,
(d)
Those owing to partners in respect of profits.
(3)
The assets shall be applied in the order of their
declaration in No. 1 of this article to the satisfaction of the
liabilities.
NOTES:
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(4)
The partners shall contribute, as provided by article
1797, the amount necessary to satisfy the liabilities.
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(5)
An assignee for the benefit of creditors or any
person appointed by the court shall have the right to
enforce the contributions specified in the preceding
number.
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(6)
Any partner or his legal representative shall have
the right to enforce the contributions specified in No. 4, to
the extent of the amount which he has paid in excess of
his share of the liability.
(7)
The individual property of a deceased partner shall
be liable for the contributions specified in No. 4.
(8)
When partnership property and the individual
properties of the partners are in possession of a court for
distribution, partnership creditors shall have priority on
partnership property and separate creditors on individual
property, saving the rights of lien or secured creditors.
(9)
Where a partner has become insolvent or his estate
is insolvent, the claims against his separate property shall
rank in the following order:
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(a)
Those owing to separate creditors;
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(b)
Those owing to partnership creditors;
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(c)
Those owing to partners by way of contribution. (n)
3. Distinguished from other combinations and relations
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a. Joint Venture
- A commercial undertaking by two or more persons,
differing from a partnership in that it relates to the
disposition of a single lot of goods or the completion
of a single project. Its duration is limited to a period
in which the goods are sold or the project is carried
on.
- A corporation may enter into joint venture
partnership with another where the nature of the
venture is in line with the business authorized by its
charter.
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CASE(S):
NOTES:
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Aurbach vs. Sanitary Wares
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180 scra 130 (1989)
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Facts:
This consolidated petition assailed the decision of the CA
directing a certain MANNER OF ELECTION OFOFFICERS IN
THE BOARD OF DIRECTORS. (Noted: There was a
disagreement about the election of Board of Members,
wherein the no. of nominees exceeded to the prescribe no.
that should have been nominated. For foreigner,3 nominees
only, while the Filipino group shall have a 6 nominees.
During the election, there are 3 nominees from the foreign
group while the Filipino group have 8 nominees. The
Chairman ruled that the first 9 nominees will be the winner
in the said election *There are two groups in this case,
theLagdameo group composed of Filipino investors and the
American Standard Inc. (ASI) composed of foreign
investors.The ASI Group and petitioner Salazar (G.R. Nos.
75975-76) contend that the actual intention of theparties
should be viewed strictly on the "Agreement" dated August
15,1962 wherein it is clearly statedthat the parties' intention
was to form a corporation and not a joint venture.
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Issue:
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The main issue hinges on who were the duly elected

directors of Saniwares for the year 1983 during itsannual
stockholders' meeting held on March 8, 1983.
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Ruling:
While certain provisions of the Agreement would make it
appear that the parties theretodisclaim being partners or
joint venturers such disclaimer is directed at third parties
and is notinconsistent with, and does not preclude, the
existence of two distinct groups of stockholders inSaniwares
one of which (the Philippine Investors) shall constitute the
majority, and the other ASIshall constitute the minority
stockholder. In any event, the evident intention of the
PhilippineInvestors and ASI in entering into the Agreement
is to enter into a joint venture enterprise
An examination of the Agreement shows that certain
provisions were included to protect theinterests of ASI as the
minority. For example, the vote of 7 out of 9 directors is
required incertain enumerated corporate acts. ASI is
contractually entitled to designate a member of theExecutive
Committee and the vote of this member is required for
certain transactions
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The Agreement also requires a 75% super-majority vote for

the amendment of the articles andby-laws of Saniwares. ASI
is also given the right to designate the president and plant
manager.The Agreement further provides that the sales
policy of Saniwares shall be that which isnormally followed
by ASI and that Saniwares should not export "Standard"
products otherwisethan through ASI's Export Marketing
Services. Under the Agreement, ASI agreed to
providetechnology and know-how to Saniwares and the
latter paid royalties for the same.
NOTES:
The legal concept of a joint venture is of common law origin.

It has no precise legal definitionbut it has been generally
understood to mean an organization formed for some
temporary purpose. It is in fact hardly distinguishable from
the partnership, since their elements are similar community
of interest in the business, sharing of profits and losses, and
a mutual right of control.
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The main distinction cited by most opinions in common law

jurisdictions is that the partnershipcontemplates a general
business with some degree of continuity , while the joint
venture is formedfor the execution of a single transaction,
and is thus of a temporary nature
HEIRS OF TAN ENG KEE vs.CA

341 SCRA 740, G.R. No. 126881, October 3, 2000, De
Leon, Jr.:p
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FACTS:
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The complaint alleged that after the second World War, Tan
EngKee and Tan Eng Lay, pooling their resources and
industry together, entered into a partnership engaged in the
business of selling lumber and hardware and construction
supplies. They named their enterprise "Benguet Lumber"
which they jointly managed until Tan EngKee's death.
Petitioners claimed that Tan Eng Lay and his children
caused the conversion of the partnership "Benguet Lumber"
into a corporation called "Benguet Lumber Company"
allegedly to deprive Tan Eng Kee and his heirs of their
rightful participation in the profits of the business. After
Tang Eng Kees death petitioners prayed for accounting of
the partnership assets, and the dissolution, winding up and
liquidation thereof, and the equal division of the net assets
of Benguet Lumber. The RTC ruled in favor of petitioners,
declaring that Benguet Lumber is a joint venture which is
akin to a particular partnership. The Court of Appeals
rendered the assailed decision reversing the judgment of the
trial court.
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NOTES:
ISSUE:
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Whether or not Tan Eng Kee and Tan Eng Lay were partners
in Benguet Lumber.
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HELD:
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NO. The trial court determined that Tan EngKee and Tan
Eng Lay had entered into a joint venture, which it said is
akin to a particular partnership. A particular partnership is
distinguished from a joint adventure, to wit:(a) A joint
adventure (an American concept similar to our joint
accounts) is a sort of informal partnership, with no firm
name and no legal personality. In a joint account, the
participating merchants can transact business under their
own name, and can be individually liable therefor.(b)
Usually, but not necessarily a joint adventure is limited to a
SINGLE TRANSACTION, although the business of pursuing
to a successful termination may continue for a number of
years; a partnership generally relates to a continuing
business of various transactions of a certain kind. A joint
venture "presupposes generally a parity of standing between
the joint co-ventures or partners, in which each party has
an equal proprietary interest in the capital or property
contributed, and where each party exercises equal rights in
the conduct of the business. The evidence presented by
petitioners falls short of the quantum of proof required to
establish a partnership. In the absence of evidence, we
cannot accept as an established fact that Tan Eng Kee
allegedly contributed his resources to a common fund for the
purpose of establishing a partnership. Besides, it is indeed
odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan Eng Kee never
asked for an accounting. The essence of a partnership is that
the partners share in the profits and losses. Each has the
right to demand an accounting as long as the partnership
exists. A demand for periodic accounting is evidence of a
partnership. During his lifetime, Tan Eng Kee appeared
never to have made any such demand for accounting from
hisbrother, Tang Eng Lay. We conclude that Tan Eng Kee
was only an employee, not a partner since they did not
present and offer evidence that would show that Tan Eng
Kee received amounts of money allegedly representing his
share in the profits of the enterprise.
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There being no partnership, it follows that there is no

dissolution, winding up or liquidation to speak of. Hence, the
petition must fail.
18 | P a g e
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NOTES:
b. Agency
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ARTICLE 1868. By the contract of agency a person binds

himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter. (1709a)
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c. Employment
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CASE(S):
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RUGA VS. NLRC

G.R. No. 72654-81 January 22, 1990
_______________________________
FACTS:
Private respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis in
cash by one Mrs. Pilar de Guzman, cashier of private
respondent. As agreed upon, they received thirteen
percent (13%) of the proceeds of the sale of the fish-catch
if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received
ten percent (10%) of the total proceeds of the sale. The
patron/pilot, chief engineer and master fisherman
received a minimum income of P350.00 per week while
the assistant engineer, second fisherman, and fishermanwinchman received a minimum income of P260.00 per
week.
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ISSUE:
Whether or not the fishermen-crew members of the trawl
fishing vessel are employees of its owner-operator, De
Guzman Fishing Enterprises.
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HELD:
The hiring of petitioners to perform work which is
necessary or desirable in the usual business or trade of
private respondent for a period of 8-15 years since 1968
qualify them as regular employees within the meaning of
Article 281 of the Labor Code as they were indeed engaged
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19 | P a g e
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to perform activities usually necessary or desirable in the

usual fishing business or occupation of private
respondent.
1. LABOR LAW; EMPLOYER-EMPLOYEE RELATIONSHIP;
ELEMENTS IN DETERMINING EXISTENCE THEREOF.
We have consistently ruled that in determining the
existence of an employer-employee relationship, the
elements that are generally considered are the following
(a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee with respect to
the means and methods by which the work is to be
accomplished. The employment relation arises from
contract of hire, express or implied. In the absence of
hiring, no actual employer-employee relation could exist.
2. ID.; ID.; PRESENT IN THE CASE AT BAR. To stress
that there is an employer-employee relationship between
them and private respondent, petitioners invite attention
to the following: that they were directly hired by private
respondent through its general manager, Arsenio de
Guzman, and its operations manager, Conrado de
Guzman; that, except for Laurente Bautu, they had been
employed by private respondent from 8 to 15 years in
various capacities; that private respondent, through its
operations manager, supervised and controlled the
conduct of their fishing operations as to the fixing of the
schedule of the fishing trips, the direction of the fishing
vessel, the volume or number of tubes of the fish-catch,
the time to return to the fishing port, which were
communicated to the patron/pilot by radio (single side
band) that they were not allowed to join other outfits even
the other vessels owned by private respondent without the
permission of the operations manager; that they were
compensated on percentage commission basis of the gross
sales of the fish-catch which were delivered to them in
cash by private respondent's cashier, Mrs. Pilar de
Guzman; and that they have to follow company policies,
rules and regulations imposed on them by private
respondent. Furthermore, the fact that on mere suspicion
based on the reports that petitioners allegedly sold their
fish-catch at midsea without the knowledge and consent
of private respondent, petitioners were unjustifiably not
allowed to board the fishing vessel on September 11, 1983
to resume their activities without giving them the
opportunity to air their side on the accusation against
them unmistakably reveals the disciplinary power
exercised by private respondent over them and the
corresponding sanction imposed in case of violation of any
of its rules and regulations.
20 | P a g e
NOTES:
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3. ID.; ID.; REGULAR EMPLOYEE, CONSTRUED. While

tenure or length of employment is not considered as the
test of employment, nevertheless the hiring of petitioners
to perform work which is necessary or desirable in the
usual business or trade of private respondent for a period
of 8-15 years since 1968 qualify them as regular
employees within the meaning of Article 281 of the Labor
Code as they were indeed engaged to perform activities
usually necessary or desirable in the usual fishing
business or occupation of private respondent.
4. ID.; WAGE, DEFINED; COMPENSATION ON A
PERCENTAGE COMMISSION BASED ON THE GROSS
SALE OF THE FISH-CATCH TANTAMOUNT TO WAGE.
Aside from performing activities usually necessary and
desirable in the business of private respondent, it must
be noted that petitioners received compensation on a
percentage commission based on the gross sale of the
fish-catch, i.e. 13% of the proceeds of the sale if the total
proceeds exceeded the cost of the crude oil consumed
during the fishing trip, otherwise only 10% of the proceeds
of the sale. Such compensation falls within the scope and
meaning of the term "wage" as defined under Article 97(f)
of the Labor Code, thus: "(f) 'Wage' paid to any employee
shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the
same, which is payable by an employer to an employee
under a written or unwritten contract of employment for
work done or to be done, or for services rendered or to be
rendered, and included the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging,
or other facilities customarily furnished by the employer
to the employee. . . . "
NOTES:
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ARSENIO T. MENDIOLA, petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION, PACIFIC FOREST RESOURCES, PHILS.,
INC. and/or CELLMARK AB, respondents
Facts:
Private respondent Pacific Forest Resources, Phils., Inc.
(Pacfor) is a corporation organized and existing under the
laws of California, USA. Private respondent Pacfor entered
into a "Side Agreement on Representative Office known as
Pacific Forest Resources (Phils.), Inc."5 with petitioner
Arsenio T. Mendiola (ATM), effective May 1, 1995,
"assuming that Pacfor-Phils. is already approved by the
Securities and Exchange Commission [SEC] on the said
21 | P a g e
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date. etitioner is not a part-owner of Pacfor Phils.

because the latter is merely Pacfor-USA's representative
office and not an entity separate and distinct from
Pacfor-USA. "It's simply a 'theoretical company' with the
purpose of dividing the income 50-50."11 Petitioner
presumably knew of this arrangement from the start,
having been the one to propose to private respondent
Pacfor the setting up of a representative office, and "not
a branch office" in the Philippines to save on taxes.12On
November 27, 2000, private respondent Pacfor, through
counsel, ordered petitioner to turn over to it all papers,
documents, files, records, and other materials in his or
ATM Marketing Corporation's possession that belong to
Pacfor or Pacfor Phils. Petitioner construed these
directives as a severance of the "unregistered
partnership" between him and Pacfor, and the
termination of his employment as resident manager of
Pacfor Phils private respondent Pacfor placed petitioner
on preventive suspension and ordered him to show
cause why no disciplinary action should be taken
against him. Petioner was dismissed.
NOTES:
ISSUE
WON there is
relationship?
_______________________________
partnership
or
employer-employee
Held:
We hold that petitioner is an employee of private
respondent Pacfor and that no partnership or coownership exists between the parties.
In a partnership, the members become co-owners of
what is contributed to the firm capital and of all
property that may be acquired thereby and through the
efforts of the members.36 The property or stock of the
partnership forms a community of goods, a common
fund, in which each party has a proprietary interest.37
In fact, the New Civil Code regards a partner as a coowner of specific partnership property.38 Each partner
possesses a joint interest in the whole of partnership
property. If the relation does not have this feature, it is
not one of partnership.39 This essential element, the
community of interest, or co-ownership of, or joint
interest in partnership property is absent in the
relations between petitioner and private respondent
Pacfor. Petitioner is not a part-owner of Pacfor Phils.
William Gleason, private respondent Pacfor's President
established this fact when he said that Pacfor Phils. is
simply a "theoretical company" for the purpose of
dividing the income 50-50. He stressed that petitioner
knew of this arrangement from the very start, having
been the one to propose to private respondent Pacfor the
setting up of a representative office, and "not a branch
22 | P a g e
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office" in the Philippines to save on taxes. Thus, the

parties in this case, merely shared profits. This alone
does not make a partnership.40
Besides, a corporation cannot become a member of a
partnership in the absence of express authorization by
statute or charter.41 This doctrine is based on the
following considerations: (1) that the mutual agency
between the partners, whereby the corporation would be
bound by the acts of persons who are not its duly
appointed and authorized agents and officers, would be
inconsistent with the policy of the law that the
corporation shall manage its own affairs separately and
exclusively; and, (2) that such an arrangement would
improperly allow corporate property to become subject
to risks not contemplated by the stockholders when
they originally invested in the corporation.42 No such
authorization has been proved in the case at bar.
NOTES:
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d. Co-ownership
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There is a co-ownership whenever the ownership of an

undivided thing or right belongs to different persons. (Art.
484.) It is the right of common dominion which two or
more persons have in a spiritual part of a thing which is
not physically divided.
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The following are the distinctions between a partnership

and a co-ownership:
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(1) Creation. Co-ownership is generally created by law.

It may exist even without a contract, but partnership is
always created by a contract (Art. 1767.), either express
or implied;
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(2) Juridical personality. A partnership has a juridical

personality separate and distinct from that of each
partner (Art.1768.), while a co-ownership has none;
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(3) Purpose. The purpose of a partnership is the

realization of profits (Art. 1767.), while in co-ownership,
it is the common enjoyment of a thing or right (see Art.
486.) which does not necessarily involve the sharing of
profits;
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(4) Duration. Under the law, there is no limitation upon

the duration of a partnership (see Arts. 1767, 1785.)
while in co-ownership, an agreement to keep the thing
undivided for more than ten years is not allowed (see Art.
494.);
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(5) Disposal of interests. A partner may not dispose of

his individual interest in the partnership (Art. 1812.) so as
to make the assignee a partner unless agreed upon by all
of the partners;
NOTES:
(6) Power to act with third persons. In the absence of

any stipulation to the contrary (Art. 1803.), a partner may
bind the partnership, while a co-owner cannot represent
the co-ownership; and
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(7) Effect of death. The death of a partner results in the

dissolution of the partnership (Art. 1830[5].), but the death
of a co-owner does not necessarily dissolve the coownership.
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e. Corporation
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i. Manner of Creation Art. 1787 vs. Sec. 2 Corporation

Code
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Art. 1787 When the capital or a part thereof which a partner

is bound to contribute consists of goods, their appraisal must
be made in the manner prescribed in the contract of
partnership, and in the absence if stipulation, it shall be
made by experts chosen by the partners, and according to
current prices, the subsequent changes thereof being for the
account of partnership.
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_______________________________
_______________________________
_______________________________
Sec. 2 Corp. Code - Corporation defined. - A corporation is an

artificial being created by operation of law, having the right
of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.
_______________________________
_______________________________
_______________________________
_______________________________
ii. Number of Incorporators Art. 1767 vs. Sec 10 Corp Code
_______________________________
_______________________________
Art. 1767 By the contract of partnership two or more

persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the
profits among themselves.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Two or more persons may also form a partnership for the

exercise of a profession.
_______________________________
_______________________________
_______________________________
24 | P a g e
_______________________________
_______________________________
______________________________
Sec. 10 Corp. Code
NOTES:
_______________________________
iii. Start of Existence Art. 1784 vs. Sec. 19 Corp Code
_______________________________
_______________________________
Art. 1784 A partnership begins from the moment of

execution of the contract, unless it is otherwise stipulated.
_______________________________
_______________________________
_______________________________
Sec. 19 Corp Code Commencement of corporate existence.

- A private corporation formed or organized under this Code
commences to have corporate existence and juridical
personality and is deemed incorporated from the date the
Securities and Exchange Commission issues a certificate of
incorporation under its official seal; and thereupon the
incorporators, stockholders/members and their successors
shall constitute a body politic and corporate under the name
stated in the articles of incorporation for the period of time
mentioned therein, unless said period is extended or the
corporation is sooner dissolved in accordance with law.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
iv. Powers Art. 1306 vs. Sec 2, 36 Corp. Code
_______________________________
_______________________________
_______________________________
Art. 1306 The contracting parties may establish such

stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
_______________________________
_______________________________
_______________________________
_______________________________
Sec 2 Corp Code - Corporation defined. - A corporation is an

artificial being created by operation of law, having the right
of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 36 Corp. Code - Corporate powers and capacity. - Every

corporation incorporated under this Code has the power and
capacity:
1. To sue and be sued in its corporate name;
_______________________________
_______________________________
_______________________________
_______________________________
2. Of succession by its corporate name for the period of time

stated in the articles of incorporation and the certificate of
incorporation;
_______________________________
_______________________________
_______________________________
_______________________________
3. To adopt and use a corporate seal;

25 | P a g e
_______________________________
_______________________________
_______________________________
______________________________
4. To amend its articles of incorporation in accordance with

the provisions of this Code;
NOTES:
_______________________________
5. To adopt by-laws, not contrary to law, morals, or public

policy, and to amend or repeal the same in accordance with
this Code;
_______________________________
_______________________________
_______________________________
_______________________________
6. In case of stock corporations, to issue or sell stocks to

subscribers and to sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this
Code; and to admit members to the corporation if it be a
non-stock corporation;
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
7. To purchase, receive, take or grant, hold, convey, sell,

lease, pledge, mortgage and otherwise deal with such real
and personal property, including securities and bonds of
other corporations, as the transaction of the lawful
business of the corporation may reasonably and
necessarily require, subject to the limitations prescribed by
law and the Constitution;
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
8. To enter into merger or consolidation with other

corporations as provided in this Code;
_______________________________
_______________________________
_______________________________
9. To make reasonable donations, including those for the

public welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no corporation,
domestic or foreign, shall give donations in aid of any
political party or candidate or for purposes of partisan
political activity;
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
10. To establish pension, retirement, and other plans for the

benefit of its directors, trustees, officers and employees;
and 11. To exercise such other powers as may be essential
or necessary to carry out its purpose or purposes as stated
in the articles of incorporation.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
v. Name Art. 1844 (l,a) vs. Sec. 11 Corp Code
_______________________________
_______________________________
_______________________________
26 | P a g e
_______________________________
_______________________________
_______________________________
______________________________
(Limited Partnerships)
Art. 1844 Two or more persons desiring to form a limited
partnership shall:
NOTES:
_______________________________
I.
Sign and swear to a certificate, which shall state
a. The name of the partnership, adding thereto the word

Limited;
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 11 Corp Code - Corporate term. - A corporation shall

exist for a period not exceeding fifty (50) years from the date
of incorporation unless sooner dissolved or unless said
period is extended. The corporate term as originally stated
in the articles of incorporation may be extended for periods
not exceeding fifty (50) years in any single instance by an
amendment of the articles of incorporation, in accordance
with this Code; Provided, That no extension can be made
earlier than five (5) years prior to the original or subsequent
expiry date(s) unless there are justifiable reasons for an
earlier extension as may be determined by the Securities
and Exchange Commission
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
vi. Term of existence Art. 1767 vs. Sec. 11 Corp Code
_______________________________
_______________________________
Art. 1767 - By the contract of partnership two or more

persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the
profits among themselves.
Two or more persons may also form a partnership for the
exercise of a profession.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 11 Corp Code- A corporation shall exist for a period not

exceeding fifty (50) years from the date of incorporation
unless sooner dissolved or unless said period is extended.
The corporate term as originally stated in the articles of
incorporation may be extended for periods not exceeding
fifty (50) years in any single instance by an amendment of
the articles of incorporation, in accordance with this Code;
Provided, That no extension can be made earlier than five
(5) years prior to the original or subsequent expiry date(s)
unless there are justifiable reasons for an earlier extension
as may be determined by the Securities and Exchange
Commission.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
27 | P a g e
_______________________________
_______________________________
_______________________________
______________________________
vii. Liability to third parties Art. 1816, 1822-1824 vs. Sec.

64. 37 Corp
NOTES:
_______________________________
_______________________________
Art. 1816 All partners, including industrial ones, shall be

liable pro rata with all their property and after all partnership
assets have been exhausted, for the contracts which may be
entered into the name and for the partnership. However, any
partner may enter into a separate obligation to perform a
partnership contract.
Art. 1822 Where, by any wrongful act or omission of any

partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners, loss or
injury is caused to any person, bot being a partner in the
partnership , or any penalty incurred, the partnership is
liable therefor to the same extent as the partner so acting or
omitting to act.
Art. 1823 The partnership is bound to make good the loss:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
1. Where one partner acting within the scope of his apparent

authority receives money or property of a third person and
misapplies it; and
_______________________________
_______________________________
_______________________________
_______________________________
2. Where the partnership in the course of its business

receives money or property of a third person and the money
or property so received is misapplied by any partner where
it is in the custody of the partnership.
_______________________________
_______________________________
_______________________________
_______________________________
Art. 1824 All partners are liable solidarily with the

partnership for everything chargeable to the partnership
under Articles 1822 and 1823.
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 64. Corp Code - Issuance of stock certificates. - No

certificate of stock shall be issued to a subscriber until the
full amount of his subscription together with interest and
expenses (in case of delinquent shares), if any is due, has
been paid.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 37 Corp Code- Power to extend or shorten corporate

term. - A private corporation may extend or shorten its term
as stated in the articles of incorporation when approved by
a majority vote of the board of directors or trustees and
ratified at a meeting by the stockholders representing at
28 | P a g e
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
______________________________
least two-thirds (2/3) of the outstanding capital stock or by

at least two-thirds (2/3) of the members in case of non-stock
corporations. Written notice of the proposed action and of
the time and place of the meeting shall be addressed to each
stockholder or member at his place of residence as shown
on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served
personally: Provided, That in case of extension of corporate
term, any dissenting stockholder may exercise his
appraisal right under the conditions provided in this code.
NOTES:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
viii.
Transferability of Interest Art. 1767, 1804 vs.
Sec. 63 Corp Code
_______________________________
_______________________________
_______________________________
Art. 1767 (supra)
_______________________________
_______________________________
_______________________________
_______________________________
Art. 1804 Every partner may associate another person

with him in his share, but the associate shall not be
admitted into the partnership without the consent of all the
other partners, even if the partner having an associate
should be a manager.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 63 Corp Code - Certificate of stock and transfer of

shares. - The capital stock of stock corporations shall be
divided into shares for which certificates signed by the
president or vice president, countersigned by the secretary
or assistant secretary, and sealed with the seal of the
corporation shall be issued in accordance with the by-laws.
Shares of stock so issued are personal property and may
be transferred by delivery of the certificate or certificates
endorsed by the owner or his attorney-in-fact or other
person legally authorized to make the transfer. No transfer,
however, shall be valid, except as between the parties, until
the transfer is recorded in the books of the corporation
showing the names of the parties to the transaction, the
date of the transfer, the number of the certificate or
certificates and the number of shares transferred.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
No shares of stock against which the corporation holds any

unpaid claim shall be transferable in the books of the
corporation. (
_______________________________
_______________________________
_______________________________
_______________________________
ix. Management Art. 1803 vs. Sec. 23 Corp Code

29 | P a g e
_______________________________
_______________________________
_______________________________
______________________________
NOTES:
Art. 1803 When the manner of management has not been
agreed upon, the following rules shall be observed:
_______________________________
_______________________________
_______________________________
1. All the partners shall be considered agents and whatever

any one of them may do alone shall bind the partnership,
without prejudice to the provisions of Art. 1801.
_______________________________
_______________________________
_______________________________
2. None of the partners may, without the consent of the

others, make any important alteration in the immovable
property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other
partners is manifestly prejudicial to the interest of the
partnership, the courts intervention may be sought.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 23 Corp Code - The board of directors or trustees. Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or
where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year until their
successors are elected and qualified.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Every director must own at least one (1) share of the capital
stock of the corporation of which he is a director, which share
shall stand in his name on the books of the corporation. Any
director who ceases to be the owner of at least one (1) share
of the capital stock of the corporation of which he is a director
shall thereby cease to be a director. Trustees of non-stock
corporations must be members thereof. a majority of the
directors or trustees of all corporations organized under this
Code must be residents of the Philippines.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
x. Dissolution Art. 1830 (1), (2) vs. Sec. 117-122 Corp Code
Art. 1830 Dissolution Is caused:
_______________________________
_______________________________
_______________________________
1. Without violation of the agreement between the partners;
_______________________________
_______________________________
_______________________________
a. By the termination of the definite term or particular

undertaking specified in the agreement;
30 | P a g e
_______________________________
_______________________________
_______________________________
_______________________________
______________________________
b. By the express will of any partner, who must act in good

faith, when no definite term or particular undertaking is
specified;
NOTES:
_______________________________
_______________________________
c. By the express will of all the partners who have not

signed their interests or suffered them to be charged for their
separate debts, either before or after the termination of any
specified term or particular undertaking.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
d. By the expulsion of any partner form the business bona

fide in accordance with such a power conferred by the
agreement between the partners;
_______________________________
_______________________________
_______________________________
2. In contravention of the agreement between the partners,

where the circumstances do not permit a dissolution under
any other provision of this article, by the express will of any
partners at any time.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 117-122 Corp Code
_______________________________
_______________________________
Sec. 117. Methods of dissolution. - A corporation formed or

organized under the provisions of this Code may be dissolved
voluntarily or involuntarily. (n) Sec. 118. Voluntary
dissolution where no creditors are affected. - If dissolution of
a corporation does not prejudice the rights of any creditor
having a claim against it, the dissolution may be effected by
majority vote of the board of directors or trustees, and by a
resolution duly adopted by the affirmative vote of the
stockholders owning at least twothirds (2/3) of the
outstanding capital stock or of at least two-thirds (2/3) of the
members of a meeting to be held upon call of the directors or
trustees after publication of the notice of time, place and
object of the meeting for three (3) consecutive weeks in a
newspaper published in the place where the principal office
of said corporation is located; and if no newspaper is
published in such place, then in a newspaper of general
circulation in the Philippines, after sending such notice to
each stockholder or member either by registered mail or by
personal delivery at least thirty (30) days prior to said
meeting. A copy of the resolution authorizing the dissolution
shall be certified by a majority of the board of directors or
trustees and countersigned by the secretary of the
corporation. The Securities and Exchange Commission shall
thereupon issue the certificate of dissolution. (62a)
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
31 | P a g e
_______________________________
_______________________________
______________________________
Sec. 119. Voluntary dissolution where creditors are affected.

- Where the dissolution of a corporation may prejudice the
rights of any creditor, the petition for dissolution shall be filed
with the Securities and Exchange Commission. The petition
shall be signed by a majority of its board of directors or
trustees or other officers having the management of its affairs,
verified by its president or secretary or one of its directors or
trustees, and shall set forth all claims and demands against
it, and that its dissolution was resolved upon by the
affirmative vote of the stockholders representing at least twothirds (2/3) of the outstanding capital stock or by at least twothirds (2/3) of the members at a meeting of its stockholders or
members called for that purpose. If the petition is sufficient in
form and substance, the Commission shall, by an order
reciting the purpose of the petition, fix a date on or before
which objections thereto may be filed by any person, which
date shall not be less than thirty (30) days nor more than sixty
(60) days after the entry of the order. Before such date, a copy
of the order shall be published at least once a week for three
(3) consecutive weeks in a newspaper of general circulation
published in the municipality or city where the principal office
of the corporation is situated, or if there be no such
newspaper, then in a newspaper of general circulation in the
Philippines, and a similar copy shall be posted for three (3)
consecutive weeks in three (3) public places in such
municipality or city. Upon five (5) day's notice, given after the
date on which the right to file objections as fixed in the order
has expired, the Commission shall proceed to hear the petition
and try any issue made by the objections filed; and if no such
objection is sufficient, and the material allegations of the
petition are true, it shall render judgment dissolving the
corporation and directing such disposition of its assets as
justice requires, and may appoint a receiver to collect such
assets and pay the debts of the corporation. (Rule 104,RCa)
Sec. 120. Dissolution by shortening corporate term. - A

voluntary dissolution may be effected by amending the
articles of incorporation to shorten the corporate term
pursuant to the provisions of this Code. A copy of the amended
articles of incorporation shall be submitted to the Securities
and Exchange Commission in accordance with this Code.
NOTES:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Upon approval of the amended articles of incorporation of the

expiration of the shortened term, as the case may be, the
corporation shall be deemed dissolved without any further
proceedings, subject to the provisions of this Code on
liquidation. (n)
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
32 | P a g e
_______________________________
_______________________________
______________________________
Sec. 121. Involuntary dissolution. - A corporation may be

dissolved by the Securities and Exchange Commission upon
filing of a verified complaint and after proper notice and
hearing on the grounds provided by existing laws, rules and
regulations. (n)
NOTES:
_______________________________
_______________________________
_______________________________
_______________________________
Sec. 122. Corporate liquidation. - Every corporation whose

charter expires by its own limitation or is annulled by
forfeiture or otherwise, or whose corporate existence for other
purposes is terminated in any other manner, shall
nevertheless be continued as a body corporate for three (3)
years after the time when it would have been so dissolved, for
the purpose of prosecuting and defending suits by or against
it and enabling it to settle and close its affairs, to dispose of
and convey its property and to distribute its assets, but not
for the purpose of continuing the business for which it was
established.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
At any time during said three (3) years, the corporation is

authorized and empowered to convey all of its property to
trustees for the benefit of stockholders, members, creditors,
and other persons in interest. From and after any such
conveyance by the corporation of its property in trust for the
benefit of its stockholders, members, creditors and others in
interest, all interest which the corporation had in the property
terminates, the legal interest vests in the trustees, and the
beneficial interest in the stockholders, members, creditors or
other persons in interest. Upon the winding up of the corporate
affairs, any asset distributable to any creditor or stockholder
or member who is unknown or cannot be found shall be
escheated to the city or municipality where such assets are
located.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Except by decrease of capital stock and as otherwise allowed

by this Code, no corporation shall distribute any of its assets
or property except upon lawful dissolution and after payment
of all its debts and liabilities.
_______________________________
_______________________________
_______________________________
_______________________________
xi. Governing Law Civil Code vs. Corporation Code
_______________________________
_______________________________
e. Art. 1769 In determining whether a partnership exists,

_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
33 | P a g e
_______________________________
_______________________________
______________________________
1. Except as otherwise provided by Art. 1825, persons who are not partners as to each other
are not partners as to third persons;
NOTES:
2. Co-ownership or co-possession does not of itself establish
a partnership, whether such co-owners or co-possessors do
or do not share any profits made by the use of the property;
_______________________________
_______________________________
_______________________________
_______________________________
3. The sharing of gross returns does not of itself establish a

partnership, WON the persons sharing them have a joint or
common right or interest in any property from which the
returns are derived;
business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such profits
were received in payment:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
b. As wages of an employee or rent to a landlord;
_______________________________
_______________________________
c. As an annuity to a widow or representative of a deceased

partner;
_______________________________
_______________________________
_______________________________
d. As interest on a loan, though the amount of payment vary

with the profits of the business;
_______________________________
_______________________________
_______________________________
e. As the consideration for the sale of a goodwill of a

business or other property by installments or otherwise.
_______________________________
_______________________________
_______________________________
_______________________________
f. Lease
YULO V. YANG CHIAO SENG
Facts:
Yang Chiao Seng proposed to form a partnership with
Rosario Yulo to run and operate a theatre on the
premises occupied by Cine Oro, PlazaSta. Cruz, Manila,
the principal conditions of the offer being (1) Yang
guarantees Yulo a monthly participation of P3,000 (2)
partnership shall be for a period of 2 years and 6 months
34 | P a g e
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
______________________________
with the condition that if the land is expropriated,

rendered impracticable for business, owner constructs
a permanent building, then Yulos right to lease and
partnership even if period agreed upon has not yet
expired; (3) Yulo is authorized to personally conduct
business in the lobby of the building; and (4) after Dec
31, 1947, all improvements placed by partnership shall
belong to Yulo but if partnership is terminated before
lapse of 1 and years, Yang shall have right to remove
improvements.
NOTES:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Parties established, Yang and Co. Ltd., to exist from

July 1,1945 Dec 31, 1947.
_______________________________
In June 1946, they executed a supplementary

agreement extending the partnership for 3 years
beginning Jan.1, 1948 to Dec. 31, 1950.
_______________________________
_______________________________
_______________________________
_______________________________
The land on which the theater was constructed was

leased by Yulo from owners, Emilia Carrion and Maria
Carrion Santa Marina for an indefinite period but that
after 1 year, such lease may be cancelled by either party
upon 90-day notice.
_______________________________
In Apr 1949, the owners notified Yulo of their desire to

cancel the lease contract come July.
_______________________________
Yulo and husband brought a civil action to declare the

lease for a indefinite period. Owners brought their own
civil action for ejectment upon Yulo and Yang.
_______________________________
CFI: Two cases were heard jointly; Complaint of Yuloand

Yang dismissed declaring contract of lease terminated.
_______________________________
CA: Affirmed the judgment. In 1950, Yulo demanded

from Yang her share in the profits of the business. Yang
answered saying he had to suspend payment because of
pending ejectment suit. Yulo filed present action in
1954, alleging the existence of a partnership between
them and that Yang has refused to pay her shares.
_______________________________
Defendants Position: The real agreement between

plaintiff and defendant was one of lease and not of
partnership; that the partnership was adopted as a
subterfuge to get around the prohibition contained in
the contract of lease between the owners and the
plaintiff against the sublease of the property.
Trial Court: Dismissal. It is not true that a partnership
was created between them because defendant has not
actually contributed the sum mentioned in the Articles
of Partnership or any other amount. The agreement is a
35 | P a g e
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
______________________________
lease because plaintiff didnt share either in the profits

or in the losses of the business as required by Art 1769
(CC) and because plaintiff was granted a guaranteed
participation in the profits belies the supposed
existence of a partnership.
NOTES:
NOTES:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Issue:
Was the agreement a contract a lease or a partnership?
_______________________________
_______________________________
Ruling:
Dismissed. The agreement was a sublease not a
partnership.
_______________________________
_______________________________
The following are the requisites of partnership:

(1) two or more persons who bind themselves to
contribute money, property or industry to a common
fund;
_______________________________
_______________________________
(2) the intention on the part of the partners to divide

the profits among themselves (Article 1761, CC).
Plaintiff did not furnish the supposed P20,000 capital
nor did she furnish any help or intervention in the
management of the theatre. Neither has she demanded
from defendant any accounting of the expenses and
earnings of the business. She was absolutely silent with
respect to any of the acts that a partner should have
done; all she did was to receive her share of P3,000 a
month which cannot be interpreted in any manner than
a payment for the use of premises which she had leased
from the owners.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
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We find no error in the judgment of the court below and

we affirm it in toto, with costs against plaintiffappellant.
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36 | P a g e
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Partnership Session 1 June 23, 2015

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Partnership Session 1 June 23, 2015

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PARTNERSHIP, AGENCY AND TRUST LAWS

PART ONE: PARTNERSHIP LAW

A. The Evolution of Partnership

2. Ancient origin of partnership as business organization

3. The relative newness of the law of partnership

c. Beginning of law of partnership: the increased use

4. America Uniform Act

B. Sources of Philippine Partnership Law

1. Code of Commerce (Arts. 116-238) Commercial and

3. New Civil Code (Title IX, Arts. 1767-1867) no more

a. Uniform Partnership Act (Sources of Arts.

NATURE AND ATTRIBUTES

Art. 1767. By the contract of partnership two or more

Two or more persons may also form a partnership for

B. Partnership as a Contractual Relation

e. As the consideration for the sale of a goodwill of a business or other property by

b. Parties who may become a partner

UNEMANCIPATED AND INSANE

(1) Those made between persons who were guilty of

c. Consent or Intention to become a partner 1769 (1)

Art. 1769 In determining whether a partnership exists,

1. Except as otherwise provided by Art. 1825, persons

persons consenting to such representation to bind them

d. Lawful subject matter and Cause 1347, 1348, 1770

Art. 1347 All things which are not outside the

5. Those which contemplate an impossible service;

Art. 1770 A partnership must have a lawful object of

When an unlawful partnership is dissolved by a judicial

The pursuit of a particular business for profit; except

e. Contribution to a common fund 1767

(2) Proof of contribution necessary in partnership.

f. Purpose: Business or profession - 1767

Art. 1350 In onerous contracts the cause is understood to

g. Community of Interest 1767, 1770, 1769 (3), (4)

Art. 1770 A partnership must have a lawful object of

When an unlawful partnership is dissolved by a judicial

Art. 1769. xxx

a. As a debt by installment of otherwise;

b. As wages of an employee or rent to a landlord;

c. As an annuity to a widow or representative of

d. As interest on a loan, though the amount of

e. As the consideration for the sale of a goodwill

2. Principles Governing Partnership

a. Contractual in nature 1767, 1784

Art. 1784 A partnership begins from the moment of

b. Separate Juridical Personality 1768, 46, 51, 1775

Article 1768. The partnership has a juridical personality

ARTICLE 51. When the law creating or recognizing them,

c. Delectus Personae 1804, 1813

Means choice of the person or choice of the persons.

absence of agreement, entitle the assignee, during the

G.R. No. 109248, July 3, 1995, Vitug, J;p

2. WON the withdrawal of Misa dissolved the partnership

2. Yes. Any one of the partners may, at his sole pleasure,

d. Mutual Agency 1803, 1818, 1822

name of any instrument, for apparently carrying on in the

An act of a partner which is not apparently for the carrying

Except when authorized by the other partners or unless

Dispose of the good-will of the business;

Renounce a claim of the partnership.

No act of a partner in contravention of a restriction on

e. Unlimited Liability 1816, 1817, 1824, 1826, 1827,

The assets of the partnership are:

The partnership property,