Pastor vs.

Gaspar
Facts:
On November 1900, Macario Nicasio and the defendant Gaspar entered into a
contract of partnership under the name Nicasio and Gaspar.
The said partnership owned the steam launch Luisa, and its only business
was relating to this launch.
On November 24, 1900, with the desire to enlarge their business, a contract
was made between the firm of Nicasio and Gaspar on the one side, and on
the other side the plaintiff and 4 others from whom N and G secured a sum of
P28, 000 in order to finance the purchase of 6 additional launches.
In the contract, N and G undertakes to return the amount loaned to the
plaintiff within a period of ten years from the date of the instrument and to
guarantee the fulfillment of the said payment they pledge to the same
parties the 6 launches.
Barely 7 months after the execution of the contract, it was terminated and
was sold by mutual consent.
The plaintiff brought action alleging that the contract was one of partnership,
and that the consent of his agent to terminate the contract and the sale of
the launches was obtained by fraud and the dissolution of the partnership
was null and void.
Issue: WON the transaction between the parties a loan or a contract of partnership.
Ruling: It was a LOAN in view of the ff. features contained in the contract as found
by the SC:
(a) It is twice stated positively that N and G are the only partners and the only
persons interested in the partnership of N and G, to which statements Pastor and his
associates assented to when he signed the document;
(b) It is stated, also distinctly and positively, that the money has been furnished as a
loan;
(c) N and G bind themselves in the contract to repay the amount something that
they would not be bound to do were the contract one of partnership;
(d) In the contract, N and G create in favor of Pastor and his associates a right of
pledge over the launches, a thing inconsistent with the idea of partnership;
(e) N and G are to be considered as consignees only as long as they do not pay the
debt. This indicates that they had a right to pay it;
(f) They bind themselves not to alienate the launches until they had paid the debt
indicating clearly that by paying the debt they could do so, a thing inconsistent with
the idea of a partnership; and

(g) It is also stated that the launch Luisa is not included in the contract.
It was also ruled that, the fact that Pastor et. al., was to share in the profits and
losses of the business and that N and G should answer for the payment of the debt
only with the launches and not with their property, indicate that the petitioner was a
partner. But these provisions are not conclusive. The rights of third persons are not
concerned. The parties could, in making the contract, if they choose, take some
provisions from the law of partnership and others from the law of loans. Loans with
a right to receive a part of the profits in lieu of interests are not uncommon. As
between the parties, such a contract is not one of a partnership.