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2. CIR vs Suter, CTA Art 1767

It is a basic tenet of the Spanish and Philippine law that a
partnership has a juridical personality of its own, distinct and
separate from that of each of the partners. (Art. 1768.)
3. In re: Sycip, Salazar Firm name - Art 1767
A profession has been defined as a group of men pursuing a
learned art as a common calling in the spirit of public service
no less a public service because it may incidentally be a means
of livelihood.
4. Ortega vs CA - Art 1767
Power to dissolve partnership. Neither would the presence of a
period for its specific duration or the statement of a particular
purpose for its creation prevent the dissolution of any
partnership by an act or will of a partner. (see Art. 1830[2].)
Among partners, mutual agency arises and the doctrine of delectus
personae allows them to have the power, although not necessarily
the right, to dissolve the partnership. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good faith, not
that the attendance of bad faith can prevent the dissolution of
the partnership but that it can result in a liability for
damages.
5. Estanislao vs CA - Art 1767
Proof of contribution. In partnership, proof is necessary that
there be contribution of money, property, or industry to a common
fund with the intention of dividing the income or profits
obtained therefrom.
6. Campos vs Pacific Comm - Art 1768
Thus, in the partnership X & Co., in which A and B are the
partners, there are three distinct persons, namely, the
partnership X & Co., A, and B. As a consequence of the distinct
legal personality possessed by X & Co., it may be declared
insolvent even if A and B are not.
7. Vargas vs Chan - Art 1768
It may enter into contracts and may sue and be sued, it being
sufficient that service of summons or other process be served on
any partner.
8. Ngo Tian Tiek vs Phil. Educ - Art 1768
The death of either A or B is not a ground for the dismissal of a
pending suit against X & Co.

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9. Ang Pue vs Sec. Commerce - Art 1768

To organize a corporation or a partnership that could claim a
juridical personality of its own and transact business as such,
is not a matter of absolute right but a privilege which may be
enjoyed only under such terms as the State may deem necessary to
impose.
Thus, it has been held that the State through Congress, and in
the manner provided by law, had the right to enact Republic Act
No. 1180 (Retail Trade Nationalization Law)15 and to provide
therein that only Filipinos may engage in the retail business,
cannot be seriously doubted. The law provides, among other
things, that after its enactment, a partnership not wholly formed
by Filipinos could continue to engage in the retail business only
until the expiration of its term. This provision is clearly
intended to apply to partnerships already existing at the time of
the enactment of the law. Hence, the agreement in the articles of
partnership to extend the terms of its life must be deemed
subject to Republic Act No. 1180 if it was already in force when
the parties came to agree regarding the extension of the original
term of their partnership.
10. Pascual vs CIR - Art 1769
Thus, in a case, it was held that two isolated transactions
whereby two persons purchased two (2) parcels of land and then
another three (3) parcels of land and sold the same a few years
thereafter, did not thereby make them partners. There must be a
clear intent to form a partnership
11. Ona vs CIR - Art 1769
Heirs agreed, after partition, to use common properties and
income therefrom as a common fund with the intention of making
profit for them in proportion to their shares in the
inheritance.
Facts: A and B are co-owners of inherited properties. They agreed
to use the said common properties and the income derived
therefrom as a common fund with the intention to produce profi ts
for them in proportion to their respective shares in the
inheritance as determined in a project of partition. Issue: What
is the effect of such agreement on the existing co-ownership?
Held: The co-ownership is automatically converted into a
partnership. From the moment of partition, A and B, as heirs, are
entitled already to their respective defi nite shares of the

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estate and the income thereof, for each of them to manage and
dispose of as exclusively his own without the intervention of the
other heirs, and, accordingly, he becomes liable individually for
all taxes in connection therewith. If, after such partition, an
heir allows his shares to be held in common with his co-heirs
under a single management to be used with the intent of making
profit thereby in proportion to his share, there can be no doubt
that, even if no document or instrument were executed for the
purpose, for tax purposes, at least, an unregistered partnership
is formed.
12. Gatchalian vs CA - Art 1769
Two persons contributed money to buy a sweepstakes ticket with
the intention to divide the prize which they may win.
Facts: A, B, etc. put up money to buy a sweepstakes ticket for
the sole purpose of dividing equally the prize which they may win
as they did in fact the amount of P50,000.00. If a partnership
had been formed by A, B, etc. then it was liable for income tax
pursuant to law then in force; if merely a community of property,
then such co-ownership was not liable, not having a legal
personality of its own.
Issue: Did A, B, etc. form a partnership or merely a community of
property?
Held: A, B, etc. formed a partnership. The partnership was not
only formed, but upon the organization thereof and the winning of
the prize, it appeared that B personally appeared
in the offi ce of the Philippine Charity Sweepstakes, in his
capacity as co-partner, and as such collected the prize. All
these circumstances repel the idea that A, B, etc. organized and
formed a community of property only.
13. Sardane vs CA - Art 1769
The compensation of an employee was to be determined under the
contract with reference to the profi ts made by the partnership.
Facts: A brought action to recover the balance due him as salary
from B and C alleging that he was entitled to 5% of the net profi
ts of the business of B and C as co-partner of the latter.
Issue: Whether the contract made was one of partnership or one of
mere employment.

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Held: The contract was a mere contract of employment. A had no

voice nor vote in the management of the affairs of the company.
The fact that the compensation received by him was to be
determined with reference to the profits made by B and C in the
business did not in any sense make him a partner therein. The
articles of partnership between B and C provided that the profits
should be divided among the partners in a certain proportion. The
contract between A and the then manager of the partnership did
not in any way vary or modify this provision of the articles of
partnership.
The profits of the business could not be determined until all the
expenses had been paid, part of which was the salary of A. It was
undoubtedly necessary in order to determine what the salary of A
was, to determine what the profits of the business were, after
paying all of the expenses except his, but that determination was
not the final determination of the net profi ts of the business
which were to be divided between B and C. It was made for the
purpose of fi xing the basis upon which As compensation should
be determined.
14. Deluao vs Casteel- - Art 1770
A party to a contract of partnership providing for the division
of a fishpond between the parties which stipulation is illegal,
seeks the transfer of 1/2 of the fishpond.
Facts: A fi led a fi shpond application for a big tract of swampy
land. B also fi led his own application for the area covered by
As application. A introduced improvements on portions of the
area applied for him in the form of dikes, fi shpond gates,
clearings, etc. Subsequently, A and C (Bs wife) entered into a
contract of partnership, with A as industrial partner and C, as
capitalist partner, which contract may be divided into two parts,
namely, a contract to exploit the fi shpond pending its award to
either A or B, and a contract to divide the fi shpond between A
and C after such award. The Secretary of [Agriculture and]
Natural Resources awarded to A the possession of the area in
question. Thereafter, A forbade C from further administering the
fi shpond. B and C brought action for specifi c performance and
damages resulting from breach of contract. Under the law (Sec.
63, Act No. 4003 [Fisheries Act] and Fisheries Administrative
Order 14, Sec. 7.), the transfer or subletting of fi shponds
covered by permits or lease agreements without prior approval of
the DENR Secretary is prohibited.

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Issue: Is the contract of partnership valid?

Held:
(1) The fi rst part is valid. Although the fi shpond was then
in possession of A, neither he nor B was the holder of a fi
shpond permit over the area. Be that as it may, they were not,
however, precluded from exploiting the fi shpond pending approval
of As application over the same area. No law, rule, or
regulation prohibited them from doing so. Thus, rather than let
the fi shpond remain idle, they cultivated it.
(2) The second part is illegal. Under the law, only a holder of
a permit or lease and no one else may enjoy the benefi ts allowed
by the law. Since the partnership had for its object the division
into two equal parts of the fi shpond between A and C after it
shall have been awarded to the former, and therefore, it
envisaged the unauthorized transfer of one-half thereof to C
other than A, it was dissolved by the approval of the application
and the award of the fi shpond. The approval was an event which
made it unlawful for the business of the partnership to be
carried on or for the members to carry it on in partnership and,
therefore, caused its ipso facto dissolution.
15. Kiel vs Estate of Sabert - - Art 1771
In
determining
whether
or
not
a
particular
transaction
constitutes a partnership, as between the parties, the intention
as disclosed by the entire transaction, and as gathered from the
facts and from the language employed by the parties as well as
their conduct, should be ascertained. A partnership may even be
created without any defi nite intention; the intention of the
parties being inferred from their conduct and dealings with each
other
16. Jo Chung Cang vs. Pacifi c Commercial Co - Art 1771
If the parties intend a general partnership, they are general
partners although their purpose is to avoid the creation of such
a relation. Thus, in a case, the Supreme Court declared an
association as a general partnership it appearing that the
inclusion of Ltd. (limited) in the fi rm name was only a
subterfuge resorted to by the partners in order to evade
liability for possible losses, while assuming their enjoyment of
the advantages to be derived from the relation.

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17. Agad vs Mabolo - - Art 1773

An inventory is required only whenever immovable property is
contributed. Hence, Article 1773 does not apply in the case of
immovable property which may be possessed or even owned by the
partnership but not contributed by any of the partners. Thus, it
has been held that a partnership contract which states that the
partnership is established to operate a fi shpond (not to
engage in a fi shpond business) is not rendered void because
no inventory of the fi shpond was made where it did not clearly
and positively appear in the articles of partnership that the
real property had been contributed by anyone of the partners.
18. Tuason vs Bolanos - Art 1783
The doctrine adopted by our Supreme Court is that, unless
authorized by statute or by its charter, a corporation is without
capacity or power to enter into a contract of partnership.
A corporation, however, may enter into joint venture partnership
with another where the nature of the venture is in line with the
business authorized by its charter. (19. Auerbach vs. Sanitary
Wares) ---- same doctrine
20. Lozana vs Depakakibo

- Art. 1786

The money or property contributed by a partner becomes the

property of the partnership. It necessarily follows that the same
cannot be withdrawn or disposed of by the contributing partner
without the consent or approval of the partnership or of the
other partners. (Lozana vs. Depakakibo, 107 Phil. 728 [1960].)
21. Sancho vs Lizaraga

- Art. 1786

Under this article, the remedy of the other partner or the

partnership is not rescission but an action for specific
performance (to collect what is owing) with damages and interest
from the defaulting partner from the time he should have complied
with his obligation. (Art. 1788.) Article 1191, which refers to
resolution of reciprocal obligations in general, is not
applicable. Articles 1786 and 1788 specifically refer to the
contract of partnership in particular; and it is a well-known
principle
that
special
provisions
prevail
over
general
provisions.
22. Uy vs Puzon

- Art. 1788

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In a case, a partner in a construction venture, who, contrary to

the terms of the partnership, failed to contribute his share in
the capital of the partnership, was ordered by the court to
reimburse his co-partner whatever amount the latter invested in
or spent for the partnership on account of the construction
projects. (Uy vs. Puzon, 79 SCRA 598 [1977]; Under Article 2200
of the Civil Code, indemnification for damages shall comprehend
not only the value of the loss suffered, but also that of the
profits which the obligee failed to obtain. In other words,
lucrum lessans is also a basis for indemnifi cation. (Uy vs.
Puzon, 79 SCRA 598 [1977].)
23. U.S. vs Clarin

- Art. 1788

Where there was mere failure to return. The mere failure on the
part of an industrial partner to return to the capitalist partner
the capital brought by him into the partnership is not an act
constituting the crime of estafa. The money having been received
by the partnership, the business commenced and profits accrued,
the action that lies with the partner who furnished capital for
the recovery of his money is a civil one arising from the
partnership contract for a liquidation of the partnership and a
levy on its assets if there should be any. (U.S. vs. Clarin, 17
Phil. 84 [1910];
24. People vs Campos

- Art. 1788

In this case, there was mere failure on the part of the

industrial partner to liquidate partnership affairs and to
account to persons interested the amounts respectively due them.
A partner is guilty of estafa if he fraudulently appropriates
partnership property delivered to him, with specific directions
to apply it to partnership purposes. (People vs. Campos, supra.)
25. Martinez vs Ong Pong Co

- Art.1796

A partner seeks an accounting from the other partners who

received from him money to be invested by them in a business.
Facts: A delivered P1,500.00 to B and C who, in a private
document, acknowledged the receipt of the money with the
agreement that we are to invest the amount in a store, the
profits and losses of which we are to divide with the former in
equal shares. A filed a complaint to compel B and C to render an
accounting of the partnership as agreed to.
Issue: From what date should the payment of interest be counted?

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Held: Inasmuch as in this case nothing appears other than the

failure to fulfill an obligation on the part of a partner who
acted as agent in receiving money for a given purpose, for which
he has rendered no accounting, such agent is responsible only for
the losses which, by a violation of the law, he incurred. This
being an obligation to pay in cash, there are no other losses
than the legal interest which interest is not due except from the
case, from the filing of the complaint. Article 1796 is not
applicable insofar as it provides that the partnership shall be
responsible to every partner for the amounts he may have
disbursed on behalf of the partnership and for the corresponding
interest from the time the expenses are made, for the reason
that no other money than that contributed as capital is involved.
(Martinez vs. Ong Pong Co., 14 Phil. 726 [1909].)
26. Ramnani vs CA

Art.1797

In a case, where two brothers engaged in a business venture, with

one furnishing the capital and the other contributing his
industry, the Supreme Court ruled that Justice and equity
dictate that the two share equally the fruit of their joint
investment and efforts, because it was through the industry and
geniuses of the industrial partner that the property of the
venture was developed and improved into a valuable asset worth
more than P22 million. (Ramnani vs. Court of Appeals, 196 SCRA
731 [1991].)

27. Moran cs CA

- Art. 1797

A partner is entitled to receive only his share of the profits

actually realized by the venture. Even when an assurance was made
by a partner that they would earn a huge amount of profits, in
the absence of fraud, the other partner cannot claim a right to
recover the profits promised where the business was highly
speculative and turned out to be a failure. Hidden risks in any
business venture have to be considered. (Moran, Jr. vs. Court of
Appeals, 133 SCRA 88 [1984].)

28. Ng Ya vs Sugbu Comm. - Art. 1800

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Hence, unless expressly withheld, the minor power to issue

receipts is included in the general powers of the manager, as
this is in keeping with present day business dealings. (Ng Ya vs.
Sugbu Commercial Co., [C.A.] 50 O.G. 4913.)
29. Teague vs Martin

- Art. 1800

But a partner designated as one of the managers to take charge of

selling fish in Manila and the purchase of supplies has no
authority to purchase for the partnership a barge, a truck and
an adding machine, inasmuch as neither of these properties could
be considered as supplies for the partnership business (Teague
vs. Martin, 53 Phil. 504 [1929].)
30. Santos vs Villanueva

Art. 1800

Nor can the managing partner of a partnership formed for the

purpose of operating a tailoring shop sell or convey the
tailoring shop which is partnership property without the consent
of all the partners. (Santos vs. Villanueva, [C.A.] 50 O.G. 175.)
31. Bachrach vs La Protectora -

Art. 1804

A contract was entered into by a partner without the consent of

the others, there being no agreement with regard to the manner of
management.
Facts: A, B, and C organized a partnership for the purpose of
engaging in the transportation business. Without a previous
express authority, A contracted an indebtedness for automobile
supplies and accessories.
Issue: Are the partnership and the partners liable for said
indebtedness?
Held: Yes. There being no agreement with regard to the manner of
management, all the partners are considered agents of the
partnership. A must be deemed to have authority to contract the
indebtedness in question inasmuch as it was incurred in the
prosecution of the partnership business. (Bachrach vs. La
Protectora, 37 Phil. 441 [1918].)

32. Machuca vs Chuidian

Art.1804

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A, B, and C are partners. A may contract with D, whereby the

latter will participate in his (As) share in the profits of the
partnership. This A can do independently of the partnership
and in accordance with the principle of freedom to contract.
The original contract of partnership between A, B, and C is not
in any manner altered. D is considered merely a creditor of A who
associated him in his share. Consequently, D has no right to
intervene in the partnership to which he is a mere stranger. Like
an
assignee,
D
cannot
interfere
in
the
management
or
administration of the partnership business, require information
or account, or inspect partnership books. (Art. 1813.)
A continues in the enjoyment of the rights and remains subject to
the liabilities of a partner as though no contract has been made
by him with D.
D does not become
debts even if the
and assent of B
Chuidian, 2 Phil.

a partner nor is he liable for the partnership

agreement between A and D is with the knowledge
and C. D is an investor. (see Machuca vs.
210 [1903].)

33. Fue Leung vs IAC

Art. 1809

The obligation to account is one which rests especially on the

shoulders of a managing or active partner, and is one of the
special tasks of a liquidating or surviving partner. (40 Am. Jur.
333.) Articles 1806, 1807, and 1809 show that the right to demand
accounting exists as long as the partnership lasts. Prescription
begins to run only upon the dissolution of the partnership when
the fi nal accounting is done. (Fue Leung vs. Intermediate
Appellate Court, 169 SCRA 746 [1989]
34. Sison vs McQuaid

- Art. 1809

A partner seeks to recover 1/2 of the proceeds of a partnership

transaction without liquidation of the business.
Facts: A seeks to recover from B 1/2 of the purchase price of
lumber sold by the partnership to the United States Army. As
complaint does not show why he should be entitled to the sum he
claims. It does not allege that there has been a liquidation of
the partnership business and the said sum has been found to be
due him as his share of the profits.
Issue: Should the proceeds from the sale of the lumber be
considered profits?

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Held: They cannot be considered profits until costs and expenses

have been deducted. Moreover, the profits of a business cannot be
determined by taking into account the result of one particular
transaction instead of all the transactions had. Hence, the need
for a general liquidation before a member of a partnership may
claim a specific sum as his share of the profits. (Sison vs. H.
McQuaid, 94 Phil. 201 [1953].)
35. Ornum vs Lasala

Art. 1809

Without objecting to a statement of accounts, a partner promised

to sign the same after receiving his shares, and after he has
been paid, refused to sign and instead demanded a liquidation.
Facts: A submitted a statement of accounts to B, his copartner.
Instead of objecting to said statement, B promised to sign the
same as soon as he received his shares as shown in said
statement. After said shares had been paid by A and accepted by B
without reservation, the latter refused to sign the statement. B
demanded a new liquidation, claiming that he was entitled to more
than what the statement of account shows.
Issue: Is B entitled to a further liquidation?
Held: No. After accepting his shares without any reservation, B
virtually confirmed his approval of the statement of accounts,
and its signing thereby became a mere formality to be complied
with by B exclusively. His refusal to sign, after receiving the
shares, amounted to a waiver of that formality in favor of A who
had already performed his obligation. This approval precludes any
right on the part of B to a further liquidation, unless he can
show there was fraud or mistake in said approval. (Ornum vs.
Lasala, 74 Phil. 241 [1943].)
36. Clemente vs Galvan

Art. 1811

A partner cannot separately assign his right to specific

partnership property but all of them can assign their rights in
the same property.
(a) A partners right in specific partnership property is not
assignable because it is impossible to determine the extent of
his beneficial interest in the property until after the
liquidation
of
partnership
affairs.
As
property
of
the
partnership, the same could not be disposed of or mortgaged even
by the partner who contributed the same without the consent or
approval of the partnership or of the other partners. (Clemente
vs. Galvan, 67 Phil. 565 [1939]

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37. Leyte-SamarSales vs Cea

Art. 1812

Partners interest not a debt due from partnership. A partner

is not a creditor of the partnership for the amount of his share.
(The Leyte-Samar Sales and K. Tomassi vs. S. Cea and O.
Castrilla, 93 Phil. 100 [1953].)