16. Pioneer Insurance & Surety Corp. v.
Court of Appeals, 175 SCRA 668 refused to pay him and instead informed him that since he bought the
(1989)
175 SCRA 668 Business Organization Corporation Law When De Facto
Partnership Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In
1965, Lim convinced Constancio Maglana, Modesto Cervantes, Francisco
Cervantes, and Border Machinery and Heavy Equipment Company
(BORMAHECO) to contribute funds and to buy two aircrafts which would
form part a corporation which will be the expansion of Southern Air Lines.
Maglana et al then contributed and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim,
without the knowledge of Maglana et al, made an agreement with Pioneer
Insurance for the latter to insure the two aircrafts which were brought in
installment from Japan Domestic Airlines (JDA) using said aircrafts as
security. So when Lim defaulted from paying JDA, the two aircrafts were
foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and
Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general
partners.
HELD: No. There was no de facto partnership. Ordinarily, when co-investors
agreed to do business through a corporation but failed to incorporate, a de
facto partnership would have been formed, and as such, all must share in the
losses and/or gains of the venture in proportion to their contribution. But in
this case, it was shown that Lim did not have the intent to form a corporation
with Maglana et al. This can be inferred from acts of unilaterally taking out a
surety from Pioneer Insurance and not using the funds he got from Maglana
et al. The record shows that Lim was acting on his own and not in behalf of
his other would-be incorporators in transacting the sale of the airplanes and
spare parts.
17. Yu v. National Labor Relations Commission, 224 SCRA 75 (1993)
FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain
Products Company Limited primarily responsible for the overall operations of
marble quarrying and export business of said partnership. He was hired by a
virtue of a Partnership Resolution in 1985 with a monthly salary of P4,000.00.
Initially he received only half of his stipulated monthly salary and was
promised by the partners that the balance would be paid upon securing
additional operating funds from abroad. However, in 1988 without his
knowledge the general partners as well as one of the limited partners sold
and transferred their interest to Willy Co and Emmanuel Zapanta. Thus the
new major partners decided to transfer the firms main office but opted to
continue the operation of the old partnership under its old firm name and with
all its employees and workers except for the petitioner. Upon knowing of the
changes in the partnership, petitioner went to the new main office to meet the
new partners and demand the payment of his unpaid salaries, but the latter
business from the original partners, it was for him to decide whether or not he
was responsible for the obligations of the old partnership including petitioners
unpaid salaries. Hence, petitioner was dismissed from said partnership.
ISSUES:
1. Whether the partnership which had hired the petitioner as Asst.
General Manager had been extinguished and replaced by a new partnership
composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment
contract as against the new partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the
partnership was the dissolution of the old partnership which had hired the
petitioner in 1984 and the emergence of the new firm composed of Willy Co
and Emmanuel Zapanta in 1988. This is based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on
as a distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith,
when no definite term or particular undertaking is specified.
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 partner at any time;
However, the legal consequence of dissolution of a partnership do not
automatically result in the termination of the legal personality of the old
partnership as according to Art. 1829, on dissolution of the partnership is
not terminated, but continues until the winding up of the partnership affairs is
completed. The new partnership simply continued the operations of the old
partnership under its old firm name without winding up the business affairs of
the old partnership.
2. Yes. Under Art. 1840, creditors of the old partnership are also creditors
of the new partnership which continued the business of former without
liquidation of the partnership affairs. Thus, creditor of the old Jade Mountain,
such as the petitioner is entitled to enforce his claim for unpaid salaries, as
well as other claims relating to his employment with the old partnership
against the new Jade Mountain.
18. Moran v. Court of Appeals, 133 SCRA 99 (1984)
Business Organization Partnership, Agency, Trust Profit and Loss
Sharing Speculative Damages
In February 1971, Isabelo Moran and Mariano Pecson entered into a
partnership agreement where they agreed to contribute P15k each for the
purpose of printing 95k posters of the delegates to the then 1971
Constitutional Commission. Moran shall be in charge in managing the
printing of the posters. It was further agreed that Pecson will receive a
commission of P1k a month starting from April 1971 to December 1971; that
the partnership is to be liquidated on December 15, 1971.
Pecson partially fulfilled his obligation to the partnership when he issued
P10k in favor of the partnership. He gave the P10k to Moran as the
managing partner. Moran however did not add anything and, instead, he only
used P4k out of the P10k in printing 2,000 posters. He only printed 2,000
posters because he felt that printing all 95k posters is a losing venture
because of the delay by the COMELEC in announcing the full delegates. All
the posters were sold for a total of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson damages.
The Court of Appeals affirmed the decision of the trial court but modified the
same as it ordered Moran to pay P47.5k for unrealized profit; P8k for
Pecsons monthly commissions; P7k as return of investment because the
venture never took off; plus interest.
ISSUE: Whether or not the CA judgment is correct.
HELD: No. The award of P47.5k for unrealized profit is speculative. There is
no evidence whatsoever that the partnership between the Moran and Pecson
would have been a profitable venture (because base on the circumstances
then i.e. the delay of the COMELEC in proclaiming the candidates, profit is
highly unlikely). In fact, it was a failure doomed from the start. There is
therefore no basis for the award of speculative damages in favor of Pecson.
Further, there is mutual breach in this case, Pecson only gave P10k instead
of P15k while Moran gave nothing at all.
As for the P8k monthly commission, this is without basis. The agreement
does not state the basis of the commission. The payment of the commission
could only have been predicated on relatively extravagant profits. The parties
could not have intended the giving of a commission inspite of loss or failure
of the venture. Since the venture was a failure, Pecson is not entitled to the
P8k commission.
As for the P7k award as return for Pecsons investment, the CA erred in his
ruling too. Though the venture failed, it did took off the ground as evidenced
by the 2,000 posters printed. Hence, return of investment is not proper in this
case. There are risks in any business venture and the failure of the
undertaking cannot entirely be blamed on the managing partner alone,
specially if the latter exercised his best business judgment, which seems to
be true in this case.
Moran must however return the unused P6k of Pecsons contribution to the
partnership plus P3k representing Pecsons profit share in the sale of the
printed posters. Computation of P3k profit share is as follows: (P10k profit
from the sale of the 2,000 posters printed) (P4k expense in printing the 2k
posters) = (P6k profit); Profit 2 = P3k each.
19. Rojas v. Maglana, 192 SCRA 110 (1990)
Maglana and Rojas executed their Articles of Co-partnership
called Eastcoast Development Enterpises which had an indefinite term
of existence and was registered with the SEC and had a Timber License.
One of the EDEs purposes was to apply or secure timber and/or private
forest lands and to operate, develop and promote such forests rights and
concessions. M shall manage the business affairs while R shall be the
logging superintendent. All profits and losses shall be divided share and
share alike between them. Later on, the two availed the services of
Pahamotang as industrial partner and executed another articles of co-
partnership with the latter. The purpose of this second partnership was to
hold and secure renewal of timber license and the term of which was fixed to
30 years. Still later on, the three executed a conditional sale of interest in the
partnership wherein M and R shall purchase the interest, share and
participation in the partnership of P. It was also agreed that after payment of
such including amount of loan secured by P in favor of the partnership, the
two shall become owners of all equipment contributed by P. After this, the
two continued the partnership without any written agreement or reconstitution
of their articles of partnership. Subsequently, R entered into a management
contract with CMS Estate Inc. M wrote him re: his contribution to the capital
investments as well as his duties as logging superintendent. R replied that he
will not be able to comply with both
. M then told R that the latters share will just be 20% of
the net profits. Such was the sharing from 1957 to 1959 without complaint or
dispute. R took funds from the partnership more than his contribution. M
notified R that he dissolved the partnership. R filed an action against M for
the recovery of properties and accounting of the partnership and damages.
CFI
: the partnership of M and R is after P retired is one of de facto and at will;
the sharing of profits and losses is on the basis of actual contributions; there
is no evidence these properties were acquired by the partnership funds thus
it should not belong to it; neither is entitled to damages; the letter of M in
effect dissolved the partnership; sale of forest concession is valid and binding
and sh
ould be considered as Ms
contribution; R must pay or turn over to the partnership the profits he
received from CMS and pay his personal account to the partnership; M
must be paid 85k which he shouldve received but was not paid to him and
must be considered as his contribution.
ISSUE
: what is the nature of the partnership and legal relationship of M-R after P
retired from the second partnership? May M unilaterally dissolve the
partnership?
SC:
There was no intention to dissolve the first partnership upon the constitution
of the second as everything else was the same except for the fact that they
took in an industrial partner: they pursued the same purposes, the capital
contributions call for the same amounts, all subsequent renewals of Timber
License were secured in favor of the first partnership, all businesses were
carried out under the registered articles. M and R agreed to purchase the
interest, share and participation of P and after, they became owners of the
equipment contributed by P. Both considered themselves as partners as per
their letters. It is not a partnership de facto or at will as it was existing and
duly registered. The letter of M dissolving the partnership is in effect a notice
of withdrawal and may be done by expressly withdrawing even before
expiration of the period with or without justifiable cause. As to the liquidation
of the partnership it shall
be divided share and share alike after an accounting has been made.
R is not entitled to any profits as he failed to give the amount he had
undertaken to contribute thus, had become a debtor of the partnership. M
cannot be liable for damages as R abandoned the partnership thru his acts
and also took funds in an amount more than his contribution.
20. Aldecoa and Co. v. Warner, Barnes and Co., 30 Phil 153 (1910)
Facts:
In other paragraphs of the complaint, from the fourth to the twelfth, the plain
tiff set forth that, prior to December 1, 1898, Warner, Barnes and Co. were
cond
ucting a business in Albay, the principal object of which was the purchase of
he
mp in the pueblos of Legaspi and Tobacco for the purpose of bringing it to
Manil
a, here to sell if for exportation, and that on the said date of December 1, 189
8, the plaintiff company became interested in the said business of Warner,
Barne
s and Co., in Albay and formed therewith a joint-account partnership whereby
Ald
ecoa and Co., were to share equally in the gains and losses of the business
in A
lbay; that the defendant is the successor to all the rights and obligations of W
arner, Barnes and Co., among which is that of being manager of the said
joint-ac
count partnership with Aldecoa and Co.; It is a recognized fact, and one
admitte
d by both parties that the partnership herein concerned concluded its
transactio
ns on December 31, 1903; wherefore the firm of Warner, Barnes & Co. Ltd.,
the ma
nager of the partnership, in declaring the latter's transactions concluded and i
n rendering duly verified accounts of its results, owes the duty to include ther
ein the property and effects belonging to the partnership in common.
Issue:
This litigation concerns the rendering of accounts pertaining to the
management
of the business of a joint-account partnership formed between the two
litigants
companies.
Held:
It is a rule of law generally observed that he who takes charge of the
manageme
nt of another's property is bound immediately thereafter to render accounts
cove
ring his transactions; and that it is always to be understood that all accounts
rendered must be duly substantiated by vouchers. It is one of the duties of
the
manager of a joint-account partnership, to liquidate the assets that form the
co
mmon property, and to state the result obtained therefrom in the final
rendering
of the accounts which he is to present at the conclusion of the partnership.
21. Lim Tanhu v. Ramolete, 66 SCRA 425 (1975)
FACTS:
Tan alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a
partner in the commercial partnership, Glory Commercial Company with
Antonio Lim Tanhu and Alfonso Ng Sua".
Defendant Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan,
and Eng Chong Leonardo, through fraud and machination, took actual and
active management of the partnership and although Tee Hoon Lim Po Chuan
was the manager of Glory Commercial Company, defendants managed to
use the funds of the partnership to purchase lands and buildings in the cities
of Cebu, Lapulapu, Mandaue, and the municipalities of Talisay and
Minglanilla.

She alleged in her complaint that after the death of Tee Hoon Lim Po Chuan,
the defendants, without liquidation, continued the business of Glory
Commercial Company, by purportedly organizing a corporation known as the
Glory Commercial Company, Incorporated and sometime in the month of
November, 1967, defendants, particularly Antonio Lim Tanhu, by means of
fraud deceit, and misrepresentations did then and there, induce and convince
her to execute a quitclaim of all her rights and interests, in the assets of the
partnership of Glory Commercial Company.
Thereafter, in the year 1968-69, the defendants who had earlier promised to
liquidate the aforesaid properties and assets in favor, among others of
plaintiff and until the middle of the year 1970 when the plaintiff formally
demanded from the defendants the accounting of real and personal
properties of the Glory Commercial Company, defendants refused and stated
that they would not give the share of the plaintiff.
ISSUE:
Whether Tan has a right over the liquidated properties of the partnership
HELD:
No, Tan has no right over the liquidated properties of the partnership
The Supreme Court held that there is no alternative but to hold that plaintiff
Tan Put's allegation that she is the widow of Tee Hoon Lim Po Chuan has
not been satisfactorily established and that, on the contrary, the evidence on
record convincingly shows that her relation with said deceased was that of a
common-law wife.
Moreover, the Supreme Court said that the lower courts committed an error
by awarding 1/3 of the partnership properties to Tan because there has been
no liquidation proceedings yet. And if there has not yet been any liquidation
of the partnership, the only right plaintiff could have would be to what might
result after much liquidation to belong to the deceased partner (her alleged
husband) and before this is finished, it is impossible to determine, what rights
or interest, if any the deceased had.
In other words, no specific amounts or properties may be adjudicated to the
heir or legal representative of the deceased partner without the liquidation
being first terminated.
22. United States v. Clarin, 17 Phil 84
Business Organization Partnership, Agency, Trust Co-Partners Liability (60% for the sisters and 40% for Manuel) said parcel of land is to be
Misappropriation
Sometime before 1910, Pedro Larin formed a partnership with Pedro Tarug,
Eusebio Clarin and Carlos de Guzman. Larin, being the capitalist, agreed to
contribute P172.00 to the partnership and the three others shall use said
fund to trade mangoes. The three industrial partners bought mangoes and
sell them and they earned P203.00 but they failed to give Larins share of the
profits. Larin charged them with the crime of estafa, but the provincial fiscal
filed an information only against Eusebio Clarin in which he accused him of
appropriating to himself not only the P172 but also the share of the profits
that belonged to Larin, amounting to P15.50. Clarin was eventually
convicted.
ISSUE: Whether or not the conviction is correct.
HELD: No. The P172.00 having been received by the partnership, the
business commenced and profits accrued, the action that lies with the
partner who furnished the capital for the recovery of his money is not a
criminal action for estafa, but 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.
The then Penal Code provides that those who are guilty of estafa are those
who, to the prejudice of another, shall appropriate or misapply any money,
goods, or any kind of personal property which they may have received as a
deposit on commission for administration or in any other producing the
obligation to deliver or return the same, (as, for example, in commodatum,
precarium, and other unilateral contracts which require the return of the same
thing received) does not include money received for a partnership; otherwise
the result would be that, if the partnership, instead of obtaining profits,
suffered losses, as it could not be held liable civilly for the share of the
capitalist partner who reserved the ownership of the money brought in by
him, it would have to answer to the charge of estafa, for which it would be
sufficient to argue that the partnership had received the money under
obligation to return it.
23. Celino v. Court of Appeals, 163 SCRA 97 (1988)
24.Torres vs. Court of Appeals, 310 SCRA 428 (1999)
Business Organization Partnership, Agency, Trust Sharing of Loss in a
Partnership Industrial Partner
In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint
venture agreement with Manuel Torres. Under the agreement, the sisters
agreed to execute a deed of sale in favor Manuel over a parcel of land, the
sisters received no cash payment from Manuel but the promise of profits
developed as a subdivision.
Manuel then had the title of the land transferred in his name and he
subsequently mortgaged the property. He used the proceeds from the
mortgage to start building roads, curbs and gutters. Manuel also contracted
an engineering firm for the building of housing units. But due to adverse
claims in the land, prospective buyers were scared off and the subdivision
project eventually failed.
The sisters then filed a civil case against Manuel for damages equivalent to
60% of the value of the property, which according to the sisters, is whats due
them as per the contract.
The lower court ruled in favor of Manuel and the Court of Appeals affirmed
the lower court.
The sisters then appealed before the Supreme Court where they argued that
there is no partnership between them and Manuel because the joint venture
agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered into with Manuel
is a partnership agreement whereby they agreed to contribute property (their
land) which was to be developed as a subdivision. While on the other hand,
though Manuel did not contribute capital, he is an industrial partner for his
contribution for general expenses and other costs. Furthermore, the income
from the said project would be divided according to the stipulated percentage
(60-40). Clearly, the contract manifested the intention of the parties to form a
partnership. Further still, the sisters cannot invoke their right to the 60%
value of the property and at the same time deny the same contract which
entitles them to it.
At any rate, the failure of the partnership cannot be blamed on the sisters,
nor can it be blamed to Manuel (the sisters on their appeal did not show
evidence as to Manuels fault in the failure of the partnership). The sisters
must then bear their loss (which is 60%). Manuel does not bear the loss of
the other 40% because as an industrial partner he is exempt from losses.
25. Sharruf & Co. v. Baloise Fire Insurance Co., 62 Phil 258 (1937)
Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)
Laws Applicable:
FACTS:
Salomon Sharruf and Elias Eskenazi were doing business under the firm
name of Sharruf & Co. They insured their stocks with aloise Fire Insurance
Co., Sun Insurance Office Ltd., and Springfield Insurance Co. raising it to
P40,000. Elias Eskenazi having paid the corresponding premiums
Soon they changed the name of their partnership to Sharruf & Eskenazi
September 22, 1933: A fire ensued at their building at Muelle de la Industria
street where petroleum was spilt lasting 27 minutes
Sharruf & Co. claimed 40 cases when only 10 or 11 partly burned and
scorched cases were found
RTC: ordered Baloise Fire Insurance Co., Sun Insurance Office Ltd., and
Springfield Insurance Co., to pay the partners Salomon Sharruf and Elias
Eskenazi P40,000 plus 8% interest
ISSUE: W/N Sharruf & Eskenazi has juridical personality and insurable
interest
HELD: YES. Reversd. Insurance companies are absolved.
It does not appear that in changing the title of the partnership they had the
intention of defrauding the insurance companies
fire which broke out in the building at Nos. 299-301 Muelle de la Industria,
occupied by Sharruf & Eskenazi but no evidence sufficient to warrant a
finding that they are responsible for the fire
So great is the difference between the amount of articles insured, which the
plaintiffs claim to have been in the building before the fire, and the amount
thereof shown by the vestige of the fire to have been therein, that the most
liberal human judgment can not attribute such difference to a mere innocent
error in estimate or counting but to a deliberate intent to demand of the
insurance companies payment of an indemnity for goods not existing at the
time of the fire, thereby constituting the so-called "fraudulent claim" which, by
express agreement between the insurers and the insured, is a ground for
exemption of the insurers from civil liability
acted in bad faith in presenting a fraudulent claim, they are not entitled to the
indemnity claimed
when the partners of a general partnership doing business under the firm
name of "Sharruf & Co." obtain insurance policies issued to said firm and the
latter is afterwards changed to "Sharruf & Eskenazi", which are the names of
the same and only partners of said firm "Sharruf & Co.", continuing the same
business, the new firm acquires the rights of the former under the same
policies;
26 In the Matter of the Petition for Authority to Continue Use of Firm
Name Sycip, Salazar & Castillo, 92 SCRA 1 (1979)
Facts:
Two firms asked that they be allowed to continue using the name of their firm
despite that Attys. Sycip and Ozaeta died.
Petitioners Arguments:
1. Under the law, a partnership is not prohibited from continuing it
business under the firm name of the deceased partner. NCC 1840 explicitly
sanctions practice.
- The use by the person or partnership continuing the business of the
partnership name, or the name of a deceased partner thereof, shall not itself
make the individual property of the deceased partner liable for any debts
contracted by such person in the partnership.
2. In regulating other professions (accountancy and engineering), the
legislature has authorized the adoption of firm names without any restriction
as to the use of the name of the deceased partner. There is no fundamental
policy that is offended by the continued use by a firm of professionals of the
firm name, which includes the name of the deceased partner, at least where
such firm name has acquired the characteristics of a trade name
3. The Canons of Professional Ethics are not transgressed by the
continued use of the name of the deceased partner because Canon 33 of the
Canons of Professional Ethics adopted by the American Bar Association
declared that:
- The continued use of the name of the deceased or former partner
when permissible by local custom is not unethical but care should be taken
that no imposition or deception is practiced by this use.
4. There is no possibility of imposition or deception because the deaths
of their respective deceased partners were well-published in all newspapers
of general circulation for several days. The stationeries now being used by
them carry new letterhead indicating the years when their respective
deceased partners were connected with the firm. Petitioners will notify all
leading national and international law directories of the facts of their
deceased partners death.
5. No local custom prohibits the continued use of the deceased
partners name in the professional firms name. There is no Philippine custom
or usage that recognized that the name of a law firm identifies the firms
individual members.
6. The continued use of the deceased partners name in the firm name
of law partnership has been consistently allowed by the U.C Courts and is an
acceptable practice in the legal profession of most countries.
ISSUE:
WON they may be allowed to continue using the current names of their firms.
HELD:
No. The petitioners are advised to drop the names of SYCIP and
OZAETA from their respective firm names.
RATIO
Jurisprudence
- The Deen case (1953) - the court advised the firm to desist from
including in their firm name of C.D. Johnson, who has long been dead.
- Register of Deeds of Manila v. China Banking Corporation (1958)
in this case, the law firm of Perkins & Ponce Enrile moved to intervene as
amicus curiae. The Court in a Resolution stated that it would like to e
informed why the name of Perkins is still being used although Atty. E.A.
Perkins is already dead. The Court advised the firm to drop the name of E.
A. Perkins from the firm name, and ruled that no practice should be allowed
which in a remote degree could give rise to responsibility of deception.(citing
the Deen case)
The Supreme Court in the Deen and Perkins case laid down a legal rule
against which no custom or practice to the contrary, even if proven, can
prevail. This is not to speak of our civil law which clearly ordains that a
partnership is dissolved by the death of any partner. Custom which are
contrary to law, public order or public policy shall not be countenanced.
The use in their partnership name of the names of the deceased partners will
run counter to New Civil Code provision under Article 1815 which state that,
Art. 1815. Every partnership shall operate under a firm name, which may or
may not include the name of one or more of the partners. Those who, not
being members of the partnership, include their names in the firm name shall
be subject to liability of a partner.
Names in a firm name of a partnership must either be those of living partners
and in the case of non-partners, should be living persons who can be
subjected to liability. The Article 1815 of the NCC prohibits a 3rd person from
including his name in the firm under pain of assuming the liability of a
partner.
The heirs of the deceased partner in law firm cannot be held liable as
old members to the creditors of a firm particularly where they are non-
lawyers. Canon 34 of the Canons of Professional Ethics prohibits an
agreement for the payment to the widow and the heirs of the deceased
lawyer of a percentage, either gross or net. Of the fees received from the
future business of the deceased lawyers clients, both because the recipients
of such decision are not lawyers and because such payments will not
represent service or responsibility on the part of the recipient. Neither the
widow nor the heirs can be held liable for transactions entered into after the
death of their lawyer-predecessor. There being no benefit accruing, there can
be no corresponding liability.
The public relations value of the use of an old firm name can tend to
create undue advantages and disadvantages in the practice of profession.
An able lawyer without connections will have to make name for himself
starting from scratch. Another able lawyer, who can join an old firm, can
initially ride on that old firms reputation established by the deceased
partners.
27. LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and
CARMELITO JOSE vs. DONALDO EFREN C. RAMIREZ and Sps .CESAR
G. RAMIREZ JR. and CARMELITA C. RAMIREZ, GRN 144214, July 14,
2003
Business Organization Partnership, Agency, Trust Dissolution and
Winding Up Need for Accounting Proceedings to Determine Partners
Share
In 1984, Villareal, Carmelito Jose and Jesus Jose, formed a partnership for
the purpose of operating a restaurant. Each contributed P250,000.00. In
1984, Ramirez was added as a partner after he contributed P250,000.00. In
1987, Jesus withdrew from the partnership and his capital share of P250k
was returned to him as agreed upon by the other partners.
Thereafter, the restaurant suffered losses. Without informing Ramirez,
Villareal and Carmelito shut down the restaurant. They then turned over the
restaurant equipments to Ramirez.
Later, Ramirez sent a letter to Villareal and Carmelito telling them hes no
longer interested in being a partner and that hes demanding his shares in
the partnership. Villareal and Carmelito ignored the request of Ramirez
hence the latter sued them.
In their defense, Villareal and Carmelito said that the restaurant equipments
served as payment to Ramirez when they were delivered to them; that
Ramirez cannot ask for share in equity because the restaurant incurred debts
(P240,658.00) and irreversible business losses. Ramirez argued by saying
that the equipments were merely placed in their house for storage as the two
partners allegedly searched for a better restaurant location; that he was not
aware of any losses or any indebtedness because he never took part in the
management of the restaurant.
The trial court ruled in favor of Ramirez. The Court of Appeals affirmed the
trial court and it further ordered Villareal and Carmelito to pay Ramirez
P253,114.00. The computation was done as follows: (Original Partnership
Capital Partnership Debt = Partnership Asset) Number of partners;
hence: (P1,000,000.00 P240,658.00 = P759,342.00) 3 = P253,114.00.
ISSUE: Whether or not the Court of Appeals is correct.
HELD: No. It is impossible that the said P1,000,000.00 original capital did not
fluctuate. It could not have remained stagnant. Further, the Court of Appeals
missed to note that one partner left and his contribution was returned (Jesus
Jose). Generally, in the pursuit of a partnership business, its capital is either
increased by profits earned or decreased by losses sustained. It does not
remain static and unaffected by the changing fortunes of the business.
The Supreme Court also noted that Ramirez cannot demand his equity
shares from Villareal and Carmelito because it should be the partnership
the partners and the partnership has a separate and distinct personality.
In determining Ramirez share in the equity, losses must be accounted for.
He cannot ask for an amount equivalent to his capital contribution especially
in this case where the partnership incurred debts and losses. At any rate,
Ramirez share is 1/3 of whatever assets the partnership still has after debts
and losses are deducted. Hence there is a need for a proper proceeding for
the accounting, liquidation, and distribution of the remaining partnership
assets. A share in a partnership can be returned only after the completion of
the latters dissolution, liquidation and winding up of the business.
On the issue of whether or not the turning over of the restaurant equipments
to Ramirez served as payment of the latters share, it is wrong for Villarreal
and Carmelito to assert that it served as a payment. Ramirez was merely
made to believe that said equipments are being stored in his place and not
being given to him as payment.
28. Singson v. Isabela Sawmill, G.R. No. L-27343, February 28, 1979
Facts: In 1951, defendants entered into a contract of partnership under the
firm name Isabela Sawmill. In 1956 the plaintiff sold to the partnership a
motor truck and two tractors. The partnership was not able to pay their whole
balance even after demand was made. One of the partners withdrew from
the partnership but instead of terminating the said partnership it was
continued by the two remaining partners under the same firm name. Plaintiffs
also seek the annulment of the assignment of right with chattel mortgage
entered into by the withdrawing partner and the remaining partners. The
appellants contend that the chattel mortgage may no longer be nullified
because it had been judicially approved and said chattel mortgage had been
judicially foreclosed.
Issue: Whether the withdrawal of one of the partners dissolved the
partnership.
Ruling:
It does not appear that the withdrawal of the partner was not published in the
newspapers. The appellees and the public in general had a right to expect
that whatever, credit they extended to the remaining partners could be
enforced against the properties of the partnership. The withdrawing partner
cannot be relieved from her liability to the creditor of the partnership due to
her own fault by not insisting on the liquidation of the partnership. Though
she had acted in good faith, the appellees also acted in good faith in
extending credit to the partnership. Where one of two innocent persons must
suffer, that person who gave occasion for the damages to be caused must
bear the consequences. Technically, the partnership was dissolved by the
withdrawal of one of the partners. Through her acts of entering into a
memorandum with the remaining partners misled the creditors that they were
doing business with the partnership. Hence, from the order of the lower court
ordering the withdrawing partner to pay the plaintiffs, she is thus entitled for
reimbursement from the remaining partners.
29.Benjamin Yu vs. NLRC and Jade Mountain Products Company
Limited , Willy Co, Rhodora and Lea Bendal, GRN 97212, June 30, 1993.
Facts:
Yu ex-Assistant General Manager of the marble quarrying and export
business operatedby a registered partnership called Jade Mountain Products
Co. Ltd.
partnership was originally organized with Bendals as general partners and
Chin Shian Jeng,Chen Ho-Fu and Yu Chang as limited partners; partnership
business consisted of exploitinga marble deposit in Bulacan
Yu, as Assistant General Manager, had a monthly salary of 4000. Yu,
however, actuallyreceived only half of his stipulated salary, since he had
accepted the promise of thepartners that the balance would be paid when the
firm shall have secured additionaloperating funds from abroad. Yu actually
managed the operations and finances of thebusiness; he had overall
supervision of the workers at the marble quarry in Bulacan andtook charge of
the preparation of papers relating to the exportation of the firms products.
general partners Bendals sold and transferred their interests in the
partnership to Co andEmmanuel Zapanta
partnership was constituted solely by Co and Zapanta; it continued to use the
old firmname of Jade Mountain
Yu dismissed by the new partners
Issues:
1. WON the partnership which had hired Yu as Asst. Gen. Manager had
beenextinguished and replaced by a new partnership composed of Co and
Zapanta; 2. if indeed anew partnership had come into existence, WON Yu
could nonetheless assert his rights underhis employment contract with the
old partnership as against the new partnership
Held:
1. Yes. Changes in the membership of the partnership resulted in the
dissolution of the old partnership which had hired Yu and the emergence of a
new partnership composedof Co and Zapanta.
Legal bases:
Art. 1828. The dissolution of a partnership is the change in the relation of
thepartners caused by any partner ceasing to be associated in the carrying
on asdistinguished from the winding up of the business.
Art. 1830. Dissolution is caused:(1) without violation of the agreement
between the partners;(b) by the express will of any partner, who must act in
good faith, when no definite termor particular undertaking is specified;(2) in
contravention of the agreement between the partners, where the
circumstances donot permit a dissolution under any other provision of this
article, by the express will of anypartner at any time;
No winding up of affairs in this case as contemplated in Art. 1829: on
dissolution thepartnership is not terminated, but continues until the winding
up of partnership affairs iscompleted
the new partnership simply took over the business enterprise owned by the
oldpartnership, and continued using the old name of Jade Mountain Products
CompanyLimited, without winding up the business affairs of the old
partnership, paying off its debts,liquidating and distributing its net assets, and
then re-assembling the said assets or mostof them and opening a new
business enterprise
2. Yes. the new partnership is liable for the debts of the old partnership
Legal basis: Art. 1840 (see codal)
Yu is entitled to enforce his claim for unpaid salaries, as well as other claims
relating to hisemployment with the previous partnership, against the new
partnership
But Yu is not entitled to reinstatement. Reason: new partnership was entitled
to appointand hire a new gen. or asst. gen. manager to run the affairs of the
business enterprisetake over. An asst. gen. manager belongs to the most
senior ranks of management and anew partnership is entitled to appoint a
top manager of its own choice and confidence. Thenon-retention of Yu did
not constitute unlawful termination.
The new partnership had itsown new General Manager, Co, the principal
new owner himself. Yus old position thusbecame superfluous or redundant.
Yu is entitled to separation pay at the rate of one months pay for each year
of service thathe had rendered to the old partnership, a fraction of at least 6
months being considered asa whole year.
30. Goquiolay vs. Sycip, 108 Phil. 947
FACTS:
Tan Sin An and Goquiolay entered into a general commercial partnership
under the partnership name Tan Sin An and Antonio Goquiolay for the
purpose of dealing in real estate. The agreement lodged upon Tan Sin An
the sole management of the partnership affairs. The lifetime of the
partnership was fixed at ten years and the Articles of Co-partnership
stipulated that in the event of death of any of the partners before the
expiration of the term, the partnership will not be dissolved but will be
continued by the heirs or assigns of the deceased partner. But the
partnership could be dissolved upon mutual agreement in writing of the
partners. Goquiolay executed a GPA in favor of Tan Sin An. The plaintiff
partnership purchased 3 parcels of land which was mortgaged to La
Urbana as payment of P25,000. Another 46 parcels of land were purchased
by Tan Sin An in his individual capacity which he assumed payment of a
mortgage debt for P35K. A downpayment and the amortization were
advanced by Yutivo and Co. The two obligations were consolidated in an
instrument executed by the partnership and Tan Sin An, whereby the entire
49 lots were mortgaged in favor of Banco HipotecarioTan Sin An died
leaving his widow, Kong Chai Pin and four minor children. The widow
subsequently became the administratrix of the estate. Repeated demands
were made by Banco Hipotecario on the partnership and on Tan Sin An.
Defendant Sing Yee, upon request of defendant Yutivo Sons , paid the
remaining balance of the mortgage debt, the mortgage was cancelled Yutivo
Sons and Sing Yee filed their claim in the intestate proceedings of Tan Sin
An for advances, interest and taxes paid in amortizing and discharging their
obligations to La Urbana and Banco Hipotecario. Kong Chai Pin filed a
petition with the probate court for authority to sell all the 49 parcels of land.
She then sold it to Sycip and Lee in consideration of P37K and of the
vendees assuming payment of the claims filed by Yutivo Sons and Sing Yee.
Later, Sycip and Lee executed in favor of Insular Development a deed of
transfer covering the 49 parcels of land.When Goquiolay learned about the
sale to Sycip and Lee, he filed a petition in the intestate proceedings to set
aside the order of the probate court approving the sale in so far as his
interest over the parcels of land sold was concerned. Probate court annulled
the sale executed by the administratrix w/ respect to the 60% interest of
Goquiolay over the properties Administratrix appealed.The decision of
probate court was set aside for failure to include the indispensable parties.
New pleadings were filed. The second amended complaint prays for the
annulment of the sale in favor of Sycip and Lee and their subsequent
conveyance to Insular Development. The complaint was dismissed by the
lower court hence this appeal.
ISSUE/S: Whether or not a widow or substitute become also a general
partner or only a limited partner. Whether or not the lower court err in holding
that the widow succeeded her husband Tan Sin An in the sole management
of the partnership upon Tans death Whether or not the consent of the other
partners was necessary to perfect the sale of the partnership properties to
Sycip and Lee?
HELD:
Kong Chai Pin became a mere general partner. By seeking authority to
manage partnership property, Tan Sin Ans widow showed that she desired
to be considered a general partner. By authorizing the widow to manage
partnership property (which a limited partner could not be authorized to do),
Goqulay recognized her as such partner, and is now in estoppel to deny her
position as a general partner, with authority to administer and alienate
partnership property. The articles did not provide that the heirs of the
deceased would be merely limited partners; on the contrary, they expressly
stipulated that in case of death of either partner, the co partnership will have
to be continued with the heirs or assignees. It certainly could not be
continued if it were to be converted from a general partnership into a limited
partnership since the difference between the two kinds of associations is
fundamental, and specially because the conversion into a limited association
would leave the heirs of the deceased partner without a share in the
management. Hence, the contractual stipulation actually contemplated that
the heirs would become general partners rather than limited ones.