Benjamin Yu vs.

National Labor Relations Commission (NLRC)

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 refused to pay him and instead informed him that since
he (Co and Zapanta) bought the 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 Benjamin Yu is still entitled to his claim as against the new partnership. 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.
ESTATE OF MOTA VS. SERRA Case Digest
ESTATE OF MOTA VS. SERRA
47 PHIL. 464

FACTS: On February 1, 1919, plaintiffs and defendant entered into a contract of partnership, for the construction
and exploitation of a railroad line from the "San Isidro" and "Palma" centrals to the place known as "Nandong."
The original capital stipulated was P150, 000. It was covenanted that the parties should pay this amount in equal
parts and the plaintiffs were entrusted with the administration of the partnership. The agreed capital of P150,000,
however, did not prove sufficient, as the expenses up to May 15, 1920, had reached the amount of P226,092.92,
presented by the administrator and O.K.'d by the defendant.

January 29, 1920, the defendant entered into a contract of sale with Venancio Concepcion, Phil. C. Whitaker, and
Eusebio R. de Luzuriaga, whereby he sold to the latter the estate and central known as "Palma" with its running
business, as well as all the improvements, machineries and buildings, real and personal properties, rights,
choices in action and interests, including the sugar plantation of the harvest year of 1920 to 1921, covering all the
property of the vendor. This contract was executed before a notary public of Iloilo.

Before the delivery to the purchasers of the hacienda thus sold, Eusebio R. de Luzuriaga renounced all his rights
under the contract of January 29, 1920, in favor of Messrs. Venancio Concepcion and Phil. C. Whitaker. This
gave rise to the fact that on July 17, 1920, Venancio Concepcion and Phil. C. Whitaker and the herein defendant
executed before Mr. Antonio Sanz, a notary public in and for the City of Manila, another deed of absolute sale of
the said "Palma" Estate for the amount of P1,695,961.90, of which the vendor received at the time of executing
the deed the amount of P945,861.90, and the balance was payable by installments in the form and manner
stipulated in the contract. The purchasers guaranteed the unpaid balance of the purchase price by a first and
special mortgage in favor of the vendor upon the hacienda and the central with all the improvements, buildings,
machineries, and appurtenances then existing on the said hacienda.

Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker bought from the plaintiffs the one-
half of the railroad line pertaining to the latter, executing therefore the document. The price of this sale was
P237,722.15, excluding any amount which the defendant might be owing to the plaintiffs. Of the purchase price,
Venancio Concepcion and Phil. C. Whitaker paid the sum of P47,544.43 only. In the Deed, the plaintiffs and
Concepcion and Whitaker agreed, among other things, that the partnership "Palma" and "San Isidro," formed by
the agreement of February 1, 1919, between Serra, Lazaro Mota, now deceased, and Juan J. Vidaurrazaga for
himself and in behalf of his brother, Felix and Dionisio Vidaurrazaga, should be dissolved upon the execution of
this contract, and that the said partnership agreement should be totally cancelled and of no force and effect
whatever.

Since the defendant Salvador Serra failed to pay one-half of the amount expended by the plaintiffs upon the
construction of the railroad line, that is, P113,046.46, as well as Phil. C. Whitaker and Venancio Concepcion, the
plaintiffs instituted the present action praying:
1) that the deed of February 1, 1919, be declared valid and binding;
2) that after the execution of the said document the defendant improved economically so as to be able to pay the
plaintiffs the amount owed, but that (the defendants) he refused to pay either in part or in whole the said amount
notwithstanding the several demands made on him for the purpose; and
3) that the defendant be sentenced to pay plaintiffs the aforesaid sum of P113, 046.46, with the stipulated interest
at 10 per cent per annum beginning June 4, 1920, until full payment thereof, with the costs of the present action.

DEFENDANTs CONTENTION: Defendant set up three special defenses:

1) the novation of the contract by the substitution of the debtor with the conformity of the creditors;
2) the confusion of the rights of the creditor and debtor; and
3) the extinguishment of the contract.

TRIAL COURT: The court a quo in its decision held that there was a novation of the contract by the substitution of
the debtor, and therefore absolved the defendant from the complaint with costs against the plaintiffs. With regard
to the prayer that the said contract be declared valid and binding, the court held that there was no way of reviving
the contract which the parties themselves in interest had spontaneously and voluntarily extinguished.

ISSUES:
1. Whether or not there was a novation of the contract by the substitution of the debtor with the consent of the
creditor, as required by Article 1205 of the Civil Code; (NO) and
2. Whether or not there was a merger of rights of debtor and creditor under Article 1192 of the Civil Code. (NO)

RULING:
1. NO, there was no novation of the contract. It should be noted that in order to give novation its legal effect, the
law requires that the creditor should consent to the substitution of a new debtor. This consent must be given
expressly for the reason that, since novation extinguishes the personality of the first debtor who is to be
substituted by new one, it implies on the part of the creditor a waiver of the right that he had before the novation
which waiver must be express under the principle that renuntiatio non praesumitur, recognized by the law in
declaring that a waiver of right may not be performed unless the will to waive is indisputably shown by him who
holds the right. The fact that Phil. C. Whitaker and Venancio Concepcion were willing to assume the defendant's
obligation to the plaintiffs is of no avail, if the latter have not expressly consented to the substitution of the first
debtor. As has been said, in all contracts of novation consisting in the change of the debtor, the consent of the
creditor is indispensable, pursuant to Article 1205 of the Civil Code which reads as follows: Novation which
consists in the substitution of a new debtor in the place of the original one may be made without the knowledge of
the latter, but not without the consent of the creditor.

2. NO, there was no merger of Rights. Another defense urged by the defendant is the merger of the rights of
debtor and creditor, whereby under Article 1192 of the Civil Code, the obligation, the fulfillment of which is
demanded in the complaint, became extinguished. It is maintained in appellee's brief that the debt of the
defendant was transferred to Phil. C. Whitaker and Venancio Concepcion by the document. These in turn
acquired the credit of the plaintiffs by virtue of the debt; thus, the rights of the debtor and creditor were merged in
one person. The argument would at first seem to be incontrovertible, but if we bear in mind that the rights and
titles which the plaintiffs sold to Phil. C. Whitaker and Venancio Concepcion refer only to one-half of the railroad
line in question, it will be seen that the credit which they had against the defendant for the amount of one-half of
the cost of construction of the said line was not included in the sale. That the plaintiffs sold their rights and titles
over one-half of the line. The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure the payment of
the price, executed a mortgage in favor of the plaintiffs on the same rights and titles that they had bought and
also upon what they had purchased from Mr. Salvador Serra. In other words, Phil. C. Whitaker and Venancio
Concepcion mortgaged unto the plaintiffs what they had bought from the plaintiffs and also what they had bought
from Salvador Serra. If Messrs. Phil. C. Whitaker and Venancio Concepcion had purchased something from Mr.
Salvador Serra, the herein defendant, regarding the railroad line, it was undoubtedly the one-half thereof
pertaining to Mr. Salvador Serra. This clearly shows that the rights and titles transferred by the plaintiffs to Phil. C.
Whitaker and Venancio Concepcion were only those they had over the other half of the railroad line. Therefore,
as already stated, since there was no novation of the contract between the plaintiffs and the defendant, as
regards the obligation of the latter to pay the former one-half of the cost of the construction of the said railroad
line, and since the plaintiffs did not include in the sale, the credit that they had against the defendant, the
allegation that the obligation of the defendant became extinguished by the merger of the rights of creditor and
debtor by the purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is wholly untenable.

Domingo BEARNEZA V. DEQUILLA

ROMUALDEZ, J.

The partnership having been dissolved by the death of Perpetua Bearneza, its subsequent legal status was that
of a partnership in liquidation, and the only rights inherited by her testamentary heir, the herein plaintiff, were
those resulting from the said liquidation in favor of the deceased partner, and nothing more. Before this liquidation
is made, which up to the present has not been effected, it is impossible to determine what rights or interests, if
any, the deceased had, the partnership bond having been dissolved.

FACTS:
1) 1903: Balbino Dequilla, the herein defendant, and Perpetua Bearneza formed a partnership for the purpose of
exploiting a fish pond
2) Bearneza obligating herself to contribute to the payment of the expenses of the business, which obligation
she made good, and both agreeing to divide the profits between themselves, the partnership continued until
the death of the said Perpetua Bearneza in the year 1912
3) The deceased left a will in one of the clauses of which she appointed Domingo Bearneza, the herein plaintiff,
as her heir to succeed to all her rights and interests in the fish pond in question.
4) Demand having been made upon Balbino Dequilla by Domingo Bearneza for the delivery of the part of the
fish pond belonging to his decedent, Perpetua, and delivery having been refused, Domingo Bearneza brought
this action to recover said part of the fish pond belonging to his decedent, Perpetua
5) Defendant Dequilla: denies generally and specifically the allegations of the complaint, and alleges, as special
defense, that "the formation of the supposed partnership between the plaintiff and the defendant for the
exploitation of the aforesaid fish pond was not carried into effect, on account of the plaintiff having refused to
defray the expenses of reconstruction and exploitation of said fish pond."
a) Another special defense, the defendant alleges "that in the event that the court should hold the plaintiff to
be entitled to the undivided one-half of the fish pond, claimed in the complaint, the plaintiff's action has
prescribed, the time for bringing the same having elapsed."
6) The court declared plaintiff Domingo Bearneza owner of one half of the fish pond
a) But without awarding him any of the damages claimed by him, the same not having been proven, in the
opinion of the court, and ordering the defendant to pay the costs.
7) Hence, this appeal filed by defendant

WON THE PLAINTIFF HAS ANY RIGHT TO MAINTAIN AN ACTION FOR THE RECOVERY OF ONE-HALF OF
THE SAID FISHPOND? (NO)
1) NO. The plaintiff has not sufficiently shown his right of action.
2) The partnership formed by Perpetua Bearneza and Balbino Dequilla, as to the existence of which the proof
contained in the record is conclusive and there is no dispute, was of a civil nature. It was a particular
partnership, as defined in article 1678 of the Civil Code, it having had for its subject-matter a specified thing,
to with, the exploitation of the aforementioned fish pond.
3) The defendant, in his letters to Perpetua or her husband, makes reference to the fish pond, calling it "our," or
"your fish pond," this reference cannot be held to include the land on which the said fish pond was built. It has
not been proven that Perpetua Bearneza participated in the ownership of said land, and Exhibits 2 and 3 of
the defendant show that he has been paying, as exclusive owner of the fish pond, the land tax thereon,
although in Exhibit X he says that the said land belongs to the State.
a) The conclusion, therefore, from the evidence is that the land on which the fish pond was constructed did
not constitute a part of the subject- matter of the aforesaid partnership.
4) This partnership not having been organized in the form of a mercantile partnership, and, therefore, the
provisions of the Code of Commerce not being applicable thereto (article 1670 of the Civil Code), it was
dissolved by the death of Perpetua Bearneza, and falls under the provisions of article 1700, subsection 3, of
the same Code, and not under the exception established in the last paragraph of said article 1700 of the Civil
Code.

5) Neither can it be maintained that the partnership continued to exist after the death of Perpetua, inasmuch as
it does not appear that any stipulation to that effect has ever been made by her and the defendant, pursuant
to the provisions of article 1704 of the Code last cited.
6) The partnership having been dissolved by the death of Perpetua Bearneza, its subsequent legal status was
that of a partnership in liquidation, and the only rights inherited by her testamentary heir, the herein plaintiff,
were those resulting from the said liquidation in favor of the deceased partner, and nothing more. Before this
liquidation is made, which up to the present has not been effected, it is impossible to determine what rights or
interests, if any, the deceased had, the partnership bond having been dissolved.
7) There is no sufficient ground for holding that a community of property existed between the plaintiff and the
defendant, it not being known whether the deceased still had any interest in the partnership property which could
have been transmitted by will to the plaintiff. There being no community of property, article 395 of the Civil Code
cited by the plaintiff in support of his contention can have no application to the case at bar.
8) Neither can it be said that the partnership continued between the plaintiff and the defendant. It is true that the
latter's act in requiring the heirs of Perpetua to contribute to the payment of the expenses of exploitation of the
aforesaid fishing industry was an attempt to continue the partnership, but it is also true that neither the said heirs
collectively, nor the plaintiff individually, took any action in response to that requirement, nor made any promise to
that effect, and therefore no new contract of partnership existed

G.R. No. L-3518 February 29, 1952

URBANO LOTA (Substituted by SOLOMON LOTA in his capacity as Administrator of the Estate of URBANO
LOTA), plaintiff-appellant,
vs.
BENIGNO TOLENTINO, defendant-appellee.

Manuel P. Calanog and Jose A. Buendia for appellant.

Potenciano Villegas for appellee.

PARAS, C.J.:

This is an appeal from a resolution of the Court of First Instance of Batangas of May 4, 1949, worded in full as
follows:

On April 6, 1949, counsel for plaintiff filed a motion praying that deceased defendant be substituted by his
heirs, Marta Sadiasa and Efigenia, Resurreccion and Mercedes, all surnamed Tolentino, as parties
defendant in this case. To said motion counsel for defendant interposed an opposition upon the following
grounds:

(Defendants/contention of the heirs:) That the nature of the action for accounting and liquidation of the
partnership filed by plaintiff since March 3, 1937, is purely personal in character and, upon the death of the
defendant on November 22, 1939, the claim was already extinguished. II. Assuming that the action for
accounting and liquidation of the partnership is not purely personal in character and that such claim is not yet
extinguished, the case should now be dismissed in view of the failure of the plaintiff to prosecute his action
for an unreasonable length of time. III. Assuming further that the plaintiff's claim was not yet extinguished
upon the death of the defendant on November 22, 1939, the rights, if any, sought to be enforced by the
plaintiff in the complaint have already been lost by laches.

The question before the Court therefore is whether the motion for substitution should be granted and the
case allowed to go to trial on the merits, or whether the defendant's opposition should be sustained and the
case dismissed. The following factual background appears of record:

Plaintiff: plaintiff filed an action against defendant to order the latter (a) to render an accounting of his
management of their partnership, and (b) to deliver the plaintiff whatever share he may have in the assets of
the partnership after the liquidation has been approved by the Court.

FACTS: The partnership above-mentioned was entered into by and between plaintiff and defendant in the
year 1918, whereby they agreed to engage in general business in the municipality of Alabat, province of
Batangas, both to divide the profits and losses share alike, and defendant to be manager of the partnership.
Plaintiff alleges that from 1918 until 1928 defendant had rendered an annual accounting, but has refused to
do so from 1929 to 1937, hence, plaintiff's complaint.
DEFENDANT: defendant filed an answer, alleging that defendant was the industrial partner in said
partnership; that he rendered a yearly accounting and liquidation thereof from 1918 to 1932, and that in the
latter year, 1932, the partnership was dissolved and defendant delivered all its properties and assets to the
plaintiff. Hence, defendant prays for the dismissal of plaintiff's complaint.

The plaintiff died in 1938, and on September 28, 1939, he was substituted by the administrator of his estate,
Solomon Lota.

On December 8, 1939, defendant's counsel made a suggestion upon the record that defendant died on
November 26, 1939. On January 9, 1940, the Court gave plaintiff 30 days to amend the complaint by
substituting for the deceased defendant the administrator of his estate or his legal representative.

On January 28, 1941, the Court ordered the dismissal of the case for lack of prosecution. This order was
reconsidered and set aside upon a showing by plaintiff that on March 28, 1941, he had filed a petition for the
issuance of letters of administration to deceased defendant's surviving spouse, Marta Sadiasa, for the
purpose of substituting her for the deceased defendant, said petition being Special Proceedings No. 3859 of
this Court entitled "Intestate Estate of the late Benigno Tolentino, Solomon Lota, petitioner." This special
proceedings was, however, dismissed for failure of the administratrix to file a bond and to take her oath.

It will thus be seen that from defendant's death on November 26, 1939, to the present, or almost ten years,
no administrator or legal representative had been actually substituted to take the place of said defendant. It
was only on April 6, 1949, that plaintiff made another try to substitute said deceased by filing his motion,
referred to in the first paragraph of this resolution, praying that defendant's heirs be substituted for him as
parties defendant.

The following considerations stand in the way of plaintiff's motion for substitution:

1. It being undisputed that defendant was the manager of the partnership formed by and between him and
the plaintiff, and that said defendant died on November 26, 1939, during the pendency of the present for
accounting and liquidation against defendant, the said action should have been discontinued as it could no
longer be maintained against deceased defendant. Under these circumstances, the remedy and duty of the
plaintiff are as set out in the following ruling of the Supreme Court in Po Yeng Cheo vs. Lim Ka Yam, (44 Phil.
172, 178):

In the first place, it is well settled that when a member of a mercantile partnership dies, the duty of liquidating
its affairs devolves upon the surviving member, or members of the firm, not upon the legal representative of
the deceased partner. (Wahl vs. Donaldson Sim and Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil.,
744). And the same rule must be equally applicable to a civil partnership clothed with the form of the
commercial association (ART. 1670, Civil Code; Lichauco vs. Lichauco, 33 Phil., 350).

If, as it appears of record, plaintiff died prior to defendant's death, the duty to liquidate devolved upon the
legal representative of the plaintiff because it was the latter who sought to establish a claim against the
defendant.

2. If after such liquidation, there should be found money or property due the partnership from the deceased
defendant, a claim therefor should be filed against the latter's estate in administration. Again, this is the
procedure marked out in the case just cited:

Upon the death of Lim Ka Yam it therefore become the duty of his surviving associates to take the proper
steps to settle the affairs of the firms, and any claim against him, or his estate, for a sum of money due to the
partnership by reason of any misappropriation of its funds by him or damages resulting from his wrongful
acts as a manager, should be prosecuted against his estate in administration in the manner pointed out in
sections 686 to 701, inclusive, of the Code of Civil Procedure. Moreover, when it appears, as here, that the
 property pertaining to Kwong Cheong Tay, like the shares in the Ya sieng Chyip Konski and Manila Electric
Railroad and Light Company, are in the possession of the deceased partner, the proper step for the surviving
associates to take would be to make application to the court having charge of the administration to require
the administration to surrender such property. (Po Yeng Cheo vs. Lim Ka Yam, supra.)

This procedure was not also followed in the case at bar because plaintiff, or his legal representative, did not
procure the appointment and qualification of an administrator of the estate of deceased defendant, altho he
had already filed a petition looking towards such administration. This plaintiff was under a duty to do if he
considered himself a creditor with a legitimate claim enforceable against the estate of deceased defendant.

3. What plaintiff, or his legal representative, insisted on doing in the present case is to continue and press his
action for accounting and liquidation against the heirs of deceased defendant, a procedure which, as above
stated, runs counter to that set out in the Po Yeng Cheo vs. Lim Ka Yam case. But even in this, plaintiff, or
his legal representative, proceeded half-heartedly, because he only filed a petition for the appointment of an
administrator for the estate of deceased defendant, but did not see to it that administrator filed a bond and
qualify as such. Hence, the said petition for administration was dismissed.

4. Also, conceding, without admitting, that the present action for accounting would lie against defendant, it is
this Court's opinion that such a duty to account died with the defendant, was extinguished upon his death,
and was not shifted upon his heirs. The heirs of the defendant have never been partners in the partnership
formed by and between plaintiff and defendant, and said heirs are hardly in a position and hardly called upon
to effect an accounting of said partnership.

5. Finally, it will be recalled that the partnership in question was organized in 1918 and dissolved in 1932.
The action for accounting was commenced on March 3, 1937. And the present motion for substitution was
filed on April 6, 1949, only. Trial on the merits at this late date might prove futile and fruitless if no partnership
property is found in the possession of defendant's heirs, let alone the allegation of said defendant in his
answer to the complaint back in 1937 that he had already delivered all the properties and assets of the
partnership to the plaintiff. If the principle of laches is ever to be applied, it should be applied to this case.

Wherefore, the plaintiff's action for substitution is denied and defendant's prayer for the dismissal for this
case against the plaintiff.

The present appellant is Solomon Lota, in his capacity as administrator of the estate of Urbano Lota, original
plaintiff, who died in l938. ISSUE: The decisive question that arises is whether or not, after the death of the
defendant Benigno Tolentino on November 22, 1939, plaintiff's action for accounting and liquidation of the
partnership formed in l918 between Urbano Lota and Benigno Tolentino, of which the latter was the industrial and
managing partner, may be continued against the heirs of Benigno Tolentino. (NO)This question was decided
adversely to the appellant by the lower court and, in our opinion, correctly. The applicable authority is the case of
Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 172, in which the following pronouncements were made:

In the first place, it is well settled that when a member of a mercantile partnership dies, the duty of liquidating
its affairs devolves upon the surviving member, or members, of the firm, not upon the legal representatives of
the deceased partner. (Wahl vs. Donaldson Sim and Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil.,
744.) And the same rule must be equally applicable to a civil partnership clothed with the form of a
commercial association (art. 1670, Civil Code: Lichauco vs. Licahuco, 33 Phil., 350). Upon the death of Lim
Ka Yam it therefore become the duty of his surviving associates to take the proper steps to settle the affairs
of the firm, and any claim against him, or his state, for a sum of money due to the partnership by reason of
any misappropriation of its funds by him, or for damages resulting from his wrongful acts as manager, should
be prosecuted against his estate in administration in the manner pointed out in sections 686 to 701,
inclusive, of the Code of Civil Procedure. Moreover, when it appears, as here, that the property pertaining to
Kwong Cheong Tay, like the shares in the Yut Siong Chyip Konski and Manila Electric Railroad and Light
Company, are in the possession of the partner, the proper step for the surviving associates to take would be
 to make application to the court having charge of the administration to require the administrator to surrender
such property.

But in the second place, as already indicated, the proceedings in this cause, considered in the character of
an action for an accounting, were futile; and the court, abandoning entirely the effort to obtain an accounting,
gave judgment against the administrator upon the supposed liability of his intestate to respond for the
plaintiffs proportionate share of the capital and assets. But of course the action was not maintenable in this
aspect after the death of the defendant; and the motion to discontinue the action against the administrator
should have been granted. (pp. 178-179.)

Another ground equally decisive against the appellant correctly advanced by the lower court in dismissing
the present action for accounting, is lack of prosecution on the part of the appellant. It may be fittingly recalled
that the action for accounting and liquidation was filed on March 3, l937. No sooner had the defendant Benigno
Tolentino died on November 22, l939, than said fact was made record by his attorney. On January 9, 1940, the
lower court gave the plaintiff (who had then died and was substituted on September 28, 1939, by the
administrator of his estate, Solomon Lota), 30 days to amend the complaint by substituting the administrator or
legal representative of the deceased defendant Benigno Tolentino. On January 28, 1941, the lower court
dismissed the case for lack of prosecution on the part of the plaintiff, but the order of dismissal was reconsidered,
upon a showing by the plaintiff that on March 28, 1941, an administration proceeding for the estate of Benigno
Tolentino was instituted by the plaintiff. On August 8, 1941 the lower court issued, at the instance of the plaintiff,
letters of administration to Tolentino's surviving spouse, Marta Sadiasa, who however failed to qualify.
Accordingly, the court dismissed the administration proceeding on January 3, 1949, for lack of interest. It was only
as late as April 6, l949, that the plaintiff filed the motion to substitute, not even the legal representative of Benigno
Tolentino but his heirs.

If the plaintiff was genuinely interested in substituting the proper party, assuming that plaintiff's action may still be
pursued after Tolentino's death, he should have taken timely measures to have the administratrix appointed on
August 8, 1941, qualify or, in case of her failure or refusal, to procure the appointment of another administrator;
because the plaintiff could have availed himself of section 6, Rule 80, of the Rules of Court, providing that "letters
of administration may be granted to any qualified applicant, though it appears that there are other competent
persons having better right to the administration, if such persons fail to appear when notified and claim the
issuance of letters to themselves." Certainly, inaction for almost eight years (after the issuance of letters of
administration) on the part of the appellant, sufficiently implies indifference to or desistance from its suit.

The theory of the appellant is that the heirs may properly be substituted for the deceased Benigno Tolentino,
because they are in possession of property allegedly belonging to the partnership in question, and the appellant
seeks the recovery thereof. Apart from the fact that said allegation seems to refer to cause of action foreign to the
claim for accounting and liquidation against Tolentino, and should have been made in proper pleading to duly
admitted by the lower court, the filing of appellant's motion for substitution more than twelve years after the
institution of the complaint came too late and already called for the prosecution. It is immaterial that, before the
appealed resolution was issued by the lower court, the appellant attempted to have the deceased defendant had
not yet been properly substituted.

The resolution herein complained of will therefore be as it is hereby affirmed, with costs against the appellant. So
ordered.

GOQUIOLAY, ET. AL V. SYCIP, ET. AL. 108 PHIL 947

The right of exclusive management conferred upon a partner is a personal right and is
premised on trust and confidence. It terminates upon the death of the partner.

Antonio C. Goquilay, ET AL. vs. Washington Z. Sycip, ET AL. GR NO. L-11840, December 10, 1963

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 (the widow of Tan Sin An) 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. (Kong
Chai Pin became a GENERAL PARTNER)

Whether or not tthe lower court was correct 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:

1st issue: 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.

GOQUIOLAY ET AL (Appellant) vs. SYCIP ET AL (Resolution of Motion for Reconsideration)

FACTS:
In SCs previous decision, the court upheld the validity of the sale of the lands owned by the partnership
Goquiolay & Tan Sin An, made in 1949 by the widow (Kong Cha Pin) of the managing partner - Tan Sin An
(Executed in her dual capacity as (1) Administratrix of the husband's estate and as (2) partner in lieu of the
husband), in favor of the buyers Washington Sycip and Betty Lee for P153,726.04
Appellant Goquiolay insist that Kong Chai Pin, widow of the deceased partner Tan Sin An, never became
more than a limited partner, incapacitated by law to manage the affairs of partnership; that the testimony of her
witness Young and Lim belies that she took over the administration of the partnership property; and that the
sale should be set aside because it was executed with the intent to defraud appellant of his share in the
properties sold.
The dispute herein is with the transfer of partnership property by one partner, acting in behalf of the firm, to
a stranger. There is no question between partners inter se, and this aspect to the case was expressly reserved in
the main decision of 26 July 1960.
The partnership was expressly organized: "to engage in real estate business, either by buying and selling real
estate".
Appellant insists that there is "not one iota of evidence" that Kong Chai Pin managed and possessed
partnership properties. Suffice it to point out that Goquiolay himself admitted that he allowed Kong Chai Pin
to take care of the properties in order to help her as she had no other means of income.
The appellant ratified this testimony in his deposition wherein he stated: that plantation was being
occupied at that time by the widow, Kong Chai Pin, and of course they are receiving quiet a lot benefit from
the plantation.
With regard to Young and Lim's testimonies, it did not contradict Goquiolay's admission that he told Mr. Yu
Eng Lai that the widow "could just do it" (continue to manage the properties). Witnesses Lim and Young
referred to the period of Japanese occupation; but Goquiolay's authority was given to the widow in
1945,after the occupation.
The disputed sale by the widow took place in 1949. Kong Chai Pin carried out no acts of management during
the Japanese occupation (1942-1944) but it does not mean that she did not do so from 1945 to 1949.
The Court found that Goquiolay did not merely rely on reports from Lim and Young; he actually manifested
his willingness that the widow should manage the partnership properties. Whether or not she complied with
this authority is a question between her and the appellant, and is not here involved. But the authority was
given, and she did have it when she made the sale, because it was never revoked.

ISSUE#1: W/N Goquiolay only gave to Tan Sin An/Kong Chai Pin authority to manage the property w/c does not
include the power to alienate (NO)

HELD: NO. What the argument of Goquiolay overlooks is that the widow was not a mere agent, because she had
become a partner upon her husband's death, as expressly provided by the articles of copartnership. Even more, granting
that by succession to her husband, Tan Sin An, the widow only became a limited partner, Goquiolay's authorization to
manage the partnership property was proof that he considered and recognized her as general partner, at least since
1945.
Under the law (Code of Commerce), appellant could not empower the widow, if she were only a limited partner, to
administer the properties of the firm, even as a mere agent: Limited partners may not perform any act of
administration with respect to the interests of the copartnership, not even in the capacity of agents of the managing
partners.

By seeking authority to manage partnership property, Kong Cha Pin showed that she desired to be considered
a general partner. By authorizing her to manage partnership property (w/c a limited partner cannot do), Goquiolay
recognized her as such partner, and is now in estoppel to deny her as a general partner, with authority to administer and
alienate property.

An heir ordinarily becomes a limited partner for his own protection, because he would normally prefer to avoid any
liability in excess of the value of the estate inherited so as not to jeopardize his personal assets. But this statutory
limitation of responsibility being designed to protect the heir, the latter may disregard it and instead elect to become a
collective or general partner, with all the rights and privileges of one, and answering for the debts of the firm not only
with the inheritance but also with the heir's personal fortune. This choice pertains exclusively to the heir, and does not
require the assent of the surviving partner.

Furthermore, the articles of co-partnership expressly stipulated that:

In the event of the death of any of the partners at any time before the expiration of said term, the co-
partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented
by his heirs or assigns in said co-partnership.

The Articles did not provide that the heirs of the deceased would be merely limited partners. It 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 because the conversion into a limited association would have the heirs of the
deceased partner without a share in the management. Hence, the contractual stipulation does actually contemplate that
the heirs would become general partners rather than limited ones.

The stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited
responsibility for the obligations of the firm. The heirs, in other words, cannot be compelled to become general
partners against their wishes. But because they are not so compellable, it does not legitimately follow that they may not
voluntarily choose to become general partners, waiving the protective mantle of the general laws of succession. It is
pointless to discuss the legality of any conversion of a limited partner into a general one. The heir never was a limited
partner, but chose to be, and became, a general partner right at the start. Furthermore, It is immaterial that the heir's
name is included in the firm name since no conversion of status is involved, and the articles of co-partnership expressly
contemplated the admission of the partner's heirs into the partnership.

Knowing that by law a limited partner is barred from managing the partnership, third parties who found the widow
managing the firm property with the acquiescence of the surviving partners were perfectly justified in assuming that
she had become a general partner, and, therefore, in negotiating with her as a partner, having authority to in behalf of
the firm.

Note that for seven long years, from partner Tan Sin An's death in 1942 to the sale in 1949, there was enough time for
Goquiolay to take up the management of these properties, or at least ascertain how its affairs stood. For seven years
Goquiolay could have asserted his alleged rights, and by suitable notice in the commercial registry could have warned
strangers that they must deal with him alone, as sole general partner. But he did nothing of the sort, because he was not
interested, and he did not even take steps to pay, or settle the firm debts that were overdue since before the outbreak of
the last war. He did not take steps, after Tan Sin An died, to cancel, or modify, the provisions of the partnership articles
that he (Goquiolay) would have no intervention in the management of the partnership. Laches certainly contributed to
confirm the view that the widow of Tan Sin An was given, authority to manage and deal with the firm's properties apart
from the presumption that a general partner dealing with partnership property has to requisite authority from his co-
partners

The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name
of the partnership with the consent of the other, undoubtedly creates on obligation between the two partners, which
consists in asking the other's consent before contracting for the partnership. A third person may and has a right to
presume that the partner with whom he contracts has, in the ordinary and natural course of business, the consent of his
copartner; for otherwise he would not enter into the contract. The third person would naturally not presume that the
partner with whom he enters into the transaction is violating the articles of partnership, but on the contrary is acting in
accordance therewith.

ISSUE#2: W/N the widow had authority to sell the real estate of the firm.

HELD: YES. Generally, where the partnership business is to deal in merchandise and goods, i.e., movable property, the
sale of its real property is not within the ordinary powers of a partner, because it is not in line with the normal business
of the firm. But where the express purpose of the partnership is to buy and sell real estate, the immovable, thus
acquired by the firm from part of its stock-in-trade, and the sale thereof is in pursuance of partnership purposes, hence
within the ordinary powers of the partner.

Since the sale by the widow was in conformity with the express objective of the partnership, "to engage in buying and
selling real estate" it cannot be maintained that the sale was made in excess of her power as general partner.

ISSUE#3: W/N the sale was executed to defraud Goquiolay

HELD: No direct evidence of it exists. Goquiolay points out, as indicia thereof, the allegedly low price paid for the
property, and the relationship between the buyers, the creditors of the partnership, and the widow of Tan Sin An.

#1 As to the price: As already noted, this property was actually sold for a total of P153,726.04, of which P37,000.00
was in cash, and the rest in partnership debts assumed by the purchaser. These debts are not questioned; they were
approved by the court, and its approval is now final.

#2 With regard to the relationship between the parties, suffice it to say that the Supreme Court has ruled that
relationship alone is not a badge of fraud. There is no evidence that the original buyers, Washington Sycip and Betty
Lee, were without independent means to purchase the property.

CASE: Ng Cho Cio vs. Ng Diong

NG CHO CIO ET AL., plaintiffs-appellants, vs. NG DIONG, defendant-appellant.
C. N. HODGES, ET AL., defendants-appellees.

Summary: The partnership firm was declared insolvent and its properties were assigned to someone else. Later
on, the insolvency proceeding was terminated and the properties were reconveyed to the partnership. Meanwhile,
the partnerships managing partner Ng Diong sold its properties.

May 1925 Several people entered into a general partnership named NG CHIN BENG HERMANOS (which
was supposed to exist until May 23, 1941, with the original 10 year-term extended for 16 more years). Ng Diong
was managing partner

January 1938 The firm obtained a 30k loan and another 50k loan from National Loan and Investment Board
(which later assigned its interests to CN Hodges) secured by real estate mortgages over 7 parcels of land
 Sometime 1938 Partnership was declared insolvent upon motion of its creditors and an assignee was named
(to whom properties of the firm were assigned)

August 1940 Majority of the creditors (whose rights later on was acquired by Julian Go) and the partners of
the firm entered into a COMPOSITION AGREEMENT whereby it was agreed that said creditors would receive
20% of the amount of their claims in full payment

October 1940 - Such was approved by insolvency court

January 1941 CN Hodges prayed for the foreclosure of the mortgages over the 7 parcels of land
Meanwhile War broke out; nothing appears to have been done in the insolvency proceedings

August 1945 Partners of the insolvent firm and Julian Go filed a petition to close or terminate the insolvency
proceedings in lieu of the previously-approved COMPOSITION AGREEMENT
October 1945 This was granted, and the assignee was ordered to reconvey all properties of the firm back as
required by law

April 2, 1946 Assignee executed a deed of reconveyance and by virtue of which, ROD cancelled the titles of
the assignee and issued new ones in the name of the partnership firm

May 1946 Due to the foreclosure proceedings instituted by CN Hodges against the firm, Ng Diong thought it
best to sell all its properties mortgaged to CN Hodges in order that the excess may be applied to the payment of
said other obligations

The other partners contend that the sale made by Ng Diong in behalf of the partnership of the 7 lots belonging
to it in favor of CN Hodges on April 2, 1946 is null and void because at that time said parcels were still in the
custody of the assignee of the insolvency proceedings, or in custodia legis, and, hence, the same is null and void

ISSUE: Was the sale made by the managing partner valid. YES

HELD:
Insolvency ended on April 2, 1946 and by that time, the partnership and Ng Diongs position as managing partner
was restored.The actual reconveyance was done by a assignee on April 2, 1946. It would, therefore, appear that
for legal and practical purposes the insolvency ended on said date. Since then partnership became, restored to
its status quo. It again reacquired its personality as such with Ng Diong as its general manager. From that date on
its properties ceased to be in custodia legis.

Such being the case, it is obvious that when Ng Diong as manager of the partnership sold the 7 parcels of land to
C. N. Hodges on April 2, 1946 by virtue of a deed of sale acknowledged before a notary public on April 6, 1946,
the properties were already was at liberty to do what it may deem convenient and proper to protect its interest.
And acting accordingly, Ng Diong made the sale in the exercise of the power granted to him by the partnership in
its articles of co-partnership. We do not, therefore, find anything irregular in this actuation of Ng Diong.

Since at the time of the sale the life of the partnership had already expired, the question may be fixed: Who shall
wind up its business affairs? May its manager still execute the sale of its properties to CN Hodges as was done
by Ng Diong?

YES. Because Ng Diong was still the managing partner of the partnership and he had the necessary authority to
liquidate its affairs under its articles of co-partnership. And considering that war had intervened and the affairs of
the partnership were placed under receivership up to October 6, 1945, we are of the opinion that Ng Diong could
still exercise his power as liquidator when he executed the sale in question in favor of CN Hodges. This is
sanctioned by Article 228 of the Code

LICHAUCO vs LICHAUCO
In 1901, F. Lichauco Hermanos partnership (a rice cleaning business) was formed. It was provided, among
others, in the partnership agreement that Faustino Lichauco will be the managing partner; and that the firm
cannot be dissolved except upon the 2/3 vote of all the partners.

In 1904, the firm wasnt performing well and was unprofitable and so its machineries were dismantled.

EUGENIA: Eugenia and one other partner demanded Faustino to make an accounting of the firms assets but
Faustino refused to do so. Belatedly in 1912, Eugenia et al filed a civil suit against Faustino to compel the latter to
perform an accounting.

FAUSTINO: Faustino, in his defense, argued that the firm was not dissolved pursuant to the partnership
agreement there being no 2/3 vote from all the members (Faustino et al are only 1/5 of the firm).

ISSUE:Whether or not Eugenia et al can demand an accounting.

HELD:Yes. The firm was already dissolved in 1904 when its machineries were dismantled this was a sign that
the firm abandoned and concluded the purpose for it was formed (rice cleaning business). Upon said dissolution,
it was the duty of Faustino to liquidate the assets and inform his partners. The provision which requires a 2/3
votes of all the partners to dissolve the firm cannot be given effect because the same denied the right of a less
number of partners to effect the dissolution especially where the firm has already sustained huge losses.

It would be absurd and unreasonable to hold that such an association could never be dissolved and liquidated
without the consent and agreement of two-thirds of its partners, notwithstanding that it had lost all its capital, or
had become bankrupt, or that the enterprise for which it had been organized had been concluded or utterly
abandoned.

Soncuya v. de Luna G.R. No. L-45464, April 28, 1939, Villa-Real, J.

Facts:

Petitioner filed a complaint against respondent for damages as a result of the fraudulent administration of the
partnership, Centro Escolar de Senoritas of which petitioner and the deceased Avelino Librada were members.
For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a partner, it is necessary
that a liquidation of the business be made that the end profits and losses maybe known and the causes of the
latter and the responsibility of the defendant as well as the damages in which each partner may have suffered,
maybe determined.

Issue:Whether the petitioner is entitled to damages. NO

Ruling:

According to the Supreme Court the complaint is not sufficient to constitute a cause of action on the part of the
plaintiff as member of the partnership to collect damages from defendant as managing partner thereof, without
previous liquidation. Thus, for a partner to be able to claim from another partner who manages the general co-
partnership, allegedly suffered by him by reason of the fraudulent administration of the latter, a previous
liquidation of said partnership is necessary.
 Singsong v. Isabela Sawmill G.R. No. L-27343, February 28, 1979, Fernandez, J.

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. Yes, but the petitioner may still
recover.

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.

G.R. No. L-18707 December 9, 1922

PO YENG CHEO, plaintiff-appellee,

vs.
LIM KA YAM, defendant-appellant.

F. R. Feria and Romualdez Bros. for appellant.

Quintin Llorente and Carlos C. Viana for appellee.

ISSUE: Whether or not Lim Yock Tock, the administrator of the estate of Lim Ka Yam can be compelled to render
an accounting and a liquidation of the partnership? NO.

STREET, J.:

By the amended complaint in this action, the present plaintiff, Po Yeng Cheo, alleged sole owner of a business
formerly conducted in the City of Manila under the style of Kwong Cheong, as managing partner in said business
and to recover from him its properties and assets. The defendant having died during the pendency of the cause in
the court below and the death suggested of record, his administrator, one Lim Yock Tock, was required to appear
and make defense.

In a decision dated July 1, 1921, the LOWER COURT: found that the plaintiff was entitled to an accounting from
Lim Ka Yam, the original defendant, as manager of the business already reffered to, and the LC accordingly
required Lim Yock Tock, as administrator, to present a liquidation of said business within a stated time. This order
bore no substantial fruit, for the reason that Lim Yock Tock personally knew nothing about the aforesaid business
(which had ceased operation more than ten years previously) and was apparently unable to find any books or
documents that could shed any real light on its transaction. However, he did submit to the court a paper written by
Lim Ka Yam in life purporting to give, with vague and uncertain details, a history of the formation of the Kwong
Cheong Tay and some account of its disruption and cessation from business in 1910. To this narrative was
appended a statement of assets and liabilities, purporting to show that after the business was liquidate, it was
actually debtor to Lim Ka Yam to the extent of several thousand pesos. Appreciating the worthlessness of this so-
called statement, and all parties apparently realizing that nothing more was likely to be discovered by further
insisting on an accounting, the court proceeded, on December 27, 1921, to render final judgment in favor of the
plaintiff.

The decision made on this occasion takes as its basis the fact stated by the court in its earlier decision of July 1,
1921, which may be briefly set fourth as follows:lawphil.net

FACTS: The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, and as such Po Yeng Cheo
inherited the interest left by Po Gui Yao in a business conducted in Manila under the style of Kwong Cheong Tay.
This business had been in existence in Manila for many years prior to 1903, as a mercantile partnership, with a
capitalization of P160,000, engaged in the import and export trade; and after the death of Po Gui Yao the
following seven persons were interested therein as partners in the amounts set opposite their respective names,
to wit: Po Yeng Cheo, P60,000; Chua Chi Yek, P50,000; Lim Ka Yam, P10,000; Lee Kom Chuen, P10,000; Ley
Wing Kwong, P10,000; Chan Liong Chao, P10,000; Lee Ho Yuen, P10,000. The manager of Kwong Cheong Tay,
for many years prior of its complete cessation from business in 1910, was Lim Ka Yam, the original defendant
herein.

Among the properties pertaining to Kwong Cheong Tay and consisting part of its assets were ten shares of a total
par value of P10,000 in an enterprise conducted under the name of Yut Siong Chyip Konski and certain shares to
the among of P1,000 in the Manila Electric Railroad and Light Company, of Manila.

In the year 1910 (exact date unstated) Kwong Cheong Tay ceased to do business, owing principally to the fact
that the plaintiff ceased at that time to transmit merchandise from Hongkong, where he then resided. Lim Ka Yam
appears at no time to have submitted to the partners any formal liquidation of the business, though repeated
demands to that effect have been made upon him by the plaintiff.

LOWER COURT: the trial judge rendered judgment in favor of the plaintiff, Po Yeng Cheo, to recover of the
defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum of sixty thousand pesos (P60,000),
constituting the interest of the plaintiff in the capital of Kwong Cheong Tay, plus the plaintiff's proportional interest
in shares of the Yut Siong Chyip Konski and Manila Electric Railroad and Light Company, estimated at P11,000,
together with the costs. From this judgment the defendant appealed.

ISSUE: Whether or not Lim Yock Tock, the administrator of the estate of Lim Ka Yam can be compelled to render
an accounting and a liquidation of the partnership? NO.

In beginning our comment on the case, it is to be observed that this court finds itself strictly circumscribed so far
as our power of review is concerned, to the facts found by the trial judge, for the plaintiff did not appeal from the
decision of the court below in so far as it was unfavorable to him, and the defendant, as appellant, has not caused
a great part of the oral testimony to be brought up. It results, as stated, that we must accept the facts as found by
the trial judge; and our review must be limited to the error, or errors, if any, which may be apparent upon the face
of the appealed decision, in relation with the pleadings of record.

Proceeding then to consider the appealed decision in relation with the facts therein stated and other facts
appearing in the orders and proceedings in the cause, it is quite apparent that the judgment cannot be sustained.
In the first place, it was erroneous in any event to give judgment in favor of the plaintiff to the extent of his share
of the capital of Kwong Cheong Tay. The managing partner of a mercantile enterprise is not a debtor to the
shareholders for the capital embarked by them in the business; and he can only be made liable for the capital
when, upon liquidation of the business, there are found to be assets in his hands applicable to capital account.
That the sum of one hundred and sixty thousand pesos (P160,000) was embarked in this business many years
ago reveals nothing as to the condition of the capital account at the time the concern ceased to do business; and
even supposing--as the court possibly did--that the capital was intact in 1908, this would not prove it was intact in
1910 when the business ceased to be a going concern; for in that precise interval of time the capital may have
been diminished or dissipated from causes in no wise chargeable to the negligence or misfeasance of the
manager.

Again, so far as appears from the appealed decision, the only property pertaining to Kwong Cheong Tay at the
time this action was brought consisted of shares in the two concerns already mentioned of the total par value of
P11,000. Of course, if these shares had been sold and converted into money, the proceeds, if not needed to pay
debts, would have been distributable among the various persons in interest, that is, among the various
shareholders, in their respective proportions. But under the circumstances revealed in this case, it was erroneous
to give judgment in favor of the plaintiff for his aliquot part of the par value of said shares. It is elementary that one
partner, suing alone, cannot recover of the managing partner the value of such partner's individual interest; and a
liquidation of the business is an essential prerequisite. It is true that in Lichauco vs. Lichauco (33 Phil., 350), this
court permitted one partner to recover of the manager the plaintiff's aliquot part of the proceeds of the business,
then long since closed; but in that case the affairs of the defunct concern had been actually liquidate by the
manager to the extent that he had apparently converted all its properties into money and had pocketed the
same--which was admitted;--and nothing remained to be done except to compel him to pay over the money to the
persons in interest. In the present case, the shares referred to--constituting the only assets of Kwong Cheong
Tay--have not been converted into ready money and doubtless still remain in the name of Kwong Cheong Tay as
owner. Under these circumstances it is impossible to sustain a judgment in favor of the plaintiff for his aliquot part
of the par value of said shares, which would be equivalent to allowing one of several coowners to recover from
another, without process of division, a part of an undivided property.

Another condition will be noted as present in this case which in our opinion is fatal to the maintenance of the
appealed judgment. This is that, after the death of the original defendant, Lim Ka Yam, the trial court allowed the
action to proceed against Lim Yock Tock, as his administrator, and entered judgment for a sum of money against
said administrator as the accounting party,--notwithstanding the insistence of the attorneys for the latter that the
action should be discontinued in the form in which it was then being prosecuted. The error of the trial court in so
doing can be readily demonstrated from more than one point of view.

In the first place, it is well settled that when a member of a mercantile partnership dies, the duty of liquidating its
affair devolves upon the surviving member, or members, of the firm, not upon the legal representative of the
deceased partner. (Wahl vs. Donaldson Sim & Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil., 744) And the
same rule must be equally applicable to a civil partnership clothed with the form of a commercial association (art.
1670, Civil Code; Lichauco vs. Lichauco, 33 Phil., 350) Upon the death of Lim Ka Yam it therefore became the
duty of his surviving associates to take the proper steps to settle the affairs of the firm, and any claim against him,
or his estate, for a sum of money due to the partnership by reason of any misappropriation of its funds by him, or
for damages resulting from his wrongful acts as manager, should be prosecuted against his estate in
administration in the manner pointed out in sections 686 to 701, inclusive, of the Code of Civil Procedure.
Moreover, when it appears, as here, that the property pertaining to Kwong Cheong Tay, like the shares in the Yut
Siong Chyip Konski and the Manila Electric Railroad and Light Company, are in the possession of the deceased
partner, the proper step for the surviving associates to take would be to make application to the court having
charge to the administration to require the administrator to surrender such property.
But, in the second place, as already indicated, the proceedings in this cause, considered in the character of an
action for an accounting, were futile; and the court, abandoning entirely the effort to obtain an accounting, gave
judgment against the administrator upon the supposed liability of his intestate to respond for the plaintiff's
proportionate share of the capital and assets. But of course the action was not maintainable in this aspect after
the death of the defendant; and the motion to discontinue the action as against the administrator should have
been granted.

The judgment must be reversed, and the defendant will be absolved from the complaint; but it will be understood
that this order is without prejudice to any proceeding which may be undertaken by the proper person or persons
in interest to settle the affairs of Kwong Cheong Tay and in connection therewith to recover from the administrator
of Lim Ka Yam the shares in the two concerns mentioned above. No special pronouncement will be made as to
costs of either. So ordered.

G.R. No. L-14606 April 28, 1960

LAGUNA TRANSPORTATION CO., INC., petitioner-appellant,

vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.

Yatco & Yatco for appellant.

Solicitor General Edilberto Barot, Solicitor Camilo Quiason and Crispin Baizas for appellee.

BARRERA, J.:

ISSUE: W/N the addition of 2 new members and its registration in the SEC dissolved the partnership? Yes. It
changed its form but it does not relieve it of its responsibilities with the SSS.

On January 24, 1958, petitioner Laguna Transportation Co., Inc. filed with the Court of First Instance of Laguna
petition praying that an order be issued by the court declaring that it is not bound to register as a member of
respondent Social Security System and, therefore, not obliged to pay to the latter the contributions required under
the Social Security Act.1 To this petition, respondent filed its answer on February 11, 1958 praying for its dismissal
due to petitioner's failure to exhaust administrative remedies, and for a declaration that petitioner is covered by
said Act, since the latter's business has been in operation for at least 2 years prior to September 1, 1957.

On February 11, 1958, respondent filed a motion for preliminary hearing on its defense that petitioner failed to
exhaust administrative remedies. When the case was called for preliminary hearing, it was postponed by
agreement of the parties. Subsequently, it was set for trial. On the date of the trial, the parties agreed to present,
in lieu of any other evidence, a stipulation of facts, which they did on May 27, 1958, as follows:

1. That petitioner is a domestic corporation duly organized and existing under the laws of the Philippines,
with principal place of business at Bian, Laguna;

2. That respondent is an agency created under Republic Act No. 1161, as amended by Republic Act No.
1792, with the principal place of business at the new GSIS Bldg., corner Arroceros and Concepcion Streets,
Manila, where it may be served with summons;

3. That respondent has served notice upon the petitioner requiring it to register as member of the System
and to remit the premiums due from all the employees of the petitioner and the contribution of the latter to
the System beginning the month of September, 1957;
4. That sometime in 1949, the Bian Transportation Co., a corporation duly registered with the Securities and
Exchange Commission, sold part of the lines and equipment it operates to Gonzalo Mercado, Artemio
Mercado, Florentino Mata and Dominador Vera Cruz;

5. That after the sale, the said vendees formed an unregistered partnership under the name of Laguna
Transportation Company which continued to operate the lines and equipment bought from the Bian
Transportation Company, in addition to new lines which it was able to secure from the Public Service
Commission;

6. That the original partners forming the Laguna Transportation Company, with the addition of two new
members, organized a corporation known as the Laguna Transportation Company, Inc., which was
registered with the Securities and Exchange Commission on June 20, 1956, and which corporation is the
plaintiff now in this case;

7. That the incorporators of the Laguna Transportation Company, Inc., and their corresponding shares are as
follows:

Name No. of Amount Amount Paid

Shares Subscribed

Dominador 333 shares P33,300.00 P9,160.81

Cruz

Maura 333 shares 33,300.00 9,160.81

Mendoza

Gonzalo 66 shares 6,600.00 1,822.49

Mercado

Artemio 94 shares 9,400.00 2,565.90

Mercado

Florentino Mata 110 shares 11,000.00 3,021.54

Sabina Borja 64 6,400.00 1,750.00

shares

1,000 P100,000.00 P27,481.55

shares

8. That the corporation continued the same transportation business of the unregistered partnership;

9. That the plaintiff filed on August 30, 1957 an Employee's Data Record . . . and a supplemental Information
Sheet . . .;

10. That prior to November 11, 1957, plaintiff requested for exemption from coverage by the System on the
ground that it started operation only on June 20, 1956, when it was registered with the Securities and
Exchange Commission but on November 11, 1957, the Social Security System notified plaintiff that it was
covered;

ISSUE: W/N the addition of 2 new members and its registration in the SEC dissolved the partnership? Yes. It
changed its form but it does not relieve it of its responsibilities with the SSS.
 11. On November 14, 1957, plaintiff through counsel sent a letter to the Social Security System contesting
the claim of the System that plaintiff was covered, . . .

12. On November 27, 1957, Carlos Sanchez, Manager of the Production Department of the respondent
System for and in behalf of the Acting Administrator, informed plaintiff that plaintiff's business has been in
actual operation for at least two years, . . .

On the basis of the foregoing stipulation of facts, the court, on August 15, 1958, rendered a decision the
dispositive part of which reads:

Wherefore, the Court is of the opinion and so declares that the petitioner was an employer engaged in
business as common carrier which had been in operation for at least two years prior to the enactment of
Republic Act No. 1161, as amended by Republic Act 1792 and by virtue thereof, it was subject to compulsory
coverage under said law. . . .

From this decision, petitioner appealed directly to us, raising purely questions of law.

Petitioner claims that the lower court erred in holding that it is an employer engaged in business as a common
carrier which had been in operation for at least 2 years prior to the enactment of the Social Security Act and,
therefore, subject to compulsory coverage thereunder.

Section 9 of the Social Security Act, in part, provides:

SEC. 9 Compulsory Coverage. Coverage in the System shall be compulsory upon all employees between
the ages of sixteen and sixty years, inclusive, if they have been for at least six months in the service of an
employer who is a member of the System. Provided, That the Commission may not compel any employer to
become a member of the System unless he shall have been in operation for at least two years. . . . (Italics
supplied.).

It is not disputed that the Laguna Transportation Company, an unregistered partnership composed of Gonzalo
Mercado, Artemio Mercado, Florentina Mata, and Dominador Vera Cruz, commenced the operation of its
business as a common carrier on April 1, 1949. These 4 original partners, with 2 others (Maura Mendoza and
Sabina Borja) later converted the partnership into a corporate entity, by registering its articles of incorporation with
the Securities and Exchange Commission on June 20, 1956. The firm name "Laguna Transportation Company"
was not altered, except with the addition of the word "Inc." to indicate that petitioner was duly incorporated under
existing laws.

The corporation continued the same transportation business of the unregistered partnership, using the same lines
and equipment. There was, in effect, only a change in the form of the organization of the entity engaged in the
business of transportation of passengers. Hence, said entity as an employer engaged in business, was already in
operation for at least 3 years prior to the enactment of the Social Security Act on June 18, 1954 and for at least
two years prior to the passage of the amendatory act on June 21, 1957. Petitioner argues that, since it was
registered as a corporation with the Securities and Exchange Commission only on June 20, 1956, it must be
considered to have been in operation only on said date. While it is true that a corporation once formed is
conferred a juridical personality separate and district from the persons composing it, it is but a legal fiction
introduced for purposes of convenience and to subserve the ends of justice. The concept cannot be extended to
a point beyond its reasons and policy, and when invoked in support of an end subversive of this policy, will be
disregarded by the courts. (13 Am. Jur. 160.)

If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked
upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but, when the
 motion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the
law will regard the corporation as an association of persons. (1 Fletcher Cyclopedia Corporations [Perm. Ed.]
135-136; U.S. Milwaukee Refrigeration Transit Co., 142 Fed. 247, cited in Koppel Philippines, Inc. vs. Yatco,
43 Off. Gaz., 4604.)

To adopt petitioner's argument would defeat, rather than promote, the ends for which the Social Security Act was
enacted. An employer could easily circumvent the statute by simply changing his form of organization every other
year, and then claim exemption from contribution to the System as required, on the theory that, as a new entity, it
has not been in operation for a period of at least 2 years. the door to fraudulent circumvention of the statute
would, thereby, be opened.

Moreover, petitioner admitted that as an employer engaged in the business of a common carrier, its operation
commenced on April 1, 1949 while it was a partnership and continued by the corporation upon its formation on
June 20, 1956. Unlike in the conveyance made by the Bian Transportation Company to the partners Gonzalo
Mercado, Artemio Mercado, Florentino Mata, and Dominador Vera Cruz, no mention whatsoever is made either in
the pleadings or in the stipulation of facts that the lines and equipment of the unregistered partnership had been
sold and transferred to the corporation, petitioner herein. This omission, to our mind, clearly indicates that there
was, in fact, no transfer of interest, but a mere change in the form of the organization of the employer engaged in
the transportation business, i.e., from an unregistered partnership to that of a corporation. As a rule, courts will
look to the substance and not to the form.(Colonial Trust Co. vs. Montolo Eric Works, 172 Fed. 310; Metropolitan
Holding Co. vs. Snyder, 79 F. 2d 263, 103 A.L.R. 612; Arnold vs. Willits, et al., 44 Phil., 634; 1 Fletcher
Cyclopedia Corporations [Perm. Ed.] 139-140.)

Finally, the weight of authority supports the view that where a corporation was formed by, and consisted of
members of a partnership whose business and property was conveyed and transferred to the corporation for the
purpose of continuing its business, in payment for which corporate capital stock was issued, such corporation is
presumed to have assumed partnership debts, and is prima facieliable therefor. (Stowell vs. Garden City News
Corps., 57 P. 2d 12; Chicago Smelting & Refining Corp. vs. Sullivan, 246 IU, App. 538; Ball vs. Bross., 83 June
19, N.Y. Supp. 692.) The reason for the rule is that the members of the partnership may be said to have simply
put on a new coat, or taken on a corporate cloak, and the corporation is a mere continuation of the partnership. (8
Fletcher Cyclopedia Corporations [Perm. Ed.] 402-411.)

Wherefore, finding no error in the judgment of the court a quo, the same is hereby affirmed, with costs against
petitioner-appellant. So ordered.

G.R. No. L-6304 December 29, 1953

SERGIO V. SISON, plaintiff-appellant,

vs.
HELEN J. MCQUAID, defendant-appellee.

Manansala and Manansala for appellant.

J.C. Orendain for appllee.

REYES, J.:

On March 28, 1951, plaintiff brought an action in the Court of First Instance of Manila against defendant, alleging
that during the year 1938 the latter borrowed from him various sums of money, aggregating P2,210, to enable her
to pay her obligation to the Bureau of Forestry and to add to her capital in her lumber business, receipt of the
amounts advanced being acknowledged in a document, Exhibit A, executed by her on November 10, 1938 and
attached to the complaint; that as defendant was not able to pay the loan in 1938, as she had promised, she
proposed to take in plaintiff as a partner in her lumber business, plaintiff to contribute to the partnership the said
sum of P2,210 due him from defendant in addition to his personal services; that plaintiff agreed to defendant's
proposal and, as a result, there was formed between them, under the provisions of the Civil Code, a partnership
in which they were to share alike in the income or profits of the business, each to get one-half thereof; that in
accordance with said contract, plaintiff, together with defendant, rendered services to the partnership without
compensation from June 15, 1938 to December, 1941; that before the last World War, the partnership sold to the
United States Army 230,000 board feet of lumber for P13,800, for the collection of which sum defendant, as
manager of the partnership, filed the corresponding claim with the said army after the war; that the claim was
"finally" approved and the full amount paid the complaint does not say when but defendant has persistently
refused to deliver one-half of it, or P6,900, to plaintiff notwithstanding repeated demands, investing the whole sum
of P13,800 for her own benefit. Plaintiff, therefore, prays for judgment declaring the existence of the alleged
partnership and requiring the defendant to pay him the said sum of P6,900, in addition to damages and costs.

Notified of the action, defendant filed a motion to dismiss on the grounds that plaintiff's action had already
prescribed, that plaintiff's claim was not provable under the Statute of Frauds, and that the complaint stated no
cause of action. Sustaining the first ground, the court dismissed the case, whereupon, plaintiff appealed to the
Court of Appeals; but that court has certified the case here on the ground that the appeal involved only questions
of law.

It is not clear from the allegations of the complaint just when plaintiff's cause of action accrued. Consequently, it
cannot be determined with certainty whether that action has already prescribed or not. Such being the case, the
defense of prescription can not be sustained on a mere motion to dismiss based on what appears on the face of
the complaint.

But though the reason given for the order of dismissal be untenable, we find that the said order should be upheld
on the ground that the complaint states no cause of action, which is also one of the grounds on which defendant's
motion to dismiss was based. Plaintiff seeks to recover from defendant one-half of the purchase price of lumber
sold by the partnership to the United States Army. But his 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. The proceeds from the sale of a certain amount of
lumber cannot be considered profits until costs and expenses have been deducted. Moreover, the profits of the
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.

In view of the foregoing, the order of dismissal is affirmed, but on the ground that the complaint states no cause of
action and without prejudice to the filing of an action for accounting or liquidation should that be what plaintiff
really wants. Without costs in this instance.1awphil.net

G.R. No. L-24243 January 15, 1926

ILDEFONSO DE LA ROSA, administrator of the intestate estate of the deceased Go-Lio, plaintiff-appellant,
vs.
ENRIQUE ORTEGA GO-COTAY, defendant-appellant.

Crispin Oben for palintiff-appellant.

Paredes, Buencamino and Yulo for defendant-appellant.

VILLA-REAL, J.:

During the Spanish regime the Chinamen Go-Lio and Vicente Go-Sengco formed a society for the purchase and
sale of articles of commerce, and for this purpose they opened a store in the town of San Isidro, Nueva Ecija.
Later Go-Lio went to China. Vicenyte Go-Sengco died and his son Enrique Ortega Go-Cotay took charge of the
businesses. Go-Lio died in China in October, 1916, leaving a widow and three children, one of whom came to the
Philippines and filed a petition for the appointment of Ildefonso de la Rosa as administrator of the intestate estate
of his deceased father, which petition was granted by the Court of First Instance of Nueva Ecija. Ildefonso de la
Rosa, in his capacity as administrator of the intestate estate of the deceased Go-Lio, requested Enrique Go-
Cotay to wind up the business and to deliver to him the portion corresponding to the deceased Go-Lio. Enrique
Ortega Go-Cotay denied the petition, alleging that the business was his exclusively. In view of this denial,
Ildefonso de la Rosa, as administratorm, on July 2, 1918, filed with the Court of First Instance of Nueva Ecija a
complaint against Enrique Ortega Co-Cotay in which he prayed that the defendant be sentenced to deliver to the
plaintiff one-half of all the property of the partnership formed by Go-lIo and Vicente Go-Sengco, with costs against
the defendant, and that the said plaintiff be appointed receiver for the property of the said partnership.

Defendant, in answering the complaint, denied each and every allegation thereof, and as a special defense
alleged that more than ten years had elapsed before the filing of the complaint, and prayed that he be absolved
therefrom, with costs against the plaintiff.

On August 3, 1918, the Court of First Instance of Nueva Ecija appointed Justo Cabo-Chan, Francisco T.
Tantengco and Go-Tiao, as commissioners to make an inventory, liquidate and determine the one-half belonging
to the plaintiff of all the property of the store in question.

On August 9, 1918, in order to prevent Justo Cabo-Chan from assuming the office of receiver, pursuant to the
order of the court dated August 3, 1918, the defendant filed a bond in the sum of P10,000.

Under the date of November 15, 1920, the said commissioners submitted to the court their report, showing the
net profits of the business between the period from 1913 to 1917, which amounted to the total sum of P25,038.70
and consisted of the following items:

Profits for the year 1913........................ P2,979.00

Profits for the year 1914........................ 3,046.94
Profits for the year 1915........................ 4,103.07
Profits for the year 1916........................ 4,735.00
Profits for the year 1917........................ 10,174.69
Total........................................................... 25.038.70

In view of the appeal taken by defendant the parties on December 7, 1921, entered into an agreement whereby
they agreed to suspend the liquidation ordered by the court until the appeal to the Supreme Court was decided,
and whereby the defenadnt was authorized to continue in the possession of the property in litigation, upon the
giving of a bond in the amount of P25,000, and cancelling the former bond for P10,000.

This court in deciding case R. G. No. 18919, on October 5, 1922, 1held that the appeal was premature and
ordered that the record be remanded to the court of origin with instruction to enter a final order in accordance with
the liquidation made by the commissioners.

The record having been remanded and two of the commissioners having filed their resignations, the copurt below
appointed again Justo Cabo-Chan suggested by the defendant and Cua POco suggested by the plaintiff, as
commissioners, who submitted two reports, one prepared by commissioners Tantengco and Cua Poco, and the
other by commissioners Justo Cabo-Chan. The former stated in their report that they had examined the books for
the years 1919 to 1922, for the reason, they said, that they appeared "to have been prepared by some person in
a careful way at a certain time." The later commissioner examined all books and stated in his report that the
business had suffered a net loss amounting to the sum of P89,099.22.
After trial and the parties having introduced all their evidence, the lower court, by order of December 13, 1924,
disapproved the report of the commissioners Tantengco and Cua Poco, but approved, with slight modifications,
the report of commissioner Cabo-Chan, holding that the result of the liquidation showed liabilities to the amiount
of P89,690.45 in view of which plaintiff had nothing to recover from defendant, as there was no profit to divide.

From this decision the plaintiff has appealed in due time and form making the following assignment of errors: (1)
The lower court erred in holding that the books were authentic, and in not holding that they were false books
exhibited by the defendant about alleged operations in the years 1918 et seq. which show enormous debts and
imaginary losses of the business; (2) the lower court erred in giving full credit to the testimony of commissioner
Justo Cabo-Chan; (3) the lower court erred in holding that the partnership had incurred debts and suffered losses,
as shown in the report of Justo Cabo-Cahn from 1918 on; (4) the lower court erred in not holding that the share of
the plaintiff, as his capital and profits until the end of 1917, is equivalent to the sum of twenty-seven thousand
seven hundred fifty-five pesos and forty-seven centavos (P27,755.47). Philippine currency, plus an annual quota
of at least two thousand five hundred three pesos and eighty-seven centavos (P2,503.87), Philippime currency,
as his portion of the profits since the beginning of 1918 until the delivery to the palintiff of his share in the
partnership; (5) the court below erred in not ordering the prosecuting attorney to commence an investigation as to
the falsified books of accounts that the defendant had exhibited for proper criminal proceeding.

From the evidence it appears that the partnership capital was P4,779.39, and the net profits until the year 1915
amounted to P5,551.40. Because some books of account had been destroyed by white ants (anay), the
liquidation of the business of the partnership for the period from 1906 to 1912 could not be made. But knowing
the net profit for the period between 1904 and 1905, which is P5,551.40, and findng the average of the profits for
each of these years, which is P2,775.70; and knowing the net profit for the year 1913, which is P2,979, we can
find the average between the net profit for 1905, namely, P2,979. Said average is the sum of P2,877.35, which
may be considered as the average of the net annual profits for the period between 1906 an 1912, which in seven
years make a total of P20,141.45. The assets of the partnership, as well as the value of its property, could not be
determined when making the liquidation because there was no inventory and for this reason it was not possible to
determine the capital of the partnership. The plaintiff, however, seems to be agreeable to considering the initial
partnership capital as the capital at the time of the winding up of the business.

August 3, 1918, defendant assumed complete responsibility for the business by objecting to the appointment of a
receiver as prayed for by plaintiff, and giving a bond therefor. Until that date his acts were those of a managing
partner, binding against the partnership; but thereafter his acts were those of a receiver whose authority is
contained in section 175 of the Code of Civil Procedure.

A receiver has no right to carry on and conduct a business unless he is authorized or directed by the court to do
some, and such authority is not derived from an order of appointment to take and preserve the property (34 Cyc.,
283; 23 R. C. L., 73). It does not appear that the defendant as a receiver was authorized by the court to continue
the business of the partnership in liquidation. This being so, he is personally liable for the losses that the business
amy have sustained. (34 Cyc., 296.) The partnership must not, therefore, be liable for the acts of the defendant in
connection with the management of the business until August 3, 1918, the date when he ceased to be a member
and manager in order to become receiver.

As to the first semester of 1918, during which time the defendant had seen managing the business of the
partnership as a member and manager, taking into account that the profits had been on the increase, said profits
having reached the amount of P10,174.69 in the year 1917, it would not be an exaggeration to estimate that the
profits for 1918 would have been at least the same as the profits of 1917; so that for the first half of 1918, the
profit would be P5,087.34.

In conclusion we have the following profits of the business of this partnership now in liquidation, to wit:

Capital of partnership........................... P4,779.39

 Profits until 1905.................................. 5,551.40
Profits 1906-1912................................ 20,141.45
Profits 1913-1917................................ 25,038.70
Profits first semester 1918............... 5,087.34
Total....................................................... 60,598.28

One-half of this total, that is, P30,299.14 pertains to the plaintiff as administrator of the intestate estate of Go-Lio.

In view of the foregoing, we are of the opinion that the case must be, as is hereby, decided by the reversing the
judgment appealed from, and sentencing the defendant to pay the plaintiff the sum of P30,299.14 with legal
interest at the rate of 6 per cent per annum from July 1, 1918, until fully paid, with costs. So ordered.

Avancea, C. J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.

CASE: MAGDUSA VS ALBARAN

G.R. No. L-17526 June 30, 1962

GREGORIO MAGDUSA, ET AL.,petitioners,vs. GERUNDIO ALBARAN, ET AL.,respondents.

Summary: Magdusa andd Albaran et al verbally formed a partnershiip de facto. When Albaran et al demanded
upon Magdusa for their shares, and the latter refused to their demands, they filed an action in court against
Magdusa. The Court held that the case should be dismissed. A partner's share cannot be returned without first
dissolving and liquidating the partnership. Moreover, since all members of the partnership are interested in his
assets and business, they are entitled to be heard in the matter of the firm's liquidation and distribution of the
property. Since some of the members were not impleaded as indispensable parties, the case should have been
dismissed.

FACTS:

Gregorio Magdusa and Gernundio Albaran et al had verbally formed a partnership de facto for the sale of
general merchandise in Surigao to which:

Magdusa contributed P2k as capital

others contributed their labor

that out of the net profits of the business, 25% would be added to the original capital, and the remaining 75%
would be divided among the members in proportion to the length of their service

In 1953 and 1954, Albaran et al made a computation to determine the value of the partners' shares. Thereafter,
they made demands upon Magdusa for payment, but the latter refused.

Magdusa denied any partnership with Albaran et al, and claimed that they were his employees.

CIR dismissed the complaint filed by Albaran et al since there are other indispensable parties not impleaded
in the complaint
 CA reversed the CIR decision, ruling that it is not an action for dissolution of a partnership and winding up oof
its affairs or liquididation of its assets in which the interest of other partners who are not brought into the case
may be affected. Also, since that the action is one for recovery of a sum of money against Magdusa, the liability is
therefore personal to magdusa, and the judgment should be against his sole interest and not against the
partnership.

ISSUE: WON the action filed by Albaran et al can be entertained / WON in the distribution of all or part of a
partnership's assets, all the partners are indispensable parties without whose intervention no decree of
distribution can validly be entered

HELD:

The Court cannot agree with the CA's decision. A partner's share can not be returned without first dissolving and
liquidating the partnership.

A partner's share can not be returned without first dissolving and liquidating the partnership, for the return is
dependent on the discharge of the creditors, whose claims enjoy preference over those of the partners; and it is
self-evident that all members of the partnership are interested in his assets and business, and are entitled to be
heard in the matter of the firm's liquidation and the distribution of its property.

Since the liquidation is not signed by the other members of the partnership, it is not binding upon them.

In the case at bar, the liquidation is not signed by the other members of the partnership besides Magdusa and
Albaran. It does not appear that they have approved, authorized, or ratified the same. Therefore, it is not binding
upon them. At the very least, they are entitled too be heard upon its correctness.

Unless a proper accounting and liquidation of the partnership affairs is first had, the capital shares of the the other
members, as retiring partners, can not be repaid for the firm's outside creditors have preference over the assets
of the enterprise and the firm's property can not be diminished to their prejudice.

Magdusa cannot be held liable in his personal capacity.

He does not hold them except as manager of, or trustee for, the partnership. It is the latter that must refund their
shares to the retiring partners.

The action should have been dismissed.

Since not all the members of the partnership have been impleaded, no judgment for refund can be rendered, and
the action should have been dismissed.

LIM TANHU v. HON. JOSE R. RAMOLETE

G.R. No. L-40098; August 29, 1975

Ponente: J. Barredo

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.

G.R. No. L-5837 May 31, 1954

CRISTOBAL BONNEVIE, ET AL., plaintiffs-appellants,

vs.
JAIME HERNANDEZ, defendant-appellee.

Ojeda and Vilgera for appellants.

Cea and Zurbano for appellee.

REYES, J.:

This is an action for the recovery of the sum of P115,312.50, with interests, as plaintiffs' alleged share in the
profits of a partnership.

It appears that prior to January, 1947, plaintiffs with other associates formed a syndicate or secret partnership for
the purpose of acquiring the plants, franchises and other properties of the Manila Electric Co. hereinafter
called the Meralco in the provinces of Camarines Sur, Albay, and Sorsogon, with the idea of continuing that
company's business in that region. No formal articles were drawn for it was the purpose of the members to
incorporate once the deal had been consummated. But in the meantime they elected Pedro Serranzana and
David Serrano general manager and secretary-treasurer, respectively, of the partnership.

Negotiation for the purchase was commenced, but as it made no headway, defendant was taken in as a member
of the partnership so that he could push the deal through, and to that end he was given the necessary power of
attorney. Using partnership funds, defendant was able to buy the Meralco properties for P122,000, paying
P40,000 upon the signing of the deed of sale and agreeing to pay the balance in two equal installments, that is,
P41,000 on or before July 31, 1947, and another P41,000 on or before January 31, 1948, with interest at 6 per
cent per annum and with a penalty clause which reads:

(6) That in case the VENDEE fails to make the payment or payments of the balance due or any part thereof
as herein provided, this contract shall, at the option of the VENDOR, be annuled and, in such an event, all
payments made by the VENDEE to the VENDOR by virtue of this contract shall be forfeited and retained by
the VENDOR in full satisfaction as the liquidated damages sustained by said VENDOR; and the said
VENDOR shall have the right to forthwith reenter and take possession of the premises, properties and rights
which are the subject-matter of this contract.

Although defendant was the one named vendee in the deed of sale, there is no question that the transaction was
in penalty made for the partnership so that the latter assumed control of the business the day following the sale.

About the latter half of the following month the members of the partnership proceeded with the formation of the
proposed corporation, apportioning among themselves its shares of stock in proportion to their respective
contributions to the capital of the partnership and their individual efforts in bringing about the acquisition of the
Meralco properties. But before the incorporation papers could be perfected, several partners, not satisfied with
the way matters were being run and fearful that the venture might prove a failure because the business was not
going well and there was a possibility of their being assessed more than their original investments when the time
came to meet the two installments of the unpaid purchase price due the Meralco, expressed their desire to
withdraw from the partnership and get back the money they had invested therein. In accordance with this wish,
one of them, Judge Jaime Reyes, in a meeting held on April 10, 1947, to consider various matters connected with
the business, presented a resolution to the effect that those partners who did not want to remain in the
association should be allowed to withdraw and get back their contributions. The resolution was approved, with the
herein plaintiffs voting affirmatively, and on that same day plaintiffs and Judge Reyes withdrew from the
partnership, and, as admitted by both parties, the partnership was then dissolved. In accordance with the terms of
the resolution, the withdrawing partners were, on the following day, reimbursed their respective contributions to
the partnership fund.

Following the dissolution of the partnership, the members who preferred to remain in the business went ahead
with the formation of the corporation, taking in new associates as stockholders. And defendant, on his part, in
fulfillment of his trust, made a formal assignment of the Meralco properties to the treasurer of the corporation,
giving them a book value of P365,000, in return for which the corporation issued, to the various subscribers to its
capital stock, shares of stock of the total face value of P225,000 and assumed the obligation of paying what was
still due the Meralco on the purchase price. The new corporation was named "Bicol Electric Company."

Though business was losing during the first year, that is, in 1947, the corporation, thanks to a loan obtained from
the RFC later prospered and made money. Then trouble began for one of its big stockholders, the defendant
herein.

Two years from their withdrawal from the partnership, when the corporate business was already in a prosperous
condition, plaintiffs brought the present suit against Jaime Hernandez, claiming a share in the profit the latter is
supposed to have made from the assignment of the Meralco properties to the corporation, estimated by plaintiffs
to be P225,000 and their share of it to be P115,312.50.

Defendant's answer denies that he has made any profit out of the assignment in question and alleges that in any
event plaintiffs, after their withdrawal from the partnership, ceased to have any further interest in the subsequent
transactions of the remaining members.

After trial the lower court found that the partnership had not realized any profit out of the assignment of the
Meralco properties to the corporation and that, even supposing that profit had really been made, defendant would
not be the one to answer to plaintiffs for their share thereof, because he did not receive the consideration for the
assignment, which according to the court, consisted of the subscriptions of various persons to the capital stock of
the corporation. The court therefore dismissed the complaint with costs against the plaintiffs. From this decision
plaintiffs appealed. The case comes within our jurisdiction because of the amount involved.

We find no merit in the appeal.

In the first place, the profit alleged to have been realized from the assignment of the Meralco properties to the
new corporation, the Bicol Electric Company, is more apparent than real. It is true that the value set for those
properties in the deed of assignment was P365,000 when the acquisition price was only P122,000. But one
should not jump to the conclusion that a profit, consisting of the difference between the two sums was really
made out of the transaction, for the assignment was not made for cash but in payment for subscriptions to shares
of stock in the assignee, and while those shares had a total face value of P225,000, this is not necessarily their
real worth. Needless to say, the real value of the shares of stock of a corporation depends upon the value of its
assets over and above its liabilities. It does not appear that the Bicol Electric Company had any assets other than
those acquired from the Meralco, and according to the evidence the company, aside from owing the Meralco,
P82,000 was, in the language of the court below, actually "in the red."

In the second place, assuming that the assignment actually brought profit to the partnership, it is hard to see how
defendant could be made to answer for plaintiffs' alleged share thereof. As stated in the decision below,
defendant did not receive the consideration for the assignment for, as already stated, the assignment was made
in payment for subscriptions of various persons to the capital stock of the new corporation. Plaintiffs, in order to
give color of legality to their claim against defendant, maintain that the latter should be held liable for damages
caused to them, consisting of the loss of their share of the profits, due to defendant's failure properly to perform
his duty as a liquidator of the dissolved partnership, this on the theory that as managing partner of the
partnership, it was defendant's duty to liquidate its affairs upon its dissolutions. But it does not appear that
plaintiffs have ever asked for a liquidation, and as will presently be explained no liquidation was called for
because when plaintiffs withdrew from the partnership the understanding was that after they had been
reimbursed their investment, they were no longer to have any further interest in the partnership or its assets and
liabilities. Moreover, the stipulation of facts made at the hearing does not bear out the claim that defendant was
the managing partner of the partnership, for if there appears that the partnership had its general manager in the
person of Pedro Serranzana, who upon the formation of the new corporation also became its vice-president and
general manager.

As a general rule, when a partner retires from the firm, he is entitled to the payment of what may be due him after
a liquidation. But certainly no liquidation is necessary where there is already a settlement or an agreement as to
what the retiring partner shall receive. In the instant case, it appears that a settlement was agreed upon on the
very day the partnership was dissolved. For when plaintiffs and Judge Jaime Reyes withdrew from the
partnership on that day they did so as agreed to by all the partners, subject to the only condition that they were to
be repaid their contributions or investments within three days from said date. And this condition was fulfilled when
on the following day they were reimbursed the respective amounts due them pursuant to the agreement.

There is evidence that the partnership was at that time operating its business at a loss and that the partnership
did not have necessary funds to meet its obligation to Meralco for the balance of the purchase price. And in that
connection it should be recalled that nonpayment of that obligation would result in the partnership losing its entire
investment because of the penalty clause in the deed of sale. Because of these circumstances there is every
reason to believe that plaintiffs together with Judge Jaime Reyes, withdrew from the partnership for fear that they
might lose their entire investment should they choose to remain in the partnership which then faced the danger of
losing its entire assets. As testified to by Judge Reyes, one of the withdrawing partners, it was clearly understood
that upon their withdrawal and return to them of their investment they would have nothing more to do with the
association. It must, therefore, have been the intention or understanding of the parties that the withdrawing
partners were relinquishing all their rights and interest in the partnership upon the return to them of their
investment. That Judge Reyes did not join the plaintiffs in this action is a clear indication that such was really the
understanding. Judge Reyes has testified that when he was invited to join in the present claim he refused
because he did not want to be a "sin verguenza." And, indeed, if the agreement was that the withdrawing partners
were still to have participation in the subsequent transactions of the partnership so that they would have a share
not only in the profits but also in the losses, it is not likely that their investment would have been returned to them.

It is, therefore, our conclusion that the acceptance by the withdrawing partners, including the plaintiffs, of their
investment in the instant case was understood and intended by all the parties as a final settlement of whatever
rights or claim the withdrawing partners might have in the dissolved partnership. Such being the case they are
now precluded from claiming any share in the alleged profits, should there be any, at the time of the dissolution.

In view of the foregoing, we find plaintiffs' claim against defendant to be without legal basis so that the judgment
of dismissal rendered by the court below should be, as it is hereby, affirmed, with costs against the appellants

Ortega vs. CA

FACTS:
On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners Ortega,
del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a letter stating that he
is withdrawing and retiring from the firm and asking for a meeting with the petitioners to discuss the mechanics of
the liquidation. On June 30, 1988, petitioner filed a petition to the Commision's Securities Investigation and
Clearing Department for the formal dissolution and liquidation of the partnership. On March 31, 1989, the hearing
officer rendered a decision ruling that the withdrawal of the petitioner has not dissolved the partnership. On
appeal, the SEC en banc reversed the decision and was affirmed by the Court of Appeals. Hence, this petition.

ISSUE:

Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will and whether
or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the
partnership regardless of his good or bad faith

HELD:

No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated that a
partnership that does not fix its term is a partnership at will. The birth and life of a partnership at will is predicated
on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate
himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on
the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause
for dissolution provided by the law itself. 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.

Idos v. CA

Idos v. CA G.R. NO. 110782, September 25, 1998, Quisumbing, J.

Facts:

In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to terminate after a year. To pay
Alarillas share of the asset, Idos issued 4 post dated checks. Alarilla was able to encash the first, second and
fourth checks but the third was dishonored for insufficiency of funds. He demanded payment but Idos failed to
pay. She claimed that the checks were issued as assurance of Alarillas share in the assets of the partnership and
that it was supposed to be deposited until the stocks were sold. He filed an information for violation of BP blg. 22
against Idos in which she was found guilty by the trial court.

Issue:Did the court confused and merged into one the legal concepts of dissolution, liquidation and termination of
a partnership?

Ruling:The partners agreement to terminate the partnership did not automatically dissolved the partnership. They
were in the process of winding-up when the check in question was issued. The best evidenceof the existence of
the partnership, which was not yet terminated were the unsold goods and uncollected receivables which were
presented to the trial court. Article 1829 of the Civil Code provides that on dissolution the partnership is not
terminated but continues until the winding-up of partnership affairs is completed. Since the partnership has not
been terminated, Idos and Alarilla remained co-partners. The check was issued by petitioner to respondent as
would a partner to another and not as a payment by debtor to creditor. Thus, absent the first element of the
complained offense, the act is not punishable by the statute.

FILIPINA Y. SY, petitioner, v. THE HONORABLE COURT OF APPEALS, respondent.

G.R. No. 127263. April 12, 2000.

Facts:

On November 15, 1973 Filipina Sy and Fernando Sy got married at the Church of Our Lady of Lourdes in Quezon
City. After some time, Fernando left their conjugal dwelling. Two children were born out of the marriage. Frederick,
their son went to his fathers residence. Filipina filed for legal separation.

The Trial Court dissolved their conjugal partnership of gains and granted the custody of their children to her.

Later on, Filipina was punched at the different parts of her body and was even choked by him when she started
spanking their son when the latter ignored her while she was talking to him.

The Trial Court convicted him for slight physical injuries only. A new action for legal separation was granted by
repeated physical violence and sexual infidelity. Filipina then filed for the declaration of absolute nullity of their
marriage citing psychological incapacity.

The Trial Court and Appellate Court denied her petition. On her petition to this Court, she assailed for the first time
that there was no marriage license during their marriage.

Issues:

1) Whether or not the marriage between petitioner and private respondent is void from the beginning for lack of a
marriage license at the time of the ceremony; and
2) Whether or not private respondent is psychologically incapacitated at the time of said marriage celebration to
warrant a declaration of its absolute nullity.

Ruling:

The date of celebration of their marriage on November 15, 1973, is admitted both by petitioner and private
respondent. The pieces of evidence on record showed that on the day of the marriage ceremony, there was no
marriage license. A marriage license is a formal requirement; its absence renders the marriage void ab initio. In
addition, the marriage contract shows that the marriage license, numbered 6237519, was issued in Carmona,
Cavite, yet, neither petitioner nor private respondent ever resided in Carmona.

The marriage license was issued on September 17,1974, almost one year after the ceremony took place on
November 15, 1973. The ineluctable conclusion is that the marriage was indeed contracted without a marriage
license. Under Article 80 of the Civil Code. those solemnized without a marriage license, save marriages of
exceptional character, are void ab initio. This is
clearly applicable in this case.

The remaining issue on the psychological incapacity of private respondent need no longer detain the Court. It is
mooted by the conclusion that the marriage of petitioner to respondent is void ab initio for lack of a marriage
license at the time their marriage was solemnized.

SUNGA-CHAN VS. CHUA G.R.

NO. 143340 AUGUST 15, 2001
Case #27
LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs. LAMBERTO T. CHUA, respondent. FACTS: On
June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan (hereafter
petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of the deceased
Jacinto L. Sunga (hereafter Jacinto), for "Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of
Shares and Damages with Writ of Preliminary Attachment." Respondent alleged that in 1977, he verbally entered into a
partnership with Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila. For business
convenience, respondent and Jacinto allegedly agreed to register the business name of their partnership, SHELLITE
GAS APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole proprietorship. While Jacinto
furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989,
respondent however suspected that the amount indicated in these documents were understated and undervalued by
Jacinto and Josephine for their own selfish reasons and for tax avoidance. Upon Jacinto's death in the later part of
1989, his surviving wife, petitioner Cecilia and particularly his daughter, petitioner Lilibeth, took over the operations,
control, custody, disposition and management of Shellite without respondent's consent. Despite respondent's repeated
demands upon petitioners for accounting, inventory, appraisal, winding up and restitution of his net shares in the
partnership, petitioners failed to comply. Petitioner Lilibeth allegedly continued the operations of Shellite, converting
to her own use and advantage its properties. RTC & CA: Ruled in favor of respondent. PETITIONERS
CONTENTION:Petitioners question the correctness of the finding of the trial court and the Court of Appeals that a
partnership existed between respondent and Jacinto from 1977 until Jacinto's death. In the absence of any written
document to show such partnership between respondent and Jacinto, petitioners argues that these courts were
proscribes from hearing the testimonies of respondent and his witness, Josephine, to prove the alleged partnership three
years after Jacinto's death. ISSUE:WON a partnership existed between CHUA and JACINTO

HELD:YES.A partnership may be constituted in any form, except where immovable property of real rights are
contributed thereto, in which case a public instrument shall necessary.6 Hence, based on the intention of the parties, as
gathered from the facts and ascertained from their language and conduct, a verbal contract of partnership may arise.7
The essential profits that must be proven that a partnership was agreed upon are (1) mutual contribution to a common
stock, and (2) a joint interest in the profits.8 Understandably so, in view of the absence of the written contract of
partnership between respondent and Jacinto, respondent resorted to the introduction of documentary and testimonial
evidence to prove said partnership.

VILLAREAL VS. RAMIREZ

G.R. No. 144214

July 14, 2003

FACTS: Villareal, C. Jose and J. Jose formed a partnership for the operation of a restaurant and catering
business under the name Aquarius Food House and Catering Services, each contributing 250K. Ramirez was
later added, contributing 250K as well. After some time, one of them (J. Jose) withdrew from the partnership; his
capital contribution was refunded to him in cash by agreement of the partners.

Without prior knowledge of respondents, petitioners closed down the restaurant, allegedly because of increased
rental. On March 1, 1987, The respondent spouses wrote petitioners, saying that they were no longer interested
in continuing their partnership or in reopening the restaurant, and that they were accepting the latters offer to
return their capital contribution. The repeated oral and written requests were, however, left unheeded

Before the RTC, respondents subsequently filed a Complaintfor the collection of a sum of money from petitioners.
the RTC ruled in favor of the respondents, ordering petitioners to pay damages and AF and costs.

The CA sustained the lower courts decision, and made a computation on the petitioners liability to respondents:

Capital, at dissolution: **P1,000,000.00

Less: liability to creditors 240,658.00

Amount to be distributed to partners 759,342.00

Over: Number of partners 3

Each partners share at dissolution 253,114.00

** which is erroneous, as this is the capital at the BEGINNING of the partnership

Hence this petition.

ISSUE: WON the CA computation was erroneous

HELD:We hold that respondents have no right to demand from petitioners the return of their equity share.

YES

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. In the
computation of the amount to be refunded to respondents, The CA did not consider:

1. The omission of any provision for the depreciationof the furniture and the equipment.

2. The amortization of the goodwill is not reflected

3. Thecapitalization amount paid by the partnership to J. Jose when he withdrew from the partnership.

Because of the above-mentioned transactions, the partnership capital was actually reduced.

But the disposition is without prejudice to proper proceedings for the accounting, the liquidation and the
distribution of the remaining partnership assets, if any

Other issue and ruling:

Issue:W/N petitioners are liable to respondents for the latters share in the partnership?

Ruling:

No. Respondents have no right to demand from petitioner the return of their equity share. As found by the court
petitioners did not personally hold its equity or assets. The partnership has a juridical personality separate and
distinct from that of each of the partners. Since the capital was contributed to the partnership, not to petitioners, it
is the partnership that must refund the equity of the retiring partners. However, before the partners can be paid
their shares, the creditors of the partnership must first be compensated. Therefore, the exact amount of refund
equivalent to respondents one-third share in the partnership cannot be determined until all the partnership assets
will have been liquidated and all partnership creditors have been paid. CAs computation of the amount to be
refunded to respondents as their share was thus erroneous.

EN BANC

G.R. No. 19892 September 6, 1923

TECK SEING AND CO., LTD., petitioner-appellee.

SANTIAGO JO CHUNG, ET AL., partners,
vs.
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-appellants.

Del Rosario & Del Rosario and Block, Johnston and Greenbaum for appellants.
F. V. Arias for appellants Jo Ibec and Go Tayco.
No appearance for petitioner and appellee.
Jose A. Espiritu and Felipe Ysmael as amici curiae.

MALCOLM, J.:

Following the presentation of an application to be adjudged an insolvent by the "Sociedad Mercantil, Teck Seing &
Co., Ltd.," the creditors, the Pacific Commercial Company, Piol & Company, Riu Hermanos, and W. H. Anderson
& Company, filed a motion in which the Court was prayed to enter an order: "(A) Declaring the individual partners
as described in paragraph 5 parties to this proceeding; (B) to require each of said partners to file an inventory of
his property in the manner required by section 51 of Act No. 1956; and (C) that each of said partners be
adjudicated insolvent debtors in this proceeding." The trial judge first granted the motion, but, subsequently, on
opposition being renewed, denied it. It is from this last order that an appeal was taken in accordance with section
82 of the Insolvency Law.

There has been laid before us for consideration and decision a question of some importance and of some
intricacy. The issue in the case relates to a determination of the nature of the mercantile establishment which
operated under the name of Teck Seing & co., Ltd., and this issue requires us to look into, and analyze, the
document constituting Teck Seing & Co., Ltd. It reads:

ESCRITURA DE SOCIEDAD MERCANTIL LIMITADA

Sepan todos por la presente:

Que nosotros, Santiago Jo Chung Cang, mayor de edad comerciante, vecino y residente del municipio de
Tabogon Provincia de Cebu, Islas Filipinas, Go Tayco, mayor de edad, comerciante, vecino y residente del
municipio de Cebu Provincia de Cebu, Islas Filipinas, Yap Gueco, mayor de edad, comerciante, vecino y
residente del municipio y Provincia de Cebu, Islas Filipinas, Lim Yogsing, mayor de edad comerciante,
vecino y residente del municipio de Cebu, Provincia de Cebu, Islas Filipinas, y Jo Ybec, mayor de edad,
comerciante, vecino y residente del municipio de Jagna, Provincia de Bohol, Islas Filipinas, hacemos
constar por la presente, que constituimos y formamos una sociedad mercantil limitada, bajo las leyes
vigentes en las Islas Filipinas y para ser registrada de acuerdo con los reglamentos vigentes del Codigo de
Comercio en Filipinas.

Que la razon social se denominara "Teck Seing & Co., Ltd." y tendra su domicilio principal en la Calle
Magallanes No. 94, de la Ciudad de Cebu, Provincia de Cebu, Islas Filipinas.

Que el capital social sera de treinta mil pesos (P30,000) moneda legal de las Islas Filipinas, dividido en
cinco acciones de a P6,000 como sigue:

Santiago Jo Chung Cang . . . . . . . . . . . . . P6,000.00

Go Tayco . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000.00

Yap Gueco . . . . . . . . . . . . . . . . . . . . . . . . 6,000.00

Jo Ybec . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000.00

Lim Yogsing . . . . . . . . . . . . . . . . . . . . . . . 6,000.00

Total . . . . . . . . . . . . . . . . . . . . . . 30,000.00
Que la duracion de la sociedad sera la de seis aos, a contar de la fecha de esta escritura, pudiendo
prorrogarse este tiempo a discrecion unanime de todos los accionistas.

El objeto de la sociedad sera la compra y venta de mercaderias en general.

El administrador o administradores de la sociedad podran, previa conformidad de los accionistas, establecer

cuantas sucursales o establecimientos considere necesarios para facilitar sus negocios y el mayor
desarrollo del comercio a que se dedica la sociedad, verificando todas las operaciones que crean
convenientes para el fomento de su capital.

Las ganancias o perdidas que resultaren durante cada ao comercial, se distribuiran proporcionalmente
entre los accionistas, de acuerdo con el capital aportado por cada uno de los mismos.

Las ganancias que resultaren en cada ao comercial, si resultaren algunas ganancias, no podran ser
retiradas pors los accionistas hasta dentro del termino de tres aos a contar de la fecha del primer balance
anual del negocio, quedadno por tanto estas ganancias en reserva, para ampliar el capital aportado opor los
accionistas y ampliar por tanto la esfera de accion emprendida por la misma sociedad. Al pasar o expirar el
termino de tres aos, cada accionista podra retirar o depositar en poder de la sociedad, las ganancias que le
debiera corresponder durante dicho termino de tres aos.

Que los accionistas no podran extraer ni disponer en ningun tiempo cualesquiera cantidad o cantidades de
la sociedad, que haya sido aportado por los mismos, para atender sus gastos particulares ni aun pagando
redito alguno sobre la cantidad que intenen disponer o extraer de dicha sociedad.

El accionista Sr. Lim Yogsing tendra a su cargo, en union del Sr. Vicente Jocson Jo, la administracion de la
Compaia, quienes podran usar indistintamente la firma social, quedando por consiguiente autorizados
amobs para hacer en nombre de ella toda calse de operaciones, negocios y especulaciones mercantiles,
practicando judicial y extra-judicialment cuantos actos se requieran para el bien de la sociedad, nombrar
procuradores o abogados para reclamaciones y cobro de creditos y proponer ante los tribunales las
demandas, convenios, transacciones y excepciones procdentes. En caso de ausencia, enfermedad o
cualquier otro impedimento del accionista administrador Sr. Lim Yogsing, este podra conferir poder general o
especial al accionista que crea conveniente para que en union del administrador auxiliar Sr. Vicente Jocson
Jo, pudieran ambos administrar convenientemente los negocios de la sociedad. Que los administradores
podran tener los empleados necesarios para el mejor que debieran percibir dichos empleados por servicios
rendidos a la sociedad.

Que ambos administradores podran disponer de mil discientos pesos(P1,200) moneda filipina, anualmente,
para sus gastos particulares, siendo dicha cantidad de P1,200 la que corresponde a cada uno de dichos
administradores, como emolumentos o salarios que se les asigna a cas uno, por sus trabajos en la
administracion de la sociedad. Entendiendose, que, los accionistas podran disponer cada fin de aola
gratificacion quese concedera a cada administrador, si los negocios del ao fueran boyantes y justifiquen la
concesion de una gratificacion especial, aparte del salario aqui dispuesto y especificado.

Que pasado el termino de seis aos, y es de la conveniencia de los accionistas la continuacion del negocio
de esta sociedad, dicho termino sera prorrogado por igual numero de aos, sin necesidas del otorgamiento
de ulteriores escrituras, quedando la presente en vigor hasta el termino dispuesto por todos los accionistas.

Que las diferencias que pudieran suscitarse entre los accionistas, bien sea por razon de lo estipulado en
esta en ella comprendidos, se procurara arreglar entre los mismos amistosa y extrajudicialmente, y si no se
consiguiere un arreglo de este modo, dichos accionistas nombraran un arbitro, cuya resolucion estan todos
obligados y por la presente se comprometen y se obligan a acatarla en todas sus partes, renunciando
ulteriores recursos.
En cuyos terminos dejamos formalizada esta escritura de sociedad mercantillimitada, y prometemos
cumplirla fiel y estrictamente segun los pactos que hemos establecido.

En testimonio de todo lo cual, firmamos en la Ciudad de Cebu, Provincia de Cebu, Islas Filipinas, hoy 31 de
octubre de mil novecientos diez y nueve.

(Fdos.) "LIM YOGSING

"Jo YBec por Ho Seng Sian
"SANTIAGO JO CHUNG CANG
"GO TAYCO
"YAP GUECO

Firnando en presencia de:

(Fdos.) "ATILANO LEYSON
"JULIO DIAZ

"ESTADOS UNIDOS DE AMERCA

"ISLAS FILIPINAS
"PROVINCIA DE CEBU

En el Municipio de Cebu, de la Provincia antes mencionada, I.F., hoy 31 de octubre de 1919, A.D., ante mi,
Notario Publico que subscribe, comprecieron personalmente Santiago Jo Chung Cang, Go Tayco, Yap
Gueco, Lim Yogsing y Jo Ybec, representado este ultimo por Ho Seng Sian, segun autorizacion hecha en
telegrama de fecha 27 de septiembre de 1919 que se me ha presentado en este mismo acto, de quienes
doy fe de que les conozco por ser las mismas personas que otorgaron el preinserto documento, ratificando
ant emi su contenido y manifestando ser el mismo un acto de su libre y voluntario otorgamiento. El Sr.
Santiago Jo Chung Cang me exhibio su cedula personal expedida en Cebu, Cebu, I.F. el dia 19 de
septiembre de 1919 bajo el No. H77742, Go Tayco tambien me exhibio la suya expedida en Cebu, Cebu,
I.F., el dia 9 de octubre de 1919 bajo el No. G2042490, Yap Gueco tambien me exhibio la suya expedida en
Cebu, Cebu, I.F. el dia 20 de enero de 1919 bajo el No. F1452296, Lim Yogsing tambien me exhibio la suya
expedida en Cebu, Cebu, I.F., el dia 26 de febrero de 1919 bajo el No. F1455662, y Ho Seng Sian
representante de Jo Ybec, me exhibio su cedula personal expedida en Cebu, Cebu, I.f. el dia 4 de febrero
de 1919 bajo el No. F1453733.

Ante mi,

(Fdo.) "F.V.ARIAS
"Notario Publico
"Hasta el 1. de enero de 1920

"Asiento No. 157

Pagina No. 95 de mi
Registro Notarial
Serie 1919
Libro 2.
 Presentado a las diez y cuarenta y tres minutos de la maana de hoy, segun el asiento No. 125, pagina 9
del Tomo 1. del Libro Diario. Cebu, 11 de febrero de 1920.

(Fdo.) "QUIRICO ABETO

[SELLO] "Registrador Mercantil Ex-Officio"

Inscrito el documento que preced al folio 84 hoja No. 188, inscripcion 1.a del Tomo 3. del Libro Registro de
Sociedades Mercantiles. Cebu, 11 de febrero de 1920. Honorarios treinta pesos con cincuenta centavos. Art.
197, Ley No. 2711, Codigo Administrativo.

(Fdo.) "QUIRICO ABETO

[SELLO] "Registrador Mercantil Ex-Officio"

Proceeding by process of elimination, it is self-evident that Teck Seing & Co., Ltd., is not a corporation. Neither is
it contended by any one that Teck Seing & Co., Ltd., is accidental partnership denominated cuenta en
participacion(joint account association).

Counsel for the petitioner and appellee described his client in once place in his opposition to the motion of the
creditors as "una verdadera sociedad anonima"(a true sociedad anonima). The provisions of the Code of
Commerce relating to sociedades anonimaswere, however, repealed by section 191 of the Corporation Law (Act
No. 1459), with the exceptions the sociedades anonimaslawfully organized at the time of the passage of the
Corporation Law were recognized, which is not our case.

The document providing for the partnership contract purported to form "una sociedad mercantil limitada,"and
counsel for the petitioner's first contention was that Teck Seing & Co., Ltd., was not "una sociedad regular
colectiva, ni siquiera comanditaria, sino una sociedad mercantil limitada."Let us see if the partnership contract
created a "sociedad en comandita," or, as it is known in English, and will hereafter be spoken of, "a limited
partnership."

To establish a limited partnership there must be, at least, one general partner and the name of the least one of
the general partners must appear in the firm name. (Code of Commerce, arts. 122 [2], 146, 148.) But neither of
these requirements have been fulfilled. The general rule is, that those who seek to avail themselves of the
protection of laws permitting the creation of limited partnerships must show a substantially full compliance with
such laws. A limited partnership that has not complied with the law of its creation is not considered a limited
partnership at all, but a general partnership in which all the members are liable. (Mechem, Elements of
Partnership, p. 412; Gilmore, Partnership, pp. 499, 595; 20 R C. L. 1064.)

The contention of the creditors and appellants is that the partnership contract established a general partnership.

Article 125 of the Code of Commerce provides that the articles of general copartnership must estate the names,
surnames, and domiciles of the partners; the firm name; the names, and surnames of the partners to whom the
management of the firm and the use of its signature is instrusted; the capital which each partner contributes in
cash, credits, or property, stating the value given the latter or the basis on which their appraisement is to be
made; the duration of the copartnership; and the amounts which, in a proper case, are to be given to each
managing partner annually for his private expenses, while the succeeding article of the Code provides that the
general copartnership must transact business under the name of all its members, of several of them, or of one
only. Turning to the document before us, it will be noted that all of the requirements of the Code have been met,
with the sole exception of that relating to the composition of the firm name. We leave consideration of this phase
of the case for later discussion.

The remaining possibility is the revised contention of counsel for the petitioners to the effect that Teck Seing &
Co., Ltd., is "una sociedad mercantil "de facto" solamente"(only a de factocommercial association), and that the
decision of the Supreme court in the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng [1906], 6 Phil., 498), is
controlling. It was this argument which convinced the trial judge, who gave effect to his understanding of the case
last cited and which here must be given serious attention.

The decision in Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, discloses that the firm Kieng-Chiong-Seng was not
organized by means of any public document; that the partnership had not been recorded in the mercantile
registry; and that Kieng-Chiong-Seng was not proven to be the firm name, but rather the designation of the
partnership. The conclusion then was, that the partnership in question was merely de factoand that, therefore,
giving effect to the provisions of article 120 of the Code of Commerce, the right of action was against the persons
in charge of the management of the association.

Laying the facts of the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, side by side with the facts before
us, a marked difference is at once disclosed. In the cited case, the organization of the partnership was not
evidenced by any public document; here, it is by a public document. In the cited case, the partnership naturally
could not present a public instrument for record in the mercantile registry; here, the contract of partnership has
been duly registered. But the two cases are similar in that the firm name failed to include the name of any of the
partners.

We come then to the ultimate question, which is, whether we should follow the decision in Hung-Man-Yoc vs.
Kieng-Chiong-Seng, supra, or whether we should differentiate the two cases, holding Teck Seing & Co., Ltd., a
general copartnership, notwithstanding the failure of the firm name to include the name of one of the partners. Let
us now notice this decisive point in the case.

Article 119 of the Code of Commerce requires every commercial association before beginning its business to
state its article, agreements, and conditions in a public instrument, which shall be presented for record in the
mercantile registry. Article 120, next following, provides that the persons in charge of the management of the
association who violate the provisions of the foregoing article shall be responsible in solidumto the persons not
members of the association with whom they may have transacted business in the name of the association.
Applied to the facts before us, it would seem that Teck Seing & Co., Ltd. has fulfilled the provisions of article 119.
Moreover, to permit the creditors only to look to the person in charge of the management of the association, the
partner Lim Yogsing, would not prove very helpful to them.

What is said in article 126 of the Code of Commerce relating to the general copartnership transacting business
under the name of all its members or of several of them or of one only, is wisely included in our commercial law. It
would appear, however, that this provision was inserted more for the protection of the creditors than of the
partners themselves. A distinction could well be drawn between the right of the alleged partnership to institute
action when failing to live up to the provisions of the law, or even the rights of the partners as among themselves,
and the right of a third person to hold responsible a general copartnership which merely lacks a legal firm name in
order to make it a partnership de jure.

The civil law and the common law alike seem to point to a difference between the rights of the partners who have
failed to comply with the law and the rights of third persons who have dealt with the partnership.

The supreme court of Spain has repeatedly held that notwithstanding the obligation of the members to register
the articles of association in the commercial registry, agreements containing all the essential requisites are valid
as between the contracting parties, whatever the form adopted, and that, while the failure to register in the
commercial registry necessarily precludes the members from enforcing rights acquired by them against third
persons, such failure cannot prejudice the rights of third persons. (Seedecisions of December 6, 1887, January
25, 1888, November 10, 1890, and January 26, 1900.) The same reasoning would be applicable to the less
formal requisite pertaining to the firm name.

The common law is to the same effect. The State of Michigan had a statute prohibiting the transaction of business
under an assumed name or any other than the real name of the individual conducting the same, unless such
person shall file with the county clerk a certificate setting forth the name under which the business is to be
conducted and the real name of each of the partners, with their residences and post-office addresses, and
making a violation thereof a misdemeanor. The supreme Court of Michigan said:

The one object of the act is manifestly to protect the public against imposition and fraud, prohibiting persons
from concealing their identity by doing business under an assumed name, making it unlawful to use other
than their real names in transacting business without a public record of who they are, available for use in
courts, and to punish those who violate the prohibition. The object of this act is not limited to facilitating the
collection of debts, or the protection of those giving credit to persons doing business under an assumed
name. It is not unilateral in its application. It applies to debtor and creditor, contractor and contractee, alike.
Parties doing business with those acting under an assumed name, whether they buy or sell, have a right,
under the law, to know who they are, and who to hold responsible, in case the question of damages for
failure to perform or breach of warranty should arise.

The general rule is well settled that, where statutes enacted to protect the public against fraud or imposition,
or to safeguard the public health or morals, contain a prohibition and impose a penalty, all contracts in
violation thereof are void. . . .

As this act involves purely business transactions, and affects only money interests, we think it should be
construed as rendering contracts made in violation of it unlawful and unforceable at the instance of the
offending party only, but not as designed to take away the rights of innocent parties who may have dealt with
the offenders in ignorance of their having violated the statute. (Cashin vs. Pliter [1912], 168 Mich., 386; Ann.
Cas. [1913-C, 697.)

The early decision of our Supreme Court in the case of Prautch Scholes & Co. vs. Hernandez [1903], 1 Phil.,
705), contains the following pertinent observations:

Another case may be supposed. A partnership is organized for commercial purposes. It fails to comply with
the requirements of article 119. A creditor sues the partnership for a debt contracted by it, claiming to hold
the partners severally. They answer that their failure to comply with the Code of Commerce makes them a
civil partnership and that they are in accordance with article 1698 of the Civil Code only liable jointly. To allow
such liberty of action would be to permit the parties by a violation of the Code to escape a liability which the
law has seen fit to impose upon persons who organized commercial partnership; "Because it would be
contrary to all legal principles that the nonperformance of a duty should redound to the benefit of the person
in default either intentional or unintentional." (Mercantile Law, Eixala, fourth ed., p. 145.)" ( See alsoLichauco
vs. Lichauco [1916], 33 Phil., 350, 360.)

Dr. Jose de Echavarri y Vivanco, in his Codigo de Comercio, includes the following comment after articles 121
and 126 of the Code:

From the decisions cited in this and in the previous comments, the following is deduced: 1st. Defects in the
organization cannot affect relations with third persons. 2d. Members who contract with other persons before
the association is lawfully organized are liable to these persons. 3d. The intention to form an association is
necessary, so that if the intention of mutual participation in the profits and losses in a particular business is
proved, and there are no articles of association, there is no association. 4th. An association, the articles of
which have not been registered, is valid in favor of third persons. 5th. The private pact or agreement to form
a commercial association is governed not by the commercial law but by the civil law. 6th. Secret stipulations
expressed in a public instrument, but not inserted in the articles of association, do not affect third persons,
 but are binding on the parties themselves. 7th. An agreement made in a public instrument, other than the
articles of association, by means of which one of the partners guarantees to another certain profits or
secures him from losses, is valid between them, without affecting the association. 8th. Contracts entered into
by commercial associations defectively organized are valid when they are voluntarily executed by the
parties, if the only controversy relates to whether or not they complied with the agreement.

xxx xxx xxx

The name of the collective merchant is called firm name. By this name, the new being is distinguished from
others, its sphere of action fixed, and the juridical personality better determined, without constituting an
exclusive character of the general partnership to such an extent as to serve the purpose of giving a definition
of said kind of a mercantile partnership, as is the case in our Code.

Having in mind that these partnerships are prevailingly of a personal character, article 126 says that they
must transact business under the name of all its members, of some of them, or of one only, the words "and
company" to be added in the latter two cases.

It is rendered impossible for the general partnership to adopt a firm name appropriate to its commercial
object; the law wants to link, and does link, the solidary and unlimited responsibility of the members of this
partnership with the formation of its name, and imposes a limitation upon personal liberty in its selection, not
only by prescribing the requisites, but also by prohibiting persons not members of the company from
including their names in its firm name under penalty of civil solidary responsibility.

Of course, the form required by the Code for the adoption of the firm name does not prevent the addition
thereto of any other title connected with the commercial purpose of the association. The reader may see our
commentaries on the mercantile registry about the business names and firm names of associations, but it is
proper to establish here that, while the business name may be alienated by any of the means admitted by
the law, it seems impossible to separate the firm names of general partnerships from the juridical entity for
the creation of which it was formed. (Vol. 2, pp. 197, 213.)

On the question of whether the fact that the firm name "Teck Seing & Co., Ltd." does not contain the name of all
or any of the partners as prescribed by the Code of Commerce prevents the creation of a general partnership,
Professor Jose A. Espiritu, as amicus curi, states:

My opinion is that such a fact alone cannot and will not be a sufficient cause of preventing the formation of a
general partnership, especially if the other requisites are present and the requisite regarding registration of
the articles of association in the Commercial Registry has been complied with, as in the present case. I do
not believe that the adoption of a wrong name is a material fact to be taken into consideration in this case;
first, because the mere fact that a person uses a name not his own does not prevent him from being bound
in a contract or an obligation he voluntarily entered into; second, because such a requirement of the law is
merely a formal and not necessarily an essential one to the existence of the partnership, and as long as the
name adopted sufficiently identity the firm or partnership intended to use it, the acts and contracts done and
entered into under such a name bind the firm to third persons; and third, because the failure of the partners
herein to adopt the correct name prescribed by law cannot shield them from their personal liabilities, as
neither law nor equity will permit them to utilize their own mistake in order to put the blame on third persons,
and much less, on the firm creditors in order to avoid their personal possibility.

The legal intention deducible from the acts of the parties controls in determining the existence of a partnership. If
they intend to do a thing which in law constitutes a partnership, they are partners, although their purpose was to
avoid the creation of such relation. Here, the intention of the persons making up Teck Seing & co., Ltd. was to
establish a partnership which they erroneously denominated a limited partnership. If this was their purpose, all
subterfuges resorted to in order to evade liability for possible losses, while assuming their enjoyment of the
advantages to be derived from the relation, must be disregarded. The partners who have disguised their identity
under a designation distinct from that of any of the members of the firm should be penalized, and not the creditors
who presumably have dealt with the partnership in good faith.

Articles 127 and 237 of the Code of Commerce make all the members of the general copartnership liable
personally and in solidumwith all their property for the results of the transactions made in the name and for the
account of the partnership. Section 51 of the Insolvency Law, likewise, makes all the property of the partnership
and also all the separate property of each of the partners liable. In other words, if a firm be insolvent, but one or
more partners thereof are solvent, the creditors may proceed both against the firm and against the solvent partner
or partners, first exhausting the assets of the firm before seizing the property of the partners. (Brandenburg of
Bankcruptcy, sec. 108; De los Reyes vs. Lukban and Borja [1916], 35 Phil., 757; Involuntary Insolvency of
Campos Rueda & Co. vs. Pacific Commercial Co. [1922], 44 Phil., 916).

We reach the conclusion that the contract of partnership found in the document hereinbefore quoted established
a general partnership or, to be more exact, a partnership as this word is used in the Insolvency Law.

Wherefore, the order appealed from is reversed, and the record shall be returned to the court of origin for further
proceedings pursuant to the motion presented by the creditors, in conformity with the provisions of the Insolvency
Law. Without special findings as to the costs in this instance, it is ordered.