Republic of the Philippines

SUPREME COURT
Manila
G.R. No. 31057 September 7, 1929
ADRIANO ARBES, ET AL., plaintiffs-appellees,
vs.
VICENTE POLISTICO, ET AL., defendants-appellants.

FACTS: This is an action to bring about liquidation of the funds and property of the association called "Turnuhan Polistico & Co." The
plaintiffs were members or shareholders, and the defendants were designated as president-treasurer, directors and secretary of said
association.
This court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an
accounting for money and property in their possessions, it is not necessary that all members of the association be made parties to the
action. (Borlasa vs. Polistico, 47 Phil., 345.) The case having been remanded to the court of origin, both parties amend, respectively,
their complaint and their answer, and by agreement of the parties, the court appointed Amadeo R. Quintos, of the Insular Auditor's
Office, commissioner to examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever
evidence the parties might desire to present.
The defendants objected to the commissioner's report, but the trial court, having examined the reasons for the objection,
found the same sufficiently explained in the report and the evidence, and accepting it, rendered judgment, holding that the association
"Turnuhan Polistico & Co." is unlawful, and sentencing the defendants jointly and severally to return the amount of P24,607.80, as
well as the documents showing the uncollected credits of the association, to the plaintiffs in this case, and to the rest of the members
of the said association represented by said plaintiffs, with costs against the defendants.

ISSUE: WON an unlawful object makes the partnership unlawful?

RULING: YES, an unlawful object makes the partnership unlawful.

There is no question that "Turnuhan Polistico & Co." is an unlawful partnership (U.S. vs. Baguio, 39 Phil., 962), but the
appellants allege that because it is so, some charitable institution to whom the partnership funds may be ordered to be turned over,
should be included, as a party defendant.
The appellants refer to article 1666 of the Civil Code, which provides:
A partnership must have a lawful object, and must be established for the common benefit of the partners.
When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile
of the partnership, or, in default of such, to those of the province.

The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership, during
its existence as result of the business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to
base his action upon the partnership contract, which is to annul and without legal existence by reason of its unlawful object; and it is
self evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of the same article provides that when the
dissolution of the unlawful partnership is decreed, the profits cannot inure to the benefit of the partners, but must be given to some
charitable institution.