Partnership Agency and Trust

BUSINESS ORGANIZATION
PARTNERSHIP, AGENCY AND TRUST
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Santos vs. Spouses Reyes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Sevilla vs. Court of Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Estanilao Jr. vs. Court of Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dan Fue Leung vs. Intermediate Apellate Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Santos vs. Spouses Reyes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Sunga – Chan vs. Sunga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Palting vs. San Jose Petroleum Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Bestida vs. Menzi and Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Magalona vs. Pesayco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Agad vs. Mabato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Red Men vs. Veteran Army . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Criado vs. Gutierrez Hermanos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Garrido vs. Asencio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Dan Fue Leung vs. IAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Sharruf Co. vs. Balosie Fire Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Island Sales Inc. vs. United Pioneer General Construction . . . . . . . . . . . . . . . . . . . . . . . . . 27
Dela Rosa vs. Ortega Go Cotay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Gogulay vs. Sycip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Angeles vs. Philippines National Railways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Urban Bank vs. Pena . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Nevada vs, Casuga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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GENERAL PROVISIONS
FERNANDO SANTOS V. SPS. ARSENIO AND NIEVES REYES

GR No. 135813. October 25, 2001
Topic: Establishment of Partnership
Facts:
Before us is a Petition for Review on Certiorari assailing the November 28, 1997 Decision, as well
as the August 17, 1998 and the October 9, 1998 Resolutions, issued by the Court of Appeals (CA)
in CA-GR CV No. 34742
In June, 1986, Petitioner Fernando Santos and Respondent Nieves Reyes were introduced to each
by MelitonZabat regarding a lending business venture proposed by Nieves. There was a verbal
agreement that Santos would act as a financier while Nieves and Zabat would take charge of
solicitation of members and collection of loan payments. The venture was launched on June 13,
1986 with the understanding that petitioner would receive 70% of the profits while Nieves and
Zabat would earn 15% each.
In July 1986, Nieves introduced Gragera, chairman of Monte Maria Development Corporation, to
petitioner. Petitioner and Gragera executed and agreement providing funds for Monte Marias
members at P1.31 commission per thousand paid daily to petitioner. Nieves kept the books as
representative of petitioner while Arsenio, husband of Nieves, acted as credit investigator.
On August 6, 1986, Santos, Nieves and Zabat executed the Article of Agreement which formalized
their earlier verbal arrangement. It was later discovered that Zabat was engaged in the same lending
business in competition with their partnership and thus Zabat was expelled from the partnership.
On June 5, 1987, Santos filed a complaint for recovery of sum of money and damages against
respondents in their capacities as employees of petitioner, with having misappropriated funds
intended for Gragera for the period July 8, 1986 up to March 31, 1987.
Respondents asserted that they were partners and not mere employees of petitioner. They allege
that the complaint was filed to preempt and prevent them from claiming their rightful share to the
profits of the partnership.
Petitioner avers that upon discovery of Zabats activities, he ceased infusing funds, thereby causing
the extinguishment of the partnership. That the agreement with Gragera was distinct partnership
and that respondents were hired as salaried employees with respect to the partnership between
petitioner and Gragera.
Issue: Whether or not respondents were employees or partners of petitioner?
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Held: They were partners.
While concededly, the partnership between [petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom, the remaining partners simply continued the
business of the partnership without undergoing the procedure relative to dissolution. Instead, they
invited Arsenio to participate as a partner in their operations. There was therefore, no intent to
dissolve the earlier partnership. The partnership between [petitioner,] Nieves and Arsenio simply
took over and continued the business of the former partnership with Zabat, one of the incidents of
which was the lending operations with Monte Maria.
Gragera and [petitioner] were not partners. The money-lending activities undertaken with Monte
Maria was done in pursuit of the business for which the partnership between [petitioner], Nieves
and Zabat (later Arsenio) was organized. Gragera who represented Monte Maria was merely paid
commissions in exchange for the collection of loans. The commissions were fixed on gross returns,
regardless of the expenses incurred in the operation of the business. The sharing of gross returns
does not in itself establish a partnership.
We agree with both courts on this point. By the contract of partnership, two or more persons bind
themselves to contribute money, property or industry to a common fund, with the intention of
dividing the profits among themselves.The Articles of Agreement stipulated that the signatories
shall share the profits of the business in a 70-15-15 manner, with petitioner getting the lions share.
This stipulation clearly proved the establishment of a partnership.
Indeed, the partnership was established to engage in a money-lending business, despite the fact
that it was formalized only after the Memorandum of Agreement had been signed by petitioner
and Gragera. Contrary to petitioners contention, there is no evidence to show that a different
business venture is referred to in this Agreement, which was executed on August 6, 1986, or about
a month after the Memorandum had been signed by petitioner and Gragera on July 14, 1986.
SEVILLA V. COURT OF APPEALS

GR No.L-41182-3. April 16, 1988
Topic: Principal Agent Relationship vs. Partnership
Facts:
Tourist world service leased the premises belonging to the party of the first part
(SegundinaNoguera) at Mabini St., Manila for the former’s use as a branch office. In the said
contract the party of the third part (Lina Sevilla) held herself solidarily liable with the party of the
part for the prompt payment of the monthly rental agreed on. When the branch office was opened,
the same was run by the herein appellant.
On or about November 24, 1961 the Tourist World Service, Inc. appears to have been informed
that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the
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branch office was anyhow losing, the Tourist World Service considered closing down its office.
This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc.
dated Dec. 2, 1961 the first abolishing the office of the manager and vice-president of the Tourist
World Service, Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive
the properties of the Tourist World Service then located at the said branch office.
The contract with SegundinaNoguera for the use of the Branch Office premises was terminated
and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of
fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the
Tourist World Service, the corporate secretary GabinoCanilao went over to the branch office, and,
finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises
on June 4, 1962 to protect the interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises,
a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance
of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent
lack of interest of the parties therein, the trial court ordered the dismissal of the case without
prejudice.
The appellee SegundinaNoguera sought reconsideration of the order dismissing her counterclaim
which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence
in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the
issues were joined, the reinstated counterclaim of SegundinaNoguera and the new complaint of
appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases
dismiss for lack of merit,
Hence this petition,
Issue: What is the relationship between Sevilla and TWS?
Held: Principal- Agent relationship
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means
used in connection therewith. In the first place, under the contract of lease covering the Tourist
Worlds Ermita office, she had bound herself in solidum as and for rental payments, an arrangement
that would be like claims of a master-servant relationship.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened,
the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc.
by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. Under these
circumstances, it cannot be said that Sevilla was under the control of Tourist World Service,
Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own
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gifts and capabilities.It is further admitted that Sevilla was not in the company's payroll. For her
efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist
World. Unlikean employee then, who earns a fixed salary usually, she earned compensation
in fluctuating amounts depending on her booking successes. The court also do not consider
the contention of Lina Sevilla about embarking on a joint venture or otherwise, a
partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In
her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right
to stop the operation of your branch office in effect, accepting Tourist World Service, Inc.'s
control over the manner in which the business was run. A joint venture, including a partnership,
presupposes generally a of standing between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the capital or property contributed and
where each party exercises equal rights in the conduct of the business.16 furthermore, the
parties did not hold themselves out as partners, and the building itself was embellished with the
electric sign "Tourist World Service, Inc. in lieu of a distinct partnership name.
Hence the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man
the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant
to a contract of agency. It is the essence of this contract that the agent renders services "in
representation or on behalf of another. In the case at bar, Sevilla solicited airline fares, but she did
so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received
4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her
letter of November 28, 1961, pre-assumed her principal's authority as owner of the business
undertaking. We are convinced, considering the circumstances and from the respondent Court's
recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership.
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with
an interest, the agency having been created for mutual interest, of the agent and the principal. It
appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an
interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the
operation thereof, holding herself solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had stopped further operations. Her interest,
obviously, is not to the commissions she earned as a result of her business transactions, but one
that extends to the very subject matter of the power of management delegated to her. It is an agency
that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation
complained of should entitle the petitioner, Lina Sevilla, to damages.
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ELIGIO ESTANISLAO, JR V. COURT OF APPEALS, REMEDIOS ESTANISLAO,

EMILIO AND LEOCADIO SANTIAGO
GR No.L-49982. April 27, 1988
Topic: Partnership Agreement
Facts:
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the
corner of Annapolis and Aurora Blvd., Quezon City which were then being leased to the Shell
Company of the Philippines Limited (SHELL)
They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service
Station with an initial investment of P15,000.00 to be taken from the advance rentals due to them
from SHELL for the occupancy of the said lots owned in common by them. A joint affidavit was
executed by them on April 11, 1966 which was prepared by Atty. Democrito Angeles. They agreed
to help their brother, petitioner herein, by allowing him to operate and manage the gasoline service
station of the family.
For practical purposes and in order not to run counter to the company's policy of appointing only
one dealer, it was agreed that petitioner would apply for the dealership. Respondent Remedios
helped in co-managing the business with petitioner from May 3, 1966 up to February 16, 1967.
The parties entered into an Additional Cash Pledge Agreement with SHELL wherein it was
reiterated that the P15,000.00 advance rental shall be deposited with SHELL to cover advances of
fuel to petitioner as dealer with a proviso that said agreement "cancels and supersedes the Joint
Affidavit dated 11 April 1966 executed by the co-owners."
The petitioner submitted financial statements regarding the operation of the business to private
respondents, but thereafter petitioner failed to render subsequent accounting. Hence through Atty.
Angeles, a demand was made on petitioner to render an accounting of the profits.
The financial report of December 31, 1968 shows that the business was able to make a profit of
P87,293.79 and that by the year ending 1969, a profit of P150,000.00 was realized
private respondents filed a complaint in the Court of First Instance of Rizal against petitioner
praying among others that the latter be ordered:
1. to execute a public document embodying all the provisions of the partnership agreement entered
into between plaintiffs and defendant as provided in Article 1771 of the New Civil Code;
2. to render a formal accounting of the business operation covering the period from May 6, 1966
up to December 21, 1968 and from January 1, 1969 up to the time the order is issued and that the
same be subject to proper audit;
3. to pay the plaintiffs their lawful shares and participation in the net profits of the business in an
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amount of no less than P l50,000.00 with interest at the rate of 1% per month from date of demand
until full payment thereof for the entire duration of the business; and
4. to pay the plaintiffs the amount of P 10,000.00 as attorney's fees and costs of the suit (pp. 13-14
Record on Appeal.)
CFI of Rizal
decided in favor of the plaintiffs and as against the defendant:
(1) Ordering the defendant to execute a public instrument embodying all the provisions of the
partnership agreement entered into between plaintiffs and defendant as provided for in Article
1771, Civil Code of the Philippines;
(2) Ordering the defendant to render a formal accounting of the business operation from April
1969 up to the time this order is issued, the same to be subject to examination and audit by the
plaintiff,
(3) Ordering the defendant to pay plaintiffs their lawful shares and participation in the net profits
of the business in the amount of P 150,000.00, with interest thereon at the rate of One (1%) Per
Cent per month from date of demand until full payment thereof;
(4) Ordering the defendant to pay the plaintiffs the sum of P 5,000.00 by way of attorney's fees of
plaintiffs' counsel; as well as the costs of suit. (pp. 161-162. Record on Appeal).
A motion for reconsideration of said decision filed by petitioner was denied on January 30, 1979.
Not satisfied therewith, the petitioner now comes to this court by way of this petition for certiorari
alleging that the respondent court erred:
1. In interpreting the legal import of the Joint Affidavit vis-a-vis the Additional Cash Pledge
Agreement; and
2. In declaring that a partnership was established by and among the petitioner and the private
respondents as regards the ownership and or operation of the gasoline service station business.
Issue: W/N there was a partnership formed?
Held: There was in fact such partnership agreement between the parties.
In the aforesaid Joint Affidavit of April 11, 1966 , it is clearly stipulated by the parties that the
P15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in
the operation of the gasoline station, which advance rentals shall be credited as rentals from May
25, 1966 up to four and one-half months or until 10 October 1966, more or less covering said
P15,000.00.
Additional Cash Pledge Agreement", the private respondents and petitioners assigned to SHELL
the monthly rentals due them commencing the 24th of May 1966 until such time that the monthly
rentals accumulated equal P15,000.00 which private respondents agree to be a cash deposit of
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petitioner in favor of SHELL to increase his credit limit as dealer.

It provided therein that "This agreement, therefore, cancels and supersedes the Joint Affidavit
dated 11 April 1966 executed by the CO-OWNERS."
Petitioner contends that because of the said stipulation cancelling and superseding that previous
Joint Affidavit, whatever partnership agreement there was in said previous agreement had thereby
been abrogated. We find no merit in this argument.
Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00 advance
rentals starting May 25, 1966 while the latter agreement also refers to advance rentals of the same
amount starting May 24, 1966.
There is, therefore, a duplication of reference to the P15,000.00 hence the need to provide in the
subsequent document that it "cancels and supersedes" the previous one. True it is that in the latter
document, it is silent as to the statement in the Joint Affidavit that the P15,000.00 represents the
"capital investment" of the parties in the gasoline station business and it speaks of petitioner as the
sole dealer, but this is as it should be for in the latter document SHELL was a signatory and it
would be against its policy if in the agreement it should be stated that the business is a partnership
with private respondents and not a sole proprietorship of petitioner.
Petitioner submitted to private respondents periodic accounting of the business. Petitioner gave a
written authority to private respondent Remedios Estanislao, his sister, to examine and audit the
books of their "common business" (amingnegosyo). Respondent Remedios assisted in the running
of the business. There is no doubt that the parties hereto formed a partnership when they bound
themselves to contribute money to a common fund with the intention of dividing the profits among
themselves.
The sole dealership by the petitioner and the issuance of all government permits and licenses in
the name of petitioner was in compliance with the afore-stated policy of SHELL and the
understanding of the parties of having only one dealer of the SHELL products.
Judgment appealed from is AFFIRMED in toto.
DAN FUE LEUNG V. HON. INTERMEDIATE APPELLATE COURT AND LEUNG YIU
GR No. 70926. January 31, 1989
Topic: Share of Profits and Losses
Facts:
Suh WahPanciteria, a restaurant located at Florentino Torres St. Sta. Cruz Manila was established
sometime in Oct. 1955 as a single proprietorship and its licenses and permits were issued and in
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favor of Dan Fue Leung as sole proprietor. Respondent adduced claims that the restaurant was
actually a partnership and that he was one of the partners who contributed P4,000.00 to its initial
establishment and in return, 22% of its annual profits. Evidencing a receipt adduced by private
respondent wherein petitioner acknowledged acceptance of P4k by affixing petitioner's signature
written in chinese characters. Florence Yap, a translator requested by the court verified and
affirmed the validty of said receipt. Witnesses So Sia and Antonio Ah Heng corroborated private
respondent's testimony that they were present when receipt was signed. Private respondent
received from petitioner amount of P12k as profits of the operation for the year of 1974. Witness
Teodulo Diaz Chief of savings Dept. of China bank testified said check was deposited to private
respondent's savings account. Petitioner however, denied having received from private respondent
amount of P4k. He contested and impugned the genuiness of the receipt. He averred that petitioner
did not receive any contribution and that he was the sole owner. Petitioner presented various gov't
licenses and permits showing that the restaurant was a sole proprietorship solely owned and
operated by himself alone. He also denied having issued to private respondent P12k check.
Petitioner raises also prescription because the alleged receipt is dated Oct. 1955 and complaint was
on July 13, 1978 as written demands were ever made by private respondent.
Issue: WON private respondent is a partner of petitioner in establishing the restaurant
WON payment of share of profits shall continue into the future with no fixed ending date
Held: (1) Yes. Private respondent is a partner of the restaurant because of Art.1767, the requisites
of partnership have been established. It would be incorrect to state that if a partner does not assert
his rights anytime within 10 years from start of operations, such rights are irretrievably lost. Private
respondent's cause of action is premised upon failure of petitioner to give him the agreed profits
of the restaurant. In effect, private respondent was asking for an accounting of his interests in the
partnership.
As to prescription, it only runs upon dissolution of the partnership when final accounting is done.
(2) No. Considering the facts of the case, the court may decree a dissolution under Art.1831 of the
Civil Code. There shall be a liquidation and winding up of partnership affairs, return of capital and
other incidents of dissolution because the continuation of the partnership has become inequitable
FERNANDO SANTOS V. SPS. ARSENIO AND NIEVES REYES

GR No. 135813. October 25, 2001
Topic: An industrialist partner’s share in net profits
Facts:
Petitioner Fernando Santos and Respondent Nieves Reyes were introduced to each other by one
MelitonZabat regarding a lending business venture proposed by Nieves. It was verbally agreed
that petitioner would act as financier while Nieves and Zabat would take charge of solicitation of
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members and collection of loan payments. The venture was launched on June 13, 1986 with the
understanding that petitioner would receive 70% of the profits while Nieves and Zabat would earn
15% each.
Nieves introduced Cesar Gragera, chairman of the Monte Maria Development Corporation, to
petiotioner seeking short-term loans for members of the corporation. Petitioner and Gragera
executed an agreement providing funds for Monte Marias members: Monte Maria was entitled to
P1.31 commission per thousand paid daily to petitioner. Nieves kept the books as representative
of petitioner while Respondent Arsenioacted as credit investigator.
On August 1986, Petitioner Santos, Respondent Nieves and Zabat executed the Article of
Agreement which formalized their earlier verbal agreement.
Petitioner andNieves later discovered that their partner Zabat engaged in the same lending business
in competition with their partnership. Zabat was expelled from the partnership.
Petitioner filed a complaint for recovery of sum of money and damages against respondents on the
ground that in their capacities as his employees misappropriated funds intended for Gragera. Upon
Gragera’s complaint that his commissions were inadequately remitted, petitioner entrusted
P200,000.00 to Nieves to be given to Gragera. Nieves allegedly failed to account for the amount.
Petitioner asserted that after examination of the records, he found that of the total amount of
P4,623,201.90 entrusted to respondents, only P3,068,133.20 was remitted to Gragera, thereby
leaving the balance of P1,555,065.70 unaccounted for.
Respondents’ claim: that they were partners and not mere employees of petitioner and that the
complaint was filed to prevent them from claiming their share. That, Arsenio was enticed by
petitioner to take the place of Zabat after petitioner learned of Zabat’s activities. Arsenio resigned
from his job at the Asian Development Bank to join the partnership.That, Nieves participated in
the business as a partner, as the lending activity with Monte Maria originated from her initiative.
Except for the limited period of July 8, 1986 through August 20, 1986, she did not handle sums
intended for Gragera. Collections were turned over to Gragera because he guaranteed 100%
payment of all sums loaned by Monte Maria.Entries she made on worksheets were based on this
assumptive 100% collection of all loans.
Petitioner: insisted that respondents were his mere employees and not partners with respect to the
agreement with Gragera. He claimed that after he discovered Zabat’s activities, he ceased infusing
funds, thereby causing the extinguishment of the partnership. The agreement with Gragera was a
distinct partnership and respondents were hired as salaried employees with respect to said
partnership.
RTC:respondents were partners, not mere employees, of petitioner. Gragera was only a
commission agent of petitioner, not his partner. Petitioner failed to prove that he had entrusted any
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money to Nieves. Thus, respondents counterclaim for their share in the partnership and for
damages was granted.
CA:upheld the RTC decision. The following circumstances indicated the existence of a partnership
among the parties: (1) it was Nieves who broached to petitioner the idea of starting a money-
lending business and introduced him to Gragera; (2) Arsenio received dividends or profit-shares);
and (3) the partnership contract was executed after the Agreement with Gragera and petitioner and
thus showed the parties intention to consider it as a transaction of the partnership. In their common
venture, petitioner invested capital while respondents contributed industry or services, with the
intention of sharing in the profits of the business. Disbelieved petitioner’s claim that Nieves had
misappropriated the fund; it was petitioner’s task to collect the amounts due, while hers was merely
to prepare the daily cash flow reports.
Issue: Whether or not respondents were entitled to the partnership profits?
Held: Yes, the respondents were entitled to the partnership profits.
The parties’ relationship is of a partnership.The partnership between petitioner, Nieves and Zabat
was technically dissolved by the expulsion of Zabattherefrom, the remaining partners simply
continued the business of the partnership without undergoing the procedure relative to dissolution.
Instead, they invited Arsenio to participate as a partner in their operations. There was therefore, no
intent to dissolve the earlier partnership. The partnership between petitioner, Nieves and Arsenio
simply took over and continued the business of the former partnership with Zabat, one of the
incidents of which was the lending operations with Monte Maria.
By the contract of partnership, two or more persons bind themselves to contribute money, property
or industry to a common fund, with the intention of dividing the profits among themselves. The
Articles of Agreement stipulated that the signatories shall share the profits of the business in a 70-
15-15 manner, with petitioner getting the lions share.This stipulation clearly proved the
establishment of a partnership.
Nieves was not merely petitioner’s employee. She discharged her bookkeeping duties in
accordance with paragraphs 2 and 3 of the Agreement. Arsenio’s duties as credit investigator are
subsumed under the phrase screening of prospective borrowers.
All expenses incurred by the money-lending enterprise of the parties must first be deducted from
the total income in order to arrive at the net profit of the partnership. The share of each one of them
should be based on this net profit and not from the gross income or total income reflected in Exhibit
10-I, which the two courts invariably referred to as cash flow sheets.
Daily CashflowReports do not reflect the business expenses incurred by the parties, because they
show only the daily cash collections.Contrary to the rulings of both the trial and the appellate
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courts, respondents’ exhibits do not reflect the complete financial condition of the money-lending
business.
For the purpose of determining the profit that should go to an industrial partner (who shares
in the profits but is not liable for the losses), the gross income from all the transactions
carried on by the firm must be added together, and from this sum must be subtracted the
expenses or the losses sustained in the business. Only in the difference representing the net
profits does the industrial partner share. But if, on the contrary, the losses exceed the income,
the industrial partner does not share in the losses.
The award of the partnership share, as computed by the trial court and adopted by the CA, to be
incomplete and not binding on this Court.
SUNGA-CHAN V. CHUA
GR No. 143340. August 15, 2001
Topic: Juridical Personality of Partnership
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 with the Regional Trial Court, Branch 11, Sindangan, Zamboanga del
Norte.
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. Respondent allegedly delivered his initial capital contribution of P100,000.00 to
Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the
intention that the profits would be equally divided between them. The partnership allegedly had
Jacinto as manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife of
respondent, ErlindaSy. As compensation, Jacinto would receive a managers fee or remuneration
of 10% of the gross profit and Josephine would receive 10% of the net profits, in addition to her
wages and other remuneration from the business.
Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation
went quite well and was profitable. Respondent claimed that he could attest to the success of their
business because of the volume of orders and deliveries of filled Shellane cylinder tanks supplied
by Pilipinas Shell Petroleum Corporation. While Jacinto furnished respondent with the
ABELLA, 2017 14
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 Jacintos 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 respondents consent. Despite repeated demands upon petitioners
for accounting, inventory, appraisal, winding up and restitution of his net shares in the partnership,
they failed to comply. Petitioner Lilibeth allegedly continued the operations of Shellite, converting
to her own use and advantage its properties.
On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out of alibis and reasons
to evade respondents demands, she disbursed out of the partnership funds the amount of
P200,000.00 and partially paid the same to respondent. Petitioner Lilibeth allegedly informed
respondent that the P200,000.00 represented partial payment of the latters share in the partnership,
with a promise that the former would make the complete inventory and winding up of the
properties of the business establishment. Despite such commitment, petitioners allegedly failed to
comply with their duty to account, and continued to benefit from the assets and income of Shellite
to the damage and prejudice of respondent. Petitioners filed a Motion to Dismiss on the ground
that the Securities and Exchange Commission (SEC) in Manila, not the Regional Trial Court in
Zambaongadel Norte had jurisdiction over the action. Respondent opposed the motion to dismiss.
The trial court finding the complaint sufficient in form and substance denied the motion to dismiss.
Petitioners filed their Answer with Compulsory Counterclaims, contending that they are not liable
for partnership shares, unreceived income/profits, interests, damages and attorney’s fees, that
respondent does not have a cause of action against them, and that the trial court has no jurisdiction
over the nature of the action, the SEC being the agency that has original and exclusive jurisdiction
over the case. As counterclaim, petitioner sought attorney’s fees and expenses of litigation.
On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the ground that the
claim for winding up of partnership affairs, accounting and recovery of shares in partnership
affairs, accounting and recovery of shares in partnership assets /properties should be dismissed
and prosecuted against the estate of deceased Jacinto in a probate or intestate proceeding.
Issues: (1)Whether or not respondent Lamberto Chua and Jacinto L. Sunga has entered into a
partnership.
(2) Whether or not Chua’s claim is barred by prescription.
Held: (1) Yes. The court ruled that a partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public instrument shall
be necessary. Also, Article 1772 of the Civil Code requires that partnership with a capital of
ABELLA, 2017 15
Php3,000.00 or more must register with the Securities and Exchange Commission, however this
registration requirement is not mandatory. Article 1768 of the Civil Code explicitly provides that
the partnership retains its juridical personality even if it fails register. The failure to register the
contract of partnership does not invalidate the same as among the partners, so long as the contract
has the essential requisites, because the main purpose of registration is to give notice to third
parties, and it can be assumed that the members themselves knew of the contents of their contract.
(2) No. The action for accounting filed by Chua three (3) years after Jacinto’s death was well
within the prescribed period. The Civil Code provides that an action to enforce an oral contract
prescribes in six (6) years while the right to demand an accounting for a partner’s interest as against
the person continuing the business accrues at the date of dissolution, in the absence of any contrary
agreement. Considering that the death of a partner results in the dissolution of the partnership, in
this case, it was after Jacinto’s death that Chua as the surviving partner had the right to an account
of his interest as against Lilibeth. It bears stressing that while Jacinto’s death dissolved the
partnership, the dissolution did not immediately terminate the partnership. The Civil Code
expressly provides that upon dissolution, the partnership continues and its legal personality is
retained until the complete winding up of its business, culminating in its termination.
PALTING V. SAN JOSE PETROLEUM INCORPORATED

GR No.L-14441. December 17, 1966
Topic: Foreign Corporation; reciprocal rights between a foreign country and the Philippines
Facts:
San Jose Petroleum filed with the Philippine Securities and Exchange Commission a sworn
registration statement, for the registration and licensing for sale in the Philippines Voting Trust
Certificates of its capital stock. It was alleged that the entire proceeds of the sale of said securities
will be devoted or used exclusively to finance the operations of San Jose Oil Company, Inc., a
domestic mining corporation.
Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE
PETROLEUM, filed with the Securities and Exchange Commission an opposition to the
registration and licensing of the securities on the grounds that (1) the tie-up between the issuer,
SAN JOSE PETROLEUM, a Panamanian corporation, and SAN JOSE OIL, a domestic
corporation, violates the Constitution of the Philippines, the Corporation Law and the Petroleum
Act of 1949; (2) the issuer has not been licensed to transact business in the Philippines; (3) the sale
of the share of the issuer is fraudulent, and works or tends to work a fraud upon Philippine
purchasers; and (4) the issuer as an enterprise, as well as its business, is based upon unsound
business principles.
Answering the foregoing opposition of Palting, et al., the registrant SAN JOSE PETROLEUM
claimed that it was a "business enterprise" enjoying parity rights under the ordinance appended to
the Constitution, which parity right, with respect to mineral resources in the Philippines, may be
ABELLA, 2017 16
exercised, pursuant to the Laurel-Langley Agreement, only through the medium of a corporation
organized under the laws of the Philippines. Thus, registrant which is allegedly qualified to
exercise rights under the Parity Amendment, had to do so through the medium of a domestic
corporation, which is the SAN JOSE OIL. It refuted the contention that the Corporation Law was
being violated, by alleging that Section 13 thereof applies only to foreign corporations doing
business in the Philippines, and registrant was not doing business here. The mere fact that it was a
holding company of SAN JOSE OIL and that registrant undertook the financing of and giving
technical assistance to said corporation did not constitute transaction of business in the Philippines.
Registrant also denied that the offering for sale in the Philippines of its shares of capital stock was
fraudulent or would work or tend to work fraud on the investors. On August 29, 1958, and on
September 9, 1958 the Securities and Exchange Commissioner issued the orders object of the
present appeal.
Issue: Whether or not respondent SAN JOSE PETROLEUM, an American business enterprise, is
entitled to parity rights in the Philippines.
Held: No.
Firstly — It is not owned or controlled directly by citizens of the United States, because it is owned
and controlled by a corporation, the OIL INVESTMENTS, another foreign (Panamanian)
corporation.
Secondly — Neither can it be said that it is indirectly owned and controlled by American citizens
through the OIL INVESTMENTS, for this latter corporation is in turn owned and controlled, not
by citizens of the United States, but still by two foreign (Venezuelan) corporations, the
PANTEPEC OIL COMPANY and PANCOASTAL PETROLEUM.
Thirdly — Although it is claimed that these two last corporations are owned and controlled
respectively by 12,373 and 9,979 stockholders residing in the different American states, there is
no showing in the certification furnished by respondent that the stockholders of PANCOASTAL
or those of them holding the controlling stock, are citizens of the United States.
Fourthly — Granting that these individual stockholders are American citizens, it is yet necessary
to establish that the different states of which they are citizens, allow Filipino citizens or
corporations or associations owned or controlled by Filipino citizens, to engage in the exploitation,
etc. of the natural resources of those states (see paragraph 3, Article VI of the Laurel-Langley
Agreement, supra.). Respondent has presented no proof to this effect.
Fifthly — But even if the requirements mentioned in the two immediately preceding paragraphs
are satisfied, nevertheless to hold that the set-up disclosed in this case, with a long chain of
intervening foreign corporations, comes within the purview of the Parity Amendment regarding
business enterprises indirectly owned or controlled by citizens of the United States, is to unduly
stretch and strain the language and intent of the law. Add to this the admitted fact that the shares
of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly
ABELLA, 2017 17
by citizens of the United States, are traded in the stock exchange in New York, and you have a
situation where it becomes a practical impossibility to determine at any given time, the citizenship
of the controlling stock required by the law.
In the circumstances, we have to hold that the respondent SAN JOSE PETROLEUM, as presently
constituted, is not a business enterprise that is authorized to exercise the parity privileges under
the Parity Ordinance, the Laurel-Langley Agreement and the Petroleum Law. Its tie-up with SAN
JOSE OIL is, consequently, illegal.
FRANCISCO BASTIDA V. MENZI& CO., INC

GR No.L-35840. March 31, 1933 (58 Phil 188)
Topic: Employment not Partnership
Facts:
That on April 27, 1922, the defendant Menzi& Co., Inc. through its president and general manager,
J.M. Menzi, under the authority of the board of directors, entered into a contract with the plaintiff
to engage in the business of exploiting prepared fertilizers.
Pursuance of said contract, plaintiff and defendant Menzi& Co., Inc., began to manufacture
prepared fertilizers, the former superintending the work of actual preparation, and the latter,
through defendants J.M. Menzi and P. C. Schlobohm, managing the business and opening an
account entitled "FERTILIZERS" on the books of the defendant Menzi& Co., Inc., where all the
accounts of the partnership business were supposed to be kept; the plaintiff had no participation in
the making of these entries, which were wholly in the defendants' charge, under whose orders
every entry was made;
The defendant Menzi& Co., Inc., was obliged to render annual balance sheets to be plaintiff upon
the 30th day of June of each year; that the plaintiff had no intervention in the preparation of these
yearly balances, nor was he permitted to have any access to the books of account; and when the
balance sheets were shown him, he, believing in good faith that they contained the true statement
of the partnership business, and relying upon the good faith of the defendants, Menzi& Co., Inc.,
J.M. Menzi, and P.C. Schlobohm, accepted and signed them, the last balance sheet having been
rendered in the year 1926;
The plaintiff was kept in ignorance of the defendants' acts relating to the management of the
partnership funds, and the keeping of accounts, until he was informed and so believes and alleges,
that the defendants had conspired to conceal from him the true status of the business, and to his
damage and prejudice made false entries in the books of account and in the yearly balance sheets,
the exact nature and amount of which it is impossible to ascertain, even after the examination of
the books of the business, due to the defendants' refusal to furnish all the books and data required
for the purpose, and the constant obstacles they have placed in the way of the examination of the
books of account and vouchers;
ABELLA, 2017 18
That when the plaintiff received the information mentioned in the preceding paragraph, he
demanded that the defendants permit him to examine the books and vouchers of the business,
which were in their possession, in order to ascertain the truth of the alleged false entries in the
books and balance sheets submitted for his approval, but the defendants refused, and did not
consent to the examination until after the original complaint was filed in this case;
As a result of the partial examination of the books of account of the business, the plaintiff has,
through his accountants, discovered that the defendants, conspiring and confederating together,
presented to the plaintiff during the period covered by the partnership contract false and incorrect
accounts,
The defendant, Menzi& CO., Inc., alleged that they made and entered into an employment
agreement with the plaintiff, who represented that he had had much experience in the mixing of
fertilizers, to superintend the mixing of the ingredients in the manufacture of prepared fertilizers
in its fertilizer department and to obtain orders for such prepared fertilizers subject to its approval,
for a compensation of 50 per cent of the net profits which it might derive from the sale of the
fertilizers prepared by him, and that said Francisco Bastida worked under said agreement until
April 27, 1922, and received the compensation agreed upon for his services; that on the said 27th
of April, 1922, the said Menzi& Co., Inc., and the said Francisco Bastida made and entered into
the written agreement, whereby they mutually agreed that the employment of the said Francisco
Bastida by the said Menzi& Co., Inc., in the capacity stated, should be for a definite period of five
years from that date and under the other terms and conditions stated therein, but with the
understanding and agreement that the said Francisco Bastida should receive as compensation for
his said services only 35 per cent of the net profits derived from the sale of the fertilizers prepared
by him during the period of the contract instead of 50 per cent of such profits, as provided in his
former agreement;
Trial Court:
Wherefore, let judgment be entered:
(a) Holding that the contract entered into by the parties, evidenced by Exhibit A, as a
contract of general regular commercial partnership, wherein Menzi& Co., Inc., was the
capitalist, and the plaintiff, the industrial partner;
The appellant makes the following assignment of error:
I. The trial court erred in finding and holding that the contract Exhibit A constitutes
a regular collective commercial copartnership between the defendant corporation,
Menzi& Co., Inc., and the plaintiff, Francisco Bastida, and not a contract of
employment.
Issue: WON plaintiff Bastida and defendant Menzi and Co. are copartners in the fertilizer business
ABELLA, 2017 19
Held:
No. there was no contract of partnership. The court held that under the facts of this case the
relationship established between Menzi& Co. and by the plaintiff was to receive 35 per cent of the
net profits of the fertilizer business of Menzi& Co., Inc., in compensation for his services of
supervising the mixing of the fertilizers. Neither the provisions of the contract nor the conduct of
the parties prior or subsequent to its execution justified the finding that it was a contract of
copartnership. Whereby the plaintiff worked for the defendant corporation for one-half of the net
profits derived by the corporation from certain fertilizer contracts. Plaintiff was paid his share of
the profits from those transactions after Menzi& Co., Inc., had deducted the same items of expense
which he now protests. Plaintiff never made any objection to defendant's manner of keeping the
accounts or to the charges. The business was continued in the same manner under the written
agreement, Exhibit A, and for four years the plaintiff never made any objection. On the contrary
he approved and signed every year the balance sheet and the profit and loss statement. It was only
when plaintiff's contract was about to expire and the defendant corporation had notified him that
it would not renew it that the plaintiff began to make objections.
The trial court relied on article 116 of the Code of Commerce, which provides that articles of
association by which two or more persons obligate themselves to place in a common fund any
property, industry, or any of these things, in order to obtain profit, shall be commercial, no matter
what its class may be, provided it has been established in accordance with the provisions of this
Code; but in the case at bar there was no common fund, that is, a fund belonging to the parties as
joint owners or partners. The business belonged to Menzi& Co., Inc. The plaintiff was working
for Menzi& Co., Inc. Instead of receiving a fixed salary or a fixed salary and a small percentage
of the net profits, he was to receive 35 per cent of the net profits as compensation for his services.
Menzi& Co., Inc., was to advanced him P300 a month on account of his participation in the profits.
It is nowhere stated in Exhibit A that the parties were establishing a partnership or intended to
become partners. Great stress in laid by the trial judge and plaintiff's attorneys on the fact that in
the sixth paragraph of Exhibit A the phrase "ensociedad con" is used in providing that defendant
corporation not engage in the business of prepared fertilizers except in association with the plaintiff
(ensociedad con). The fact is that ensociedad con as there used merely means en reunion con or
in association with, and does not carry the meaning of "in partnership with".
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MAGALONA V. PESAYCO
GR No.L-39607. February 6, 1934
Topic: Oral Partnership
Facts:
In September 1930, EncarnacionMagalona and Juan Sermeno, the plaintiffs and Juan Pesayco, the
defendant formed a partnership for the purpose of catching “semillas de bañgus o aua” in the sea
and rivers of San Jose, Antique Province. They agreed that Pesayco would put in a bid for this
privilege and if such is granted he would become the manager and that each partner would
contribute 1/3 of the capital. The defendant offered a bid amounting to P5,550.09 which was the
highest bid thus the privilege was awarded to Pesayco. It was required that 1/4 of the bid should
be deposited, therefore each partner would be contributing 1/3 of the said amount. Pesayco, having
only P410 on hand, wired Lutero to complete the payment of the required deposit which the latter
sent P1,000 to the municipal treasurer of San Jose, Antique. From January 1, 1931 the business
was managed by Pesayco but he never gave any account of this catches or sales to his partners
Magalona and Sermeno except the two sales of “semillas de bañgus” which he gave to
TiburcioLutero as representative of Magalona.
On April 21, 1931, a complaint was filed praying that (1) a receiver be appointed by the court to
manage and take charge of the funds and affairs of the partnership; (2) Pesayco be ordered to pay
his partners for their participation in the profits; (3) Pesayco be required to turn over to the receiver
all the funds of the partnership and (4) Pesayco to pay the costs. A receiver was appointed by the
court which took over the management and possession of all devices and implements used in the
partnership.
It was found that before April 20, 1931, Pesayco sold 975,000 “semillas de bañgus” equivalent to
P2,925 market value. He did not pay his partners any part of the said sale. Pesayco did not deny
the sale but denies that there was a partnership because the partnership agreement was not in
writing.
Issue: W/N there was a partnership even if the partnership agreement was not in writing?
Held: Yes.The partnership was proven by the oral testimony of the plaintiffs and witnesses two of
whom were Attorneys Lutero and Maza.Also, Article 1667 of the Civil Code provides that “Civil
partnerships may be established in any form whatever, unless real property or real rights are
contributed to the same, in which case a public instrument shall be necessary." Therefore, it is not
required that the partnership agreement be in writing. This decision is affirmed with costs against
Pesayco.
ABELLA, 2017 21
AGAD V. MABATO
GR No.L-24193. June 28, 1968
Topic: Partnership contract in a public instrument; Lack of Inventory
Facts:
Petitioner Mauricio Agad claims that he and defendant SeverinoMabato are - pursuant to a public
instrument dated August 29, 1952, copy of which is attached to the complaint as Annex "A" -
partners in a fishpond business to which they contributed P1, 000 each, with right to receive 50%
of the profits. As managing partner, Mabato yearly rendered the accounts of the operations of the
partnership. However, for the years 1957-1963, defendant failed to render the accounts despite
repeated demands. Agad prayed in his complaint against Mabato and Mabato&Agad Company,
filed on June 9, 1964, that judgment be rendered sentencing Mabato to pay him (Agad) the sum of
P14, 000, as his share in the profits of the partnership for the period from 1957 to 1963, in addition
to P1, 000 as attorney's fees, and ordering the dissolution of the partnership, as well as the winding
up of its affairs by a receiver to be appointed therefor.
Mabato denied the existence of the partnership alleging that Agad failed to pay his P1, 000
contributions. He then filed a motion to dismiss on the ground of lack of cause of action. After due
hearing, the court issued the order appealed from, granting the motion to dismiss the complaint for
failure to state a cause of action. This conclusion was predicated upon the theory that the contract
of partnership, Annex “A”, is null and void, pursuant to Art. 1773 of our Civil Code, because an
inventory of the fishpond referred in said instrument had not been attached thereto.
Issue:
Whether or not immovable property has been contributed to the partnership as to warrant the
attachment of an inventory to the public instrument
Held:NO.
Article 1771 states that:

“Art. 1771. A partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary.”
Furthermore, Article 1773 provides that:
“Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto,
if inventory of said property is not made, signed by the parties; and attached to the public
instrument.”
It should be noted that as stated in Annex "A" the partnership was established "to operate a
fishpond", not to "engage in a fishpond business". Moreover, none of the partners contributed
either a fishpond or a real right to any fishpond. Their contributions were limited to the sum of P1,
000 each.
ABELLA, 2017 22
The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership. Neither
said fishpond nor a real right thereto was contributed to the partnership or became part of the
capital thereof, even if a fishpond or a real right thereto could become part of its assets.
Therefore, Article 1773 of the Civil Code finds no application in the case at bar.
Note: Inventory of real property is governed by the civil code with respect to partnership. Without
which the contract of partnership would be rendered void. For its purpose is to show how much is
due from each partner to complete his share in the common fund.
OBLIGATIONS OF PARTNERS
THE GREAT COUNCIL OF THE UNITED STATES OF THE IMPROVED ORDER OF

RED MEN V. VETERAN ARMY OF THE PHILIPPINES
GR No. 3186. March 7, 1907 (Phil 685)
Facts:
The party The Veteran Army of the Philippines is an association composed of men who fought
during the Spanish war and the Philippine insurrection. Its constitution provides for the
organization of posts, and among the posts thus organized is the General Henry W. Lawton Post,
No. 1.
On the 1st day of March, 1903, a contract of lease of parts of a certain building in the city of Manila
was signed by Lewis, Stovall, Hayes, as trustees of the Apache Tribe, No. 1. A certain Albert E.
McCabe, citing for and on behalf of Lawton Post, Veteran Army of the Philippines as lessor and
The Improved Order of Red Men were the lessee, for the two-year lease commencing on February
1, 1903 up to February 28, 1905. The Lawton Post occupied the premises in controversy for
thirteen months, and only paid for that time, abandoning the remaining period.
Judgment was rendered in the lower court in favor of the defendant McCabe, acquitting him of the
complaint. Judgment was rendered also against the Veteran Army of the Philippines for P1,738.50,
and the costs. From this judgment, the last named defendant has appealed. The plaintiff did not
appeal from the judgment acquitting defendant McCabe of the complaint.
Issue:
Whether or not The Veteran Army of the Philippine is a civil partnership.
Whether or not the contact of lease was executed by someone authorized by The Veteran Army
of the Philippines.
Held:
First Issue – NO, the appellant is clearly not a mercantile partnership and there is doubt whether
it is a civil partnership pursuant to Article 1665 of the Civil Code. The opinion of the
ABELLA, 2017 23
commentators is that the society is not constituted for the purpose of gain. Such organization is
covered by the Laws of Association of 1887, but that law was never extended to the Philippines.
Assuming that the appellant is covered by the Civil Code is discussed in the second issue, as it is
the most favorable to the plaintiff.
Second Issue - NO, Article 1695 of the Civil Code provides as follows:
"Should no agreement have been made with regard to the form of management, the following rules
shall be observed:
1. All the partners shall be considered as agents, and whatever any one of them may do by himself
shall bind the partnership; but each one may oppose the act of the others before they may have
produced any legal effect."
One partner of the association can be considered as an agent without an agreement, however while
the Supreme Court found that while the constitution of The Veteran Army of the Philippines did
not expressly state the agreement; it can be deduced from its articles that such power declare the
duties of its officers. It was concluded that such inquiry of a contract must be decided by the whole
department, as duties of several officers were declared in the organization’s constitution.
LEOPOLDO CRIADO V. GUTIERREZ HERMANOS

GR No.L-12371. March 23, 1918 (37 Phil 883)
Topic: Independent, Private Act of a Partner not that of a Partnership
Facts:
In January 1900, Placido Gutierrez de Celis (37%), Miguel Gutierrez de Celis (37%), Miguel
Alonzo (16%), Daniel Perez (5%), and Leopoldo Criado (5%) formed a partnership called
Gutierrez Hermanos. Perez and Criado were the industrialist partners while the other three are the
capitalist partners which was subsequently dissolved and liquidated in 1903.
Before dissolution, Miguel Alonzo, formerly one of the general partners and manager of the firm
of Gutierrez Hermanos, has an obligation to pay plaintiff, Leopoldo Criado, the sum P1,100 by
reason of the contract of loan executed by the former to the latter. And to prevent plaintiff from
suing for the recovery of that debt an action against the testate or intestate estate of the debtor who
died without having paid his debt.
The other partner Miguel Gutierrez de Celis, manager of the firm, succeeded in persuading the
plaintiff by promising to return said sum to Criado — this not being a strange obligation, for at the
time of his death the deceased debtor Miguel Alfonso, was a partner in the firm of Gutierrez
Hermanos and had a share in the firm's assets. But the fact is that from 1898, when Alfonso died,
until 1912, the date the complaint was filed, such settlement had already been made of the
decedent's said share and in spite of the attempts to collect made by the creditor he was unable to
recover the loan.
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RULING OF THE LOWER COURT: After full trial, judgment was rendered on July 8, 1913, by
which, dismissing plaintiff's first cause of action
Issue:
Whether or not the act of the partner Alonzo will hold the partnership obliged to pay the sum
involved?
Held: NO.
Even on the supposition that at the time of his death the debtor Miguel Alfonso certainly and
positively left this debt and that in order to avoid judicial proceedings on the part of the creditor,
Miguel Gutierrez de Celis subrogated and put himself in the place of the debtor, binding himself
to pay said amount to plaintiff, yet, in view of the fact that said, loan was made as an independent
private act, unconnected with the mercantile operations of the firm of Gutierrez Hermanos, and
that the record does not duly show that this firm, though its manager assumed the obligation to
reimbursed the sum, there is no provision of law to warrant us in holding that the firm of Gutierrez
Hermanos is obliged to pay the amount claimed by the plaintiff as the subject-matter of his first
cause of action.
3. Jose Garrido v. Agustin Asencio (partners books of account)

GR No.L-4281. March 30, 1908 (10 Phil 691)
Facts:
Garrido and Asencio were members of a partnership doing business under the firm name
of Asencio y Cia. The business of the partnership did not prosper and it was dissolved by mutual
agreement of the members. Garrido brings this action to recover from Asencio, who appears to
have been left in charge of the books and the funds of the firm, the amount of the capital which he
had invested in the business. Asencio, alleging that there had been considerable losses in the
conduct of the business of the partnership, denied that there was anything due for Garrido as
claimed, and filed a cross complaint wherein he prayed for a judgment against Garrido for a certain
amount which he alleged to be due by Garrido under the articles of partnership on account of
Garrido's share of these losses.
The trial court found that the evidence substantially sustains the claim of Asencio as to the alleged
losses in the business of the partnership and gave judgment in his favor.
Issues:
1. The trial court erred in holding the statement of account of the partnership of Asencio y Cia
submitted by Asencio as competent and sufficient evidence in this case.
2. The trial court erred in holding that evidence of record proved the existence of losses in the
business of the said partnership.
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3. The trial court erred in refusing to give judgment in favor of Garrido.
Held: Garrido had equal rights with Asencio, and that during the existence of the partnership they
were equally responsible for the mode in which the books were kept and that the entries made by
one had the same effect as if they had been made by the other. The testimony of record presenting
Garrido jointly with Asencio kept these books, made entries therein, and was responsible with him
shows the correctness of the entries in these books. Hence, must be taken to be admitted by him.
It appears from the record that the statement of account, the vouchers, and the books of the
company were placed at the disposition of Garrido for more than six weeks prior to the trial, and
that during the trial he was given every opportunity to indicate any erroneous or fraudulent items
appearing in the account, yet he was unable, or in any event he declined to specify such items,
contenting himself with a general statement to the effect that there must be some mistake, as he
did not and could not believe that the business had been conducted at a loss.
Upon the whole record as brought here by Garrido, the Supreme Court ruled that the weight of the
evidence does sustain the findings of the trial court, and the judgment entered in that court should
be, and is hereby, affirmed.
Dan Fue Leung v. Hon. Intermediate Appellate Court (right to demand an accounting)
GR No. 70926. January 31, 1989
(p. 8)
Topic: Right to Demand an Accounting
Facts:
Suh Wah Panciteria, a restaurant located at Florentino Torres St. Sta. Cruz Manila was
established sometime in Oct. 1955 as a single proprietorship and its licenses and permits were
issued and in favor of Dan Fue Leung as sole proprietor. Respondent adduced claims that the
restaurant was actually a partnership and that he was one of the partners who contributed
P4,000.00 to its initial establishment and in return, 22% of its annual profits. Evidencing a
receipt adduced by private respondent wherein petitioner acknowledged acceptance of P4k by
affixing petitioner's signature written in chinese characters. Florence Yap, a translator requested
by the court, verified and affirmed the validty of said receipt. Witnesses So Sia and Antonio Ah
Heng corroborated private respondent's testimony that they were present when receipt was
signed. Private respondent received from petitioner amount of P12k as profits of the operation
for the year of 1974. Witness Teodulo Diaz Chief of savings Dept. of China bank testified said
check was deposited to private respondent's savings account. Petitioner however, denied having
received from private respondent amount of P4k. He contested and impugned the genuiness of
the receipt. He averred that petitioner did not receive any contribution and that he was the sole
owner. Petitioner presented various gov't licenses and permits showing that the restaurant was a
sole proprietorship solely owned and operated by himself alone. He also denied having issued to
ABELLA, 2017 26
private respondent P12k check. Petitioner raises also prescription because the alleged receipt is
dated Oct. 1955 and complaint was on July 13, 1978 as written demands were ever made by
private respondent.
Issue: Whether or not private respondent is a partner of petitioner in establishing the restaurant?
Whether or not payment of share of profits shall continue into the future with no fixed ending date?
Held: (1) YES. Private respondent is a partner of the restaurant because of Art.1767, the requisites
of partnership have been established. It would be incorrect to state that if a partner does not assert
his rights anytime within 10 years from start of operations, such rights are irretrievably lost. Private
respondent's cause of action is premised upon failure of petitioner to give him the agreed profits
of the restaurant. In effect, private respondent was asking for an accounting of his interests in the
partnership.
As to prescription, it only runs upon dissolution of the partnership when final accounting is done.
(2) No. Considering the facts of the case, the court may decree a dissolution under Art.1831 of the
Civil Code. There shall be a liquidation and winding up of partnership affairs, return of capital and
other incidents of dissolution because the continuation of the partnership has become inequitable.
OBLIGATIONS OF THE PARTNERS WITH REGARD TO THIRD PERSONS
SHARRUF& CO V. BALOISE FIRE INSURANCE

GR No. 44119. March 30, 1937 (64 Phil 258)
Topic: Change of Name of Partnership
Facts:
In the months of June and July 1933, the plaintiffs in this case, Sharruf and Elias Eskenzi were
doing business under the firm name of Sharruf& Co. Engaged in the textile business they acquired
an insurance policy from the herein defendant Balaoise Fire Insurance. Their insured amount is
40,000.00 pesos and after sometime theySharruf&Eskenzi firm name changed to Sharruf& Co
without changing any of its partners but rather just the firm name. Under the Civil Code, a change
in the firm name without substantial change in the members of the partnership shall acquire all the
rights of the former existing name of the partnership, including the fire insurance it gained from
Balaoise Fire Insurance.
ABELLA, 2017 27
Months after June, around September of the same year, a fire due to an unknown cause, destroyed
the business place where the plaintiffs were engaged in the work. Only materials were destroyed
but did not amount to the total insured interest as claimed by Sharruf& Co in the amount of
40,000.00. The discrepancy from the actual damaged destroyed was different from the amount to
be claimed.
Balaoise Fire Insurance first contends that Sharruf & Co cannot claim for they do not have juridical
personality in the name of the contract in which originally they signed. However, the Supreme
Court ruled in the previous case of Lim Cuan Sy Vs Northern Assurance, a mere change in the
operation name without intent to defraud of actual substantial change in the partners or owner,
shall still give rise to the acquisition of rights by the latter from the former.
Issue:
Whether or not Sharruf & Co has juridical personality to claim from the insurance company, from
the insurance contract they entered.
Held: Yes. Sharruf& Co made a change of name and not in substantial, therefor they can claim
for the fact they have juridical personality. However, they committed fraud in their presentation of
claims due to the fact that the discrepancy to be claimed was higher from what was really damaged.
Such fraud resulted the Supreme Court to favor the defendant Balaoise Fire Insurance.
Note: A change in name of the partnership is not a substantial change to remove all rights of the
partners to and from the partnership
ISLAND SALES, INC V. UNITED PIONEERS GENERAL CONSTRUCTION

COMPANY, ET AL
GR No.L-22493. July 31, 1975
Topic: Pro rata Liability
Facts:
On April 22, 1961, United Pioneers General Construction Company, a general partnership duly
registered under the laws of the Philippines, purchased from Island Sales, Inc. a motor vehicle on
the installment basis and for this purpose executed a promissory note for P9,440.00, payable in
twelve (12) equal monthly installments of P786.63, the first installment payable on or before May
22, 1961 and the subsequent installments on the 22nd day of every month thereafter, until fully
paid, with the condition that failure to pay any of said installments as they fall due would render
the whole unpaid balance immediately due and demandable.
Having failed to receive the installment due on July 22, 1961, Island Sales, Inc. sued the defendant
company for the unpaid balance amounting to P7,119.07.
ABELLA, 2017 28
Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc
were included as co-defendants in their capacity as general partners of the defendant company.
Daniel A. Guizona failed to file an answer and was consequently declared in default.
Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant
Romulo B. Lumauig is concerned.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming
that since there are five general partners, the joint and subsidiary liability of each partner should
not exceed one-fifth of the obligations of the defendant company. But the trial court denied the
said motion notwithstanding the conformity of the plaintiff to limit the liability of the defendants
Daco and Sim to only one-fifth of the obligations of the defendant company.Hence, this appeal.
Issue:Whether or not the dismissal of the complaint to favor one of the general partners of a
partnership increases the joint and subsidiary liability of each of the remaining partners for the
obligations of the partnership.
Held:
No. Article 1816 of the Civil Code provides:
Art. 1816. All partners including industrial ones, shall be liable pro rata with all
their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the
partnership, under its signature and by a person authorized to act for the partnership.
However, any partner may enter into a separate obligation to perform a partnership
contract.
In the instant case, there were five (5) general partners when the promissory note in question was
executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the
liability of the appellant Benjamin C. Daco shall be limited to only one-fifth of the obligations of
the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig
was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner
in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned
Lumauig's individual liability to the plaintiff.
3. DE LA ROSA V. ORTEGA GO-COTAY

GR No.L-24243. January 15, 1926 (48 Phil 605)
Facts:
Go Lio and Vicente Go Sengco formed a partnership and opened a store in Nueva Ecija. Later on
Go Lio went to China and Vicente Go Sengco died and his son Enrique Ortega Go-Cotay took
charge of the business. Go Lio died in China, one of his children went to the Philippines and filed
ABELLA, 2017 29
a petition for the appointment of Ildefonso de la Rosa as administrator of the intestate estate of Go
Lio which was granted by CFI of Nueva Ecija. Ildefonso, in his capacity as administrator of the
intestate estate of Go Lio, requested Enrique to wind up the business and deliver to him the portion
corresponding to the deceased Go Lio. Enrique denied the petition, alleging the business was his
exclusively. Ildefonso filed with CFI of Nueva Ecija a complaint against Enrique in which he
prayed that Enrique be sentenced to deliver to him one half of the property of said partnership. On
August 3, 1918, the CFI of Nueva Ecija appointed three persons as commissioners to make an
inventory, liquidate and determine the one-half belonging to the plaintiff of all the property of the
partnership. On August 9, 1918, in order to prevent one of the commissioners 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 which authorized him to continue in possession of the property. From
1913-1917 the partnership had a profit of 25k. Defendant filed an appeal with the SC but was
remanded to the court of origin for being immature and with instruction to enter a final order with
the liquidation of the partnership. Lower court appointed three commissioners and discovered that
the partnership suffered a net loss of 89k from 1919-1922. Since there was no profit plaintiff had
nothing to recover.
Issue: WON the partnership should bear the losses incurred.
Held: No.The Court held that the defendant was a receiver. Prior August 3, 1918, defendant
assumed complete responsibility for the business by objecting to the appointment of a receiver as
prayed for by the plaintiff, and giving a bond therefore. Until that date his acts were those of a
managing partner, binding against the partnership; but thereafter his acts were those of a receiver.
A receiver has no right to carry on and conduct a business unless he is authorized or directed by
the court to do so, and such authority is not derived from an order of appointment to take and
preserve the property. 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 may have sustained. 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.
DISSOLUTION AND WINDING UP
ANTONIO GOQUIOLAY AND THE PARTNERSHIP “TAN SIN AN” V. WASHINGTON

SYCIP, ET AL
GR No.L-11840. July 26, 1960
Facts:
Tan Sin An and Antonio C. Goquiolay, entered into a general commercial partnership for the
purpose in dealing in real estate. The partnership had a capital of P30,000.00, P18,000.00 of which
was contributed by Goquiolay and P12,000.00 by Tan Sin An.
ABELLA, 2017 30
They stipulated in the agreement that Tan Sin An shall be the sole managing and partner, and
Antonio C. Goquiolay as co-partner.
The lifetime of the partnership was fixed at ten (10) years and also 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 partnership purchased 3 parcels of land in Davao, subject-matter of the instant litigation,
assuming the payment of a mortgage obligation, payable to "La Urbana SociedadMutua de
Construccion y Prestamos" for a period of ten (10) years.
Another 46 parcels were purchased by Tan Sin An in his individual capacity, assuming the
payment of a mortgage obligation payable to Yutivo and Co.
The two separate obligations were consolidated in an instrument executed by the partnership and
Tan Sin An, whereby the entire 49 lots were mortgaged in favor of the "Banco Hipotecario de
Filipinas" (as successor to "La Urbana").
Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin, and four minor children
where Defendant Kong Chai Pin was appointed administratrix of the intestate estate of her
deceased husband.
Repeated demands for payment were made by the Banco Hipotecario on the partnership and on
Tan Sin An. The defendant Sing Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sans
Hardware Co., paid the remaining balance of the mortgage debt, and the mortgage was cancelled.
Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in the intestate
proceedings of Tan Sin An for P62,415.91 and P54,310.13, respectively, as alleged obligations of
the partnership "Tan Sin An and Antonio C. Goquiolay" and Tan Sin An, for advances, interest
and taxes paid in amortizing and discharging their obligations to "La Urbana" and the "Banco
Hipotecario".
Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land
to Washington Z, Sycip and Betty Y. Lee, for the purpose preliminary of settling the aforesaid
debts of Tan Sin An and the partnership. Pursuant to a court order, the administratrix executed on
April 4, 1949, a deed of sale of the 49 parcels of land to the defendants Washington Sycip and
Betty Lee in consideration of P37,000.00 and of vendees' assuming payments of the claims filed
by Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc.
Later, in July, 1949, defendants Sycip and Betty Lee executed in favor of the Insular Development
Co., Inc. a deed of transfer covering the said 49 parcels of land.
ABELLA, 2017 31
After learning about the sale to Sycip the surviving partner Antonio Goquiolay filed a petition in
the intestate proceedings seeking 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. The probate court annulled the
sale executed by the administratrix with respect to the 60% interest of Antonio Goquiolay over the
properties sold. Kong Chai Pin appealed to the Court of Appeals, which court later certified the
case to the SC.
SC rendered decision setting aside the orders of the probate court complained of and remanding
the case for new trial, due to the non-inclusion of indispensable parties. Thereafter, new pleadings
were filed.
The second amended complaint in the case at bar prays for the annulment of the sale in favor of
Washington Sycip and Betty Lee, and their subsequent conveyance in favor of Insular
Development Co., Inc., in so far as the 3 lots owned by the plaintiff partnership are concerned.
The complaint was dismissed by the lower court; hence, this appeal.
Issues:
1) Whether or not Kong Chai Pin, succeeded her husband, Tan Sin An, in the sole
management of the partnership, upon the latter's death?
2) Whether or not the consent of the other partners was necessary to perfect the sale of the
partnership properties to Washington Sycip and Betty Lee?
3) Whether or not the sale of the entire firm realty is valid?
Held:
1) Yes. The provision in the articles stating that "in the event of death of any one of the
partners within the 10-year term of the partnership, the deceased partner shall be
represented by his heirs", could not have referred to the managerial right given to Tan Sin
An; more appropriately, it related to the succession in the proprietary interest of each
partner.
Kong Chai Pin manifested her intent to be bound by the partnership agreement not only as
a limited but as a general partner. Thus, she managed and retained possession of the
partnership properties and was admittedly deriving income therefrom up to and until the
same were sold to Washington Sycip and Betty Lee. By executing the deed of sale of the
parcels of land in dispute in the name of the partnership, she was acting no less than as a
managing partner. Having thus preferred to act as such, she could be held liable for the
partnership debts and liabilities as a general partner, beyond what she might have derived
only from the estate of her deceased husband. By allowing her to retain control of the firm's
property from 1942 to 1949, plaintiff estopped himself to deny her legal representation of
the partnership, with the power to bind it by the proper contracts.
ABELLA, 2017 32
2) No. Strangers dealing with a partnership have the right to assume, in the absence of
restrictive clauses in the co-partnership agreement, that every general partner has power to
bind the partnership, specially those partners acting with ostensible authority.
The records fail to disclose that appellant Goquiolay made any opposition to the sale of the
partnership realty to Washington Z. Sycip and Betty Lee; on the contrary, it appears that
he (Goquiolay) only interposed his objections after the deed of conveyance was executed
and approved by the probate court, and, consequently, his opposition came too late to be
effective.
3) Yes. Goquiolay questions the validity of the sale covering the entire firm realty, on the
ground that it, in effect, threw the partnership into dissolution, which requires consent of
all the partners. This view is untenable. That the partnership was left without the real
property it originally had will not work its dissolution, since the firm was not organized to
exploit these precise lots but to engage in buying and selling real estate, and "in general
real estate agency and brokerage business". Incidentally, it is to be noted that the payment
of the solidary obligation of both the partnership and the late Tan Sin An, leaves open the
question of accounting and contribution between the co-debtors, that should be ventilated
separately.
AGENCY
ANGELES VS. PHILIPPINE NATIONAL RAILWAYS

500 SCRA 444 (2006)
Facts:
PNR accepted Gaudencio’s Romualdez’ offer to buy on an “AS IS, WHERE IS” basis PNR’s
scrap/unserviceable rails located in Lubao, Pampanga for a total amount of P96,000. Romualdez
wrote a letter explicitly authorizing Lizette Angeles (deceased; was substituted by the husband) as
Romualdez’ lawful representative in the withdrawal of the scrap materials. The letter also contain
that Lizette was given the Original Copy of the Award for the above said purpose.
Lizette informed the PNR that the scrap materials was not ready for hauling and requested that the
PNR transfer the location. The PNR granted this request and allowed the withdrawal of scrap
materials in Tarlac. Later on, however, it suspended the withdrawal for alleged documentary
discrepancies and reports of pilferage.
The spouses demanded the return of the money they paid but PNR refused on the ground that some
scrap materials have already been withdrawn (worth P114,781.80). The spouses filed a suit for
specific performance against PNR. The trial court ruled that the spouses are not real parties in
interest. The CA affirmed the decision of the trial court.
Issue:
Whether or not Lizette was an assignee or a mere agent of Romualdez.
ABELLA, 2017 33
Held: Where agency exists, the 3rd party’s liability on a contract is to the principal and not to the
agent. An agent, by himself, is not a real party in interest with regard to the contract. The situation
is different is the agent is the assignee. In such a case the agent may, in his own behalf, sue on a
contract made for his principal as an assignee of the contract. The rule requiring every action to
be prosecuted in the name of the real party in interest recognizes the assignment of rights of action
and also recognizes that when one has a rights assigned to him, he is then a real party in interest
and may maintain an action upon such claim or right.
The agent may also be called an attorney, proxy, delegate, or representative. The scrutiny of the
letter would reveal that Lizette was an agent and not an assignee.
Power of Attorney – in the absence of statute, no form or method of execution is required. It may
be in any form clearly showing on its face the agent’s authority. It is an instrument in writing by
which a person, as principal, appoints another as his agent and confers upon him the authority to
perform certain special acts on behalf of the principal. The written authorization itself is the power
of attorney. Its primary purpose is not to define the authority of the agent but to evidence the
authority of the agent to third parties. Except as may be required by statute, a power of attorney is
valid even if it is not notarized. It is strictly construed and pursued. The agent may not go beyond
nor deviate from the power of attorney.
URBAN BANK, INC vs. MAGDALENO M. PEÑA

G.R. No. 145817, October 19, 2011
Facts:
Peña, a lawyer, was formerly a stockholder, director and corporate secretary of Isabel Sugar
Company, Inc. (ISCI). ISCI owned a parcel of land. ISCI leased the land. Without its consent and
in violation of the lease contract, the lessee subleased the land to several tenants, who in turn put
up nightclubs inside the compound. Before the expiration of the lease contract, ISCI informed the
lessee and his tenants that the lease would no longer be renewed because the land will be sold.
ISCI and Urban Bank executed a Contract to Sell, and they agreed that the final installment
released by the bank upon ISCI’s delivery of full and actual possession of the land, free from any
tenants.
ISCI then instructed Peña, to act as its agent and handle the eviction of the tenants. The lessee left,
but the unauthorized sub-tenants refused to leave. Peña had the gates of the property closed and he
also posted security guards—services for which he advanced payments. Despite the closure of the
gates and the posting of the guards, the sub-tenants would force open the gates, and proceed to
carry on with their businesses.
Peña then filed a complaint with the RTC, which issued a TRO. At the time the complaint was
filed, a new title to the had already been issued in the name of Urban Bank.
When information reached the judge that the had already been transferred by ISCI to Urban Bank,
the trial court recalled the TRO and issued a break-open order for the property. Peña immediately
contacted ISCI’s presidentand told him that because of the break-open order of the RTC, he (Peña)
would be recalling the security guards he had posted to secure the property. The President asked
ABELLA, 2017 34
him to suspend the withdrawal of the posted guards, so that ISCI could get in touch first with
Urban Bank.
Peña also called Urban Bank’s President. The President allegedly assured him that the bank was
going to retain his services, and that the he should not give up possession of the subject land.
Thereafter, Peña, in representation of Urban Bank, filed a separate complaint with the RTC-
Makati City, to enjoin the tenants from entering the Pasay property. Acting on Urban Bank’s
preliminary prayer, the RTC-Makati City issued a TRO.
While the 2nd complaint was pending, Peña made efforts to settle the issue of possession of the
with the sub-tenants. During the negotiations, he was exposed to several civil and crimal cases and
received several threats against his life. The sub-tenants eventually agreed to stay off the property
for a total consideration of PhP1.5M. Peña advanced the payment for the full and final settlement
of their claims against Urban Bank. Peña formally informed Urban Bank that it could already take
possession of the Pasay property. There was however no mention of the compensation due and
owed to him for the services he had rendered. The bank subsequently took actual possession of the
property and installed its own guards at the premises.
Peña thereafter made several attempts to contact Urban Bank, but the bank officers would not take
any of his calls. Peña formally demanded from Urban Bank the payment of the 10% compensation
and attorney’s fees allegedly promised to him during his telephone conversation with Urban
Bank’s President for securing and maintaining peaceful possession of the property.
Urban Bank and individual bank officers and directors argued that it was ISCI, the original owners
of the Pasay property, that had engaged the services of Peña in securing the premises; and,
consequently, they could not be held liable for the expenses Peña had incurred.
Issue: Whether or not Pena is entitled to payment for the services he rendered as agent of Urban
Bank.
Held: Yes.
Peña should be paid for services rendered under the agency relationship that existed between him
and Urban Bank based on the civil law principle against unjust enrichment, and not on the basis
of the purported oral contract. Whether or not an agency has been created is determined by the fact
that one is representing and acting for another. The law makes no presumption of agency; proving
its existence, nature and extent is incumbent upon the person alleging it.
(NOTE: This case is also under I.3.c of our outline so I’m including this): Agency is presumed to
be for compensation. Unless the contrary intent is shown, a person who acts as an agent does so
with the expectation of payment according to the agreement and to the services rendered or results
effected.
In this case there’s no evidence that Urban Bank agreed to pay Peña a specific amount or
percentage of amount for his services, so the court applies the principle against unjust enrichment
and on the basis of quantum meruit. The agency of Peña comprised of services ordinarily
performed by a lawyer who is tasked with the job of ensuring clean possession by the owner of a
property. The court measured the amount Pena is entitled to for the services he rendered (as
opposed to the 10% compensation demanded by Pena).
ABELLA, 2017 35
CORAZON NEVADA VS. ATTY. RODOLFO CASUGA

668 SCRA 441
FACTS:
In 2007, Corazon Nevada, filed a disbarment case against Atty. Rodolfo Casuga. Nevada alleged
the following:
1. That Atty. Casuga acquired several pieces of jewelry from her; the jewelries include diamond
earrings and diamond rings amounting P300,000.00. and a Rolex gold watch worth
$12,000.00; that Casuga assured her that he will sell them; but despite repeated demands,
Casuga never remitted any money nor did he return said jewelries.
2. That in 2006, Casuga, taking advantage of his close relationship with Nevada (they belong to
the same religious sect), Casuga represented himself as the hotel administrator of the hotel (Mt.
Crest) that Nevada own; that as such, Casuga was able to enter into a contract of lease with
one Jung Chul; that he negotiated an office space with Chul in said Hotel for P90,000.00; that
Casuga notarized said agreement; that he forged the signature of Edwin Nevada (husband);
that he never remitted the P90k to Nevada.
In his defense, Casuga said:
1. That Nevada actually pawned said jewelries in a pawnshop; that she later advised Casuga’s
wife to redeem said jewelries using Mrs. Casuga’s wife; that Casuga can sell said jewelries
and reimburse herself from the proceeds; that he still has possession of said jewelries.
2. That he never received the P90,000.00; that it was received by a certain Pastor Oh; that he was
authorized as an agent by Edwin Nevada to enter into said contract of lease.
ISSUE: Whether or not there is merit in Atty. Casuga’s defense.

HELD: No. Atty. Casuga is in violation of the following:
Casuga misrepresented himself as a duly authorized representative of Nevada when in fact he was
not. He never adduced evidence showing that he was duly authorized either by Edwin or Corazon.
He also dialed to adduce evidence proving that he never received the P90k from Chul. On the
contrary, a notarized letter showed that Casuga did receive the money. His misrepresentations
constitute gross misconduct and his mere denial does not overcome the evidence presented against
him.
ABELLA, 2017 36

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BUSINESS ORGANIZATION

PARTNERSHIP, AGENCY AND TRUST

Santos vs. Spouses Reyes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

FERNANDO SANTOS V. SPS. ARSENIO AND NIEVES REYES

Topic: Establishment of Partnership

Issue: Whether or not respondents were employees or partners of petitioner?

Held: They were partners.

SEVILLA V. COURT OF APPEALS

Topic: Principal Agent Relationship vs. Partnership

Issue: What is the relationship between Sevilla and TWS?

Held: Principal- Agent relationship

ELIGIO ESTANISLAO, JR V. COURT OF APPEALS, REMEDIOS ESTANISLAO,

Topic: Partnership Agreement

Issue: W/N there was a partnership formed?

petitioner in favor of SHELL to increase his credit limit as dealer.

Judgment appealed from is AFFIRMED in toto.

Topic: Share of Profits and Losses

Issue: WON private respondent is a partner of petitioner in establishing the restaurant

FERNANDO SANTOS V. SPS. ARSENIO AND NIEVES REYES

Topic: An industrialist partner’s share in net profits

Issue: Whether or not respondents were entitled to the partnership profits?

Held: Yes, the respondents were entitled to the partnership profits.

Topic: Juridical Personality of Partnership

PALTING V. SAN JOSE PETROLEUM INCORPORATED

FRANCISCO BASTIDA V. MENZI& CO., INC

Topic: Employment not Partnership

Wherefore, let judgment be entered:

The appellant makes the following assignment of error:

Topic: Oral Partnership

Topic: Partnership contract in a public instrument; Lack of Inventory

Article 1771 states that:

THE GREAT COUNCIL OF THE UNITED STATES OF THE IMPROVED ORDER OF

LEOPOLDO CRIADO V. GUTIERREZ HERMANOS

Topic: Independent, Private Act of a Partner not that of a Partnership

3. Jose Garrido v. Agustin Asencio (partners books of account)

3. The trial court erred in refusing to give judgment in favor of Garrido.

Topic: Right to Demand an Accounting

OBLIGATIONS OF THE PARTNERS WITH REGARD TO THIRD PERSONS

SHARRUF& CO V. BALOISE FIRE INSURANCE

Topic: Change of Name of Partnership

ISLAND SALES, INC V. UNITED PIONEERS GENERAL CONSTRUCTION

Topic: Pro rata Liability

No. Article 1816 of the Civil Code provides:

3. DE LA ROSA V. ORTEGA GO-COTAY

DISSOLUTION AND WINDING UP

ANTONIO GOQUIOLAY AND THE PARTNERSHIP “TAN SIN AN” V. WASHINGTON

ANGELES VS. PHILIPPINE NATIONAL RAILWAYS

URBAN BANK, INC vs. MAGDALENO M. PEÑA

CORAZON NEVADA VS. ATTY. RODOLFO CASUGA

In his defense, Casuga said:

ISSUE: Whether or not there is merit in Atty. Casuga’s defense.

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