1815

Philippine National Bank vs Lo et al

Business Organization – Partnership, Agency, Trust – Firm Name
In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun,
Lam and Peng formed a commercial partnership under the name of “Tai
Sing and Co.,” with a capital of P40,000 contributed by said partners. The
firm name was registered in the mercantile registrar in the Province of Iloilo.
Ping, in the articles of partnership, was assigned as the general manager.
However, in 1917, he executed a special power of attorney in favor of Lam
to act in his behalf as the manager of the firm. Subsequently, Lam obtained
a loan from PNB – the loan was under the firm’s name. In the same year,
Ping died in China. From 1918 to 1920, the firm, via GM Lam, incurred
other loans from PNB. The loans were not objected by any of the partners.
Later, PNB sued the firm for non-payment. Lo, in his defense, argued that
he cannot be liable as a partner because the partnership, according to him,
is void; that it is void because the firm’s name did not comply with the
requirement of the Code of Commerce that a firm name should contain the
“names of all of the partners, of several of them, or only one of them”. Lo
also argued that the acts of Lam after the death of Ping is not binding upon
the other partners because the special power of attorney shall have already
ceased.
ISSUE: Whether or not Lo is correct in both arguments.
HELD: No. The anomalous adoption of the firm name above noted does
not affect the liability of the general partners to third parties under Article
127 of the Code of Commerce. The object of the Code of Commerce in
requiring a general partnership to transact business under the name of all
its members, of several of them, or of one only, is to protect the public from
imposition and fraud; it is for the protection of the creditors rather than of
the partners themselves. It is unenforceable as between the partners and
at the instance of the violating party, but not in the sense of depriving
innocent parties of their rights who may have dealt with the offenders in
ignorance of the latter having violated the law; and that contracts entered
into by a partnership firm defectively organized are valid when voluntarily
executed by the parties, and the only question is whether or not they
complied with the agreement. Therefore, Lo cannot invoke in his defense
the anomaly in the firm name which they themselves adopted. Lo was not
able to prove his second argument. But even assuming arguendo, his
second contention does not deserve merit because (a) Lam, in acting as a
GM, is also a partner and his actions were never objected to by the
partners, and (b) it also appeared from the evidence that Lo, Lam and the
other partners authorized some of the loans.
NOTE: Under the New Civil Code, a firm name may or may not include the
name of one or more of the partners (Article 1815).

1811
DELUAO v. CASTEEL
G.R. No. L-21906; December 24, 1968
Ponente: J. Castro

FACTS:

In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract

of swampy land, 178.76 hectares, in the then sitio of Malalag, municipality
of Padada, Davao for 3 consecutive times because the Bureau of Fisheries
did not act upon his previous applications.
Despite the said rejection, Casteel did not lose interest. Because of the
threat poised upon his position by the other applicants who entered upon
and spread themselves within the area, Casteel realized the urgent
necessity of expanding his occupation thereof by constructing dikes and
cultivating marketable fishes. But lacking financial resources at that time,
he sought financial aid from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were
already occupied by rival applicants, Casteel immediately filed a protest.
Consequently, two administrative cases ensued involving the area in
question.

However, despite the finding made in the investigation of the above

administrative cases, the Director of Fisheries nevertheless rejected
Casteel's application on October 25, 1949, required him to remove all the
improvements which he had introduced on the land, and ordered that the
land be leased through public auction
On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party
of the first part, and Nicanor Casteel as party of the second part, executed
a contract — denominated a "contract of service". On the same date the
above contract was entered into, Inocencia Deluao executed a special
power of attorney in favor of Jesus Donesa

On November 29, 1949 the Director of Fisheries rejected the application

filed by Felipe Deluao on November 17, 1948. Unfazed by this rejection,
Deluao reiterated his claim over the same area in the two administrative
cases and asked for reinvestigation of the application of Nicanor Casteel
over the subject fishpond.

The Secretary of Agriculture and Natural Resources rendered a decision

ordering Casteel to be reinstated in the area and that he shall pay for the
improvement made thereupon.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from
further administering the fishpond, and ejected the latter's representative
(encargado), Jesus Donesa, from the premises.

ISSUE:
Whether the reinstatement of Casteel over the subject land constitute a
dissolution of the partnership between him and Deluao

HELD:

Yes, the reinstatement of Casteel dissolved his partnership with Deluao.

The Supreme Court ruled that the arrangement under the so-called
"contract of service" continued until the decision both dated Sept. 15, 1950
were issued by the Secretary of Agriculture and Natural Resources in DANR
Cases 353 and 353-B.

This development, by itself, brought about the dissolution of the

partnership. Since the partnership had for its object the division into two
equal parts of the fishpond between the appellees and the appellant after it
shall have been awarded to the latter, and therefore it envisaged the
unauthorized transfer of one half thereof to parties other than the applicant
Casteel, it was dissolved by the approval of his application and the award
to him of the fishpond.

The approval was an event which made it unlawful for the members to
carry it on in partnership. Moreover, subsequent events likewise reveal the
intent of both parties to terminate the partnership because each refused to
share the fishpond with the other.

1811
Clemente vs. Galvan
Facts:

Plaintiff and defendant organized a civilpartnership which they named

"Galvan yCompañia" to engage in the manufactureand sale of paper and
other stationery.

Plaintiff ask for dissolution which thedefendant confirm but with a

conditionthat having covered a deficit incurred bythe partnership
amounting to P4,000 withhis own money, plaintiff reimburse him ofone-
half of said sum.

Juan D. Mencarini, assigned as receiverand liquidator. Upon acting on his

duty,the court ordered him to deliver certainmachines which were then at
Nos. 705-707 Ylaya Street.

But before he could take actualpossession of said machines, upon thestrong

opposition of defendant, the court,on motion of the latter, suspended
theeffects of its order

In the meantime the judgments renderedin cases Nos. 42794 and 43070
orderingClemente to pay a sum of money.
He mortgage the machines with hisnephew, the intervenor (plaintiff in
theherein case.) For having expired theterms in the mortgage the
intervenorcommenced case No. 49629 to collect hismortgage credit.
Issue:
W/N the mortgage between Clemente andhis nephew (intervenor, plaintiff
in the case) isvalid?
Rule
: No. The machines in contention originallybelonged to the defendant and
from him weretransferred to the partnership Galvan y Compania.This being
the case, said machines belong to thepartnership and not to him, and shall
belong to ituntil partition is effected according to the resultthereof after the
liquidation. Also, Clemente didnot have actual possession of the machines,
hecould not in any manner mortgage them.

1809
DAN FUE LEUNG VS IAC and LEUNG YIU
FACTS:

Dan Fue Leung.The Sun Wah Panciteria was registered as a single proprietorship and its licenses and
permits were issued to and in favor of petitioner Dan Fue Leung as the sole proprietor. Respondent
Leung Yiu adduced evidence during the trial of the case to show that Sun Wah Panciteria was actually a
partnership and that he was one of the partners having contributed P4,000.00 to its initial
establishment.Lower court ruled in favor of the private respondent. Petitioner appealed the trial court's
amended decision. However,the questioned decision was further modified and affirmed by the
appellate court.

Both the trial court and the appellate court declared that the private petitioner is a partner and is
entitled to a share of the annual profits of the restaurant. Hence, an appeal to the SC.The petitioner
argues that private respondent extended 'financial assistance' to herein petitioner at the time of the
establishment of the Sun Wah Panciteria, in return of which private respondent allegedly will receive a
share in the profits of the restaurant. It was, therefore, error for the Appellate Court to interpretor
construe 'financial assistance' to mean the contribution of capital by a partner to a partnership.

ISSUE:

WON the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria.

HELD:
In essence, the private respondent alleged that when Sun Wah Panciteria was established, he gave
P4,000.00 to the petitioner with the understanding that he would be entitled to twenty-two percent
(22%) of the annual profit derived from the operation of the said panciteria. These allegations, which
were proved, make the private respondent and the petitioner partners in the establishment of Sun Wah
Panciteria because Article 1767 of the Civil Code provides that"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". Therefore, the lower courts did not err in
construing the complaint as one wherein the private respondent asserted his rights as partner of the
petitioner in the establishment of the Sun Wah Panciteria, notwithstanding the use of the term financial
assistance therein.SC affirmed appellate court's decision and ordered the dissolution of the partnership.

Ornum v. Lasala 74 Phil 242

Facts:

Ornum submitted a statement of accounts to respondents, his copartner. Instead

of objecting to said statement, respondent Lasala promised to sign the same as
soon as he received his shares as shown in said statement. After said shares had
been paid by Ornum and accepted by respondents without reservation, the latter
refused to sign the statement. Lasala demanded a new liquidation, claiming that
he was entitled to more than what the statement of account shows.

Issue:

Is the respondent entitled to a further liquidation?

Held:

No. After accepting his shares without any reservation, respondent virtually
confirmed his approval of the statement of accounts, and its signing thereby
became a mere formality to be complied with by Lasala exclusively. His refusal to
sign, after receiving the shares, amounted to a waiver of that formality in favor of
Ornum who had already performed his obligation. This approval precludes any
right on the part of respondent to a further liquidation, unless he can show there
was fraud or mistake in said approval

EVANGELISTA & CO. v. ABAD SANTOS

G.R. No. L-31684; June 28, 1973
Ponente: J. Makalintal

FACTS:

On October 9, 1954 a co-partnership was formed under the name of

"Evangelista & Co." On June 7, 1955 the Articles of Co-partnership were amended so as
to include herein respondent, Estrella Abad Santos, as industrial partner, with herein
petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad Santos and Conchita P.
Navarro, the original capitalist partners, remaining in that capacity, with a contribution
of P17,500 each

On December 17, 1963 herein respondent filed suit against the three other
partners, alleging that the partnership, which was also made a party-defendant, had
been paying dividends to the partners except to her; and that notwithstanding her
demands the defendants had refused and continued to refuse to let her examine the
partnership books or to give her information regarding the partnership affairs or to pay
her any share in the dividends declared by the partnership

The defendants, in their answer, denied ever having declared dividends or

distributed profits of the partnership; denied likewise that the plaintiff ever demanded
that she be allowed to examine the partnership books; and by way of affirmative
defense alleged that the amended Articles of Co-partnership did not express the true
agreement of the parties, which was that the plaintiff was not an industrial partner; that
she did not in fact contribute industry to the partnership.

ISSUE:

Whether Abad Santos is entitled to see the partnership books because she is an
industrial partner in the partnership

HELD:

Yes, Abad Santos is entitled to see the partnership books.

The Supreme Court ruled that according to

ART. 1299. Any partner shall have the right to a formal account as to partnership
affairs:

(1)If he is wrongfully excluded from the partnership business or possession of its

property by his co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and reasonable."
In the case at hand, the company is estopped from denying Abad Santos as an
industrial partner because it has been 8 years and the company never corrected their
agreement in order to show their true intentions. The company never bothered to
correct those up until Abad Santos filed a complaint

1807
CATALAN vs. GATCHALIAN

105 Phil 1270, G.R. No. L-11648, April 22, 1959

FACTS:

Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave
together with the improvements thereon to secure a credit from the latter. The
partnership failed to pay the obligation. The properties were sold to Dr. Marave at
apublic auction. Catalan redeemed the property and he contends that title should
becancelled and a new one must be issued in his name.

ISSUE:

Did Catalan’s redemption of the properties make him the absolute owner of
thelands?

HELD:

No. Under Article 1807 of the NCC every partner becomes a trustee for
hiscopartner with regard to any benefits or profits derived from his act as a
partner.Consequently, when Catalan redeemed the properties in question, he
became a trusteeand held the same in trust for his copartner Gatchalian, subject
to his right to demandfrom the latter his contribution to the amount of
redemption.

Pang lim & Galvez vs. Lo Seng

Facts:

Lo Seng and Pang Lim were partners in the business of running a distillery, known
as "El Progreso”

The land on which said distillery is located was to thefirm of Lo Seng and Co. for
the term of three years.

Upon the expiration of this lease a new writtencontract, in the making of which Lo
Yao wasrepresented by one Lo Shui as attorney in fact,became effective whereby
the lease was extended forfifteen years.

Pang Lim sold all his interest in the distillery to hispartner Lo Seng, thus placing
the latter in the positionof sole owner

Lo Shui, again acting as attorney in fact of Lo Yao,executed and acknowledged

before a notary public adeed purporting to convey to Pang Lim and
anotherChinaman named Benito Galvez, the entire distilleryplant. But this
document was never recorded in theregistry of property.

Thereafter, Pang Lim and Benito Galvez demandedpossession from Lo Seng, but
the latter refused toyield; and the present action of unlawful detainer
wasthereupon initiated by Pang Lim and Benito Galvez inthe court of the justice
of the peace of Paombong torecover possession of the premises.

Plaintiff Pang Lim has occupied a double role in thetransactions which gave rise to
this litigation, namely,first, as one of the lessees; and secondly, as one of
thepurchasers now seeking to terminate the lease. Thesetwo positions are
essentially antagonistic andincompatible. Every competent person is by law
bondto maintain in all good faith the integrity of his ownobligations; and no less
certainly is he bound torespect the rights of any person whom he has placedin his
own shoes as regards any contract previouslyentered into by himself.

Issue: WON Pang Lim, having been a participant in thecontract of lease now in
question, is in a position to terminateit: and this is a fatal obstacle to the
maintenance of the action of unlawful detainer by him.
Held: NO.

While yet a partner in the firm of Lo Seng and Co.,Pang Lim participated in the
creation of this lease, and when hesold out his interest in that firm to Lo Seng this
operated as atransfer to Lo Seng of Pang Lim's interest in the firm assets,including
the lease; and Pang Lim cannot now be permitted, inthe guise of a purchaser of
the estate, to destroy an interest derived from himself, and for which he has
received full value.

Ratio:

The bad faith of the plaintiffs in seeking to deprive thedefendant of this lease is
strikingly revealed in thecircumstance that prior to the acquisition of thisproperty
Pang Lim had been partner with Lo Sengand Benito Galvez an employee. Both
therefore hadbeen in relations of confidence with Lo Seng and inthat position had
acquired knowledge of thepossibilities of the property and possibly anexperience
which would have enabled them, in casethey had acquired possession, to exploit
the distillerywith profit.

it would be shocking to the moral sense if thecondition of the law were found to
be such that PangLim, after profiting by the sale of his interest in abusiness,
worthless without the lease, could interveneas purchaser of the property and
confiscate for hisown benefit the property which he had sold for avaluable
consideration to Lo Seng.

Above all other persons in business relations,partners are required to exhibit

towards each otherthe highest degree of good faith. In fact the relationbetween
partners is essentially fiduciary, each beingconsidered in law, as he is in fact, the
confidentialagent of the other.

If one partner obtains in his own name and for hisown benefit the renewal of a
lease on property usedby the firm, to commence at a date subsequent to
theexpiration of the firm's lease, the partner obtainingthe renewal is held to be a
constructive trustee of thefirm as to such lease.
As Lo Seng is vested with the possessory right asagainst Pang Lim, he cannot be
ousted either by PangLim or Benito Galvez. Having lawful possession asagainst
one cotenant, he is entitled to retain it against both

Lim Tanhu vs. Ramolete

66 SCRA 425

FACTS:

Private respondent Tan Put alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a
partner and practically the owner who has controlling interest of Glory Commercial Company and a
Chinese Citizen until his death. Defendant Antonio Lim Tanhu and Alfonso Leonardo Ng Sua were
partners in name but they were mere employees of Po Chuan and were naturalized Filipino
Citizens. Tan Put filed complaint against spouses-petitoner Lim Tanhu and Dy Ochay including their
son Tech Chuan and the other spouses-petitoner Ng Sua and Co Oyo including also their son Eng
Chong Leonardo, that through fraud and machination took actual and active management of the
partnership and that she alleged entitlement to share not only in the capital and profits of the
partnership but also in the other assets, both real and personal, acquired by the partnership with funds
of the latter during its lifetime."
According to the petitioners, Ang Siok Tin is the legitimate wife, still living, and with whom Tee
Hoon had four legitimate children, a twin born in 1942, and two others born in 1949 and 1965, all
presently residing in Hong Kong. Tee Hoon died in 1966 and as a result of which the partnership was
dissolved and what corresponded to him were all given to his legitimate wife and children.

Tan Put prior of her alleged marriage with Tee Hoon on 1949, was engaged in the drugstore
business; that not long after her marriage, upon the suggestion of the latter sold her drugstore for
P125,000.00 which amount she gave to her husband as investment in Glory Commercial Co.
sometime in 1950; that after the investment of the above-stated amount in the partnership its business
flourished and it embarked in the import business and also engaged in the wholesale and retail trade
of cement and GI sheets and under huge profits.

Defendants interpose that Tan Put knew and was are that she was merely the common-law wife of
Tee Hoon. Tan Put and Tee Hoon were childless but the former had a foster child, Antonio Nunez.

ISSUE: Whether Tan Put, as she alleged being married with Tee Hoon, can claim from the company
of the latter’s share.

HELD:

Under Article 55 of the Civil Code, “the declaration of the contracting parties that they take each
other as husband and wife "shall be set forth in an instrument" signed by the parties as well as by
their witnesses and the person solemnizing the marriage. Accordingly, the primary evidence of a
marriage must be an authentic copy of the marriage contract”. While a marriage may also be proved
by other competent evidence, the absence of the contract must first be satisfactorily explained.
Surely, the certification of the person who allegedly solemnized a marriage is not admissible
evidence of such marriage unless proof of loss of the contract or of any other satisfactory reason for
its non-production is first presented to the court. In the case at bar, the purported certification issued
by a Mons. Jose M. Recoleto, Bishop, Philippine Independent Church, Cebu City, is not, therefore,
competent evidence, there being absolutely no showing as to unavailability of the marriage contract
and, indeed, as to the authenticity of the signature of said certifier, the jurat allegedly signed by a
second assistant provincial fiscal not being authorized by law, since it is not part of the functions of
his office. Besides, inasmuch as the bishop did not testify, the same is hearsay.

An agreement with Tee Hoon was shown and signed by Tan Put that she received P40,000 for her
subsistence when they terminated their relationship of common-law marriage and promised not to
interfere with each other’s affairs since they are incompatible and not in the position to keep living
together permanently. Hence, this document not only proves that her relation was that of a common-
law wife but had also settled property interests in the payment of P40,000.

IN VIEW OF ALL THE FOREGOING, the petition is granted. All proceedings held in respondent
court in its Civil Case No. 12328 subsequent to the order of dismissal of October 21, 1974 are hereby
annulled and set aside, particularly the ex-parte proceedings against petitioners and the decision on
December 20, 1974. Respondent court is hereby ordered to enter an order extending the effects of its
order of dismissal of the action dated October 21, 1974 to herein petitioners Antonio Lim Tanhu, Dy
Ochay, Alfonso Leonardo Ng Sua and Co Oyo. And respondent court is hereby permanently
enjoined from taking any further action in said civil case gave and except as herein indicated. Costs
against private respondent.

Hanlon vs. Haussermann and Beam

Facts: This action was originally instituted by R. Y. Hanlon to compel the

defendants, John W.Haussermann and A. W. Beam, to account for a share of the
profits gained by them in rehabilitating the plant of the Benguet Consolidated
Mining Company and in particular to compel them to surrender to the plaintiff
50,000 shares of the stock of said company, with dividends paid thereon.It was
initially agreed by Hanlon, Haussermann, Beam and Sellner that P75,000.00 was
needed to rehabilitate the mine; P50,000.00 would come from Hanlon by securing
and obtaining subscriptions for the company’s stocks, P25,000.00 would come
from Haussermann and Beam.

They were to receive compensation in the form of shares of stock for the services
rendered inthe flotation of this proposition. The funds were needed on a certain
date. It was also stated inthe contract that Haussermann and Beam would be
discharged if Sellner could not provide theamount due from him within the time
frame stipulated.Hanlon was unable to raise the P75,000.00, so that
Haussermann and Beam madearrangements to finance the rehabilitation of the
mine. Because of this new arrangement, thecompany became profitable that it
was able to pay dividends. Because of this, the value of the company’s stocks
appreciated.

Held: Hanlon is not entitled to an accounting for his share in the profits of the
company;Haussermann and Beam are absolved.Under the equitable doctrine, if
the contracting parties have treated time as of the essence of the contract, the
delinquency will not be excused and specific performance will not be granted;but
on the other hand, if it appears that time has not been made of the essence of the
contract,equity will relieve from the delinquency and specific performance may
be granted, duecompensation being made for the damage caused by the
delay.Time is of the essence of the contract for the sale of an option on mining
property, or a contractfor the sale thereof, even though there is no express
stipulation to that effect. The same idea isclearly applicable to a contract like that
now under consideration which provides for therehabilitation of a mining plant
with funds to be supplied by the contractor within a limited period

1806
ANTONIO PARDO v. THE HERCULES LUMBER and IGNACIO FERRER

FACTS

Antonio Pardo [Hercules Lumber Company stockholder] seeks to obtain a writ of

Mandamus to compel the companyand its acting secretary Ignacio Ferrer to

permit him [Pardo] and his duly authorized agent and representative toexamine
the company’s records and business transactions.

The main ground upon which the defense of the company appears to be rested
has reference to the time, ortimes, within which the right of inspection may be
exercised.

Article 10 of the By-laws of the company

"Every shareholder may examine the books of the company and other documents
pertaining to thesame upon the days which the board of directors shall annually
fix."

Board Resolution passed at the directors' meeting held on 16 February 1924

The board also resolved to call the usual general (meeting of shareholders) for
March 30 of thepresent year, with notice to the shareholders that the books of
the company are at their dispositionfrom the 15th to 25th of the same month for
examination, in appropriate hours.

ISSUES & HOLDING

WON the board resolution constitutes a lawful restriction on the right conferred
by statute.

NO

WON Pardo lost his right to inspection and examination for the year, since he has
not availed himself of the permission [to inspect the company’s books and
transactions within the 10 days defined in the board resolution.

NO

WON the shareholder’s motive in exercising this right is material.

NO

RATIO:

The basis of right of inspection is

Sec. 51 of Act No. 1459

[Corporation Law].

In Philpotts v. PhilippineManufacturing Co., and Berry, it was held that the right of
examination there conceded to the stockholder may beexercised either by a
stockholder in person or by any duly authorized agent or representative.
 It may be admitted that the officials in charge of a corporation may deny
inspection when sought at unusualhours or under other improper conditions; but
neither the executive officers nor the board of directors havethe power to
deprive a stockholder of the right altogether.

A by-law unduly restricting the right of inspectionis undoubtedly invalid.

Under a statute similar to our own it has been held that the statutory right of
inspection is notaffected by the adoption by the board of directors of a resolution
providing for the closing of transfer books thirty daysbefore an election.Our
statute declares that the right of inspection can be exercised "at reasonable
hours."

This means at reasonablehours on business days throughout the year, and not
merely during some arbitrary period of a few dayschosen by the
directors.Additional issue: The motives that prompted Pardo to make inspection

It is alleged that the information which Pardo seeks is desired for ulterior
purposes in connection with a competitivefirm with which Pardo is alleged to be
connected. It is also insisted that one of

Pardo’s

purposes is to obtain evidencepreparatory to the institution of an action, which

he means to bring against the company re: a contract of employmentwhich once
existed between the corporation and himself.

These suggestions are entirely apart from the issue the motive of the shareholder
exercising the right is immaterial.

Writ of mandamus will issue

1803
Council Red Men vs. Veterans Army Facts:
This case involves the Veteran Army of the Philippines. Their Constitution
provides for the organization of posts. Among the posts thus organized is the
General Henry W. Lawton Post, No. 1. March 1, 1903: a contract of lease of parts
of a certain buildings in the city of Manila was signed by Lewis, Stovall, and Hayes
(as trustees of the Apache Tribe, No. 1, Improved Order of Red Men) as lessors,
and McCabe (citing for and on behalf of Lawton Post, Veteran Army of the
Philippines) as lessee. The lease was for the term of two years commencing
February 1, 903, and ending February 28, 1905. The Lawton Post occupied the
premises in controversy for thirteen months, and paid the rent for that time.
Thereafter, it abandoned the premises. Council Red Men then filed an action to
recover the rent for the unexpired term of the lease. Judgment was rendered in
the court below on 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. It is claimed by the Veterans Army that
the action cannot be maintained by the Council Red Men as this organization did
not make the contract of lease. It is also claimed that the action cannot be
maintained against the Veteran Army of the Philippines because it never
contradicted, either with the Council Red Men or with Apach Tribe, No. 1, and
never authorized anyone to so contract in its name.

Issue:

Whether or not Article 1695 of the Civil Code is applicable to the Veteran Army of
the Philippines.

NO

Held:

Council Red Men must show that the contract of lease was authorized by the
Veterans Army The view most favorable to the appellee (Council Red Men) is the
one that makes the appellant (Veterans Army) a civil partnership. Assuming that is
such, and is covered by the provisions of title 8, book 4 of the Civil Code, it is
necessary for the appellee (Council Red Men) to prove that the contract in
question was executed by some authorized to so by the Veteran Army of the
Philippines. Article 1695 of the Civil Code is not applicable in this case 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, therefore, is empowered to contract in the name of the partnership only
when the articles of partnership make no provision for the management of the
partnership business. The constitution of the Veteran Army of the Philippines
makes provision for the management of its affairs, so that article 1695 of the Civil
Code, making each member an agent of the partnership in the absence of such
provision, is not applicable to that organization. In the case at bar we think that
the articles of the Veteran Army of the Philippines do so provide. It is true that an
express disposition to that effect is not found therein, but we think one may be
fairly deduced from the contents of those articles. They declare what the duties of
the several officers are. In these various provisions there is nothing said about the
power of making contracts, and that faculty is not expressly given to any officer.
We think that it was, therefore, reserved to the department as a whole; that is,
that in any case not covered expressly by the rules prescribing the duties of the
officers, the department were present. It is hardly conceivable that the members
who formed this organization should have had the intention of giving to any one
of the sixteen or more persons who composed the department the power to
make any contract relating to the society which that particular officer saw fit to
make, or that a contract when so made without consultation with, or knowledge
of the other members of the department should bind it. The contract of lease is
not binding on the Veterans Army absent showing that it was authorized in a
meeting of the department We therefore, hold, that no contract, such as the one
in question, is binding on the Veteran Army of the Philippines unless it was
authorized at a meeting of the department. No evidence was offered to show that
the department had never taken any such action. In fact, the proof shows that the
transaction in question was entirely between Apache Tribe, No. 1, and the Lawton
Post, and there is nothing to show that any member of the department ever knew
anything about it, or had anything to do with it. Judgment against the appellant is
reversed, and the Veteran Army of the Philippines is acquitted of the complaint.
No costs will be allowed to either party in this court

Bachrach vs. “La Protectora,”

Doctrine:

Facts: Nicolas Segundo, Antonio Adiarte, Ignacio Flores and Modesto Serrano
(defendants) formed a

civil partnership called “La Protectora” for the purpose of engaging in the
business of

transporting passengers and freight at Laoag, Ilocos Norte. Marcelo Barba, acting
as manager, negotiated for the purchase of 2 automobile trucks from E. M.
Bachrach for P16,500. Barba paid P3,000 in cash and for the balance executed
promissory notes. One of these promissory notes was signed in the following
manner:

“P.P La Protectora, By Marcelo Barba Marcelo Barba”

The other 2 notes were signed in the same way but the word “by” was omitted. It
was obvious that in signing the notes, Barba intended to bind both the
partnership and himself. The defendants executed a document in which they
declared that they were members of La Protectora and that they had granted to
its president full authority to contract for the purchase of the 2 automobiles. The
document was delivered by Barba to Bachrach at the time the vehicles were
purchased. Barba incurred a debt amounting to P2,617.57 and Bachrach
foreclosed a chattel mortgage on the trucks but there was still balance. To
recover the balance, action was instituted against the defendants. Judgment was
rendered against the defendants.

Issue: a.Whether or not the defendants are liable for the firm debts. b.Whether
or not Barba had authority to incur expenses for the partnership
(relevant issue)

Held: a.Yes. Promissory notes constitute the obligation exclusively of La

Protectora and Barba. They do not constitute an obligation directly binding the
defendants. Their liability is based on the principles of partnership liability. A
member is not liable in solidum with his fellows for the entire indebtedness but is
liable with them or his aliquot part. SC obiter: the document was intended merely
as an authority to enable Barba to bind the partnership and that the parties to
the instrument did not intend to confer upon Barba an authority to bind them
personally. b. Yes. Under Art 1804, every partner may associate another person
with him in his share. All partners are considered agents of the partnership.
Barba must be held to have authority to incur these expenses. He is shown to
have been in fact the president/manager, and there can be no doubt that he had
actual authority to incur obligation

1802
LITTON vs. HILL & CERON

Facts:

The plaintiff sold and delivered to Carlos Ceron, who is one of the managing
partners of Hill & Ceron, a certain number of mining claims.

Both partners have the management of the business of the partnership, and that
either may contract and sign for the partnership with the consent of the other.
Ceron did not obtain Hill’s consent for the purchase of the mining claims.

Litton was unable to collect the balance from Hill & Ceron or from its surety.

The trial court held Ceron personally liable for the unpaid amount. The
partnership Hill &Ceron, Robert Hill (the partner of Ceron), and the surety were
absolved.
CA affirmed, saying that Ceron did not intend to represent and did not act for
thepartnership Hill & Ceron.

Issue: who should prove that the consent of the other partner is needed when
entering into acontract with third persons?

Issue: is the partnership liable?

Held: Yes.Under article 226 of the Code of Commerce, the dissolution of a

commercial association shallnot cause any prejudice to third parties until it has
been recorded in the commercial registry.(See also Cardell vs. Mañeru, 14 Phil.,
368.) The Supreme Court of Spain held that thedissolution of a partnership by the
will of the partners which is not registered in the commercialregistry, does not
prejudice third persons.Third persons, like the plaintiff, are not bound in entering
into a contract with any of the twopartners, to ascertain whether or not this
partner with whom the transaction is made has theconsent of the other partner.
The public need not make inquiries as to the agreements hadbetween the
partners. Its knowledge is enough that it is contracting with the partnership which
isrepresented by one of the managing partners.There is a general presumption
that each individual partner is an authorized agent for the firmand that he has
authority to bind the firm in carrying on the partnership transactions.(Mills vs.

Riggle, 112 Pac., 617.)The presumption is sufficient to permit third persons to

hold the firm liable on transactionsentered into by one of members of the firm
acting apparently in its behalf and within the scopeof his authority. (Le Roy vs.
Johnson, 7 U. S. [Law. ed.], 391.)The kind of business in which the partnership Hill
& Ceron is to engage being thus determined,none of the two partners, under
article 130 of the Code of Commerce, may legally engage in thebusiness of
brokerage in general as stock brokers, security brokers and other activities
pertaining to the business of the partnership. Ceron, therefore, could not have
entered into the contract of sale of shares with Litton as a private individual, but
as a managing partner of Hill &Ceron.