Benjamin Yu vs.

National Labor Relations Commission

(NLRC)
FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain Products Company
Limited primarily responsible for the overall operations of marble quarrying and export business
of said partnership. He was hired by a virtue of a Partnership Resolution in 1985 with a monthly
salary of P4,000.00. Initially he received only half of his stipulated monthly salary and was
promised by the partners that the balance would be paid upon securing additional operating funds
from abroad. However, in 1988 without his knowledge the general partners as well as one of the
limited partners sold and transferred their interest to Willy Co and Emmanuel Zapanta. Thus the
new major partners decided to transfer the firm’s main office but opted to continue the operation
of the old partnership under its old firm name and with all its employees and workers except for
the petitioner. Upon knowing of the changes in the partnership, petitioner went to the new main
office to meet the new partners and demand the payment of his unpaid salaries, but the latter
refused to pay him and instead informed him that since he bought the business from the original
partners, it was for him to decide whether or not he was responsible for the obligations of the old
partnership including petitioners unpaid salaries. Hence, petitioner was dismissed from said
partnership.

ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General Manager had
been extinguished and replaced by a new partnership composed of Willy Co and Emmanuel
Zapanta.
2. Whether petitioner could assert his rights under his employment contract as against the
new partnership

HELD:
1. Yes. The legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired the petitioner in 1984 and the emergence of
the new firm composed of Willy Co and Emmanuel Zapanta in 1988. This is based on the
following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on as a distinguished from the winding up of
the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when no definite term
or particular undertaking is specified.
2. in contravention of the agreement between the partners, where the circumstances do not
permit a dissolution under any other provision of this article, by the express will of any
partner at any time;
However, the legal consequence of dissolution of a partnership do not automatically result in the
termination of the legal personality of the old partnership as according to Art. 1829, “ on
dissolution of the partnership is not terminated, but continues until the winding up of the
partnership affairs is completed. The new partnership simply continued the operations of the old
partnership under its old firm name without winding up the business affairs of the old
partnership.

2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of the new
partnership which continued the business of former without liquidation of the partnership affairs.
Thus, creditor of the old Jade Mountain, such as the petitioner is entitled to enforce his claim for
unpaid salaries, as well as other claims relating to his employment with the old partnership
against the new Jade Mountain.
MICHAEL C. GUY vs ATTY GLENN GACOTT

FACTS:

Gacott purchased two (2) brand new transreceivers from Quantech Systems Corp (QSC) through its
employee Rey Medestomas. Due to major defects, Gacott returned the items to QSC and requested
for replacement. However, despite several demands, Gacott was never given a replacement or a
refund. Thus, Gacott filed a complaint for damages. Summons was served upon QSC and
Medestomas, afterwhich they filed their Answer.

RTC’s decision ordered the defendants to jointly and severally pay plaintiff. The decision became
final as QSC and Medestomas did not interpose an appeal. Gacott then secured a Writ of Execution.
During the execution stage, Gacott learned that QSC was not a corporation, but was in fact a general
partnership. In the articles of partnership, Guy was appointed as General Manager of QSC. The
sheriff attached Guy’s vehicle. Guy filed his Motion to Lift Attachment Upon Personalty, arguing that
he was not a judgment debtor and, therefore, his vehicle could not be attached. On June 28, 2009,
the RTC issued an order denying Guy’s motion and his subsequent motion for reconsideration.
RTC’s ratio: All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Article 1822 and 1823.Guy to seek relief before the CA. The CA dismissed Guy’s
appeal for the same reasons given by the trial court. Guy filed a motion for reconsideration but it
was denied by the CA.

Guy arguments:

1. That jurisdiction over the person of the partnership (QSC) was not acquired because
the summons was never served upon it or through any of its authorized officer;
2. Article 1816 of the Civil Code which states that the liability of the partners to the
partnership is merely joint and subsidiary in nature. And he is not solidarily liable
with the partnership because the solidary liability of the partners under Articles
1822, 1823 and 1824 of the Civil Code only applies when it stemmed from the act of
a partner. In this case, the alleged lapses were not attributable to any of the
partners.

ISSUE 1a: WON the service of summons to QSC was flawed.

HELD: YES, however, voluntary appearance cured the defect.

SC RATIO:
 Under Section 11, Rule 14 of the 1997 Revised Rules of Civil Procedure, when the
defendant is a corporation, partnership or association organized under the laws of
the Philippines with a juridical personality, the service of summons may be made on
the president, managing partner, general manager, corporate secretary, treasurer,
or in-house counsel.

Jurisprudence is replete with pronouncements that such provision provides

an exclusive enumeration of the persons authorized to receive summons for
juridical entities.

In this case, QSC was not served with the summons through any of the enumerated
authorized persons to receive such, namely: president, managing partner, general
manager, corporate secretary, treasurer or in-house counsel. Service of summons
upon persons other than those officers enumerated in Section 11 is invalid.
Even substantial compliance is not sufficient service of summons. Nevertheless,
while proper service of summons is necessary to vest the court jurisdiction over the
defendant, the same is merely procedural in nature and the lack of or defect in the
service of summons may be cured by the defendant’s subsequent voluntary
submission to the court’s jurisdiction through his filing a responsive pleading such
as an answer. In this case, it is not disputed that QSC filed its Answer despite the
defective summons. Thus, jurisdiction over its person was acquired through
voluntary appearance.

ISSUE 1b: WON whether the trial court’s jurisdiction over QSC extended to the person of Guy insofar
as holding him solidarily liable with the partnership.

HELD: NO.

SC RATIO:

Although a partnership is based on delectus personae or mutual agency, whereby any

partner can generally represent the partnership in its business affairs, it is non sequitur that
a suit against the partnership is necessarily a suit impleading each and every partner. It
must be remembered that a partnership is a juridical entity that has a distinct and separate
personality from the persons composing it.

A decision rendered on a complaint in a civil action or proceeding does not bind or

prejudice a person not impleaded therein, for no person shall be adversely affected by the
outcome of a civil action or proceeding in which he is not a party.
 Here, Guy was never made a party to the case. He did not have any participation in the
entire proceeding until his vehicle was levied upon and he suddenly became QSC’s “co-
defendant debtor” during the judgment execution stage. It is a basic principle of law that
money judgments are enforceable only against the property incontrovertibly belonging to
the judgment debtor.

ISSUE 2a:

WON a partners’ liability is subsidiary and generally joint and WON immediate levy upon
the property of a partner can be made.

HELD.

NO partner’s liability is not subsidiary and generally joint and the partner’s property cannot
be immediately levied.

SC RATIO:

Article 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.

This provision clearly states that, first, the partners’ obligation with respect to the
partnership liabilities is subsidiary in nature. To say that one’s liability is subsidiary means
that it merely becomes secondary and only arises if the one primarily liable fails to
sufficiently satisfy the obligation.

In this case, Guy’s liability would only arise after the properties of QSC would have been
exhausted. The records, however, miserably failed to show that the partnership’s properties
were exhausted. Clearly, no genuine efforts were made to locate the properties of QSC that
could have been attached to satisfy the judgment − contrary to the clear mandate of Article
1816.
Second, Article 1816 provides that the partners’ obligation to third persons with respect to
the partnership liability is pro rata or joint.Liability is joint when a debtor is liable only for
the payment of only a proportionate part of the debt. In contrast, a solidary liability makes a
debtor liable for the payment of the entire debt. In the same vein, Article 1207 does not
presume solidary liability unless: 1) the obligation expressly so states; or 2) the law or
nature requires solidarity. With regard to partnerships, ordinarily, the liability of the
partners is not solidary. The joint liability of the partners is a defense that can be raised by a
partner impleaded in a complaint against the partnership.

In other words, only in exceptional circumstances shall the partners’ liability be solidary in
nature. Articles 1822, 1823 and 1824 of the Civil Code provide for these exceptional
conditions, to wit:

Article 1822. Where, by any wrongful act or omission of any partner acting in the
ordinary course of the business of the partnership or with the authority of his co-
partners, loss or injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is liable therefor to the same
extent as the partner so acting or omitting to act.

Article 1823. The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent authority
receives money or property of a third person and misapplies it; and

(2) Where the partnership in the course of its business receives money or
property of a third person and the money or property so received is
misapplied by any partner while it is in the custody of the partnership.

Article 1824. All partners are liable solidarily with the partnership for everything
chargeable to the partnership under Articles 1822 and 1823.

In essence, these provisions articulate that it is the act of a partner which caused loss or
injury to a third person that makes all other partners solidarily liable with the partnership
because of the words "any wrongful act or omission of any partner acting in the ordinary
course of the business," "one partner acting within the scope of his apparent
authority" and "misapplied by any partner while it is in the custody of the partnership." The
 obligation is solidary because the law protects the third person, who in good faith relied
upon the authority of a partner, whether such authority is real or apparent.40

In the case at bench, it was not shown that Guy or the other partners did a wrongful act or
misapplied the money or property he or the partnership received from Gacott. A third
person who transacted with said partnership can hold the partners solidarily liable for the
whole obligation if the case of the third person falls under Articles 1822 or
1823.41 Gacott’s claim stemmed from the alleged defective transreceivershe bought from
QSC, through the latter's employee, Medestomas. It was for a breach of warranty in a
contractual obligation entered into in the name and for the account of QSC, not due to the
acts of any of the partners. For said reason, it is the general rule under Article 1816 that
governs the joint liability of such breach, and not the exceptions under Articles 1822 to
1824. Thus, it was improper to hold Guy solidarily liable for the obligation of the
partnership.

ISSUE 2b:

WON it is necessary to implead a partner in order to be bound by the partnership liability.

HELD: YES. It is necessary to implead a partner.

SC RATIO:

Under Article 1821, notice to any partner of any matter relating to partnership
affairs, and the knowledge of the partner acting in the particular matter, acquired
while a partner or then present to his mind, and the knowledge of any other partner who
reasonably could and should have communicated it to the acting partner, operate as notice
to or knowledge of the partnership, except in the case of fraud on the partnership,
committed by or with the consent of that partner.

A careful reading of the provision shows that notice to any partner operates as notice to
or knowledge to the partnership only. Evidently, it does not provide for the reverse
situation, or that notice to the partnership is notice to the partners.
SUPREME COURT RULING:WHEREFORE, the petition is GRANTED. The June 25, 2012 Decision
and the March 5, 2013 Resolution of the Court of Appeals in CA-G.R. CV No. 94816 are
hereby REVERSED and SET ASIDE. Accordingly, the Regional Trial Court, Branch 52, Puerto
Princesa City, is ORDERED TO RELEASE Michael C. Guy's Suzuki Grand Vitara subject of the Notice
of Levy/ Attachment upon Personalty.
 SONCUYA VS DE LUNA

FACTS

Josue Soncuya filed a complaint againstCarmen De Luna alleging that Carmen should pay damages in the
sum of P700,432 as a result of the administration, which said to be fraudulent, of the partnership,
"Centro Escolar de Señ ioritas", of which Josue, Carmen and the deceased Librada Avelino were
members.

No liquidation has been effected nor is it prayed that it be made.

Carmen interposed a demurrer based on the following grounds: (1) That the complaint does not contain
facts sufficient to constitute a cause of action; and (2) that the complaint is ambiguous, unintelligible
and vague.

ISSUE

W/N Josue can claim damages against Carmen based on the complaint filed.

RULING:

No.

For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a partner by
reason of the supposed fraudulent management of the partnership referred to, it is first necessary that a
liquidation of the business thereof be made to the end that the profits and losses may be known and the
causes of the latter and the responsibility of the defendant as well as the damages which each partner
may have suffered, may be determined.

For a partner to be able to claim from another partner who manages the general civil partnership,
damages allegedly suffered by him by reason of the fraudulent administration of the latter, a previous
liquidation of said partnership is necessary.
GREGORIO MAGDUSA, ET AL.,

petitioners, vs.

GERUNDIO ALBARAN, ET AL.,

respondents.Appellant and appellees, together with various other persons, had verbally formed a
partnership

de facto

, for the sale of general merchandise to which appellant contributed P2,000 as capital, and the others
contributed their labor, under the condition that out of the net profits of the business, 25% would be
added to the original capital, and the remaining 75% would be divided among the members in
proportion to the length of service of each. sometime in 1953 and 1954, the appellees expressed their
desire to withdraw from the partnership, and appellant thereupon made a computation to determine
the value of the partners& shares to that date. The results of the computation were embodied in the
document drawn in the handwriting of appellant. Appellees thereafter made demands upon appellant
for payment, but appellant having refused, they filed the initial complaint in the court below. Appellant
defended by denying any partnership with appellees, whom he claimed to be mere employees of his.

The Court of First Instance of Bohol dismissed the complaint on the ground that the other were
indispensable parties but had not been impleaded. Upon appeal, the Court of Appeals reversed the
decision, ruling that it is not an action for a dissolution of a partnership and winding up of its affairs or
liquidation of its assets in which the interest of other partners who are not brought into the case may be
affected. The action of the plaintiffs is one for the recovery of a sum of money with Gregorio Magdusa
as the principal defendant. The partnership, with Gregorio Magdusa as managing partner, was brought
into the case as an alternative defendant only.

Issue:

Whether or not appellees’ action can be entertained, because in the distribution of all or part of a
partnership’s assets, all the partners have no interest and are indispensable parties without whose
intervention no decree of distribution can be validly entered.

Ruling:

It cannot be entertained. A partner’s share cannot be returned without first dissolving and liquidating
the partnership, for the return is dependent on the discharge of the creditors, whose claims enjoy
preference over those of the partners; and it is self-evident that all members of the partnership are
interested in his assets and business, and are entitled to be heard in the matter of the firm’s liquidation
and the distribution of its property. The liquidation drawn by appellant is not signed by the other
members of the partnership besides appellees and appellant’, it does not appear that they have
approved, authorized, or ratified the same, and, therefore, it is not binding upon them. At the very
least, they are entitled to be heard upon its correctness.
In addition, unless a proper accounting and liquidation of the partnership affairs is first had, the capital
shares of the appellees, as retiring partners, cannot be repaid, for the firm’s outside creditors have
preference over the assets of the enterprise, and the firm’s property cannot be diminished to their
prejudice. Finally, the appellant cannot be held liable in his personal capacity for the payment of
partners& shares for he does not hold them except as manager of, or trustee for, the partnership. *t is
the latter that must refund their shares to the retiring partners. Since not all the members of the
partnership have been impleaded, no judgment for refund can be rendered.
JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDENG
JASO
G.R. No. 178782 September 21, 2011

FACTS
Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis Eric Amaury Biondo, a
French national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and
Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the
remaining 20% to be used for the payment of the ice making machine which was purchased for the business. For and
in consideration of the sum of P500,000.00, however, Biondo subsequently executed a Deed of
Assignment transferring all his rights and interests in the business in favor of respondent Eden Jaso, the wife of
respondent Prosencio Jaso. With Biondo’s eventual departure from the country, the Spouses Jaso caused their
lawyer to send Josefina a letter apprising her of their acquisition of said Frenchmans share in the business and
formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant
suit for specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of
the joint venture, appointment of a receiver and damages. The said complaint alleged that the Spouses Realubit had
no gainful occupation or business prior to their joint venture with Biondo and that aside from appropriating for
themselves the income of the business, they have fraudulently concealed the funds and assets thereof thru their
relatives, associates or dummies. The Spouses Realubit claimed that they have been engaged in the tube ice trading
business under a single proprietorship even before their dealings with Biondo.

The RTC rendered its Decision discounting the existence of sufficient evidence from which the income,
assets and the supposed dissolution of the joint venture can be adequately reckoned. Upon the finding, however, that
the Spouses Jaso had been nevertheless subrogated to Biondos rights in the business in view of their valid
acquisition of the latters share as capitalist partner. On appeal before the CA, the foregoing decision was set aside
upon the following findings that the Spouses Jaso validly acquired Biondos share in the business which had been
transferred to and continued its operations and not dissolved as claimed by the Spouses Realubit.

ISSUES
1. Whether there was a valid assignment or rights to the joint venture
2. Whether the joint venture is a contract of partnership
3. Whether Jaso acquired the title of being a partner based on the Deed of Assignment

RULING
1. Yes. As a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a
presumption of regularitybut is also considered prima facie evidence of the facts therein stated. A party assailing the
authenticity and due execution of a notarized document is, consequently, required to present evidence that is clear,
convincing and more than merely preponderant. In view of the Spouses Realubits failure to discharge this onus, we
find that both the RTC and the CA correctly upheld the authenticity and validity of said Deed of Assignment upon
the combined strength of the above-discussed disputable presumptions and the testimonies elicited from Eden and
Notary Public Rolando Diaz.

2. Yes. Generally understood to mean an organization formed for some temporary purpose, a joint venture is
likened to a particular partnership or one which has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation. The rule is settled that joint ventures are governed by the
law on partnerships which are, in turn, based on mutual agency or delectus personae.

3. No. It is evident that the transfer by a partner of his partnership interest does not make the assignee of such
interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to
receive anything except the assignees profits. The assignment does not purport to transfer an interest in the
partnership, but only a future contingent right to a portion of the ultimate residue as the assignor may become
entitled to receive by virtue of his proportionate interest in the capital. Since a partner’s interest in the partnership
includes his share in the profits, we find that the CA committed no reversible error in ruling that the Spouses Jaso
are entitled to Biondos share in the profits, despite Juanitas lack of consent to the assignment of said Frenchmans
interest in the joint venture. Although Eden did not, moreover, become a partner as a consequence of the assignment
and/or acquire the right to require an accounting of the partnership business, the CA correctly granted her prayer for
dissolution of the joint venture conformably with the right granted to the purchaser of a partner’s interest under
Article 1831 of the Civil Code.