16. E.J SMITH and RAFAEL REYES v. JACINTA LOPEZ and IGNACIA LOPEZ DE PINEDA 5 Phil.

78,
September 30 1905
The plaintiffs were not seeking to enforce a right pertaining to a legal entity. They were not obliged to register in the
Mercantile Registry. They were merely merchants having a common interest in the business. They were under no
obligation to register.
FACTS:
Nicasio Lopez, as administrator of the house owned by his two daughters, contracted the services of Philippine
Gas Light Company for the installation of a water system, urinals, closets, shower baths, and drain pipes in the house at
142 Calle Dulumbayan, Santa Cruz Manila. This was done pursuant to the order of the Board of Health.
The Company, with Smith and Reyes as proprietors, incurred a total of P4020 Mexican currency; P750 of which
was already paid, leaving a balance of P3270.Failing to pay, Smith and Reyes instituted an action to recover the P3270
plus interest, from the sisters, Jacinta and Ignacia Lopez de Pineda.
As a defense, the sisters claimed, among others, that they are not liable for the sum demanded since the works
done by Smith were done without the authority or consent of the sisters. The CFI ruled in favor of Smith and ordered the
Lopez sisters to pay P2717.40 local currency.
ISSUE:
Whether or not Smith and Reyes have legal capacity to sue as a partnership. (YES)
RULING:
YES. Messrs. Smith and Reyes executed the contract in their own individual capacity and not in the name of any
partnership. They acted as coowners of the Philippine Gas Light Company. In their complaint they sought to enforce a
legitime right which they had as such coowners.
The plaintiffs were not seeking to enforce a right pertaining to a legal entity. They were not obliged to register in
the Mercantile Registry. They were merely merchants having a common interest in the business. They were under no
obligation to register.
_____________________________________________________________________________
17. E. S. LYONS, plaintiff-appellant, v. C. W. ROSENSTOCK, Executor of the Estate of Henry W. Elser,
deceased, defendant-appellee.
G.R. No. L-35469 March 17, 1932 Street, J.

DOCTRINE OF THE CASE:

Under the law prevailing in this jurisdiction a trust does not ordinarily attach with respect to property acquired by a
person who uses money belonging to another. Of course, if an actual relation of partnership had existed in the money
used, the case might be different; and much emphasis is laid in the appellant's brief upon the relation of partnership
which, it is claimed, existed.

FACTS:
Henry Elser was engaged in the business of buying, selling, and administering real estate. Plaintiff Lyons had joined him
in several ventures with the profits being shared by them equally. Lyons, on the other hand, was a missionary of the
Methodist Episcopal Church, went on leave to the United States and was gone for nearly a year and a half.

Before he left, Elser made written statements showing that Lyons was at that time half owner with Elser of three pieces of
real property. Lyons executed in favor of Elser a general power of attorney empowering him to manage and dispose of
said properties at will to the mutual advantage of both. During the absence of Lyons two of the pieces of property were
sold by Elser, leaving a single piece of property located at Carriedo.

Later, Elser became interested in a piece of property referred to as San Juan Estate which he planned to develop, in order
to acquire the property, Elser obtained a loan from the Chinese merchant Uy Siuliong with Fidelity & Surety Co. as
surety. This surety agreement is then secured by a mortgage on the equity of redemption in the Carriedo property which
Elser and Lyons co-own. Elser together with three associates organized a limited partnership under the name of J. K.
Pickering & Company for the purpose further developing the recently-bought San Juan estate.

While in the process of closing the negotiations with the San Juan estate, Elser wrote several letters to Lyons inviting him
to join in the new business. Lyons, however, was not inclined to join Elser particularly because the board of missions of
his church was averse to his engaging in business activities other than those in which the church was concerned.
Moreover, some of Lyons' missionary associates had apparently been criticizing his independent commercial activities.
Upon receipt of the letter, it was clear to Elser that he can no longer expect assistance from Lyons so sought to release the
Carriedo property from the mortgage by substituting his own property in M. H. del Pilar Street, Manila, and 1,000 shares
of the J. K. Pickering & Company as security. However, Elser took back the new mortgage and retained the Carriedo
property as mortgaged property after Lyons gave his consent.

When Elser was concluding the transaction for the purchase of the San Juan Estate, he was indebted to Lyons to the extent
of, possibly, P11,669.72, which had accrued to Lyons from profits and earnings derived from other properties. When the
J. K. Pickering & Company was organized and stock issued, Elser indorsed to Lyons 200 of the shares allocated to
himself, as he then believed that Lyons would be one of his associates in the deal. It will be noted that the par value of
these 200 shares was more than P8,000 in excess of the amount which Elser in fact owed to Lyons; and when the latter
returned to the Philippine Islands, he accepted these shares and sold them for his own benefit.

The trial court found in effect that the excess value of these shares over Elser's actual indebtedness was conceded by Elser
to Lyons in consideration of the assistance that had been derived from the mortgage placed upon Lyon's interest in the
Carriedo property. As the development of the San Juan Estate was a success, Elser paid the loan to Uy Siuliong.

Upon Elser’s death, Lyons filed an action against Rosenstock, as executor of the estate of Elser, to recover 446 and two-
thirds shares of the stock of J. K. Pickering & Co., together with the sum of about P125,000, representing the dividends
which accrued on said stock. Lyons alleged that when Elser placed a mortgage upon the equity of redemption in the
Carriedo property, Lyons, as half-owner of said property, became, involuntarily the owner of an undivided interest in the
property acquired partly by that money.

ISSUE:
Whether or not there was a general relation of partnership between the parties

RULING:
NO. The position of the appellant is, in our opinion, untenable. If Elser had used any money actually belonging to Lyons
in this deal, he would under Art. 1724 of the Civil Code and Art. 264 of the Code of Commerce, be obligated to pay
interest upon the money so applied to his own use. Under the law prevailing in this jurisdiction a trust does not ordinarily
attach with respect to property acquired by a person who uses money belonging to another. Of course, if an actual relation
of partnership had existed in the money used, the case might be different; and much emphasis is laid in the appellant's
brief upon the relation of partnership which, it is claimed, existed. But there was clearly no general relation of partnership,
under Art. 1678 of the Civil Code. It is clear that Elser, in buying the San Juan Estate, was not acting for any partnership
composed of himself and Lyons, and the law cannot be distorted into a proposition which would make Lyons a participant
in this deal contrary to his express determination.

It seems to be supposed that the doctrines of equity worked out in the jurisprudence of England and the United States with
reference to trust supply a basis for this action. The doctrines referred to operate, however, only where money belonging
to one person is used by another for the acquisition of property which should belong to both; and it takes but little
discernment to see that the situation here involved is not one for the application of that doctrine, for no money belonging
to Lyons or any partnership composed of Elser and Lyons was in fact used by Elser in the purchase of the San Juan Estate.
Of course, if any damage had been caused to Lyons by the placing of the mortgage upon the equity of redemption in the
Carriedo property, Elser's estate would be liable for such damage. But it is evident that Lyons was not prejudice by that
act.

_____________________________________________________________________________
18. GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO vs. HON.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA
 The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to
choose with whom a person wishes to associate himself is the very foundation of that partnership.

Mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the
right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for
damages.

FACTS:

The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was registered in the Mercantile Registry and
reconstituted with the SEC. The firm underwent several amendments to the articles of partnership to change the firm name
until it finally decided to settle with BITO, MISA & LOZADA.

Joaquin L. Misa, Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners, with
respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.

Misa wrote the respondents-appellees a letter stating his withdrawal and retirement from the firm. He also stated
that the accountants should be instructed to make proper liquidation of his participation in the firm. On the same day, he
sent another letter stating that he would like to have a meeting regarding the mechanics of liquidation, and his interest in
the two floors of the building where the firm is situated.

Misa filed a petition to the Commision's Securities Investigation and Clearing Department for the formal
dissolution and liquidation of the partnership. However, respondents-appellees filed their opposition to the petition. The
hearing officer rendered a decision that the withdrawal of the Misa has not dissolved the partnership. On appeal, the SEC
en banc reversed the decision and was affirmed by the Court of Appeals. Hence, this petition.

ISSUES:

1. Whether or not the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at
will. (YES)

2. Whether or not the withdrawal of Misa dissolved the partnership regardless of his good or bad faith. (YES)

RULING:

1. YES. A partnership that does not fix its term is a partnership at will. The partnership agreement does not provide
for a specified period or undertaking. The "DURATION" clause simply states that the partnership shall continue
so long as mutually satisfactory and shall be continued by the surviving partners upon the death or legal
incapacity of one of the partners.

The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners.
The right to choose with whom a person wishes to associate himself is the very foundation of that
partnership.

2. YES. Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. However,
such partner must act in good faith, not that the attendance of bad faith can prevent the dissolution of the
partnership but that it can result in a liability for damages.
Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power,
although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject
him to a possible action for damages.

_____________________________________________________________________________
 19. WILLIAMUY, plaintiff-appellee, v. BARTOLOME PUZON, substituted by FRANCO PUZON, defendant-
appellant.
G.R. No. L-19819 October 26, 1977 CONCEPCION JR., J.
Facts:
Defendant Bartolome Puzon had a contract with the Republic of the Philippines for the construction of the Ganyangan
Bato Section of the Pagadian Zamboanga City Road, province of Zamboanga del Sur 1 and of five (5) bridges in the
Malangas-Ganyangan Road. Finding difficulty in accomplishing both projects, Bartolome Puzon sought the financial
assistance of the plaintiff, William Uy. As an inducement, Puzon proposed the creation of a partnership between them
which would be the sub-contractor of the projects and the profits to be divided equally between them. William Uy
inspected the projects in question and, expecting to derive considerable profits therefrom, agreed to the proposition, thus
resulting in the formation of the "U.P. Construction Compan which was subsequently engaged as subcontractor of the
construction projects.

The partners agreed that the capital of the partnership would be P100,000.00 of which each partner shall contribute the
amount of P50,000.00 in cash. 5 But, as heretofore stated, Puzon was short of cash and he promised to contribute his share
in the partnership capital as soon as his application for a loan with the Philippine National Bank in the amount of
P150,000.00 shall have been approved. However, before his loan application could be acted upon, he had to clear his
collaterals of its incumbrances first. For this purpose, Wilham Uy gave Bartolome Puzon the amount of P10,000.00 as
advance contribution of his share in the partnership to be organized between them under the firm name U.P.
CONSTRUCTION COMPANY which amount mentioned above will be used by Puzon to pay his obligations with the
Philippine National Bank to effect the release of his mortgages with the said Bank. On October 29, 1956, William Uy
again gave Puzon the amount of P30,000.00 as his partial contribution to the proposed partnership and which the said
Puzon was to use in payment of his obligation to the Rehabilitation Finance Corporation. 7 Puzon promised William Uy
that the amount of P150,000.00 would be given to the partnership to be applied thusly: P40,000.00, as reimbursement of
the capital contribution of William Uy which the said Uy had advanced to clear the title of Puzon's property; P50,000.00,
as Puzon's contribution to the partnership; and the balance of P60,000.00 as Puzon's personal loan to the partnership. 8

Although the partnership agreement was signed by the parties on January 18, 1957,work on the projects was started by the
partnership on October 1, 1956 in view of the insistence of the Bureau of Public Highways to complete the project right
away. 10 Since Puzon was busy with his other projects, William Uy was entrusted with the management of the projects and
whatever expense the latter might incur, would be considered as part of his contribution. 11 At the end of December, 1957,
William Uy had contributed to the partnership the amount of P115,453.39, including his capital. 12

The loan of Puzon was approved by the Philippine National Bank in November, 1956 and he gave to William Uy the
amount of P60,000.00. Of this amount, P40,000.00 was for the reimbursement of Uy's contribution to the partnership
which was used to clear the title to Puzon's property, and the P20,000.00 as Puzon's contribution to the partnership
capital. 13

To guarantee the repayment of the above-mentioned loan, Bartolome Puzon, without the knowledge and consent of
William Uy, assigned to the Philippine National Bank all the payments to be received on account of the contracts with the
Bureau of Public Highways for the construction of the afore-mentioned projects. By virtue of said assignment, the Bureau
of Public Highways paid the money due on the partial accomplishments on the government projects in question to the
Philippine National Bank which, in turn, applied portions of it in payment of Puzon's loan. Of the amount of
P1,047,181.07, released by the Bureau of Public Highways in payment of the partial work completed by the partnership
on the projects, the amount of P332,539.60 was applied in payment of Puzon's loan and only the amount of P27,820.80
was deposited in the partnership funds, which, for all practical purposes, was also under Puzon's account since Puzon was
the custodian of the common funds.

As time passed and the financial demands of the projects increased, William Uy, who supervised the said projects, found
difficulty in obtaining the necessary funds with which to pursue the construction projects. William Uy correspondingly
called on Bartolome Puzon to comply with his obligations under the terms of their partnership agreement and to place, at
lest, his capital contribution at the disposal of the partnership. Despite several promises, Puzon, however, failed to do
so. Realizing that his verbal demands were to no avail, William Uy consequently wrote Bartolome Puzon formal letters of
demand, to which Puzon replied that he is unable to put in additional capital to continue with the projects.
Failing to reach an agreement with William Uy, Bartolome Puzon, as prime contractor of the construction projects, wrote
the subcontractor, U.P. Construction Company, on November 20, 1957, advising the partnership, of which he is also a
partner, that unless they presented an immediate solution and capacity to prosecute the work effectively, he would be
constrained to consider the sub-contract terminated and, thereafter, to assume all responsibilities in the construction of the
projects in accordance with his original contract with the Bureau of Public Highways. On November 27, 1957, Bartolome
Puzon again wrote the U.P.Construction Company finally terminating their subcontract agreement as of December 1,
1957.

Thereafter, William Uy was not allowed to hold office in the U.P. Construction Company and his authority to deal with
the Bureau of Public Highways in behalf of the partnership was revoked by Bartolome Puzon who continued with the
construction projects alone. 22

On May 20, 1958, William Uy, claiming that Bartolome Puzon had violated the terms of their partnership agreement,
instituted an action in court, seeking the dissolution of the partnership and payment of damages.

Answering, Bartolome Puzon denied that he violated the terms of their agreement claiming that it was the plaintiff,
William Uy, who violated the terms thereof. He, likewise, prayed for the dissolution of the partnership and for the
payment by the plaintiff of his, share in the losses suffered by the partnership.

Issue:
Whether or not Puzon is guilty of breach of contract. (Yes)
Ruling:
Yes, the findings of the trial court that the appellant failed to contribute his share in the capital of the partnership is clear
incontrovertible. The record shows that after the appellant's loan the amount of P150,000.00 was approved by the
Philippine National Bank in November, 1956, he gave the amount P60,000.00 to the appellee who was then managing the
construction projects. Of this amount, P40,000.00 was to be applied a reimbursement of the appellee's contribution to the
partnership which was used to clear the title to the appellant's property, and the balance of P20,000.00, as Puzon's
contribution to the partnership. Thereafter, the appellant failed to make any further contributions the partnership funds as
shown in his letters to the appellee wherein he confessed his inability to put in additional capital to continue with the
projects.
Parenthetically, the claim of the appellant that the appellee is equally guilty of not contributing his share in the partnership
capital inasmuch as the amount of P40,000.00, allegedly given to him in October, 1956 as partial contribution of the
appellee is merely a personal loan of the appellant which he had paid to the appellee, is plainly untenable. The terms of
the receipts signed by the appellant are clear and unequivocal that the sums of money given by the appellee are appellee's
partial contributions to the partnership capital.
The findings of the trial court that the appellant misapplied partnership funds is, likewise, sustained by competent
evidence. It is of record that the appellant assigned to the Philippine National Bank all the payments to be received on
account of the contracts with the Bureau of Public Highways for the construction of the aforementioned projects to
guarantee the repayment of the bank. By virtue of the said appellant's personal loan with the said bank assignment, the
Bureau of Public Highways paid the money due on the partial accomplishments on the construction projects in question to
the Philippine National Bank who, in turn, applied portions of it in payment of the appellant's loan.
That the assignment to the Philippine National Bank prejudicial to the partnership cannot be denied. The appellant
Bartolome Puzon received from the Bureau of Public highways, in payment of the work accomplished on the construction
projects, the amount of P1,047,181.01, which amount rightfully and legally belongs to the partnership by virtue of the
subcontract agreements between the appellant and the U.P. Construction Company. In view of the assignment made by
Puzon to the Philippine National Bank, the latter withheld and applied the amount of P332,539,60 in payment of the
appellant's personal loan with the said bank. For sure, if the appellant gave to the partnership all that were earned and due
it under the subcontract agreements, the money would have been used as a safe reserve for the discharge of all obligations
of the firm and the partnership would have been able to successfully and profitably prosecute the projects it subcontracted.
 _____________________________________________________________________________
20. LIWANAG vs. THE HON. COURT OF APPEALS
FACTS:
Petitioner Carmen Liwanag and Thelma Tabligan went to the house of complainant Isidora Rosales and asked her to
join them in the business of buying and selling cigarette, which Rosales readily agreed. Under the agreement, Rosales
would give the money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents, with a
corresponding 40% commission; otherwise the money would be returned to Rosales. Rosales gave several cash advances
to Liwanag and Tabligan amounting to P633,650.00.
During the first two months, Liwanag and Tabligan made periodic visits to Rosales to report on the progress of the
transactions. However, the visits suddenly stopped and Rosales was no longer able to obtain information regarding the
business. Alarmed by this, and believing that the amounts she advanced were being misappropriated, Rosales filed a case
of estafa against Liwanag.
The trial court rendered a decision, finding Liwanag guilty as charged and was ordered to reimburse the sum of
P526,650 to the private complainant.
Liwanag in her petition advances the theory that the intention of the parties was to enter into a contract of
partnership, wherein Rosales would contribute the funds while she would buy and sell the cigarettes, and later divide the
profits between them. She also argues that the transaction can also be interpreted as a simple loan, with Rosales lending to
her the amount stated on an installment basis.
However the motion for reconsideration was denied by the Court of Appelas. Hence the petition.
ISSUE:
Whether or not there was a Contract of Partnership between Petitioner and Respondent
HELD:
NO. The language of the receipt signed by Liwanag could not be any clearer. It indicates that the money delivered to
her was for a specific purpose, that is, for the purchase of cigarettes, and in the event the cigarettes cannot be sold, the
money must be returned to Rosales.
Thus, even assuming that a contract of partnership was indeed entered into by and between the parties, the Court
ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such partner is guilty of estafa.
Neither can the transaction be considered a loan, since in a contract of loan once the money is received by the debtor,
ownership over the same is transferred. Being the owner, the borrower can dispose of it for whatever purpose he may
deem proper.
In the instant petition, however, it is evident that Liwanag could not dispose of the money as she pleased because it
was only delivered to her for a single purpose, namely, for the purchase of cigarettes, and if this was not possible then to
return the money to Rosales. Since in this case there was no transfer of ownership of the money delivered, Liwanag is
liable for conversion under Art. 315, par. 1(b) of the Revised Penal Code.
WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals dated November 29, 1993,
is AFFIRMED.Costs against petitioner.
SO ORDERED.
_____________________________________________________________________________
21. THE UNITED STATES, plaintiff-appellee, vs. EUSEBIO CLARIN, defendant-appellant.
G.R. No. 5840 September 17, 1910 ARELLANO, C.J.:

"The P172 having been received by the partnership, the business commenced and profits accrued, the action that lies with
the partner who furnished the capital for the recovery of his money is not a criminal action for estafa, but a civil one
arising from the partnership contract for a liquidation of the partnership and a levy on its assets if there should be any."
Facts:

Pedro Larin (with Eusebio Clarin and Carlos De Guzman) delivered to Pedro Tarud P172, in order that the latter might
buy and sell mangoes. Believing that he could make money in such business, Larin made an agreement with the other
three men by which the profits were to be divided equally amongst them.

Tarug, Clarin and de Guzman trade in the mangoes and obtained P203, but they did not comply with the terms of the
contract by delivering to Larin his half of the profits, neither did they render him any account of the capital.

Larin charged the three of them the crime of estafa, however the fiscal only filed the information against Clarin where he
was accused of appropriating to himself the P172 and the share of profit of P15.50 that belonged to Larin.

The trial court sentenced Clarin, to six months' arresto mayor, to suffer the accessory penalties, and to return to Pedro
Larin P172, besides P30.50 as his share of the profits, or to subsidiary imprisonment in case of insolvency, and to pay the
costs.

Issue:
WON a criminal action for estafa is proper against a co-partner who failed to deliver half of the profits of the partnership
(NO)

Ruling:
No. When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and Guzman, he invested his
capital in the risks or benefits of the business of the purchase and sale of mangoes, and, even though he had reserved the
capital and conveyed only the usufruct of his money, it would not devolve upon of his three partners to return his capital
to him, but upon the partnership of which he himself formed part, or if it were to be done by one of the three specifically,
it would be Tarug, who, according to the evidence, was the person who received the money directly from Larin. The P172
having been received by the partnership, the business commenced and profits accrued, the action that lies with the partner
who furnished the capital for the recovery of his money is not a criminal action for estafa, but a civil one arising from the
partnership contract for a liquidation of the partnership and a levy on its assets if there should be any.

No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "who, to the prejudice of another,
shall appropriate or misapply any money, goods, or any kind of personal property which they may have received as a
deposit on commission for administration or in any other character producing the obligation to deliver or return the same,"
(as, for example, in commodatum, precarium, and other unilateral contracts which require the return of the same thing
received) does not include money received for a partnership; otherwise the result would be that, if the partnership, instead
of obtaining profits, suffered losses, as it could not be held liable civilly for the share of the capitalist partner who reserved
the ownership of the money brought in by him, it would have to answer to the charge of estafa, for which it would be
sufficient to argue that the partnership had received the money under obligation to return it.

______________________________________________________________________________________

22. EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA
ATIENZA ABAD SANTOS, petitioners, v. ESTRELLA ABAD SANTOS, respondent.
G.R. No. L-31684 June 28, 1973 Makalintal, J.

DOCTRINE OF THE CASE:

An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if
he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he
may have obtained in violation of this provision, with a right to damages in either case.

FACTS:
In 1954, a co-partnership was formed under the name of "Evangelista & Co." In 1955 the Articles of Co-partnership was
amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with petitioners Domingo C.
Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that
capacity, with a contribution of P17,500 each. The amended Articles provided, that "the contribution of Estrella Abad
Santos consists of her industry being an industrial partner", and that the profits and losses "shall be divided and distributed
among the partners ... in the proportion of 70% for the first three partners, Domingo C. Evangelista, Jr., Conchita P.
Navarro and Leonardo Atienza Abad Santos to be divided among them equally; and 30% for the fourth partner Estrella
Abad Santos."

In 1963, respondent Santos filed suit against the three other partners in the Court of First Instance of Manila, alleging that
the partnership, had been paying dividends to the partners except to her; and that notwithstanding her demands the
defendants had refused and continued to refuse and let her examine the partnership books or to give her information
regarding the partnership affairs to pay her any share in the dividends declared by the partnership. She prayed that the
defendants be ordered to render accounting to her of the partnership business and to pay her corresponding share in the
partnership profits after such accounting, plus attorney's fees and costs.

The defendants, 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; defendants also 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; and that her share of 30% was to be based
on the profits which might be realized by the partnership only until full payment of the loan which it had obtained in
December, 1955 from the Rehabilitation Finance Corporation in the sum of P30,000, for which the plaintiff had signed a
promisory note as co-maker and mortgaged her property as security.

The parties are in agreement that the main issue in this case is " by the partnership from June 7, 1955 until the mortgage
loan from the Rehabilitation Finance Corporation shall be fully paid, as claimed by appellants (herein petitioners)."

The Court of First Instance, in resolving whether the plaintiff-appellee (respondent here) is an industrial partner as
claimed by her or merely a profit sharer entitled to 30% of the net profits that may be realized, found for the plaintiff and
rendered judgement "declaring her an industrial partner of Evangelista & Co.; ordering the defendants to render an
accounting of the business operations of the partnership; to pay the plaintiff such amounts as may be due as her share in
the partnership profits and/or dividends after such an accounting has been properly made; to pay plaintiff attorney's fees in
the sum of P2,000.00 and the costs of this suit." The defendants appealed to the Court of Appeals, which thereafter
affirmed judgments of the court a quo. Hence this petition.

ISSUE:
Whether or not the Abad Santos is an industrial partner of the partnership

RULING:
YES. Even as she was and still is a Judge of the City Court of Manila, she has rendered services for appellants without
which they would not have had the wherewithal to operate the business for which appellant company was organized.
Article 1767 of the New Civil Code which provides that "By 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,
'does not specify the kind of industry that a partner may thus contribute, hence the said services may legitimately be
considered as appellee's contribution to the common fund. Another article of the same Code relied upon appellants reads:

'ART. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits
him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail
themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in
either case.'

It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any
conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner
with this prestation. There is no pretense, however, even on the part of the appellee is engaged in any business
antagonistic to that of appellant company, since being a Judge of one of the branches of the City Court of Manila can
hardly be characterized as a business.

What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant
company, with the right to demand for a formal accounting and to receive her share in the net profit that may result from
such an accounting, which right appellants take exception under their second assigned error. Our said holding is based on
the following article of the New Civil Code:

'ART. 1899. 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 circumstance render it just and reasonable.
_________________________________________________________________________________________

23. JOSUE SONCUYA v. CARMEN DE LUNA

FACTS:
Petitioner filed a complaint against respondent for damages as a result of the fraudulent administration of the
partnership, “Centro Escolar de Senoritas” of which petitioner and the deceased Avelino Librada were members. For the
purpose of adjudicating to plaintiff damages which he alleges to have suffered as a partner 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.
ISSUE:
Whether the petitioner is entitled to damages?
RULING:
The Court held that the complaint is not sufficient to constitute a cause of action on the part of the plaintiff as
member of the partnership to collect damages from defendant as managing partner thereof, without previous liquidation.
Thus, for a partner to be able to claim from another partner who manages the general co-partnership, allegedly suffered by
him by reason of the fraudulent administration of the latter, a previous liquidation of said partnership is necessary.
______________________________________________________________________________
24) PEDRO MARTINEZ vs. ONG PONG CO and ONG LAY (January 10, 1910 ARELLANO, C.J.)
The failure to fulfill an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for
which he has rendered no accounting, such agent is responsible only for the losses.
FACTS:
Plaintiff delivered P1,500 to the defendants who, in a private document, acknowledged that they had received the
same with the agreement "that we are to invest the amount in a store, the profits or losses of which we are to divide with
the former, in equal shares."
Plaintiff filed a complaint to compel the defendants to render him an accounting of the partnership as agreed to, or
else to refund him the P1,500. Ong Pong Co admitted the fact of the agreement and the delivery of the P1,500, but he
alleged that Ong Lay (deceased) was the one who had managed the business, and that nothing had resulted therefrom save
the loss of the capital of P1,500, to which loss the plaintiff agreed.
CFI of Manila ordered Ong Pong Co to return to the plaintiff one-half of the capital of P1,500 (P750) he had
received from the plaintiff, plus P90 as one-half of the profits, calculated at the rate of 12%/annum for the six months that
the store was supposed to have been open, making a total of P840, with legal interest rate of 6%/annum, from the 12 June
1901, when the business terminated, until the full payment thereof. Ong Pong Co appealed due to the fact that there were
losses/the closing of the store due to ejectment from the premises occupied by it.

ISSUE:
Whether or not respondents are liable as agents of the company and are obliged to refund the money that they
received. (YES)

RULING:
 The defendants received a certain capital from the plaintiff for organizing a company and were to handle the said
money and invest it in a store (object). They failed to fulfill the obligation of a partner who acted as an agent (agent
because there was no special agreement vesting in one sole person the management of the business) in receiving money
for a given purpose, for which he has rendered no accounting, such agent is responsible for the losses which he incurred.
Art. 1688 is applicable (no other money than that contributed as is involved). Article 1138 of the Civil Code has
been invoked (debts of a partnership where the obligation is not a joint one), as is likewise provided by article 1723
(liability of two or more agents with respect to the return of the money that they received from their principal).
Judgment appealed from is affirmed, provided that the defendant Ong Pong Co shall only pay the plaintiff the
sum of P750 with the legal interest rate of 6%/per annum from the time of the filing of the complaint (April 25, 1907) and
the costs.

Note: The court finds no evidence that the entire capital or any part was lost. With regard to the possible profits,
the court does not find that the amount thereof has been proven, nor deem it possible to estimate them to be a certain sum;
hence, it can not admit the 12%/annum for the period of six months.
______________________________________________________________________________
25. JUAN AGUSTIN, ET AL., plaintiffs;VICTOR DEL ROSARIO, appellant, vs.
BARTOLOME INOCENCIO, defendant-appellee

FACTS:

The parties to this controversy, who had been conducting a partnership as industrial partners without capital,
contributed from its profits the sum of P807.28 as a fund toward the construction of a casco for use in their business, to
which they added P3, 500, borrowed from Maria del Kosario, the wife of the defendant, Bartolome Inocencio, he being
the managing partner. During the construction, the defendant f P2, 024.49 to complete the work. The note passed into the
hands of the defendant by reason of the successive deaths of his wife and of their only child, each without debts, and for
the amount thereof he became a creditor, subject, however, to the deduction therefrom of his proportionate part of the
indebtedness.

Issue: WON defendant is a creditor of plaintiffs?

Ruling:

No. Trial court treated his claim on this note, as well as the sum of P2,024.49 furnished by him, as an addition to
his capital in the firm, rather than as a loan. If considered as a loan, this sum would place the defendant as a creditor in a
stronger position as against his associates than if regarded as a mere contribution to capital. Thus, it is rather beneficial
that the note be considered as contribution to the capital other than a debt by the partnership.

______________________________________________________________________________
26. Ramnani vs. Court of Appeals

We have here a situation where two brothers engaged in a business venture, with one furnishing the capital, and the other
contributing his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment
and efforts.

FACTS:
Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood. Ishwar and his
spouse Sonya had their main business based in New York. Realizing the difficulty of managing their investments in the
Philippines they executed a general power of attorney on appointing Navalrai and Choithram as attorneys-in-fact,
empowering them to manage and conduct their business concern in the Philippines.Spouses Ishwar supplied the capital of
$150,000.00 for the business. Choithram, in his capacity as aforesaid attorney-in-fact of Ishwar, entered into two
agreements for the purchase of two parcels of land located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd.
Partnership (Ortigas for short). with a total area of approximately 10,048 square meters. Choithram paid the down
payment and installments on the lot with his personal checks. A building was constructed thereon by Choithram and this
was occupied and rented by Jethmal Industries and a wardrobe shop called Eppie’s Creation. Three other buildings were
built thereon by Choithram through a loan of P100,000.00 obtained from the Merchants Bank as well as the income
derived from the first building. The buildings were leased out by Choithram as attorney-in-fact of Ishwar. Two of these
buildings were later burned. Ishwar asked Choithram to account for the income and expenses relative to these properties
during the period 1967 to 1970. Choithram failed and refused to render such accounting. As a consequence, on February
4, 1971, Ishwar revoked the general power of attorney. Choithram and Ortigas were duly notified of such revocation.
Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Ishwar and Sonya in
favor of his daughter-in-law, Nirmla Ramnani. Upon complete payment of the lots, Ortigas executed the 6 corresponding
deeds of sale in favor of Nirmla.

Ishwar and Sonya (spouses Ishwar for short) filed a complaint in the Court of First Instance of Rizal against Choitram
and/or spouses Nirmla and Moti (Choithram, et al. for brevity) and Ortigas for reconveyance of said properties or payment
of its value and damages.

ISSUE:
Whether or not a partnership was formed between Choitram and Ishwar?

RULING:
Yes. Under the peculiar circumstances of this case and despite the fact that Choithram, et al., have committed acts
which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties
in litigation, the Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the
industrial partner in the acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist partner
in the joint venture. The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They
entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For this purpose they
appointed Choithram as their attorney-in-fact. Choithram in turn decided to invest in the real estate business. He bought
the two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he
paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the
buildings were burned later, Choithram was able to build two other buildings on the property. He rented them out and
collected the rentals. Through the industry and genius of Choithram, Ishwar’s property was developed and improved into
what it is now a valuable asset worth millions of pesos. As of the last estimate in 1985, while the case was pending before
the trial court, the market value of the properties is no less than P22,304,000.00. It should be worth much more today. We
have a situation where two brothers engaged in a business venture. One furnished the capital, the other contributed his
industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts.
Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would
end up the loser. After all, blood is thicker than water.
______________________________________________________________________________
27. Garcia Don V. Compania

FACTS:

Plaintiff was employed as foreman by one Genaro Ansuategui, the local manager of certain mines of the
defendant company. He filed an action brought to recover from the defendant the sum of 9,558 1/3 Spanish pesetas for
services rendered. However, The defendant averred that it had never received such services of the plaintiff and denied the
fact of the employment. To support such claim he said that it does not appear from the books of the company that the
plaintiff was employed by the defendants, or that any record of the employment was forwarded to the central office in
Manila.

Counsel for the defendant company insists, however, that, granting that the plaintiff did in fact work in the mines of the
defendant company and was employed by its local manager, nevertheless, defendant is not indebted to the plaintiff for
these service, because the local manager at the mines was not authorized to enter into the alleged contract of employment,
such authority not having been granted to him under his letter of instructions, a copy of which appears in the record. Trial
judge ruled in favor of plaintiff.

ISSUE:
Whether or not defendant is authorized to enter into alleged contract of employment (YES)
RULING:
YES. Letter of instruction states that:

"The salaries which it is said are paid to the faginantes and the excess of employees for little work is also a waste. The
necessary employees should be kept and paid reasonably, and he who is not needed [satisfied], let him go. The cutting of
logs and wood of all kinds ought to be done by contract, and the persons employed in digging the barracones and other
work at wages which your good judgment may dictate, but on account permitting abuses.

We trust you to correct and supply (subsanar) anything which is not noted herein, in accordance with your good judgment,
and finally we urgently request that you keep us informed of everything."

It is of no doubt that Genaro Ansuategui was fully and expressly authorized by the terms of this letter of instructions to
enter into the alleged contract of employment with the plaintiff on behalf of the defendant company.
______________________________________________________________________________

28. TAI TONG CHUACHE & CO., petitioner, v.

THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.
G.R. No. L-55397 February 29, 1988 Gancayco, J.

―Article 1800 provides that a managing partner may execute all acts of administration‖---it includes right to sue debtors
of the partnership in case of their failure to pay their obligations when it became due and demandable (in this case, Chua
is a managing partner or at the very least, a partner who is also an agent who acted for and in behalf of Tai Tong.)

FACTS:

Azucena Palomo acquired a parcel of land at San Rafael, Davao City. They assumed the mortgage of the building
in favour of SSS which building was insured with SSS Acredited Group of Insurers for P25k

On 19 April 1975, Azucena Palomo obtained a P100k loan from Tai Tong Chuache Inc. and secured it by
mortgaging the said land and building to Tai Tong Chuache Co. On April 25, Arsenio Chua(representative of Tai Tong)
insured Tai Tong’s interest with Travellers Multi-Indemnity Corp for 100,000. (70k for the building, 30k for the land)

On 11 June 1975, Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000. with Zenith
Insurance Corp. and 5 days after, secured another from Philippine British Assurance Company covering another P50k for
the building and 70k for the contents thereof.

On 31 July 1975, the building and the contents were razed by fire.

Based on the computation of the loss, including the Travellers, respondents Zenith, PBAC, and SSS were liable
and the three paid their shares of the loss. Complainants thereafter demanded from Travellers its share but the latter
refused. So, they instead demanded from the PBAC, Zenith, and SSS the balance of each share in the loss in the amount
of P30,894.31 (Herein to be shared by Zenith,PBAC, and SSS). The companies refused.

Hence, the complainants filed with the Insurance Commission and Tai Tong intervening herein asserting its claim
in the insurance.

Travellers admitted the policy and as affirmative defense, it claimed that the policy was secured by Chua in his
name and he was also the one who paid premiums and therefore, they are not bound to pay Tai Tong.

The IC absolved Travellers from liability on the basis of certification issued by CFI in another case that Arsenio
Chua stands as the complainant and not Tai Tong. From that evidence, IC inferred that the credit extended by Tai Tong
must have been paid and thus, Tai Tong’s insurable interest ceased as a consequence of the payment as inferred by IC.
Hence, the appeal.

ISSUE/s:

1. Whether Tai Tong Chuache has insurable interest as mortgagee thereof (YES)
RULING: YES.

The Court pointed out that IC’s decision was wrong as it erroneously interpreted CFI’s decision to mean that the
Tai Tong has already been paid since Arsenio Chua stood there as the complainant and not Tai Tong.

In contrast, Court ruled that Tai Tong’s presentation of the mortgage contract is sufficient and it need not prove
that it was not paid. Also, the Court observed that Travellers did not assail the validity of Tai Tong’s insurance policy and
that Tai Tong’s claim of non-payment was actually not paid was backed by Azucena who testified that she has not paid.

(RELEVANT TO THE TOPIC)

-IC argued that “if the civil case really stemmed from the loan granted to Azucena Palomo by Tai Tong the same
should have been brought by Tai Tong Chuache or by its representative in its own behalf. From the above premise
respondent concluded that the obligation secured by the insured property must have been paid.”

SC ruled that the conclusion was wrong. It should be borne in mind that petitioner being a partnership may sue and be
sued in its name or by its “duly authorized representative”.

The fact that Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner's declaration that
Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated by respondent insurance company.

Thus, Chua as the managing partner of the partnership may execute all acts of administration including the right
to sue debtors of the partnership in case of their failure to pay their obligations when it became due and demandable.

Or at the very least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the
partnership. Being an agent, it is understood that he acted for and in behalf of the firm.

Public respondent's allegation that the civil case filed by Arsenio Chua was in his capacity as personal creditor of
spouses Palomo has no basis. Thus, with Travellers’ policy not being assailed coupled with its failure to prove Tai Tong’s
lack of insurable interest, then it shall be liable to the said policy (P100k).

______________________________________________________________________________

29. JOHN FORTIS vs. GUTIERREZ HERMANOS

o GR: Receipt by a person of share of profits of business is prima facie evidence that he is a partner

XPN: Profit was for payment as wages of employee.

o It is the net profit, after all expenses (including salary of employee) have been deducted that is shared
between partners.

FACTS:
Fortis is an employee of Gutierrez Hermanos from 1900-1902. He brought an action to recover a balance of his salary for
the year 1902 which he claims was due to him. He alleged that he was entitled, as salary, to 5% of the net profits of the
business of Gutierrez Hermanos for said year. The complaint also contained a cause of action for the sum of 600 pesos,
money expended by him for Gutierrez Hermanos during the year 1903.
The court ruled in favor of Fortis and held that the 5% net profits for 1902 amounted to 26,378.68 Mexican Pesos (MP),
but he received on account of such salary only MP 12,811.75. Thus, the court ordered Gutierrez Hermanos to pay Fortis
the reduced sum of MP 13,025.40.
Gutierrez Hermanos moved for a new trial, which was denied. Hence, the petition/
ISSUE:
Whether or not Fortis is a co-partner.
RULING:
NO. The relationship between Fortis and Gutierrez Hermanos arose from a mere contract of employment. Fortis neither
had any voice nor vote in the management of the affairs of the partnership. The fact that the compensation received by
him was to be determined with reference to the profits made by the Gutierrez Hermanos in their business did not in any
sense make him a partner. Moreover, the articles of partnership stated that the profits should be divided among the
partners named in a certain proportion. The contract made between the Fortis and Miguel Alonzo Gutierrez (manager of
Gutierrez Hermanos) did not modify nor amend said provision in the articles of partnership.
Furthermore, the profits of the business could not be determined until all of the expenses had been paid. A part of the
expenses to be paid for the year 1902 was the salary of the plaintiff. That salary had to be deducted before the net profits
of the business, which were to be divided among the partners, could be ascertained. It was necessary to determine what
the profits of the business were after paying all of the expenses except his, in order to determine what the salary of the
Fortis was. But such determination does not arrive at the net profits of the business yet. It was only made for the purpose
of fixing the basis upon which his compensation should be determined.
______________________________________________________________________________
30. E. M. BACHRACH v."LA PROTECTORA", ET AL.

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. In the body of the note the word "I" (yo) instead of "we"
(nosotros) is used before the words "promise to pay" (prometemos) used in the printed form. It is plain that the singular
pronoun here has all the force of the plural.
As preliminary purchase of the trucks, the defendants executed in due form a document in which they declared
that they were members of the firm "La Protectora" and that they had granted to its president full authority "in the name
and representation of said partnership to contract for the purchase of two automobiles." The document in question was
delivered by him to Bachrach at the time the automobiles were purchased. Marcelo Barba purchased of the plaintiff
various automobile effects and accessories to be used in the business of "La Protectora and upon May 21, 1914, the
indebtedness resulting from these additional purchases amounted to the sum of P2,916.57
Bachrach foreclosed a chattel mortgage on the trucks but there was still balance. To recover the balance, action
was instituted against the defendants. CFI rendered judgment against the defendants.
ISSUES:
1. Whether or not the defendants are liable personally to the partnership’s debts. (NO)
2. Whether or not Barba had authority to incur expenses for the partnership. (YES)

RULING:
 1. The transaction by which Barba secured these trucks was in conformity with the tenor of this document. The
promissory notes constitute the obligation exclusively of "La Protectora" and of Marcelo Barba; and they do not in any
sense constitute an obligation directly binding on the four appellants. Their liability is based on the fact that they are
members of the civil partnership and as such are liable for its debts. It is true that article 1698 of the Civil Code declares
that a member of a civil partnership is not liable in solidum (solidariamente) with his fellows for its entire indebtedness
The Court thinks that the document referred to was intended merely as an authority to enable Barba to bind the
partnership and that the parties to that instrument did not intend thereby to confer upon Barba an authority to bind them
personally. It is obvious that the contract which Barba in fact executed in pursuance of that authority did not by its terms
profess to bind the appellants personally at all, but only the partnership and himself. It
2. 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. The authority of Marcelo
Barba to bind the partnership, in the purchase of the trucks, is fully established by the document executed by the four
appellants upon June 12, 1913.
______________________________________________________________________________
31. THE GREAT COUNCIL OF THE UNITED STATES OF THE IMPROVED ORDER OF RED MEN,
plaintiff-appellee, v. THE VETERAN ARMY OF THE PHILIPPINES, defendant-appellant.
G.R. No. 3186 March 7, 1907 Willar, J.

DOCTRINE OF THE CASE:

The 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.

FACTS: This case involves the Veteran Army of the Philippines. On March 1, 1903, a contract of lease of parts of 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 (signing 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, 1903, and ending February 28, 1905. The Lawton Post
occupied the subject premises 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 by
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, defendant has appealed. The
plaintiff did not appeal from the judgment acquitting defendant McCabe of the complaint.

It is claimed by the Veterans Army that the action cannot be maintained by the Council Red Men as The Veterans Army
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.

ISSUES: Whether or not the Veterans Army is liable?

RULING: No. Council Red Men must show that the contract of lease was authorized by the Veterans Army. It is
necessary for the appellee (Council Red Men) to prove that the contract in question was executed by someone 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 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.

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.

NOTE: Whether a fraternal society, such as the Veteran Army of the Philippines, is a civil partnership is not decided.
______________________________________________________________________________
32) JOSE MACHUCA vs. CHUIDIAN, BUENAVENTURA & CO.
(G.R. No. 1011 May 13, 1903 LADD, J.)
The assignment by its terms is not to take effect until all the liabilities of the partnership have been discharged and
nothing remains to be done except to distribute the assets, if there should be any, among the partners.
FACTS:
The defendants are a regular general partnership, as a continuation of a prior partnership of the same name. The
original partners (1882) were D. Telesforo Chuidian, Doña Raymunda Chuidian, Doña Candelaria Chuidian, and D.
Mariano Buenaventura. The capital was fixed in the partnership agreement at P16,000 pesos, the first three partners
contributed 50,000 pesos each, and the last P10,000 and it was stipulated that the liability of the partners should be
"limited to the amounts brought in by them to form the partnership stock."

Doña Raymunda Chuidian retired from the partnership on November 4, 1885 and it subsequently went into
liquidation, and it does not appear that the liquidation had been terminated when this action was brought. On January 1,
1894, D. Mariano Buenaventura died, his estate passing by will to his children, among whom was D. Vicente
Buenaventura.

D. Vicente Buenaventura executed a public instrument in which he "assigns to D. Jose Gervasio Garcia . . . a 25%
share in all that may be obtained by whatever right in whatever form from the liquidation of the partnership of Chuidian,
Buenaventura & Co., in the part pertaining to him in said partnership”.

The liquidator of the partnership declined to record in the books of the partnership the plaintiff's claim under the
assignment as a credit due to him, this action is brought to compel such record to be made, and the plaintiff further asks
that he be adjudicated to be a creditor of the partnership in an amount equal to 25% of D. Vicente Buenaventura's share.

The court below held that plaintiff is entitled not only to have the credit assigned him recorded in the books of the
partnership but also to receive forthwith 25% of amount representing the share of D. Vicente Buenaventura.

ISSUE:
WON Machuca is entitled to D. Vicente Buenaventura’s 25% share in the partnership. (NO)

RULING:
The clause 19 of the partnership agreement stipulated that "upon the dissolution of the company, the pending
obligations in favor of outside parties should be satisfied, the funds of the minors Jose and Francisco Chuidian (it does not
appear what their interest in the partnership was or when or how it was acquired) should be taken out, and afterwards the
resulting balance of the account-current of each one of those who had put in money (imponentes) should be paid."

It follows that D. Vicente, whose rights are those of his father is not entitled to receive any part of the assets until
the creditors who are nonpartners and the Chuidian minors are paid. Whatever rights he had either as creditor or partner,
he could only transfer subject to this condition. The assignment by its terms is not to take effect until all the liabilities of
the partnership have been discharged and nothing remains to be done except to distribute the assets, if there should be any,
among the partners. (The assignment does not purport to transfer an interest in the partnership, but only a future
contingent right to 25% of such portion.)

The plaintiff will be entitled to receive from the assets of the partnership, if any remain, at the termination of the
liquidation, 25% of D. Vicente's resulting interest, both as partner and creditor. However, nothing in the case show either
that the nonpartner creditors of the partnership have been paid or that the claims of the Chuidian minors have been
satisfied.
______________________________________________________________________________
33. ANTONIO PARDO v. THE HERCULES LUMBER CO., INC., and IGNACIO FERRER
GR No. L-22442, August 1, 1924
It may be admitted that the officials in charge of a corporation may deny inspection when sought at unusual hours or
under other improper conditions; but neither the executive officers nor the board of directors have the power to deprive a
stockholder of the right altogether. A by-law unduly restricting the right of inspection is undoubtedly invalid2.
FACTS:
Antonio Pardo, a stockholder in the Hercules Lumber Company, was denied of his right to inspect the records and
business transactions of said company by Ignacio Ferrer, the acting secretary.
In the company’s defense, it said that Article 10 of its by-laws declared that every shareholder may examine the
books of the company and other documents pertaining to the same upon the days which the board of directors shall
annually fix.
The respondent company further stated that the resolution constitutes a lawful restriction on the right conferred by
statute, and it is insisted that as the petitioner has not availed himself of the permission to inspect the books and
transactions of the company within the ten days, his right to inspection and examination is lost, at least for this year.
ISSUE:
Whether or not Article 10 of the company’s by-laws is valid. (NO)
RULING:
NO. The general right given by the statute may not be lawfully abridged to the extent attempted in this resolution.
It may be admitted that the officials in charge of a corporation may deny inspection when sought at unusual hours or
under other improper conditions; but neither the executive officers nor the board of directors have the power to deprive a
stockholder of the right altogether. A by-law unduly restricting the right of inspection is undoubtedly invalid.
It will be noted that our statute declares that the right of inspection can be exercised "at reasonable hours." This
means at reasonable hours on business days throughout the year, and not merely during some arbitrary period of a few
days chosen by the directors.
______________________________________________________________________________
34. PANG LIM and BENITO GALVEZ, plaintiffs-appellees, v. LO SENG, defendant-appellant.
One partner cannot, to the detriment of another, apply exclusively to his own benefit the results of the knowledge
and information gained in the character of partner.

FACTS: Lo Seng and Pang Lim, Chinese residents of the City of Manila, were partners, under the firm name of Lo Seng
and Co., in the business of running a distillery, known as "El Progreso," in the Province of Bulacan. The land on which
said distillery is located as well as the buildings and improvements belonged to the Lo Yao who resides in Hongkong,
who, in September, 1911, leased the same to the firm of Lo Seng and Co. for the term of three years. Upon the expiration
of this lease a new written contract, in the making of which Lo Yao was represented by one Lo Shui as attorney in fact,
became effective whereby the lease was extended for fifteen years. June 1, 1916, Pang Lim sold all his interest in the
distillery to his partner Lo Seng, thus placing the latter in the position of sole owner; and on June 28, 1918, Lo Shui, again
acting as attorney in fact of Lo Yao, executed and acknowledged before a notary public a deed purporting to convey to
Pang Lim and another Chinaman named Benito Galvez, the entire distillery plant including the land used in connection
therewith. In other words, after selling his interest, Pang Lim terminated the lease between him and Lo Seng and
acknowledged a new lease with Galvez. Thereafter Pang Lim and Benito Galvez demanded possession from Lo Seng, but
the latter refused to yield; and the present action of unlawful detainer was thereupon initiated by Pang Lim and Benito
Galvez. In CFI, judgment was rendered for the plaintiffs; and the defendant thereupon appealed to the Supreme Court.

Issue: WON plaintiffs can terminate the lease against Lo Seng?

Ruling:

NO. While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this lease, and
when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo Seng of Pang Lim's interest in the
firm assets, including the lease. It is therefore accepted as fundamental in equity jurisprudence that one partner cannot, to
the detriment of another, apply exclusively to his own benefit the results of the knowledge and information gained in the
character of partner. Thus, Pang Lim cannot now be permitted, in the guise of a purchaser of the estate, to destroy an
interest derived from himself, and for which he has received full value. Certainly it would be shocking to the moral sense
if the condition of the law were found to be such that Pang Lim, after profiting by the sale of his interest in a business,
worthless without the lease, could intervene as purchaser of the property and confiscate for his own benefit the property
which he had sold for a valuable consideration to Lo Seng. In other words, after selling his assets to Lo Seng, Pang Lim
cannot anymore terminate such lease contract in his favor because it was already included in such transfer of assets.

Also, articles 1461 and 1474 of the Civil Code, which declare that every person who sells anything is bound to
deliver and warrant the subject-matter of the sale and is responsible to the vendee for the legal and lawful possession of
the thing sold. Among the assets of the partnership which Pang Lim transferred to Lo Seng, upon selling out his interest in
the firm to the latter, was this very lease. Thus, under estoppel by deed, if a person, having no title to land, conveys the
same to another by some one or another of the recognized modes of conveyance at common law, any title afterwards
acquired by the vendor will pass to the purchaser; and the vendor is estopped as against such purchaser from asserting
such after-acquired title.

______________________________________________________________________________
35. THE DIRECTOR OF LANDS, petitioner, v. LOPE ALBA, ET AL., claimants. ELIGIO CATALAN, movant
and appellee, v. RAMON GATCHALIAN, oppositor and appellant.
G. R. No. L-11648 April 22, 1959 Montemayor, J.

DOCTRINE OF THE CASE:

Under general principles of law, a partner is an agent of the partnership. (Art. 1818, New Civil Code). Furthermore,
every partner becomes a trustee for his co-partner with regard to any benefits or profits derived from his act as partner
(Art. 1807, New Civil Code).

FACTS:
Eligio Catalan and Ramon Gatchalian, as partners, mortgaged to Dr. Dionisio Marave two lots in Tacloban City, including
the improvements thereon, all belonging to the partnership, to secure the payment of a loan. The partnership failed to pay
the loan; the mortgage was foreclosed and the properties were sold at public auction to Dr. Marave.

Before the expiration of the one year period of redemption, Catalan, on his own behalf, redeemed the properties with his
private funds. The Sheriff issued the corresponding certificate of redemption in favor of Catalan. Upon Catalan's petition,
the lower court ordered the cancellation of the title in the name of the partnership and to issue in its stead another in the
name of Catalan.

ISSUE:
Whether or not Catalan became the absolute owner of the properties upon his redemption over the property.

RULING:
NO. The theory of Catalan, accepted by the trial court, that he became the absolute owner of the properties in question
upon making the redemption because he was subrogated to the rights of Dr. Marave who made the purchase at public
auction, is untenable. Under general principles of law, a partner is an agent of the partnership. (Art. 1818, New Civil
Code). Furthermore, every partner becomes a trustee for his co-partner with regard to any benefits or profits derived from
his act as partner (Art. 1807, New Civil Code).

Consequently, when Catalan redeemed the properties in question, he became a trustee and held the same in trust for his
co-partner Gatchalian, subject to his right to demand from the latter his contribution to the amount of redemption. The
principle of subrogation cannot be applied because at the time Catalan redeemed the property, Dr. Marave, the purchaser
at public auction, had not yet become the absolute owner of said properties. He never received the definite and formal
certificate of sale constituting muniment of title, for the reason that redemption was made. Consequently, there was no
title to the properties which he could convey to Catalan as redemptioner.
______________________________________________________________________________

36. R. Y. HANLON vs. JOHN W. HAUSSERMANN and A. W. BEAM, defendants-appellants. GEORGE C.

SELLNER, intervener.
After the termination of an agency, partnership, or joint adventure, each of the parties is free to act in his own interest,
provided he has done nothing during the continuance of the relation to lay a foundation for an undue advantage to
himself. To act as agent for another does not necessarily imply the creation of a permanent disability in the agent to act
for himself in regard to the same subject-matter; and certainly no case has been called to our attention in which the
equitable doctrine above referred to has been so applied as to prevent an owner of property from doing what he pleased
with his own after such a contract as that of November 5, 1913, between the parties to this lawsuit had lapsed.
FACTS:
Hanlon, Haussermann, Beam, and Sellner entered into a contract to promote the rehabilitation of a mining company. The
parties agreed to raise money on the said plan within six months by obtaining subscriptions to shares of the mining
company. It was expressly stipulated that the failure of one to perform within the stipulated period would discharge the
others. Hanlon defaulted in his part.
Under the contract, Haussermann and Beam were discharged from their obligations. Thereafter, Haussermann and Beam
considered themselves released from the said contract, and presented a new plan for the rehabilitation of the company.
The new plan was adopted and Haussermann and Beam succeeded in raising the price of the stock of the company and
made large profits.
Hanlon brought action to compel Haussermann and Beam to account for his share in the profits which he claimed
Haussermann and Beam obtained by virtue of their contract

ISSUE:
Whether or not Haussermann and Beam are accountable to Hanlon as a fiduciary for profits

HELD:
NO, After the termination of an agency, partnership, or joint adventure, each of the parties is free to act in his own
interest, provided he has done nothing during the continuance of the relation to lay a foundation for an undue advantage to
himself. To act as agent for another does not necessarily imply the creation of a permanent disability in the agent to act for
himself in regard to the same subject-matter; and certainly no case has been called to our attention in which the equitable
doctrine above referred to has been so applied as to prevent an owner of property from doing what he pleased with his
own after such a contract as that of November 5, 1913, between the parties to this lawsuit had lapsed.

In the present case so far as we can see, Haussermann and Beam acted in good faith for the accomplishment of the
common purpose and to the full extent of their obligation during the continuance of their contract; and if Sellner had not
defaulted, or if Hanlon had been able to produce the necessary capital from some other source, during the time set for
raising the money, the original project would undoubtedly have proceeded to its consummation. Certainly, no act of
Haussermann and Beam can be pointed to which prevented or retarded its realization; and we are of the opinion that,
under the circumstances, nothing more could be required of the defendants than a full and honest compliance with their
contract. As this had been discharged through the fault of another they cannot be held liable upon it. Certainly, we cannot
accede to the proposition that the Haussermann and Beam by making the contracts in question had decapacitated
themselves and their company for an indefinite period from seeking other means of financing the company's necessities,
save only upon the penalty of surrendering a share of their ultimate gain to the two adventurers who are plaintiffs in this
action.

An examination of the decisions of the American and English courts reveals a great mass of material devoted to the
discussion of the question whether in a given case time is of the essence of a contract. As presented in those courts, the
question commonly arises where a contracting party, who has himself failed to comply with some agreement, tenders
performance after the stipulated time has passed, and upon the refusal of the other party to accept the delayed performance
the delinquent party resorts to the court of equity to compel the other party to proceed. The equitable doctrine there
recognized as applicable in such situation is that 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, due compensation being made for the damage caused by the delay. In such cases the courts
take account of the difference between that which is matter of substance and that which is matter of mere form.

Our conclusion, upon a careful examination of the whole case, is that the action cannot be maintained. The judgment is
accordingly reversed and the defendants are absolved from the complaint. No express pronouncement will be made as to
costs of either instance.
______________________________________________________________________________
37. DAN FUE LEUNG, petitioner, v. HON. INTERMEDIATE APPELLATE COURT and LEUNG
YIU, respondents.
G.R. No. 70926 January 31, 1989 GUTIERREZ, JR., J.
Facts:

The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established sometime in
October, 1955. It 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.

According to private respondent, About the time the Sun Wah Panciteria started to become operational, the private
respondent gave P4,000.00 as his contribution to the partnership. Furthermore, the private respondent received from the
petitioner the amount of P12,000.00.

The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned
the genuineness of the receipt. According to the petitioner, he did not receive any contribution at the time he started the
Sun Wah Panciteria. He used his savings from his salaries as an employee at Camp Stotsenberg in Clark Field and later as
waiter at the Toho Restaurant amounting to a little more than P2,000.00 as capital in establishing Sun Wah Panciteria. To
bolster his contention that he was the sole owner of the restaurant, the petitioner presented various government licenses
and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself
alone.

Fue Leung also flatly denied having issued to the private respondent the receipt and the Equitable Banking Corporation's
Check No. 13389470 B in the amount of P12,000.00.

Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in the setting up
and operations of the panciteria. While the dispositive portions merely ordered the payment of the respondents share, there
is no question from the factual findings that the respondent invested in the business as a partner. Hence, the two courts
declared that the private petitioner is entitled to a share of the annual profits of the restaurant. The petitioner, however,
claims that this factual finding is erroneous.

Issue:

Whether or not the Leung Yiu is a partner of Dan Fue Leung in the establishment of Sun Wah Panciteria. (Yes)

Ruling:

Yes, 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. We agree with the appellate court's observation to the effect that "... given its ordinary
meaning, financial assistance is the giving out of money to another without the expectation of any returns therefrom'. It
connotes an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under which
the P4,000.00 was given to the petitioner does not obtain in this case.' (p. 99, Rollo) The complaint explicitly stated that
"as a return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two percentum (22%)
of the annual profit derived from the operation of the said panciteria.' (p. 107, Rollo) The well-settled doctrine is that the
'"... nature of the action filed in court is determined by the facts alleged in the complaint as constituting the cause of
action." (De Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v. Court of Appeals, 135
SCRA 37).

On the Issue of Prescription

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are — 1)
two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2) intention on
the part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106
Phil. 110)-have been established. As stated by the respondent, a partner shares not only in profits but also in the losses of
the firm. If excellent relations exist among the partners at the start of business and all the partners are more interested in
seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It
would be incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations,
such rights are irretrievably lost. The private respondent's cause of action is premised upon the failure of the petitioner to
give him the agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an
accounting of his interests in the partnership.

______________________________________________________________________________

38. Sison vs. McQwaid

There is a need for a general liquidation before a member of a partnership may claim a specific sum as his share of the
profits.

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

ISSUE:
Whether or not the plaintiff is entitled to the sums he claims?

RULING:
No. It is not clear from the allegations of the complaint just when plaintiff’s cause of action accrued.
Consequently, it cannot be determined with certainty whether that action has already prescribed or not. Such being the
case, the defense of prescription can not be sustained. We find that the said order should be upheld on the ground that the
complaint states no cause of action. Plaintiff seeks to recover from defendant one-half of the purchase price of lumber
sold by the partnership to the United States Army. But his complaint does not show why he should be entitled to the sum
he claims. It does not allege that there has been a liquidation of the partnership business and the said sum has been found
to be due him as his share of the profits.The proceeds from the sale of a certain amount of lumber cannot be considered
profits until costs and expenses have been deducted. Moreover, the profits of a business cannot be determined by taking
into account the result of one particular transaction instead of all the transactions had. Hence, the need f or a general
liquidation before a member of a partnership may claim a specific sum as his share of the profits.

______________________________________________________________________________

39. FERNANDEZ v. DE LA ROSA

LADD, J.:

In January, 1900, plaintiff entered into a verbal agreement with the defendant to form a partnership for the
purchase of cascoes and the carrying on of the business of letting the same for hire in Manila. The defendant was to buy
the cascoes and each partner was to provide the amount of money required, and the profits was to be divided
proportionately. The plaintiff furnished the defendant 300 pesos to purchase a casco designated as No. 1515, which the
defendant did purchase for 500 pesos. The plaintiff furnished further sums aggregating about 300 pesos for repairs on this
casco. On March 1900, he furnished the defendant 825 pesos to purchase another casco designated as No. 2089, which the
defendant did purchase for 1,000 pesos. In April, the parties undertook to draw up articles of partnership for the purpose
of embodying the same in an authentic document. However, the defendant proposed a draft of such articles which differed
materially from the terms of the earlier verbal agreement, and was unwilling to include casco No. 2089 in the partnership,
thus, the parties were unable to come to any understanding and no written agreement was executed. The defendant in the
meantime had the control and management of the two cascoes, thus the plaintiff made a demand for an accounting upon
him, which the defendant refused to render, denying the existence of the partnership altogether.

ISSUE:

1. Whether or not partnership existed between the parties

2. Whether or not the money returned by the respondent to complainant extinguished the alleged partnership.

HELD:

1. YES. The Court held that the money furnished by the plaintiff and received by the defendant with the
understanding that it was to be used for the purchase of the cascoes establishes the first element of the contract, namely,
mutual contribution to a common stock. The second element, the intention to share profits, appears when the purchase of
the cascoes were done in common, in the absence of any other explanation of the object of the parties in making the
purchase, and, it may be added, in view of the admitted fact that prior to the purchase of the first casco the formation of a
partnership had been a subject of negotiation between them.
 Thus a complete and perfect contract of partnership was entered into by the parties. The execution of a written
agreement was not necessary in order to give efficacy to the verbal contract of partnership as a civil contract, the
contributions of the partners not having been in the form of immovables or rights in immovables. The special provision
cited, requiring the execution of a public writing in the single case mentioned and dispensing with all formal requirements
in other cases, renders inapplicable to this species of contract the general provisions of article 1280 of the Civil Code.

2. NO. The amount returned was insufficient comparted to the contribution of the plaintiff to the capital of the
partnership, since it did not include the sum which he had furnished for the repairs of casco No. 1515. Moreover, a profit
may have been realized from the business during the period in which the defendant have been administering it prior to the
return of the money, and if so he still retained that sum in his hands. For these reasons the acceptance of the money by the
plaintiff did not have the effect of terminating the legal existence of the partnership by converting it into a societas
leonina.

There was no intention on the part of the plaintiff in accepting the money to relinquish his rights as a partner, nor is there
any evidence that by anything that he said or by anything that he omitted to say he gave the defendant any ground
whatever to believe that he intended to relinquish them. On the contrary he notified the defendant that he waived none of
his rights in the partnership. The defendant might have himself terminated the partnership relation at any time, if he had
chosen to do so, by recognizing the plaintiff's right in the partnership property and in the profits. Having failed to do this
he cannot be permitted to force a dissolution upon his co-partner upon terms which the latter is unwilling to accept.

______________________________________________________________________________

40. JOSE GARRIDO, plaintiff-appellant, vs. AGUSTIN ASENCIO, defendant-appellee.

G.R. No. L-4281 March 30, 1908 CARSON, J.

Facts:
Garrido and Asencio were members of the partneship, under the firm name Asencio y Cia. The business did not prosper
and was dissolved by mutual agreement of the members. Garrido brought the action to recover from Asencio the amount
of the capital he had invested in the business. Asencio alleged that there had been losses in the conduct of the business and
denied the claim of Garrido.

The trial court rendered a decision in favor of Asencio, finding substantial evidence to sustain his claim of the alleged
losses in the business. (The trial court based it on the statement of account of the partnership submitted by Asencio.

Issue:
WON the trial court erred in holding that evidence of record proved the existence of losses in the business (NO)

Ruling:

No. Garrido assigns as errors the admission of the statement of accounts on the ground that the books of the partnership
were not kept in accordance with the Code of Commerce. However it was not necessary for the court to consider such as
an assignment of error, because no objections were made as to its admission in the lower court. Also, such accounts were
admissible under the provision of Section 338 of the Code of Civil Procedure.

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.

The lower court seems to have scrutinized the account with painstaking care, and to have been satisfied as to its accuracy,
except as to some unimportant items, which he corrected, but counsel for the appellant reiterates in this court his general
allegations as to the inaccuracy of the account, and points out some instances wherein he alleges that items of expenditure
appear to have been charged against the partnership more than once. Upon the whole record as brought by the appellant
the court was not able to say that the weight of the evidence does not sustain the findings of the trial court.
 ______________________________________________________________________________

41. JOSE ORNUM and EMERENCIANA ORNUM, petitioners, v. MARIANO, LASALA, et al., respondent.
G.R. No. L-47823 July 26, 1943 Paras, J.

DOCTRINE OF THE CASE:

After such shares had been paid by the petitioners and accepted by the respondents without any reservation, the approval
of the statement of accounts was virtually confirmed and its signing thereby became a mere formality to be complied with
by the respondents exclusively. Their refusal to sign, after receiving their shares, amounted to a waiver to that formality
in favor of the petitioners who has already performed their obligation.

FACTS:
In 1908 Pedro Lasala, father of the respondents, and Emerenciano Ornum formed a partnership, Lasala as capitalist while
Ornum will be the industrial partner. Lasala delivered the sum of P1,000 to Ornum who will conduct a business at his
place of residence in Romblon.

In 1912, when the assets of the partnership consisted of outstanding accounts and old stock of merchandise, Emerenciano
Ornum, following the wishes of his wife, asked for the dissolution of the Lasala, Emerenciano. Ornum looked for
someone who could take his place and he suggested the names of the petitioners who accordingly became the new
partners. Upon joining the business, the petitioners, contributed P505.54 as their capital. The new partnership Pedro
Lasala had a capital of P1,000, appraised value of the assets of the former partnership, plus the said P505.54 invested by
the petitioners who, as industrial partners, were to run the business in Romblon.

After the death of Pedro Lasala, his children (the respondents)succeeded to all his rights and interest in the partnership.
The partners never knew each other personally. No formal partnership agreement was ever executed. The petitioners, as
managing partners, were received one-half of the net gains, and the other half was to be divided between them and the
Lasala group in proportion to the capital put in by each group.

During the course divided, but the partners were given the election, as evidenced by the statements of accounts referred to
in the decision of the Court of Appeals, to invest their respective shares in such profits as additional capital. The
petitioners accordingly let a greater part of their profits as additional investment in the partnership.

After twenty years the business had grown to such an extent that is total value, including profits, amounted to P44,618.67.
Statements of accounts were periodically prepared by the petitioners and sent to the respondents who invariably did not
make any objection thereto. Before the last statement of accounts was made, the respondents had received P5,387.29 by
way of profits.

The last and final statement of accounts, prepared by the petitioners after the respondents had announced their desire to
dissolve the partnership. Pursuant to the request contained in this letter, the petitioners remitted and paid to the
respondents the total amount corresponding to them under the above-quoted statement of accounts which, however, was
not signed by the latter. Thereafter the complaint in this case was filed by the respondents, praying for an accounting and
final liquidation of the assets of the partnership.

The Court of First Instance of Manila held that the last and final statement of accounts prepared by the petitioners was
tacitly approved and accepted by the respondents who, by virtue of the above-quoted letter of Father Mariano Lasala, lost
their right to a further accounting from the moment they received and accepted their shares as itemized in said statement

This judgment was reversed by the Court of Appeals principally on the ground that as the final statement of accounts
remains unsigned by the respondents, the same stands disapproved. Hence this appeal.

ISSUE:
Whether or not the accounting stated in the letter including the last and final statement of account was tacitly accepted by
the petitioners as the final liquidation and accounting of the assets of the partnership.

RULING:
YES. Supreme Court stated that the last and final statement of accounts hereinabove quoted, had been approved by the
respondents. This approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932, quoted in part in the
appealed decision from the failure of the respondents to object to the statement and from their promise to sign the same as
soon as they received their shares as shown in said statement.

After such shares had been paid by the petitioners and accepted by the respondents without any reservation, the approval
of the statement of accounts was virtually confirmed and its signing thereby became a mere formality to be complied with
by the respondents exclusively. Their refusal to sign, after receiving their shares, amounted to a waiver to that formality in
favor of the petitioners who has already performed their obligation.

This approval precludes any right on the part of the respondents to a further liquidation, unless the latter can show that
there was fraud, deceit, error or mistake in said approval.(Pastor ,vs .Nicasio, 6 Phil., 152; Aldecoa & Co.,vs. Warner,
Barnes & Co., 16 Phil., 423; Gonsalez vs. Harty, 32 Phil. 328.)The Court of Appeals did not make any findings that there
was fraud, and on the matter of error or mistake it merely said

______________________________________________________________________________

42. INOCENCIA DELUAO and FELIPE DELUAO, plaintiffs-appellees, vs. NICANOR CASTEEL and JUAN
DEPRA, defendants, NICANOR CASTEEL, defendant-appellant.
No. L-21906. August 29, 1969. Castro, J.

It is an elementary rule in law that a partnership cannot be formed for an illegal purpose or one contrary to
public policy and that where the object of a partnership is the prosecution of an illegal business or one which is contrary
to public policy, the partnership is void.

Facts:

Nicanor Casteel filed a fishpond application for a tract of land located in Davao City. However, his applications
were denied. Casteel filed an MR and while the motion was pending resolution, he was advised by the District Forester of
Davao that no further action would be taken unless he files a new application. Meanwhile several applications were
submitted by some other persons for an area covered by Casteel's application.

He wanted to preclude subsequent applicants from entering and spreading themselves within the area by expanding his
occupation thereof by the construction of dikes and the cultivation of marketable fishes. However, because of
insufficiency of fund to continue the construction, he borrowed P27, 000 from the Deluaos to finance needed
improvements for the fishpond, and was compelled by force of this circumstance to enter into the contract of partnership,
with an agreement to divide the fishpond after the award. Eventually, Casteel administered the said property and single-
handedly opposed rival applicants who occupied portions of the fishpond area. He relentlessly pursued his claim to the
said area up to the Office of the DANR Secretary, until it was finally awarded to him

Issues:
1.Whether or not a Partnership is formed between the parties.
2. Whether or not Casteel may be obliged to divide the fish pond after the award

Ruling:
1. No. While it is true that the contract between the parties is one of partnership, The evidence preponderates in
favor of the view that the initial intention of the parties was not to form a co-ownership but to establish a partnership -
Inocencia Deluao as capitalist partner and Casteel as industrial partner - the ultimate undertaking of which was to divide
into two equal parts such portion of the fishpond as might have been developed by the amount extended by the plaintiffs-
appellees, with the further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of
the fishpond that would pertain to him. However, it is an elementary rule in law that a partnership cannot be formed for an
illegal purpose or one contrary to public policy and that where the object of a partnership is the prosecution of an illegal
business or one which is contrary to public policy, the partnership is void.

A contract of partnership, to exploit the fishpond pending its award is valid, while, a contract of partnership to
divide the fishpond between them after such award is illegal.
 In this case, a partnership was formed to divide a fishpond into equal parts is null and void as being against public
policy. A partnership cannot be formed for an illegal purpose because it is against several prohibitory laws. And since the
contract is null and void, the party cannot be made to execute a formal transfer of one-half of the fishpond and to secure
official approval of the same as agreed upon.

2. No. The contract is null and void, the party cannot be made to execute a formal transfer of one-half of the
fishpond and to secure official approval of the same as agreed upon.

Hence, there is no obligation on the part of Casteel to divide the fishpond.

---------------------------------------------------------------------------------------------------------------------
Other issues:

1. Prohibition under Act 4003

Deluao initially argue that Fisheries Act (Act 4003) does not contain any prohibition against transfer or subletting of
fishponds covered by permits or lease agreement, Admin. Order 14, Sec 7 is a nullity because it is inconsistent with the
Fisheries Act.

Sec 63 of Act 4003, provides :

Permits or leases entitling the holders thereof, for a certain stated period of time not ,to exceed twenty years,
to enter upon definite tracts of a public forest land to be devoted exclusively for fishponds purposes, or to
take certain fishery products or to construct fishponds within tidal, mangrove and other swamps, ponds and
streams within public forest lands or proclaimed timber lands or established forest reserves, may be issued or
executed by the Secretary of Agriculture and Natural Resources, subject to the restrictions and limitations
imposed by the forest laws and regulations, to such persons, associations or corporations as are qualified to
utilize or take forest products under Act Number Thirty-six hundred and seventy-four. x x x

Ruling:
SC said that it is clear from the above-quoted section of the Fisheries Act that only holders of permits or leases
issued or executed by the Secretary of Agriculture and Natural Resources 3 (hereinafter referred to as DANR Secretary)
can enter upon definite tracts of public forest land to be devoted exclusively for fishpond purposes, or to construct
fishponds(this is the purpose of the parties for which the partnership is to be created - to exclude others) within tidal,
mangrove and other swamps, ponds and streams within public forest lands or established forest reserves Inferentially,
persons who do not have permits or leases properly issued or executed by the DANR Secretary cannot do any of the acts
mentioned in sec. 63. Certainly, a transferee or sub-lessee of a fishpond is not a holder of a permit or lease. lawfully "enter
upon definite tracts of a public forest land to be devoted exclusively for fishpond purposes,

2. Application of Admin Order 14

Deluao then insisted that the prohibition in Admin Order 14 Sec 37(a) refers only to fishponds covered by permits or
leases, and since no permit or lease had as yet been granted to Casteel, the prohibition does not apply.

Ruling:
Administrative Order 14, for, anyway, he had not yet been issued a permit or lease.
The appellees advocate a dangerous theory which invites promiscuous violation of the said administrative order. For all
that a would-be permittee or lessee would. do in order to escape the consequences of an unauthorized sublease or transfer,
is to effect such sublease or transfer before the issuance of the lease or permit, and then argue that there is no violation
because such sublease or transfer.

3. Judicial Review of actions of DANR

3rd issue is about Judicial review and Political question regarding the acts of the DANR in granting permits, etc.

Ruling:
Purely administrative and discretionary functions of administrative agencies of the government may not be
interfered with by the courts especially in a case where the agency is not even a party.
4. Equity - Amado Lacuesta vs. Roberto Doromal
Appellees cited the case of Amado Lacuesta vs. Roberto Doromal, etc. (DANR case 3270) in which the DANR
Secretary has allegedly interpreted the prohibition found in sec. 37(a) of Fisheries Administrative Order 14 as not absolute
so that the approval required may yet legally be obtained even after the transfer of a permit.

In Lacuesta the verbal agreement to divide the fishpond was entered into even before the fishpond application was
filed. The parties there helped each other in securing the approval of the application. The DANR Secretary found for a
fact that the appellee in the said case would not have succeeded in securing the approval of his fishpond application,
coupled with the issuance of the permit, were it not for the indispensable aid both material and otherwise extended by the
appellant spouses. Thus, the appellant spouses paid the filing fee for the application, the bond premiums and the surveying
fees. They asked the assistance of their congressman who facilitated the release of the permit. They paid the rentals for the
fishpond for several years. In fact, the permit was even cancelled - although later reinstated - because of the appellee's
failure to pay rentals. In the face of the foregoing facts, the DANR Secretary could not simply ignore the equitable rights
of the appellants over one-half of the fishpond in question.

Ruling:
The cited case cannot be applied here in the case at bar because in this case, Casteel was the original occupant and
applicant since before the last World War. He wanted to preclude subsequent applicants from entering and spreading
themselves within the area applied for by him, by expanding his occupation thereof by the construction of dikes and the
cultivation of marketable fishes. There is here neither allegation nor proof that, without the financial aid given by the
Deluaos in the amount of P27,000, the area would not have been awarded or adjudicated to Casteel. This explains,
perhaps, why the DANR Secretary did not find it equitable to award one-half of the fishpond to the appellee spouses
despite their many appeals and motions for reconsideration.

5. Implied Trust
According to the appellees, the fact that Casteel and Deluao agreed to acquire the fishpond in question in the
name of Casteel alone resulted in a trust by operation of law (citing art. 1452, Civil Code) in favor of the appellees as
regards their one-half interest.

Ruling:
There is no implied trust. A trust is the right, enforceable in equity, to the beneficial enjoyment of property the
legal title to which is in another (Ulmer v. Fulton, 97 ALR 1170, 129 Ohio St 323, 195 NE 557). However, since we held
as illegal the second part of the contract of partnership between the parties to divide the fishpond between them after the
award, a fortiori, no rights or obligations could have arisen therefrom. Inescapably, no trust could have resulted because
trust is founded on equity and can never result from an act violative of the law.

6. Specific property under Article 1811

The appellees said that the beneficial right over the fishpond in question is the "specific partnership property"
contemplated by art. 1811 of the Civil Code.

Ruling:
The appellees' statement is incorrect. A reading of the said provision will show that what is meant is tangible
property, such as a car, truck or a piece of land, but not an intangible thing such as the beneficial right to a fishpond. If
what the appellees have in mind is the fishpond itself, they are grossly in error. A fishpond of the public domain can never
be considered a specific partnership property because only its use and enjoyment - never its title or ownership - is granted
to specific private persons.

Dispositive portion:
We must state that since the contract of service, exh. A, is contrary to law and therefore null and void, it is not and
can never be considered as the law between the parties.

ACCORDINGLY, the appellees' February 8, 1969 motion for reconsideration is denied.

______________________________________________________________________________
 43. The Leyte—Samar Sales Co., and Raymundo Tomassipetitioners, vs. Sulpicio V. Cea, in his capacity as Judge
of the Court of First Instance of Leyte and Olegario Lastrilla, respondents.
No. L–5963. May 20, 1953

The partner of a partnership is not a creditor of such partnership for the amount of his share.

Facts:
Leyte—Samar Sales Co. (hereinafter called LEssco) and Raymond Tomassi instituted an action for damages
against Far Eastern Lumber & Commercial Co. (unregistered commercial partnership hereinafter called FELCO).

Trial Court held that partners of FELCO, Arnold Hall, Fred Brown and Jean Roxas, liable for the amount of
P31.5k (solidary). CA affirmed.

The judgement became final, so the sheriff sold it at auction on June 9, 1951 to Robert Dorfe and Pepito Asturias
"all the rights, interests, titles and participation" of the defendants in certain buildings and properties described in the
certificate, for a total price of eight thousand and one hundred pesos. But on June 4, 1951 Olegario Lastrilla filed in the
case a motion, wherein he claimed to be the owner by purchase on September 29, 1949, of all the "shares and interests" of
defendant Fred Brown in the FELCO, and requested "under the law of preference of credits" that the sheriff be required to
retain in his possession so much of the proceeds of the auction sale as may be necessary "to pay his right".

Over the plaintiffs' objection the judge in his order, granted Lastrilla's motion by requiring the sheriff to retain 17
per cent of the money "for delivery to the assignee, administrator or receiver" of the FELCO. And on motion of Lastrilla,
the court on August 14, 1951, modified its order of delivery and merely declared that Lastrilla was entitled to 17 per cent
of the properties sold

Issue: Whether or not Lastrilla is entitled to be paid a part of the proceeds of the sale

Ruling:
No. Even assuming that Lastrilla is a partner of FELCO (in place of Brown), he cannot claim the proceeds
because the partner of a partnership is not a creditor of such partnership for the amount of his shares. That is too
elementary to need elaboration.

Granting, arguendo that the auction sale did not include the interest or portion of the FELCO properties corre-
sponding to the shares of Lastrilla in the same partnership (17% ) , the resulting situation would be—at most—that the
purchasers Dorfe and Asturias will have to recognize dominion of Lastrilla over 17 per cent of the properties awarded to
them.2 So Lastrilla acquired no right to demand any part of the money paid by Dorfe and Asturias to the sheriff for the
benefit of FELCO and Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares (acquired from
Brown) could not have been and were not auctioned off to Dorfe and Asturias.

Supposing however that Lastrilla's shares have been actually (but unlawfully) sold by the sheriff (at the instance
of plaintiffs) to Dorfe and Asturias, his remedy is to claim the property", not the proceeds of the sale, which the sheriff is
directed by section 14, Rule 39 to deliver unto the judgment creditors.

In other words, the owner of property wrongfully sold may not voluntarily come to court, and insist, "I approve
the sale, therefore give me the proceeds because I am the owner". The reason is that the sale was made for the judgment
creditor (who paid for the fees and notices) , and not for anybody else.

On this score the respondent judge's action on Lastrilla's motion should be declared as in excess of jurisdiction,
which even amounted to want of jurisdiction, considering specially that Dorfe and Asturias, and the defendants
themselves, had undoubtedly the right to be heard —but they were not notified..

----------You may skip this lengthy discussion: ----------

Why was it necessary to hear them on the merits of Lastrilla's motion?

Because Dorfe and Asturias might be unwilling to recognize the validity of Lastrilla's purchase, or, if valid, they
may want him not to forsake the partnership that might have some obligations in connection with the partnership
properties. And what is more important, if the motion is granted, when the time for redemption comes, Dorfe and Asturias
will receive from redemptioners seventeen per cent (1.7%) less than the amount they had paid for the same properties.

The defendants Arnold Hall and Jean Roxas, eyeing Lastrilla's financial assets, might also oppose the substitution
by Lastrilla of Fred Brown, the judgment against them being joint and several. They might entertain misgivings about
Brown's slipping out of their common predicament through the disposal of his shares.

Lastly, all the defendants would have reasonable motives to object to the delivery of 17 per cent of the proceeds to
Lastrilla, because it is so much money deducted, and for which the plaintiffs might ask another levy on their other
holdings or resources. Supposing of course, there was no fraudulent collusion among them.

Now, these varied interests of necessity make Dorfe, Asturias and the defendants indispensable parties to the motion of
Lastrilla—granting it was a step allowable under our regulations on execution. Yet these parties were not notified, and
obviously took no part in the proceedings on the motion. "A valid judgment cannot be rendered where there is a want of
necessary parties, and a court cannot properly adjudicate matters involved in a suit when necessary and indispensable
parties to the proceedings are not before it.
----------xxx ----------

Wherefore, the orders of the court recognizing Lastrilla's right and ordering payment to him of a part of the
proceeds were patently erroneous, because promulgated in excess or outside of its jurisdiction.