Professional Documents
Culture Documents
partner. 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.
It would not be right to let any of the partners remain in the partnership under such an atmosphere of
animosity: It would not be right to let any of the partners remain in the partnership under such an atmosphere
of animosity. For as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and
fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be
said to characterize the act. Bad faith, in the context here used, is no different from its normal concept of
conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.
Campus Rueda & Co. v. Pacific Commercial & Co
Limited partnership; act of bankruptcy: In the Philippines, a limited partnership duly organized in accordance
with law has a personality distinct from that of its members; and if it commits an act of bankruptcy, such as
failing for more than thirty days to pay debts amounting to P1,000 or more, it may be adjudged insolvent on the
petition of three of its creditors although its members may not be insolvent.
Vargas & Co. vs. Chan
A partnership, duly organized and registered under the laws of the Philippine Islands, is a legal entity capable
of suing and of being sued in the company name.
In bringing an action against such a company it is not necessary to make the partners composing said
company parties defendant.
The service of summons on such a company is made in pursuance of paragraph 1, section 396, of the Code of
Civil Procedure by delivering a copy thereof to the president or other head of the corporation, secretary,
cashier, or managing agent thereof.
The certificate of service by the sheriff is prima facie evidence of the facts set out in such certificate; and where
such certificate shows that service of summons in an action against a partnership duly organized and
registered under the laws of the Philippine Islands was made by serving a copy thereof on a person therein
named and described as the managing agent of the company, it is prima facie evidence of the fact that the
person on whom the summons was served was in fact the managing agent of the company.
Ngo Tian Tek vs. Phil. Education Co.
CONTRACTS BINDING ON UNDISCLOSED PRINCIPAL.Contracts entered into by a factor of a commercial
establishment known to belong to a well-known enterprise or association, shall be understood as made for the
account of the owner of such enterprise or association, even when the factor has not so stated at the time of
executing the same, provided that such contracts involve objects comprised in the line and business of the
establishment.
LACK OF RECORDED POWER NOT PREJUDICIAL TO THIRD PERSONS.The circumstance that a f actor
does not have a recorded power of attorney will not operate to prejudice third persons.
PARTIES; PARTNERSHIP; DEATH OF A PARTNER.A case will not be dismissed because of the death of a
partner, where the partnership, possessing a personality distinct from any of the partners, is sued.
overpaid his income tax has the right to be reimbursed what he has erroneously paid. However, the law is very
clear that the claim and action for such reimbursement are subject to the bar of prescription.
Gatchalian vs. Collector of Internal Revenue
PARTNERSHIP OF A CIVIL NATURE; COMMUNITY OF PROPERTY; SWEEPSTAKES; INCOME TAX.
According to the stipulated facts the plaintiffs organized a partnership of a civil nature because each of them
put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may
win, as they did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only
formed, but upon the organization thereof and the winning of the prize, J. G. personally appeared in the office
of the Philippine Charity Sweepstakes, in his capacity as co-partner, as such collected the prize, the office
issued the check for ?50,000 in favor of J. G. and company, and the said partner, in the same capacity,
collected the check. All these circumstances repel the idea that the plaintiffs organized and formed a
community of property only. Having organized and constituted a partnership of a civil nature, the said entity is
the one bound to pay the income tax which the defendant collected under the aforesaid section 10 (a) of Act
No. 2833, as amended by section 2 of Act No. 3761. There is no merit in plaintiffs' contention that the tax
should be prorated among them and paid individually, resulting in their exemption from the tax.
Sardane vs. Court of Appeals
While receipt of a share in then profits of the business is a prima facie evidence that the person receiving the
same is a partner, no such inference shall be drawn if such profits were received in payment of his wages as
an employee.As manager of the basnig Sardaco, naturally some degree of control over the operations and
maintenance thereof had to be exercised by herein petitioner. The fact that he had received 50% of the net
profits does not conclusively establish that he was a partner of the private respondent herein. Article 1769(4) of
the Civil Code is explicit that while the receipt by a person of a share of the profits of a business is prima facie
evidence that he is a partner in the business, 110 such inference shall be drawn if such profits were received in
payment as wages of an employee. Furthermore, herein petitioner had no voice in the management of the
affairs of the basnig. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos, in
denying the claim of the plaintiff therein that he was a partner in the business of the defendant, declared: "This
contention cannot be sustained. It was a mere contract of employment. The plaintiff had no voice nor vote in
the management of the affairs of the company. The fact that the compensation received by him was to be
determined with reference to the profits made by the defendant in their business did not in any sense make
him a partner therein. x x x.
Deluao vs. Casteel
Validity of contract of partnership to exploit a fishpond pending its award and a contract of partnership to divide
the fishpond after such award.A contract of partnership to exploit a fishpond pending its award to any
qualified party or applicant is valid, but a contract of partnership to divide the fishpond after such award is
illegal. Act 4003, known as the Fishery Act, prohibits the holder of a fishpond permit (,the permittee) from
transferring or subletting the fishpond granted to him without the previous consent or approval of the Secretary
of Agriculture and Natural Resources.
Partnership; Dissolution; Case at bar.Art. 1830(3) of the Civil Code enumerates, as one of the causes for the
dissolution of a partnership, "x x x any event which makes it unlawful for the business of the partnership to be
carried on or for the members to carry it on in partnership." In the case at bar, the approval of the appellant's
fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of
law which made the continuation of the partnership unlawful and therefore caused its ipso facto dissolution.
Inasmuch as the erstwhile partners articulated in the aforecited letters their respective resolutions not to share
the fishpond with each otherin direct violation of the undertaking for which they have established their
partnershipeach must be deemed to have expressly withdrawn from the partnership, thereby causing its
dissolution pursuant to Art. 1830(2) of the Civil Code which provides, inter alia, that dissolution is caused "by
the express will of any partner at any time.
Kiel vs. Estate of Sabert
PROOF OF PARTNERSHIP; DECLARATIONS AND ADMISSIONS.The declarations of one partner, not
made in the presence of his copartner, are not competent to prove the existence of a partnership between
them as against such other partner. The existence of a partnership cannot be established by general
reputation, rumor, or hearsay.
INTENTION OF PARTIES TO GOVERN.The intention of the parties, as gathered from the facts and as
ascertained from their language and conduct, should be sought out and then given effect.
CASE AT BAR.Held: That, applying the tests as to the existence of a partnership, competent evidence exists
establishing the verbal partnership formed by Kiel and Sabert, and that Kiel has a legal right to ask for an
accounting with reference to the improvements and personal property on the land as of the date upon which he
left the plantation in the hands of Sabert as trustee.
Jo Chung Cang vs. Pacific Commercial Co.
MERCANTILE LAW; CONTRACTS; PARTNERSHIP; INSTANT CASE.Held: That the mercantile
establishment which operated under the name of Teck Seing & Co., Ltd., and which was constituted by the
document set forth in the decision, is not a corporation, nor a cuenta en participacin (joint account
association), nor a sociedad annma, nor a sociedad en comandita (limited partnership), nor a de facto
commercial association, but is a general partnership.
LIMITED PARTNERSHIP.Those who seek to avail themselves of the protection of laws permitting the
creation of limited partnerships must show a substantially full compliance with such laws. A limited partnership
that has not complied with the law of its creation is not considered a limited partnership at all, but a general
partnership in which all the members are liable.
To establish a limited partnership, there must be, at least, one general partner and the name of at least one of
the general partners must appear in the firm name. (Code of Commerce, arts. 122 [2], 146, 148.)
DEFECTS IN THE ORGANIZATION; FIRM NAME; ARTICLE 126 OF THE CODE OF COMMERCE,
CONSTRUED.Article 126 of the Code of Commerce requires the general copartnership to transact business
under the name of all its members, or of several of them, or of one only. The object of the article is manifestly
to protect the public against imposition and fraud.
Article 126 of the Code of Commerce was intended more for the protection of the creditors than of the partners
themselves. A distinction can be drawn between the right of the alleged partnership to institute action when
failing to live up to the provisions of the law, or even the rights of the partners as among themselves, and the
right of a third person to hold responsible a general partnership which merely lacks a firm name, in order to
make it a partnership de jure. The law should be construed as rendering contracts made in violation of it
unlawful and unenforceable at the instance of the offending party only, but not as designed to take away the
rights of innocent parties who may have dealt with the offenders in ignorance of their having violated the law.
The civil law and the common law alike point to a difference between the rights of the partners who have failed
to comply with the law and the rights of third persons who have dealt with the partnership.
According to the Spanish civil law, defects in the organization cannot affect relations with third persons.
Contracts entered into by commercial associations defectively organized are valid when they are voluntarily
executed by the parties, if the only controversy relates to whether or not they complied with the agreement.
FAILURE OF REGISTRY, EFFECT.While the failure to register in the commercial registry necessarily
precludes the members from enforcing rights acquired by them against third persons, such failure cannot
prejudice the rights of third persons. (Decisions of the supreme court of Spain of December 6, 1887, January
25, 1888, November 10, 1890, and January 26, 1900.)
BANKRUPTCY AND INSOLVENCY; LIABILITY OF PARTNERSHIP AND PARTNERS.If a firm be insolvent,
but one or more partners thereof are solvent, the creditors may proceed both against the firm and against the
solvent partner or partners, first exhausting the assets of the firm before seizing the property of the partners.
[Jo Chung Cang vs. Pacific Commercial Co., 45 Phil. 142(1923)]
Agad vs. Mabolo & Agad & Co.
How partnership may be constituted.A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be necessary (Art. 1771,
Civil Code). A contract of partnership is void, whenever immovable property is contributed thereto, if inventory
of said property is not made, signed by the parties, and attached to the public instrument (Art. 1773, Id.).
Aurbach vs. Sanitary Wares
A corporation cannot enter into a partnership contract but may engage in a joint venture with others.The ASI
Groups argument is correct within the context of Section 24 of the Corporation Code. The point of query,
however, is whether or not that provision is applicable to a joint venture with clearly defined agreements: The
legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been
generally understood to mean an organization formed for some temporary purpose. It is in fact hardly
distinguishable from the partnership, since their elements are similarcommunity of interest in the business,
sharing of profits and losses, and a mutual right of control. The main distinction cited by most opinions in
common law jurisdictions is that the partnership contemplates a general business with some degree of
continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary
nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership
may be particular or universal, and a particular partnership may have for its object a specific undertaking. (Art.
1783, Civil Code). It would seem therefore that under Philippine law, a joint venture is a form of partnership
and should thus be governed by the law of partnerships. The Supreme Court has however recognized a
distinction between these two business forms, and has held that although a corporation cannot enter into a
partnership contract, it may however engage in a joint venture with others. Moreover, the usual rules as
regards the construction and operations of contracts generally apply to a contract of a joint venture.
dependents of the deceased employee would only be partially satisfied, which is evidently contrary to the intent
and purpose of the law to give full protection to the employee.
STATUTORY CONSTRUCTION; LIBERAL CONSTRUCTION OF WORKMEN'S COMPENSATION LAWS.
Workmen's Compensation laws should be construed fairly, reasonably and liberally in favor of and for the
benefit of the employee and his dependents. All doubts as to right of compensation should be resolved in his
favor, and the law should be interpreted to promote its purpose.
McDonald vs. National City Bank of New York
PARTNERSHIP; UNREGISTERED PARTNERSHIP; PERSONS COMPOSING IT ARE PARTNERS;
ASSOCIATION is PARTNERSHIP.While an uregistered commercial partnership has no juridical personality,
nevertheless, where two or more persons, attempt to create a partnership failing to comply with all the legal
formalities, the law considers them as partners and the association is a partnership in so far as it is favorable to
third persons, by reason of the equitable principle of estoppel.
"De Facto" EXISTENCE; DOMICILE AS TO THIRD PERSONS.If the law recognizes a defectively organized
partnership as de facto as far as third persons are concerned, for purposes of its de facto existence it should
have such attribute of a partnership as domicile. Although it has no legal standing, it is a partnership de facto
and the general provisions of the code applicable to all partnership apply to it.
Pioneer Insurance & Security Corporation vs. Court of Appeals
Persons who attempt but fail to form a corporation and who carry on business under the corporate name
occupy the position of partners inter se.While it has been held that as between themselves the rights of the
stockholders in a defectively incorporated association should be governed by the supposed charter and the
laws of the state relating thereto and not by the rules governing partners, it is ordinarily held that persons who
attempt, but fail, to form a corporation and who carry on business under the corporate name occupy the
position of partners inter se. Thus, where persons associate themselves together under articles to purchase
property to carry on a business, and their organization is so defective as to come short of creating a
corporation within the statute, they become in legal effect partners inter se, and their rights as members of the
company to the property acquired by the company will be recognized.
Such a relation does not necessarily exist however for ordinarily persons cannot be made to assume the
relation of partners as between themselves when their purpose is that no partnership shall exist.However,
such a relation does not necessarily exist, for ordinarily persons cannot be made to assume the relation of
partners, as between themselves, when their purpose is that no partnership shall exist (London Assur. Corp. v.
Drennen, Minn., 6 S.Ct. 442, 116 U. S. 461, 472, 29 L.Ed. 688), and it should be implied only when necessary
to do justice between the parties; thus, one who takes no part except to subscribe for stock in a proposed
corporation which is never legally formed does not become a partner with other subscribers who engage in
business under the name of the pretended corporation, so as to be liable as such in an action for settlement of
the alleged partnership and contribution (Ward v. Brigham, 127 Mass. 24). A partnership relation between
certain stockholders and other stockholders, who were also directors, will not be implied in the absence of an
agreement,
Same; Same; Same; Same; Petitioner never had the intention to form a corporation with the respondents
despite his representations to them.It is therefore clear that the petitioner never had the intention to form a
corporation with the respondents despite his representations to them. This gives credence to the cross-claims
of the respondents to the effect that they were induced and lured by the petitioner to make contributions to a
proposed corporation which was never formed because the petitioner reneged on their agreement.
No de facto partnership was created among the parties which would entitle the petitioner to a reimbursement of
the supposed losses of the proposed corporation.Applying therefore the principles of law earlier cited to the
facts of the case, necessarily, no de facto partnership was created among the parties which would entitle the
petitioner to a reimbursement of the supposed losses of the proposed corporation. The record shows that the
petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting the sale of
the airplanes and spare parts.
Viuda de Chan vs. Pen
INSOLVENCY; LIABILITY OF THE PARTNERS.Where a partnership, as such, has no visible assets, the
partners individually must, jointly and severally, respond for its debts (Code of Commerce, art. 127).
PARTNERSHIP AND SEPARATE PARTNERS JOINED IN THE SAME ACTION.Both the partnership and
the separate partners thereof may be joined in the same action, though, the private property of the partners
cannot be taken in payment of the partnership debts until the common property of the concern is exhausted.
PARTNERSHIP ADJUDGED BANKRUPT IN NAME OF OSTENSIBLE PARTNER.A partnership may be
adjudged bankrupt in the name of an ostensible partner when such name is the name under which the
partnership did business.