Syjuco vs. Castro, G.R. No. 70403.

FACTS:

Ponente: Justice Narvasa

Eugenio Lim, along with his brothers, all hereinafter collectively called the Lims, borrowed from petitioner Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of 800,000.00. The loan was given on the security of a first mortgage on property registered in the names of said borrowers as owners in common. Thereafter, additional loans on the same security were obtained by the Lims from Syjuco, so that the aggregate of the loans stood at 2,460,000.00, exclusive of interest. When the obligation matured, the Lims failed to pay it despite demands therefor and consequently, Syjuco caused extra-judicial proceedings for the foreclosure of the mortgage and for the Sheriff of Manila to execute the scheduled auction sale. The attempt to foreclose triggered off a legal battle that has dragged on for 20 years, through 5 cases in the courts, one of which the respondents advocated the theory that the mortgage, which they had individually constituted, in fact no longer belonged to them, having been earlier deeded over by them to the partnership, Heirs of Hugo Lim, making the said mortgage void because it was executed by them without authority from the partnership. Judgment was rendered by the trial court declaring void the mortgage in question because it was executed by the Lims without authority from the partnership which was and had been the exclusive owner of the mortgaged property, and making permanent an injunction against the foreclosure sale. Syjuco filed an instant petition for certiorari, prohibition and mandamus. It prays in its petition that the default judgment rendered against it by Judge Castro be annuled on the ground of, among others, estoppel, res judicata, and Article 1819 of the Civil Code. ISSUE: Whether or not the lower court erred in deciding the case. HELD: Yes. The court holds that the respondent partnership was inescapably chargeable with knowledge of the mortgage executed by all the partners thereof, and therefore its silence and failure to impugn said mortgage within a reasonable time, let alone a space of more than 17 years, brought into play the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized. Equally or even more preclusive of the respondent partnerships claim to the mortgaged property is the last paragraph of Art. 1819 of the Civil Code , which contemplates a situation similar to the case at bar. It states that where the title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights in such property. Consequently, those members' acts, declarations and omissions cannot be deemed to be simply the individual acts of said members, but in fact and in law, those of the partnership. Finally, the Court emphasizes that the right of the Lims to assert the existence of the partnership could have been stressed at the time they instituted their first action, considering that the actions involved property supposedly belonging to it, and therefore, the partnership was the real party in interest. What was done by them was to split their cause of action in violation of the well known rule that only one suit may be instituted for a single cause of action. Hence, the court orders that the assailed judgment be declared null and void and the complaint be dismissed from being barred by prior judgment and esstoppel, and for lack of merit. VILLAREAL et. al. vs RAMIREZ Facts: Petitioners (Luzviminda Villareal, Diogenes Villareal and Carmilito Jose) entered into a partnership whereby the partners would set up a catering service named Aquarious Food House and Catering Service. L. Villareal would be the general manager and Jose as the operations manager. The total capital of the partnership was P750,000. Thereafter, herein respondent Ramirez joined as a partner and made a capital contribution of P250,000. A few years later, Jose withdrew from the partnership and was refunded his capital contribution of P250,000 and shortly thereafter the restaurant was closed down due to losses incurred, the closure allegedly without the knowledge of respondent.

After the closure, the petitioners informed the respondent of the closure and stored at the house of the latter the furniture and equipement of the store. Later, respondent communicated with petitioners that they were no longer interested in continuing the partnership to reopen the business and thus sough a refund of their capital contribution. Such was ignored by petitioner prompting respondent to seek remedy before the courts-- during trial, petitioner avers that the furniture stored at respondents house was to serve as payment, such avertment was to no avail. The trial court ruled in favor of the respondent and awarded actual damages amounting to P250,000. When the case was elevated to the CA, the decision was still favorable to the repsondent with a modification of the amount to be paid by petitioner (not the return of the capital contribution), whereby the CA ruled that upon the dissolution of the partnership, the remaining capitalization minus its obligations should be divided among the partners, thus the amount to be paid was P253,114. Thus prompting the present petition. Issue: Whether or not petitioners are liable to pay respondents of their share in the partnership? Held: Technically, NO, the petitioners as partners are not liable to the return of the share of the respondent/partner, it is the partnership who is a distinct and independent entity who must refund the equity of the retiring partners. In which case, such equity must also be assessed and liquidated upon the dissolution of the partnership. What can be returned is that proportionate share remaining in the coffers of the partnership and not the capital contribution. In the case at bar, there is an error in the computation of the amount to be refunded as the lower courts failed to take into account the losses and obligations incurred by the partnership, thus the capitalization has already reduced at the time of the dissolution. The law does not relieve parties from the effects of unwise, foolish or disastrous contracts; as such, reduction as to the capitalization must be borne by all the parties. Absent the assesment of such changes in the capitalization of the parties, the Court sets aside the decision of the CA without prejudice to a subsequent proceeding for the accounting and liquidation of the remaining partnership assets. ROJAS vs. MAGLANA (192 SCRA 110) FACTS: A partnership was constituted between Rojas and Maglana to operate timber forest products concession, and articles of co-partnership were duly executed and registered with the SEC using the firm name Eastcoast Development Enterprises. Later, the partners took in an industrial partner, whereby they executed an Additional Agreement which essentially adopted the registered articles but covering the acceptance of an industrial partner, which agreement was not duly registered with the SEC, and the partnership operated under the original registered firm name. Shortly thereafter, the original partners bought out the interest, share and participation of the industrial partner in the firm, and the partnership was continued without the benefit of any written agreement or reconstitution of their written articles of copartnership. When Rojas entered into a separate management contract with another logging enterprise and withdrew his equipment from the partnership, Maglana made a formal demand against Rojas for the payment of his promised contribution to the partnership and compliance with his obligation to perform the duties of logging superintendent as provided expressly in the registered articles of co-partnership. When Rojas responded that he would not be able to comply with his promised contribution and will not work as logging superintendent for the partnership, Maglana gave notice of the dissolution of the partnership. In the suit that ensued between the partners, one of the issues that had to be resolved by the Court was the nature of the partnership and the legal relationship of Rojas and Maglana after the retirement of the industrial partner from the second partnership. ISSUE: Whether or not there was a change in the nature of the partnership/legal relationship of the partners after the retirement of the industrial partner of the second partnership?

HELD: NO. On this issue, the trial court ruled that the second partnership superseded the first partnership, so that when the second partnership was dissolved by the withdrawal of the industrial partner, there being no written contract of co-partnership when it was continued by the two original partners, there was no reconstitution of the original partnership, and consequently the partnership that was continued between Rojas and Maglana was a de facto partnership at will. In overruling the court a quo, the Supreme Court held . . . [I]t appears evident that it was not the intention of the partners to dissolve the first partnership, upon the constitution of the second one, which they unmistakable called an Additional Agreement . . . Except for the fact that they took in one industrial partner, gave him an equal share in the profits and fixed the term of the second partnership to thirty (30) years, everything else was the same. Thus, they adopted the same name, . . . they pursued the same purposes and the capital contributions of Rojas and Maglana as stipulated in both partnership call for the same amounts. Just as important is the fact that all subsequent renewal of Timber License No. 35-36 were secured in favor of the First Partnership, the original licensee. . . To all intents and purpose therefore, the First Articles of Partnership were only amended, in the form of Supplementary Articles of Co-Partnership . . . which was never registered . . . Otherwise stated, even during the existence of the second partnership, all business transactions were carried out under the duly registered articles. (Ibid, at pp. 117-118) The Court then proceeded to hold that On the other hand, there is no dispute that the second partnership was dissolved by common consent. Said dissolution did not affect the first partnership which continued to exist as shown by the subsequent acts of the original partners carrying one with the original partnership business and confirming the obligations constituted under the original articles of partnership. The conclusion of the Court was thus: Under the circumstances, the relationship of Rojas and Maglana after the withdrawal of [the industrial partner] can neither be considered as a de facto partnership, nor a partnership at will, for as stressed, there is an existing partnership, duly registered. (Ibid, at p. 118) Rojas therefore affirms two important aspects in Partnership Law: Firstly, that registration of the contract of partnership with the SEC has the legal effect of binding the partners (and perhaps even third parties dealing with the partnership), as to the contractual obligations, the rights and duties of the partners, and which has effective force even as the partnership undergoes changes within its constitution by the acceptance into and withdrawal of partners into the venture. Secondly, the underlying business enterprise, the manner of its operation, has much legal influence of determining the contractual intents of the partners in the determination of inter-partnership rights and obligations. Nobio Sardane v. CA and Romeo Acojedo G.R. No. L-47045 November 22, 1988 Regalado, J.: Facts: Acojedo, herein private respondent brought an action for collection of a sum of P5,217.25 based on promissory notes executed by the herein petitioner Nobio Sardane in favor of the Acojedo. It has been established in the trial court that on many occasions, Acojedo demanded the payment of the total amount of P5,217.25. The failure of the petitioner to pay the said amount prompted Acojedo to seek the services of lawyer who made a letter formally demanding the return of the sum loaned. Because of the failure of the petitioner to heed the demands extrajudicially made by Acojedo, the latter was constrained to bring an action for collection of sum of money. In an oral testimony given by petitioner Sardane he stated that a partnership existed between him and Acojedo which vary the meaning of the abovementioned promissory notes, and that the said amount taken by him from Acojedo was not his personal debt, but expenses of the partnership between him and Acojedo. Consequently, said trial court concluded that the promissory notes involved were merely receipts for the contributions to said partnership.

Issue: Whether there exists a partnership? Held: No. The Court of Appeals held, and SC agrees, that even if evidence aliunde other than the promissory notes may be admitted to alter the meaning conveyed thereby, still the evidence is insufficient to prove that a partnership existed between the private parties hereto. As manager of the basnig Sardane 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, no such inference shall be drawn if such profits were received in payment as wages of an employee.

The same rule was reiterated in Bastida vs. Menzi & Co., Inc., et al. 6 which involved the same factual and legal milieu. There are other considerations noted by respondent Court which negate herein petitioner's pretension that he was a partner and not a mere employee indebted to the present private respondent. Thus, in an action for damages filed by herein private respondent against the North Zamboanga Timber Co., Inc. arising from the operations of the business, herein petitioner did not ask to be joined as a party plaintiff. Also, although he contends that herein private respondent is the treasurer of the alleged partnership, yet it is the latter who is demanding an accounting. The advertence of the Court of First Instance to the fact that the casco bears the name of herein petitioner disregards the finding of the respondent Court that it was just a concession since it was he who obtained the engine used in the Sardaco from the Department of Local Government and Community Development. Further, the use by the parties of the pronoun "our" in referring to "our basnig, our catch", "our deposit", or "our boseros" was merely indicative of the camaraderie and not evidentiary of a partnership, between them. G.R. No. L-59956 October 31, 1984 ISABELO MORAN, JR. vs. THE HON. COURT OF APPEALS and MARIANO E. PECSON GUTIERREZ, JR., J.: Facts: On February 22, 1971 Pecson and Moran entered into an agreement whereby both would contribute P15,000 each for the purpose of printing 95,000 posters (featuring the delegates to the 1971 Constitutional Convention), with Moran actually supervising the work; that Pecson would receive a commission of P l,000 a month starting on April 15, 1971 up to December 15, 1971; that on December 15, 1971, a liquidation of the accounts in the distribution and printing of the 95,000 posters would be made, that Pecson gave Moran P10,000 for which the latter issued a receipt; that only a few posters were printed; that on or about May 28, 1971, Moran executed in favor of Pecson a promissory note in the amount of P20,000 payable in two equal installments (P10,000 payable on or before June 15, 1971 and P10,000 payable on or before June 30, 1971), the whole sum becoming due upon default in the payment of the first installment on the date due, complete with the costs of collection. Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a sum of money and alleged in his complaint three (3) causes of action, namely: (1) on the alleged partnership agreement, the return of his contribution of P10,000.00, payment of his share in the profits that the partnership would have earned, and, payment of unpaid commission; (2) on the alleged promissory note, payment of the sum of P20,000.00; and, (3) moral and exemplary damages and attorney's fees. Issues: 1. Whether or not Moran is liable to Pecson for the supposed expected profits due him 2. Whether or not Moran is Liable to Pecson for the supposed commission in the partnership arising out of Pecsons investment

Held: 1. The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of the partnership for whatever he may have promised to contribute and for interests and damages from the time he should have complied with his obligation. In the instant case, there is no evidence whatsoever that the partnership between the petitioner and the private respondent would have been a profitable venture. In fact, it was a failure doomed from the start. There is therefore no basis for the award of speculative damages in favor of the private respondent. In this case, however, there was mutual breach. Private respondent failed to give his entire contribution in the amount of P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any of the amount expected of him. He further failed to comply with the agreement to print 95,000 copies of the posters. Instead, he printed only 2,000 copies. Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership. And even with an assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim a right to recover the highly speculative profits. It is a rare business venture guaranteed to give 100% profits. 2. The partnership agreement stipulated that the petitioner would give the private respondent a monthly commission of Pl,000.00 from April 15, 1971 to December 15, 1971 for a total of eight (8) monthly commissions. The agreement does not state the basis of the commission. The payment of the commission could only have been predicated on relatively extravagant profits. The parties could not have intended the giving of a commission inspite of loss or failure of the venture. Since the venture was a failure, the private respondent is not entitled to the P8,000.00 commission. As already mentioned, there are risks in any business venture and the failure of the undertaking cannot entirely be blamed on the managing partner alone, specially if the latter exercised his best business judgment, which seems to be true in this case. WHEREFORE, the petition is GRANTED. Isabelo Moran, Jr., to pay private respondent Mariano Pecson P6,000.00 representing the amount of the private respondent's contribution to the partnership but which remained unused; and P3,000.00 representing one half of the net profits gained by the partnership in the sale of the two thousand copies of the posters.

Liwanag v. Court of Appeals and People G.R. No. 114398. October 24, 1997 ROMERO J.: FACTS: Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went to the house of complainant Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales readily agreed. Under their 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 to her if the goods are sold; otherwise the money would be returned to Rosales. Consequently, Rosales gave several cash advances to Liwanag and Tabligan amounting toP633, 650.00. During the first two months, Liwanag and Tabligan made periodic visits to Rosales to report on the progress of the transactions. The visits, however, suddenly stopped, and all efforts by Rosales to obtain information regarding their business proved futile.rarAlarmed by this development and believing that the amounts she advanced were being misappropriated, Rosales filed a case of estafa against Liwanag.chaAfter trial on the merits, the trial court rendered finding Liwanag guilty as charged. Appeal to the CA was unavailing since Appellate Court affirmed her conviction. On petition

for review to the High Court, Liwanag 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. Issue: Whether or not petitioners contention deserve merit. Held: No. The receipt indicates that the money delivered to Liwanag 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.chanroblesvirtualawlibrary Thus, even assuming that a contract of partnership was indeed entered into by and between the parties, we have 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.

G.R. No. 84157 July 28, 1989 JACOB S. LIM, petitioner, vs. COURT OF APPEALS, PIONEER INSURANCE AND SURETY CORPORATION, BORDER MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES and CONSTANCIO MAGLANA, respondents. GUTIERREZ, JR., J.: FACTS: In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship. On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract for the sale and purchase of two DC-3A Type aircrafts and one set of necessary spare parts to be paid in installments. On May 22, 1965, Pioneer Insurance and Surety Corporation as surety executed and issued its Surety Bond No. 6639 in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts. It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana contributed some funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand his airline business. They executed two separate indemnity agreements in favor of Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. The indemnity agreements stipulated that the indemnitors principally agree and bind themselves jointly and severally to indemnify and reimburse Pioneer for any damages, loss, costs, tax or penalty it may incur as surety. On June 10, 1965, Lim doing business under the name

and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts. The deed as duly registered. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. The Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts. The appellate court held Lim liable to reimburse certain amounts given by the respondents to the petitioner as their contributions to the intended corporation as well as additional payment for the expenses incurred in the cross-complaint. Petitioner questions this order, on the theory that as a result of the failure of respondents Bormaheco, Spouses Cervantes, Constancio Maglana and petitioner Lim to incorporate, a de facto partnership among them was created, and that as a consequence of such relationship all must share in the losses and/or gains of the venture in proportion to their contribution. Issue: Whether or not a de facto partnership was created Held: 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. 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, 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. 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. Lim in an undertaking sometime on or about August 9,1965, promised to incorporate his airline in accordance with their agreement and proceeded to acquire the planes on his own account. Since then up to the filing of this answer, Lim has refused, failed and still refuses to set up the corporation or return the money of Maglana. Lim has also ignored Bormaheco and Cervanteses, who, after learning the chattel mortgage executed by Lim demanded for the possession of the two planes and their accessories and or return the amount advanced. 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.

ESTANISLAO VS. C.A. Facts: The petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the in Quezon City which were then being leased to SHELL. They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial investment of PhP15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots owned in common by them. A joint affidavit was executed by them on April 11, 1966. The respondents agreed to help their brother, petitioner therein, by allowing him to operate and manage the gasoline service station of the family. In order not to run counter to the companys policy of appointing only one dealer, it was agreed that petitioner would apply for the dealership. Respondent Remedios helped in co-managing the business with petitioner from May 1966 up to February 1967. On May 1966, the parties entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated that the P15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement cancels and supersedes the Joint Affidavit. For sometime, the petitioner submitted financial statement regarding the operation of the business to the private respondents, but thereafter petitioner failed to render subsequent accounting. Hence , the private respondents filed a complaint against the petitioner praying among others that the latter be ordered: (1) To execute a public document embodying all the provisions of the partnership agreement they entered into; (2) To render a formal accounting of the business operation veering the period from May 6, 1966 up to December 21, 1968, and from January 1, 1969 up to the time the order is issued and that the same be subject to proper audit; (3) To pay the plaintiffs their lawful shares and participation in the net profits of the business; and (4) To pay the plaintiffs attorneys fees and costs of the suit. Issue: Can a partnership exist between members of the same family arising from their joint ownership of certain properties? Trial Court: The complaint (of the respondents) was dismissed. But upon a motion for reconsideration of the decision, another decision was rendered in favor of the respondents. CA:Affirmed in toto Petitioner:The CA erred in interpreting the legal import of the Joint Affidavit vis--vis the Additional Cash Pledge Agreement. Because of the stipulation cancelling and superseding the Joint Affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated. Also, the CA erred in declaring that a partnership was established by and among the petitioner and the private respondents as regards the ownership and /or operation of the gasoline service station business. Held:

There is no merit in the petitioners contention that because of the stipulation cancelling and superseding the previous joint affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00 advance rental starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24, 1966. There is therefore a duplication of reference to the P15,000.00 hence the need to provide in the subsequent document that it cancels and supercedes the previous none. Indeed, it is true that the latter document is silent as to the statement in the Join Affidavit that the value represents the capital investment of the parties in the business and it speaks of the petitioner as the sole dealer, but this is as it should be for in the latter document, SHELL was a signatory and it would be against their policy if in the agreement it should be stated that the business is a partnership with private respondents and not a sole proprietorship of the petitioner. Furthermore, there are other evidences in the record which show that there was in fact such partnership agreement between parties. The petitioner submitted to the private respondents periodic accounting of the business and gave a written authority to the private respondent Remedios Estanislao to examine and audit the books of their common business (aming negosyo). The respondent Remedios, on the other hand, assisted in the running of the business. Indeed, the parties hereto formed a partnership when they bound themselves to contribute money in a common fund with the intention of dividing the profits among themselves.

G.R. No. L-59956 October 31, 1984 ISABELO MORAN, JR. vs. THE HON. COURT OF APPEALS and MARIANO E. PECSON GUTIERREZ, JR., J.: Facts: On February 22, 1971 Pecson and Moran entered into an agreement whereby both would contribute P15,000 each for the purpose of printing 95,000 posters (featuring the delegates to the 1971 Constitutional Convention), with Moran actually supervising the work; that Pecson would receive a commission of P l,000 a month starting on April 15, 1971 up to December 15, 1971; that on December 15, 1971, a liquidation of the accounts in the distribution and printing of the 95,000 posters would be made, that Pecson gave Moran P10,000 for which the latter issued a receipt; that only a few posters were printed; that on or about May 28, 1971, Moran executed in favor of Pecson a promissory note in the amount of P20,000 payable in two equal installments (P10,000 payable on or before June 15, 1971 and P10,000 payable on or before June 30, 1971), the whole sum becoming due upon default in the payment of the first installment on the date due, complete with the costs of collection. Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a sum of money and alleged in his complaint three (3) causes of action, namely: (1) on the alleged partnership agreement, the return of his contribution of P10,000.00, payment of his share in the profits that the partnership would have earned, and, payment of unpaid commission; (2) on the alleged promissory note, payment of the sum of P20,000.00; and, (3) moral and exemplary damages and attorney's fees. Issues: 3. Whether or not Moran is liable to Pecson for the supposed expected profits due him 4. Whether or not Moran is Liable to Pecson for the supposed commission in the partnership arising out of Pecsons investment Held: 3. The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of the partnership for whatever he may have promised to contribute and for

interests and damages from the time he should have complied with his obligation. In the instant case, there is no evidence whatsoever that the partnership between the petitioner and the private respondent would have been a profitable venture. In fact, it was a failure doomed from the start. There is therefore no basis for the award of speculative damages in favor of the private respondent. In this case, however, there was mutual breach. Private respondent failed to give his entire contribution in the amount of P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any of the amount expected of him. He further failed to comply with the agreement to print 95,000 copies of the posters. Instead, he printed only 2,000 copies. Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership. And even with an assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim a right to recover the highly speculative profits. It is a rare business venture guaranteed to give 100% profits. 4. The partnership agreement stipulated that the petitioner would give the private respondent a monthly commission of Pl,000.00 from April 15, 1971 to December 15, 1971 for a total of eight (8) monthly commissions. The agreement does not state the basis of the commission. The payment of the commission could only have been predicated on relatively extravagant profits. The parties could not have intended the giving of a commission inspite of loss or failure of the venture. Since the venture was a failure, the private respondent is not entitled to the P8,000.00 commission. As already mentioned, there are risks in any business venture and the failure of the undertaking cannot entirely be blamed on the managing partner alone, specially if the latter exercised his best business judgment, which seems to be true in this case. WHEREFORE, the petition is GRANTED. Isabelo Moran, Jr., to pay private respondent Mariano Pecson P6,000.00 representing the amount of the private respondent's contribution to the partnership but which remained unused; and P3,000.00 representing one half of the net profits gained by the partnership in the sale of the two thousand copies of the posters.

G.R. No. 84157 July 28, 1989 JACOB S. LIM, petitioner, vs. COURT OF APPEALS, PIONEER INSURANCE AND SURETY CORPORATION, BORDER MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES and CONSTANCIO MAGLANA, respondents. GUTIERREZ, JR., J.: FACTS: In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship. On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract for the sale and purchase of two DC-3A Type aircrafts and one set of necessary spare parts to be paid in installments. On May 22, 1965, Pioneer Insurance and Surety Corporation as surety executed and issued its Surety Bond No. 6639 in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts. It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana contributed some funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to be their contributions to a new

corporation proposed by Lim to expand his airline business. They executed two separate indemnity agreements in favor of Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. The indemnity agreements stipulated that the indemnitors principally agree and bind themselves jointly and severally to indemnify and reimburse Pioneer for any damages, loss, costs, tax or penalty it may incur as surety. On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts. The deed as duly registered. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. The Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts. The appellate court held Lim liable to reimburse certain amounts given by the respondents to the petitioner as their contributions to the intended corporation as well as additional payment for the expenses incurred in the cross-complaint. Petitioner questions this order, on the theory that as a result of the failure of respondents Bormaheco, Spouses Cervantes, Constancio Maglana and petitioner Lim to incorporate, a de facto partnership among them was created, and that as a consequence of such relationship all must share in the losses and/or gains of the venture in proportion to their contribution. Issue: Whether or not a de facto partnership was created Held: 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. 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, 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. 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. Lim in an undertaking sometime on or about August 9,1965, promised to incorporate his airline in accordance with their agreement and proceeded to acquire the planes on his own account. Since then up to the filing of this answer, Lim has refused, failed and still refuses to set up the corporation or return the money of Maglana. Lim has also ignored Bormaheco and Cervanteses, who, after learning the chattel mortgage executed by Lim demanded for the possession of the two planes and their accessories and or return the amount advanced. 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.

3. G.R. No. L-39780 November 11, 1985

GUTTIERREZ, JR., J.: GALAN TROPICAL

ELMO MUASQUE, petitioner, vs. COURT OF APPEALS,CELESTINO COMMERCIAL COMPANY and RAMON PONS,respondents.

Facts: Petitioner Elmo Muasque filed a complaint for payment of sum of money and damages against respondents Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a contract with respondent Tropical through its Cebu Branch Manager Pons for remodelling a portion of its building without exchanging or expecting any consideration from Galan although the latter was casually named as partner in the contract; that by virtue of his having introduced the petitioner to the employing company (Tropical). Galan would receive some kind of compensation in the form of some percentages or commission; that Tropical, under the terms of the contract, agreed to give petitioner the amount of P7,000.00 soon after the construction began and thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a stranger to the contract, Galan, who succeeded in getting petitioner's indorsement on the same check persuading the latter that the same be deposited in a joint account; that on when the second check for P6,000.00 was due, petitioner refused to indorse said cheek presented to him by Galan but through later manipulations, respondent Pons succeeded in changing the payee's name from Elmo Muasque to Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in his construction business and subjecting him to demands of creditors to pay' for construction materials, the payment of which should have been made from the P13,000.00 received by Galan; that petitioner undertook the construction at his own expense completing it prior to the March 16, 1967 deadline;that because of the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan petitioner demanded that said amount be paid to him by respondents under the terms of the written contract between the petitioner and respondent company. ISSUES: (1) Whether or not there existed partners between Celestino Galan and Elmo Muasque; and (2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse money to respondent Galan. HELD There is a general presumption that each individual partner is an authorized agent for the firm and that he has authority to bind the firm in carrying on the partnership transactions. (Mills vs. Riggle,112 Pan, 617). The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of members of the firm acting apparently in its behalf and within the scope of his authority. (Le Roy vs. Johnson, 7 U.S. (Law. ed.), 391.) In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the petitioner and Galan and even more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace. The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the legal entities which is the partnership, are solidarily liable. Article 1824 which provides that: "All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

However, as between the partners Muasque and Galan, justice also dictates that Muasque be reimbursed by Galan for the payments made by the former representing the liability of their partnership to herein intervenors, as it was satisfactorily established that Galan acted in bad faith in his dealings with Muasque as a partner. WHEREFORE, petitioner is liabile and respondent Galan to intervenors Blue Diamond Glass and Cebu Southern Hardware is declared to be joint and solidary. Petitioner may recover from respondent Galan any amount that he pays, in his capacity as a partner, to the above intervenors,

Benjamin Yu v. NLRC G.R. No. 97212 June 30, 1993 FELICIANO, J.: FACTS: Petitioner was formerly the Assistant General Manager of the marble quarrying and export business operated by a registered partnership with the firm name of "Jade Mountain Products Company Limited.The partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of China (Taiwan), as limited partners. The partnership business consisted of exploiting a marble deposit found on land owned by the Sps. Ricardo and Guillerma Cruz, situated in Bulacan Province, under a Memorandum Agreement dated 26 June 1984 with the Cruz spouses. The partnership had its main office in Makati, Metropolitan Manila. However, petitioner was dismissed from his position when 82% of the shares of the partnership where now under the control of Willy Co and Emmanuel Zapanta and continued to use the old firm name of Jade Mountain, though they moved the firm's main office from Makati to Mandaluyong, Metropolitan Manila. Aggrieved, petitioner filed a claim for unpaid salaries since he was only given half of the P4,000 promised as monthly compensation during his stay with the firm and a complaint for illegal dismissal. The Labor Arbiter sided with petitioner, but on appeal, the NLRC reversed the decision and said the there was already a new partnership in existence and petitioner should post his claims to the old partners of Jade Mountain. Hence, this petition for review on certiorari ISSUE/S : 1) Whether the partnership which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnerships composed of Willy Co and Emmanuel Zapanta; and (2) Whether a new partnership had come into existence, and whether petitioner Yu could nonetheless assert his rights under his employment contract as against the new partnership HELD: 1. Yes. The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which had hired petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.The applicable law in this connection, of which the NLRC seemed quite unaware, is found in the Civil Code provisions relating to partnerships is under Art. 1828 which provides The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. 2. Yes. It is important to underscore the fact that the business of the old partnership was simply continued by the new partners, without the old partnership undergoing the procedures relating to dissolution and winding up of its business affairs. In other words, the new partnership simply took over the business enterprise owned by the preceeding partnership, and continued using the old name of Jade Mountain Products Company Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then re-assembling the said assets or most of them and opening a new business enterprise. , Benjamin Yu is still entitled to enforce his claim for unpaid salaries, as well as other claims relating to his employment with the previous partnership, against the new Jade Mountain G.R. No. 109248 July 3, 1995 GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners, vs.

HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondents.

VITUG, J.: FACTS : Law firm BITO, MISA & LOZADA was duly registered in the SEC. Misa wrote a letter to the other partners stating his intent to withdraw from the partnership and asking a meeting regarding the dissolution of the partnership and liquidation of his share in the parnerships assets. Misa wrote in another latter his sentiment for withdrawal, due to the unfair treatment to the employees and refusal to increase the salary of the employees by the other partners. Misa filed fo the dissolution of the partnership in the SEC who granted the dissolution. Parties appealed to the CA. Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died.

ISSUE: 1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will; 2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith; and 3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the dissolution of the partnership so that he can get a physical partition of partnership was not made in bad faith; HELD: 1) A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. The partnership agreement provides that partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners Hearing officer however opined that the partnership is one for a specific undertaking and hence not a partnership at will. The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all partnerships, which necessarily must have a purpose, would all be considered as partnerships for a definite undertaking. There would therefore be no need to provide for articles on partnership at will as none would so exist. Apparently what the law contemplates, is a specific undertaking or "project" which has a definite or definable period of completion. 2) Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, 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. 3) Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to have been spurred by "interpersonal conflict" among the partners. Indeed, 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.