Professional Documents
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Partnership and Agency Digests For Atty Cochingyan
Partnership and Agency Digests For Atty Cochingyan
Cochingyan
TAN SEN GUAN & CO. VS. PHILIPPINE TRUST has no claim against either Mindoro Sugar or the
CO. trust estate.
(2) Exhibit D (the certificate of sale to Roman
Facts: Plaintiff Tan Sen Guan & Co. secured a Catholic Archbishop) shows that all properties to
judgment for a sum of P21,426 against the Mindoro Phil Trust as Trustee were included in the sale.
Sugar Co. of which the Philippine Trust is the trustee. The only thing reserved from the sale was the
The plaintiff entered into an agreement with the standing crops, and it is reasonable to presume
defendant Philippine Trust Co. wherein the former that they had also been sold between the date of
assigned, transferred, and sold to the latter the full the sale and the institution of this action. Where
amount of said judgment against Mindoro Sugar Co. the real estate, the personal property including
together with all its rights thereto and the latter animals, and all the bills receivable are sold, it
offered satisfactory consideration thereto. The would be a forced construction of the contract of
agreement further stipulated that upon signing of the agreement to hold that the assets of the Mindoro
agreement, Phil Trust shall pay Tan Sen the sum of Sugar Company had not been sold.
P5000; should the Mindoro Sugar be sold or its
ownership be transferred, an additional P10,000
pesos will be paid to Tan Sen upon perfection of the
sale; in case any other creditor of Mindoro Sugar PHIL. AIR LINES, INC. VS. HEALD LUMBER CO.
obtains in the payment of his credit a greater
proportion than the price paid to Tan Sen, the Phil Facts: Lepanto Consolidated Mines chartered a
Trust shall pay to the latter whatever sum may be helicopter belonging to plaintiff Phil. Air Lines to
necessary to be proportioned the claim of the make a flight from its base at Nichols Field Airport to
creditor. However, if the Mindoro Sugar is sold to any the formers camp at Manyakan Mountain Province.
person who does not pay anything to the creditors or The helicopter, with Capt. Gabriel Hernandez and Lt.
pay them equal or less than 70 percent of their Rex Imperial on board, failed to reach the destination
claim, or should the creditors obtain from other as it collided with defendants tramway steel cables
sources the payment of their claim equal to or less resulting in its destruction and death of the officers.
than 70 percent, the Phil Trust will only pay to Tan Plaintiff insured the helicopters and the officers who
Senthe additional sum of P10,000 upon the sale or piloted the same for P80,000 and P20,000
transfer of the Mindoro Sugar as above stated. The respectively and as a result of the crash, the
properties of Mindoro Sugar were later on sold at insurance companies paid to the plaintiff the total
public auction to the Roman Catholic Archbishop of indemnity of P120,000. Plaintiff sustained additional
Manila and base on the agreement plaintiff Tan Sen damages totaling P103,347.82 which were not
brought suit against defendant Phil Trust for the sum recovered by insurance. The plaintiff instituted this
of P10,000. action against defendant Heald Lumber Company to
recover the sum paid by the insurance company to
Defendants argument: Only a portion of the the plaintiff and the additional damages which was
Mindoro Sugars properties were sold. not recovered from the insurance.
CFI: Absolved the defendant on two grounds: (a) in Defendants argument: Plaintiff has no cause of
the contract, it was only bound as a trustee and not action against defendant for if anyone should due
as an individual; (b) that it has not been proved that defendant for its recovery, it will only be the
all the properties of the Mindoro Sugar had been insurance companies.
sold.
Plaintiffs argument: It asserts that the claim of
Issues: the said amount of P120,000 is on behalf and for the
benefit of the insurers and shall be held by plaintiff in
(1) W/N the defendant is not personally trust for the insurers. It is appellants theory that,
responsible for the claim of the plaintiff inasmuch as the loss it has sustained exceeds the
based on the deed of assignment because amount of the insurance paid to it by the insurers,
of having executed the same in its capacity the right to recover the entire loss from the
as trustee of the properties of the Mindoro wrongdoer remains with the insured and so the
Sugar. action must be brought in its own name as real party
(2) W/N all the properties of the Mindoro Sugar in interest. To the extent of the amount received by it
were sold at public auction to the Roman as indemnity from the insurers, plaintiff would then
Catholic Archbishop of Manila. be acting as a trustee for them. To support this
contention, appellant cites American authorities.
Held: SC reversed CFIs ruling. RTCs Ruling: The court ordered the plaintiff to
amend its complaint to delete the first allegation that
(1) The Phil Trust Company in its individual capacity insurance companies have paid a portion of the
is responsible for the contract as there was no plaintiffs damages, since the Court believes that the
express stipulation that the trust estate and not real parties in interest are the insurance companies
the trustee should be held liable on the contract concerned or bring in the insurance companies as
in question. Not only is there no express parties plaintiff. And having manifested plaintiffs
stipulation that the trustee should not be held decision not to amend the complaint, such move of
responsible but the Wherefore clause of the plaintiff amounts to a deletion of the portion objected
contract states the judgment was expressly to and so the complaint should be deemed limited to
assigned in favor of Phil Trust Company and not the additional damages.
Phil Trust Company, the trustee. It therefore
follows that appellant had a right to proceed Issue:
directly against the Phil Trust on its contract and
Facts: Epifanio Gomez owned a property which was (1) The fact that one of the two individuals who
sold in a pacto de retro sale to Luis Yangco have constituted themselves trustees for
redeemable in 5 years, although the period passed the purpose above indicated conveys his
without redemption, the vendee conceded the interest in the property to his cotrustee does
vendor the privilege of repurchase. Gomez apply to a not relieve the latter from the obligation to
kinsman, Bibiano Baas, for assistance on a comply with the trust.
condition that he will let him have the money if his (2) A trust constituted between two contracting
brother Marcelino Gomez and his sister Telesfora parties for the benefit of a third person is
Gomez would make themselves responsible for the not subject to the rules governing donations
loan. The siblings agreed and Baas advance the of real property. The beneficiary of the trust
sum of P7000 which was used to repurchase the may demand performance of the obligation
property in the names of Marcelino and Telesfora.. A without having formally accepted the
private partnership in participation was created benefit of the trust in a public document,
between Marcelino and Telesfora and therein agreed upon mere acquiescence in the formation of
that the capital of the partnership should consist of the trusts and acceptance under the second
P7000 of which Marcelino was to supply the amount par. of article 1257 of the CC. Much energy
of P1500 and Telesora the sume of P5500. It was has been expanded by the attorneys for the
further agreed that the all the property to be appellant in attempting to demonstrate
redeemed shall be named to the two, that Marcelino that, if Epifanio at any time had any right in
should be its manager, that all the income, rent, the property by virtue of the partnership
produce of the property shall be applied exclusively agreement between Marcelino and Telesfora
to the amortization of the capital employed by the such right could be derived as a donation
two parties with its corresponding interest and other and that, inasmuch as the donation was
incidental expenses and as soon as the capital never accepted by Epifanio in a public
employed, with its interest and other incidental document, his supposed interest therein is
expenses, shall have been covered, said properties unenforceable. The partnership should not
shall be returned to Epifanio Gomez or his legitimate be viewed in light of an intended donation,
children. A year after Epifanios death, Telesfora but as an express trust.
wanted to free herself from the responsibility which (3) As against the beneficiary, prescription is
she had assumed to Baas and conveyed to not effective in favor of a person who is
Marcelino her interest and share in the three acting as a trustee of a continuing and
properties previously redeemed from Yangco and subsisting trust. Therefore, Marcelino cannot
both declared dissolved the partnership they created. acquire ownership over the property
With Marcelino as the sole debtor, Baas required through prescription.
Facts: Spouses Urbano and Panganiban owned as Held: Where the grantee takes the property under
conjugal property 29 unregistered parcels of land an agreement to convey to another on certain
during their lifetime. When Urbano died, his conditions, a trust results for the benefit of such
compulsory heirs were the children of Gaudencia, his other or his heirs. It is also the rule that there is an
child with Panganiban, who are petitioners in this implied trust when a person purchases land with his
case, and two other legitimate children, his children own money and takes conveyance thereof in the
with his second wife, who are the private name of another. In such a case, the property is held
respondents in this case. on a resulting trust in favor of the one furnishing the
consideration for the transfer. This kind of trust is
Petitioners filed a civil case in the CFI for from equity and arises by implication or operation of
partition and delivery of possession of certain shares law.
in the conjugal assets. They contended that private
respondents have excluded them from taking In the present case, it is apparent that
possession of the whole conjugal property and that Emilio furnished the consideration intending to obtain
the latter appropriated to themselves the products a beneficial interest in the property in question.
coming from the parcels of land. The court ruled in Having supplied the money, it is presumed that he
favor of the private respondents claiming that the intended to purchase the lot for his own benefit.
action of the petitioners has already prescribed for Moreover, by entering into an agreement with Emilio
the reason that an implied or constructive trust that the necessary documents of transfer will be
prescribes in ten years. made later, Lucas acknowledged the he merely held
the property in trust for his brother with the
Issue: W/N there is an implied or constructive trust understanding that it will eventually be conveyed to
granted by the petitioners in favor of the the plaintiffs predecessor in interest. Lastly, by
respondents. No. acknowledging the presence of trust, the plaintiffs
action cannot be said to have been barred by lapse
of time. The case is therefore remanded for further
Held: The Court ruled that the present case does not
proceedings.
fall under the rules of implied trust. Considering the
fact that the parties in this case inherited the land
from the same ancestor, Urbano, both parties are
clearly co-owners of the disputed properties. This
case is therefore governed by the rules on co- LAUREANO VS. STEVENSON
ownership. Under the civil code, prescription does
not run against a co-owner or a co-heir so long as he Facts: In 1912, Felix Laureano sold to Eugenio
expressly or impliedly recognizes the co-ownership. Kilayco a piece of property situated in the City of
Iloilo, and such land was then registered in the
In view of their lack of a clear repudiation of latters name. Adjoining such property was another
the co-ownership, private respondents cannot property belonging to Laureano.
acquire the share of the petitioners by prescription.
When the cadastral survey was initiated in Iloilo in
1914, Kilayco made proper representations to
confirm the title to his property. Thereafter, title was
HEIRS OF CANDELARIA VS. ROMERO issued to him, but later, for some unknown reason,
the certificate was ordered cancelled and a new one
was issued. Then, presumably by mistake, the title
Facts: Parties to this case are the heirs of Emilio
was made to include not only Kilaycos property but
Candelaria as plaintiff and Luisa Romero, and the
property belonging to his neighbor, Laureano. The
heirs of Lucas as defendants.
final decree to his effect was issued in 1916.
Emilio and Lucas Candelaria bought a lot on
Creditors of Kilayco, becoming aware of the
an installment basis. Lucas paid the first two
existence of the title to the property, instituted
installments but because of sickness which caused
actions and obtained writs of execution in May 1922.
him to be bedridden, he sold his share to his brother
The sale of the property was set for October 1922. All
Emilio who continued to pay the purchase price until
the while, Laureano had done nothing to protect his
the obligation to pay had been fully satisfied. The
interests in the property. However, he claims to have
TCT was however issued under the name of Lucas.
been absent in Spain at the time of the hearing in the
Nevertheless, Lucas acknowledges that he merely
cadastral case and to have known nothing of it.
held the title in trust for his brother with the
understanding that the necessary documents of
transfer will be made later and this fact was known On June 1922, Laureano filed a case against Kilayco
not only to him but also to the defendants. However to obtain a judgment, declaring him to be the owner
upon his death, his heirs refused to reconvey the lot of the parcels of land mistakenly included in the
to plaintiff despite repeated demands. latters title, and ordering the cancellation of the
certificate of title theretofore issued in the name of
Kilayco.
Plaintiff brought an action in the CFI for a
complaint for reconveyance of real property. The
lower court however dismissed the case on the
1. Kilayco never laid a claim to the property; CA: Resolved in favor of respondents, declaring that
2. The two lots covered by the certificate were the sale to intervenor-petitioners did not terminate
mistakenly registered in the name of the trust relationship between the appellants and the
Kilayco; and appellees. The sale in favor of petitioners shall be
3. The court did not have jurisdiction to enforced against the share of respondents as heirs
confirm the title of the two lots for the of Fausto.
reason that no petition for title was filed, no
trial was held, no evidence was presented, Issue: Was the disputed land held in trust by Fausto
and no judgment was rendered regarding Soy for his sisters, Emilia, Cornelia and Anastacia
these two lots in the land registration (mothers of herein respondents)?
proceedings.
Ruling: CA decision reversed, order for partition
Kilayco was, in effect, merely holding the title of the dismissed.
property in trust of Laureano. The creditors of
Kilayco could acquire no higher or better right than Fausto, being predecessor-in-interest, had appeared
Kilayco had in the property, which, in this case, was to be the registered owner of the lot for more than 30
nothing. Hence, Laureano can rightfully recover the years and his dominical rights can no longer be
two parcels of land included in the title of Kilayco challenged. Any insinuation as to the existence of an
through mistake. implied or constructive trust should not be allowed.
April 1965, Respondents Rosita Lopez, Gavino Respondents had literally slept on their rights
Cayabyab, Agueda and Felipa Ubando, Pedro Soriano, presuming they had any and can no longer dispute
Teosidia Lopez and Federico Ballesteros (nieces and the conclusive and incontrovertible character of
nephews of Fausto) filed the instant complaint for Faustos title as they are deemed to have acquiesced
partition against Fausto Soy. On the same day they therein.
filed a notice of lis pendens and had it annotated on
the OCT. Fausto answered and contested plaintiffs
claims, asserting exclusive title in his name. Fausto
countered that the questioned land was never ADAZA V. CA
registered in the names of his parents Eugenio and
Ambrosia, and that he had been the registered owner Facts: In 1953, Victor Adaza Sr. executed a Deed of
of the premises since 1932. Donation, covering the disputed land in this case,
located in Sinonok, Zamboanga del Norte in favor of
On the basis of evidence adduced ex-parte, the Trial Respondent Violeta. The land being disposable public
Court held that respondents and Fausto were co- land had been held and cultivated by Victor, Sr. With
owners of the lot and ordered the partition thereof. the help of her brother, Horacio, Violeta filed a
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
homestead application over the land and a free The doctrine of laces is not to be applied
patent was issued in 1956. An OCT was issued in mechanically as between near relatives.
1960. In 1962, Violeta and husband, Lino obtained a
loan from PNB by executing a mortgage on the land,
while Homero Adaza, brother of Violeta remained
administrator of the same. ARMAMENTO V. GUERRERO
In 1971, Horacio invited his brothers and sisters for a Facts: This case involves an action for reconveyance
family gathering where he asked Violeta to sign a or for the declaration of an implied trust on Lot No.
Deed of Waiver with respect to the property in 974 and for damages.
Sinonok. The Deed stated that the land was owned in
common by Violeta and Horacio even though the
The disputed land was the subject of 2 Patent
OCT was in her name only. The Deed also provided
Applications: (1) Free patent filed by Defendant on
for the waiver, transfer and conveyance of Violeta to
Aug 1 1958, issued Jul 1961, OCT issued Feb 1962
Horacio of of the property and its improvements.
and (2) Homestead Patent filed by Plaintiff on Jul 7
Violeta and Horacio signed the Deed with Homero as
1959, approved Jan 1964.
a witness.
Plaintiff Armamento alleges that he is the possessor-
A few months later, Violeta and husband Lino filed a
actual occupant of and Homestead applicant over the
complaint for annulment of the Deed of waiver and
disputed lot. Upon following up his application, he
for damages against Horacio and wife Felisa. The
was shocked to discover that Defendant Guerrero,
complaint alleged that (1) she was absolute owner of
through fraud and misrepresentation obtained a Free
the land by virtue of an unconditional donation
Patent over the same land, by falsely stating that he
executed by her father in her favor; (2) she was
had continuously possessed the lot since July 1945 or
registered owner; (3) she signed the Deed of waiver
prior thereto, when in truth defendant was never in
because of fraud, misrepresentation and undue
possession.
influence; and (4) because of such malicious acts,
she is entitled to damages from Horacio.
In his Answer, Guerrero denies that he was not in
possession claiming that he had been in occupation
Trial Court: Declared Deed of Waiver as valid and
of said lot and even authorized a certain Macario
binding upon Violeta, that Horacio was co-owner of
Caangay to administer the same while he was
of the land, and odering Violeta to pay Horacion
termporarily away for missionary work in Cagayan de
the proceeds of his share.
Oro.
CA: Reversed Trial court decision, declaring that
Trial Court: Dismissed the case on the following
though the deed was signed voluntarily, such Deed
grounds: (a) Plaintiff has no personality to file the
was without consideration or cause because the land
action for reconveyancethe proper party being the
had been unconditionally donated to Violeta alone.
Republic of the Philippines; (b) Plaintiff has no cause
of action in the absence of privity of contract
Issue: Who owns the disputed parcel of land? between parties; (c) defendants title has become
Ruling: Petition granted. indefeasible and cannot be cancelled; and (d) even
if based on fraud, the action has prescribed.
Deed of donation had a crossed-out provision: That
the donee shall share of the entire property with Issues: Is plaintiffs action for reconveyance
one of her brothers and sisters after the death of the justified? Was there a trust created?
donor.
Ruling: After the lapse of one year, a decree of
The record is bereft of any indication of any evil registration is no longer open to review or attack,
intent or malice on the part of Homero, Victor, Jr. and although its issuance is attended with fraud.
Teresita (siblings of Violeta) that would suggest However, an action for reconveyance is still available
deliberate collusion against Violeta. Their father had for the aggrieved party if the property has not yet
executed the Deed of Donation with the passed to an innocent purchaser for value. This is
understanding that the same would be divided exactly what plaintiff has done.
between Horacio and Violeta and that Violeta had
signed the Deed of Waiver freely and voluntarily.
Plaintiff has not been able to prove fraud and
misrepresentation because of the trial court
Victor Adaza, Sr. left 4 parcels of land divided among dismissal. While plaintiff is not the owner of the
the 6 children through the practice of having the land, so that, strictly speaking, he has no personality
lands acquired by him titled to the name of one of his to file this application, he pleads for equity and
children. invokes the doctrine of implied trust under Art. 1456
of the Civil Code: If property is acquired through
The property involved in the instant case is owned in mistake or fraud, the person obtaining it is, by force
common by Violeta and brother, Horacio even though of law, considered a trustee of an implied trust for
the OCT was only in her name. She held half of the the benefit of the person from whom the property
land in trust for petitioner Horacioimplied trust comes.
based on Article 1449 of the Civil Code:
The doctrine of implied trust may be made to
There is also an implied trust when a donation is operate in plaintiffs favor, assuming that he can
made to person but It appears that although the prove his allegation that defendant had acquired
legal estate is transmitted to the donee, he legal title by fraud.
nevertheless is either to have no beneficial interest
of only a part thereof. A constructive trust is a trust raised by construction
of law or arising by operation of law. If a person
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
obtains legal title to property by fraud or LOWER COURT: Dismissed the complaint on the
concealment, courts of equity will impress upon the basis of res judicata as their shares were already
title a so-called constructive trust in favor of the settled in the intestate proceedings. No deed of trust
defrauded part. was alledged and proven.
Action for reconveyance has not prescribedthe Plaintiffs appealed saying that they were grievously
prescriptive period being 10 years. (Title obtained prejudiced by the partition and thus res judicata
1962, Suit commenced 1967) should not bar their action.
Case is remanded to CFI Cotobato. SC: The plaintiffs have not proven any express trusts
neither have they specified the kind of implied trust
contemplated in their action. Either way, such action
may be barred by laches.
RAMOS v RAMOS
In the cadastral proceedings, Jose and wife claimed
Facts: Spouses Martin Ramos and Candida were the 8 lots of the plaintiffs. After the death of Jose, the
survived by three legitimate children: Jose, Agustin said lots were adjudicated to his widow and daughter.
and Granada. Martin was also survived by 7 natural In 1932 Gregoria leased the said lots to Yulo, who in
children. A special proceeding was instituted for the 1934 transferred his lease rights over Hacienda
settlement of the estate of said spouses. Rafael, Calazato to Bonin and Olmedo, husband of plaintiff
brother of Martin was appointed administrator. A Atanacia. Bonin and Olmedo in 1935 sold their lease
project of partition was submitted and the conjugal rights over Hacienda Calaza to Consing.
hereditary estate was appraised at P74,984.93. It
consisted of 18 parcels of land, some head cattle and Those transactions prove that the heirs of Jose had
advances to the legitimate children. It was agreed in repudiated any trust which was supposedly
the project of partition that Jose and Agustin would constituted over Hacienda Calaza in favor of the
pay the cash adjudications to their natural siblings. plaintiffs.
Only the sum of P 37, 492.46 of the P74k
represented the estate of Martin. 1/3 thereof was the The period of extinctive prescription is 10 years.
free portion out of which the shares of the natural Atanacia, Modesto and Manuel, could have brought
children were to be taken: each would get P1,785.35. the action to annul the partition. Maria and Emiliano
The project of partition as well as the intervention of were both born in 1896. They reached the age of 21
Timoteo as guardian of the five minor heirs was in 1917 and could have brought the action from that
approved by the court. Later on, Judge Nepomuceno year.
asked the administrator to submit a report showing
that the shares have been delivered to the heirs as The instant action was filed only in 1957. As to
required which the siblings acknowledged in a Atanacia, Modesto and Manuel, the action was filed
manifestation. The Himalayan cadastre (8 lots) 43 years after it accrued and, as to Maria and
involved in this case were registed in equal shares in Emiliano, the action was filed 40 years after it
the names of Joses widow, Gregoria and her accrued. The delay was inexcusable. The instant
daughter Granada. action is unquestionably barred by prescription and
res judicata.
The Plaintiffs (natural children) contend that while
they were growing up, they had been well supported It was anomalous that the manifestation should
by Jose and Agustin as they had been receiving their recite that they received their shares from their
shares from the produce of the Haciendas in varied administrator, when in the project of partition it was
amounts over the years. Even after the death of Jose, indicated that said shares shall be received in cash
Gregoria had continued giving them money but had from brothers Jose and Agustin. Thus due to this
stopped in 1951 by reason that lessee Lacson was irregularities as well as those of the intestate
not able to pay the lease rental. No accounting had proceedings, the plaintiffs contend that the partition
ever been made to them by Jose nor Gregoria. Upon was not binding on them (except for Timoteo who
the survey of the land, they did not intervene, as Jose considered himself bound by the partition). They ask
and Agustin promised that said lands shall be that the case be remanded to the lower court for the
registered in the names of the heirs. They did not determination and adjudication of their rightful
know that the intestate proceedings were instituted shares.
for the distribution of the estate of their father.
Neither did they have any knowledge that a guardian However, due to the fact that the plaintiffs slept on
was assigned to represent their minor siblings, their rights, the courts can no longer afford them
considering that Modesto and Miguel who were relief
claimed to be such were no longer minors at the time
of the partition. They never received their share in
the estate of their father. Plaintiffs later on
discovered that the property had a Torrens title in the VARSITY HILLS, INC v NAVARRO
name of Gregoria and her daughter when Modestos
children had inquired from the Register of Deeds. Facts: The present action began from a previous civil
Petitioners now bring the present suit for the case wherein a petition was filed by herein
reconveyance of the subject parcels of land in their respondents Mejia as heirs of Quintin Mejia and by
favor. Elpidio Tiburcio as assignee of a portion of the estate
left by the latter as plaintiff against petitioners
Petitioners claim that in effect, Gregoria and Tuason et. al. The complaint alleged that Quintin
daughter are holding their shares in trust which was Mejia had obtained a Spanish title to the land and
denied by defendants. Defendants alledge res that he and his successors in interest had occupied
judicata and prescription. the land without interruption until they were forcibly
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
rejected therefrom and their houses demolished in GERONA v DE GUZMAN
1934 through a writ of execution. In 1914, the
defendants Tuason had obtained a decree of Facts: Petitioner Gerona heirs are the legitimate
registration covering 35,403 hectares and that they children of Domingo Gerona and Placida de Guzman.
had fraudulently and insidiously included plaintiffs Placida was a legitimate daughter of Marcelo de
land in the area covered by the Certificate of Transfer Guzman and his first wife Teodora de la Cruz. After
by inserting fake and false technical descriptions. UP the death of Teodora, Marcelo married Camila Ramos.
et al. as subsequent acquirers whose titles are Their children are herein respondents de Guzman
derived from the original fraudulent certificates heirs. Marcelo died some time in Septermber 1945
should likewise be annulled. and respondents executed a deed of extra-judicial
settlement of his estate. They fraudulently stipulated
Herein Petitioners contend that the decision in a civil therein that they were the only surviving heirs of
case wherein the Respondents were declared as Marcelo although knowing that petitioners were also
without title to the land and ejected by a writ of his forced heirs. They were able to cause the transfer
execution was affirmed by the Supreme Court. The the certificates of 7 parcels of land each in their
Petitioners contend in the present case that the names. The petitioners discovered the fraud only the
causes of action averred by the Respondents were year before the institution of the case. Petitioners
barred by the LRA and the statute of limitations over seek to annul the extra-judicial settlement as well as
51 years having elapsed since the decree of have their shares in the said properties reconveyed
registration was issued, barred by laches as 32 years to them.
have elapsed since the ejectment and that the court
had no jurisdiction to review and revise the decree of Contentions: Defendants argue that Placida de
registration. They also maintain as affirmative Guzman was not entitled to share in the estate of
defenses that they had in possession for over 30 Marcelo as she was an illegitimate child and that the
years of the land thus acquiring title by acquisitive action of the Petitioners is barred by the statute of
prescription and that claims for ownership were limitations.
extinguished by the decree and that they are
purchasers for value and in good faith of the lands Rulings:
standing in their names. A motion to dismiss was
filed yet was denied by the lower court. The TRIAL COURT: The trial court dismissed the case
Petitioners resorted to the SC for a special after finding that Placida was a legitimate child of
proceeding for writs of certiorari and prohibition thus Marcelo and that the properties described herein
the trial court was enjoined from proceeding with the belonged to the conjugal partnership of Marcelo and
trial until further orders. Camila. It also ruled that Petitioners action had
already prescribed.
Mejia and Tiburcio claim that appeal in due time was
the proper remedy. CA: affirmed ruling of the trial court
Issue: Can the present action prosper based on Contentions: Petitioners assert that since they are
claims of implied/constructive trust? co-heirs of Marcelo, the action for partition is not
subject to the statue of limitations; that if affected,
SC: The court below gravely abused its discretion in the period of 4 years did not begin to run until
denying petitioners motion to dismiss based on their discovery of the fraud. They claim that the fraud
affirmative defenses. The action by Tiburcio and done by respondents took place in 1956 or 1957 and
Mejias was already barred by res judicata and that it had not prescribed when the present action
extinctive prescription. A previous case was decided was commenced.
wherein Quintin Mejia had been found without title
and thus ejected. The action in the court below was SC: The rule holds true only when the defendants do
definitely barred as while the present respondents not hold the property in question under an adverse
were not parties to the cause which Quintin Mejia title. The statute of limitations operates from the
was such a party, the final judgment against him time the adverse title is asserted by the possessor of
concludes and bars his predecessors and privies as the property.
well. Since the respondents failed to file a petition for
review of the decree within one year after the entry The defendants excluded the petitioners from the
thereof despite claims that there was fraud in the estate of Marcelo when they executed the deed of
inclusion of their land in the title, they are barred by extra-judicial settlement claiming that they are the
the LRA. However if the fraud had been committed sole heirs thus setting up an adverse title to the
after the issuance of the decree, they should have estate.
pleaded when Quintin was made a defendant in Civil
Case 4420. Nevertheless, their cause of action is An action for reconveyance of real property based
barred by res judicata. With or without judgment upon a constructive or implied trust, resulting from
against Quintin, their action had been fraud may be barred by the statute of limitations and
extinguished by the lapse of 30 years from the the action may only be filed within 4 years from the
time he was ejected from the land in question. discovery of the fraud. In the case at bar, the
An action to recover is also foreclosed by the discovery was made on June 25, 1948 when the deed
statute of limitations. Actions on implied trusts was filed with the Register of Deeds and new
are extinguished by laches or prescription of certificates of title were issued in the names of the
10 years. Respondents have presented no cause of respondents exclusively. Plaintiffs complaint was not
action. The lower court by denying the motion to filed until November 4, 1958 or more than 10 years
dismiss constituted GADLEJ since they prolonged a after.
litigation that was unmeritorious on its face.
YULO V. YANG CHIAO SENG Ruling: Dismissal. The agreement was a sublease not
a partnership. The following are the requisites of
Facts: Yang Chiao Seng proposed to form a partnership: (1) two or more persons who bind
partnership with Rosario Yulo to run and operate a themselves to contribute money, property or
theatre on the premises occupied by Cine Oro, Plaza industry to a common fund; (2) the intention on
Sta. Cruz, Manila, the principal conditions of the offer the part of the partners to divide the profits among
being (1) Yang guarantees Yulo a monthly themselves (Article 1761, CC)
participation of P3,000 (2) partnership shall be for a
period of 2 years and 6 months with the condition Plaintiff did not furnish the supposed P20,000 capital
that if the land is expropriated, rendered nor did she furnish any help or intervention in the
impracticable for business, owner constructs a management of the theatre. Neither has she
permanent building, then Yulos right to lease and demanded from defendant any accounting of the
partnership even if period agreed upon has not yet expenses and earnings of the business. She was
expired; (3) Yulo is authorized to personally conduct absolutely silent with respect to any of the acts that
business in the lobby of the building; and (4) after a partner should have done; all she did was to
Dec 31, 1947, all improvements placed by receive her share of P3,000 a month which cannot be
partnership shall belong to Yulo but if partnership is interpreted in any manner than a payment for the
terminated before lapse of 1 and years, Yang shall use of premises which she had leased from the
have right to remove improvements. Parties owners.
established, Yang and Co. Ltd., to exist from July 1,
1945 Dec 31, 1947.
In June 1946, they executed a supplementary ESTANISLAO, JR. VS. COURT OF APPEALS
agreement extending the partnership for 3 years
beginning Jan 1, 1948 to Dec 31, 1950. Facts: The petitioner and private respondents are
brothers and sisters who are co-owners of certain lots
The land on which the theater was constructed was at the in Quezon City which were then being leased
leased by Yulo from owners, Emilia Carrion and Maria to SHELL. They agreed to open and operate a gas
Carrion Santa Marina for an indefinite period but that station thereat to be known as Estanislao Shell
after 1 year, such lease may be cancelled by either Service Station with an initial investment of
party upon 90-day notice. In Apr 1949, the owners PhP15,000.00 to be taken from the advance rentals
notified Yulo of their desire to cancel the lease due to them from SHELL for the occupancy of the
contract come July. Yulo and husband brought a civil said lots owned in common by them. A joint affidavit
action to declare the lease for a indefinite period. was executed by them on April 11, 1966. The
Owners brought their own civil action for ejectment respondents agreed to help their brother, petitioner
upon Yulo and Yang. therein, by allowing him to operate and manage the
gasoline service station of the family. In order not to
CFI: Two cases were heard jointly; Complaint of Yulo run counter to the companys policy of appointing
and Yang dismissed declaring contract of lease only one dealer, it was agreed that petitioner would
terminated. apply for the dealership. Respondent Remedios
helped in co-managing the business with petitioner
CA: Affirmed the judgment. from May 1966 up to February 1967.
In 1950, Yulo demanded from Yang her share in the On May 1966, the parties entered into an Additional
profits of the business. Yang answered saying he had Cash Pledge Agreement with SHELL wherein it was
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
reiterated that the P15,000.00 advance rental shall respondents and not a sole proprietorship of the
be deposited with SHELL to cover advances of fuel to petitioner.
petitioner as dealer with a proviso that said
agreement cancels and supersedes the Joint Furthermore, there are other evidences in the record
Affidavit. which show that there was in fact such partnership
agreement between parties. The petitioner
For sometime, the petitioner submitted financial submitted to the private respondents periodic
statement regarding the operation of the business to accounting of the business and gave a written
the private respondents, but thereafter petitioner authority to the private respondent Remedios
failed to render subsequent accounting. Hence , the Estanislao to examine and audit the books of their
private respondents filed a complaint against the common business (aming negosyo). The
petitioner praying among others that the latter be respondent Remedios, on the other hand, assisted in
ordered: the running of the business. Indeed, the parties
hereto formed a partnership when they bound
(1) To execute a public document embodying all themselves to contribute money in a common fund
the provisions of the partnership agreement with the intention of dividing the profits among
they entered into; themselves.
(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; IN THE MATTER OF THE PETITION FOR
(3) To pay the plaintiffs their lawful shares and AUTHORITY TO CONTINUE USE OF THE FIRM
participation in the net profits of the NAME OZAETA, ROMULO, ETC.
business; and
(4) To pay the plaintiffs attorneys fees and
Facts: Two petitions were filed, one by the surviving
costs of the suit.
partners of Atty. Herminio Ozaeta and the other by
the surviving partners of Atty. Alexander Sycip
Issue: Can a partnership exist between members of praying that they be allowed to continue using the
the same family arising from their joint ownership of names of partners who had passed away in their firm
certain properties? names. Both petitions were consolidated.
Trial Court: The complaint (of the respondents) was Petitioners Arguments:
dismissed. But upon a motion for reconsideration of
the decision, another decision was rendered in favor
Under the law, a partnership is not prohibited
of the respondents.
from continuing its business under a firm name
which includes the name of a deceased
CA: Affirmed in toto
partner. In fact, art. 1840 of the civil code
explicitly sanctions the practice.
Petitioner: The CA erred in interpreting the legal
In regulating other professions, such as
import of the Joint Affidavit vis--vis the Additional
accountancy and engineering, the legislature
Cash Pledge Agreement. Because of the stipulation
has authorized the adoption of firm names
cancelling and superseding the Joint Affidavit,
without any restriction as to the use, in such
whatever partnership agreement there was in said
firm name, of the name of the deceased
previous agreement had thereby been abrogated.
partner, the legislative authorization given to
Also, the CA erred in declaring that a partnership was
those engaged in the practice of accountancy
established by and among the petitioner and the
a profession requiring the same degree of trust
private respondents as regards the ownership and /or
and confidence in respect of clients as that
operation of the gasoline service station business.
implicit in the relationship of attorney and
client to acquire and use a trade name,
Held: There is no merit in the petitioners contention
strongly indicates that there us no fundamental
that because of the stipulation cancelling and
policy that is offended by the continued use by
superseding the previous joint affidavit, whatever
a firm of professionals of a firm name which
partnership agreement there was in said previous
included the name of a deceased partner, at
agreement had thereby been abrogated. Said
least where such firm name has acquired the
cancelling provision was necessary for the Joint
characteristics of a trade name
Affidavit speaks of P15,000.00 advance rental
The Canon of Professional Ethics are not
starting May 25, 1966 while the latter agreement
also refers to advance rentals of the same amount transgressed by the continued use of the name
starting May 24, 1966. There is therefore a of a deceased partner in the firm name of a law
duplication of reference to the P15,000.00 hence the partnership as declared by Canon 33 adopted
need to provide in the subsequent document that it by American Bar Association declaring that
cancels and supercedes the previous none. The continued use of the name of a deceased
Indeed, it is true that the latter document is silent as or former partner when permissible by local
to the statement in the Join Affidavit that the value custom, is not unethical, but care should be
represents the capital investment of the parties in taken that no imposition or deception is
the business and it speaks of the petitioner as the practiced through this use.
sole dealer, but this is as it should be for in the latter There is no possibility of imposition or
document, SHELL was a signatory and it would be deception because the deaths of their
against their policy if in the agreement it should be respective deceased partners were well
stated that the business is a partnership with private publicized in all newspapers of general
circulation for several days.
The use in partnership names of the names of Facts: Menzi Co. was organized in 1921 for the
deceased partners will run counter to Article purpose of importing and selling general
1825 of the CC which provides that names in a merchandise, including fertilizers and fertilizer
firm name of a partnership must either be those ingredients. Sometime in November of that year, the
of living partners and, in the case of non plaintiff, who had had some experience in mixing and
partners, should be living persons who can be selling fertilizer, went to see Toehl, the manager of
subjected to liability. In fact, art. 1825 prohibits a the sundries department of Menzi & Co. (through
third person from including his name in the firm which the fertilizer business was carried out) and told
name under pain of assuming the liability of a him that he had a written contract with the Philippine
partner. The heirs of a deceased partner in a law Sugar Centrals Agency for 1,250 tons of mixed
firm cannot be held liable as the old members to fertilizers, and that he could obtain other contracts,
the creditors of a firm particularly where they including one from Calamba Sugar Estates for 450
are non-lawyers. With regard to art. 1840, it tons, but that he did not have the money to buy the
treats more of a commercial partnership with a ingredients to fill the order and carry on the business.
good will to protect rather than a professional He offered to assign to Menzi & Co. his contract with
partnership, with no saleable good will but Phil Sugar Centrals Agency and to supervise the
whose reputation depends on the personal mixing of the fertilizer and to obtain other orders for
qualifications of its individual members. Thus, it 50 % of the net profit that Menzi & Co., Inc., might
has been held that a saleable goodwill can exist derive therefrom. J. M. Menzi (gen. manager of Menzi
only in a commercial partnership and cannot & Co.) accepted the offer. The agreement between
arise in a professional partnership consisting of the parties was verbal and was confirmed by the
lawyers. letter of Menzi to the plaintiff on January 10, 1922.
A partnership for the practice of law cannot be
likened to partnerships formed by other Menzi & Co. continued to carry on its fertilizer
professionals or for business. For one thing, the business under this arrangement with the plaintiff. It
law on accountancy specifically allows the use of ordered ingredients from the US and other countries,
a trade name in connection with the practice of and the interest on the drafts for the purchase of
accountancy. A partnership for the practice of these materials was charged to the business as a
law is not a legal entity. It is a mere relationship part of the cost of the materials. The mixed
or association for a particular purpose. It is not a fertilizers were sold by Menzi & Co. between January
partnership formed for the purpose of carrying in 19 and April 1, 1922 under its Corona brand.
a trade or business or of holding property. Thus,
it has been stated that the used of an assumed Pursuant to the verbal agreement, the defendant
or trade name in law practice is improper. corporation on April 27, 1922 entered into a written
The right to practice law is not a natural or contract with the plaintiff, marked Exhibit A, which is
constitutional right but is in the nature of a the basis of the present action. Still, the fertilizer
privilege or franchise. It is limited to persons of business as carried on in the same manner as it was
good moral character with special qualifications prior to the written contract, but the net profit that
duly ascertained and certified. The right does the plaintiff herein shall get would only be 35%. The
not only presuppose in its possessor integrity, intervention of the plaintiff was limited to supervising
legal standing and attainment but also the the mixing of the fertilizers in the bodegas of Menzi.
exercise of a special privilege, highly personal The trademarks used in the sale of the fertilizer were
and partaking of the nature of a public trust. registered in the Bureau of Commerce & Industry in
The continued use of a deceased or former the name of Menzi & Co., Inc. and the fees were paid
partners name in the firm names of law by that company.
partnerships not sanctioned by local custom due
to the possibility of deception upon the public Prior to the expiration of the contract (April 27,
where the name of a deceased partner continues 1927), the manager of Menzi notified the plaintiff
to be used. The possibility of deception upon the that the contract for his services would not be
public, real or consequential, where the name of renewed. Subsequently, when the contract expired,
a deceased partner continues to be used cannot Menzi proceeded to liquidate the fertilizer business in
be ruled out. A person in search of legal counsel question. The plaintiff refused to agree to this. It
might be guided by the familiar ring of a argued, among others, that the written contract
distinguished name appearing in a firm title. In entered into by the parties is a contract of general
addition, theres no local custom within our regular commercial partnership, wherein Menzi was
jurisdiction that sanctions the practice of the capitalist and the plaintiff the industrial partner.
continued use of a deceased partners name.
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
Issue: Is the relationship between the petitioner and cannot be considered as an unregistered partnership
Menzi that of partners? and cannot be subject to corporate tax.
Held: The relationship established between the Issue: W/N petitioners are deemed to have formed
parties was not that of partners, but that of employer an unregistered partnership subject to tax under
and employee, whereby the plaintiff was to receive sections 24 and 84(b) of the National Internal
35% of the net profits of the fertilizer business of Revenue code.
Menzi in compensation for his services for
supervising the mixing of the fertilizers. Neither the Ruling: YES
provisions of the contract nor the conduct of the
parties prior or subsequent to its execution justified For tax purposes, the co ownership of
the finding that it was a contract of co-partnership. inherited properties is automatically converted
The written contract was, in fact, a continuation of into unregistered partnership the moment the
the verbal agreement between the parties, whereby said common properties and/or incomes
the plaintiff worked for the defendant corporation for derived therefrom are use as a common fund
one-half of the net profits derived by the corporation with the intent to produce profits for the heirs
form certain fertilizer contracts. in proportion to their respective shares in the
inheritance as determined in a project
According to Art. 116 of the Code of Commerce, partition. This is because from the moment of
articles of association by which two or more persons such partition, the heirs are entitled already to
obligate themselves to place in a common fund any their respective definite shares of estate and
property, industry, or any of these things, in order to the incomes thereof, for each of them to
obtain profit, shall be commercial, no matter what it manage and dispose of as exclusively his own
class may be, provided it has been established in without the intervention of the other heirs and
accordance with the provisions of the Code. accordingly he becomes liable individually for
However in this case, there was no common fund. all taxes in connection therewith. If after such
The business belonged to Menzi & Co. The plaintiff partition, he allows his share to be held in
was working for Menzi, and instead of receiving a common with his co heirs under a single
fixed salary, he was to receive 35% of the net profits management to be used with the intent of
as compensation for his services. The phrase in the making profit thereby in proportion to his
written contract en sociedad con, which is used as share, there can be no doubt that even if no
a basis of the plaintiff to prove partnership in this document or instrument were executed for the
case, merely means en reunion con or in purpose, for tax purposes at least, an
association with. unregistered partnership is formed.
The income derived from inherited properties
It is also important to note that although Menzi may be considered as individual income of the
agreed to furnish the necessary financial aid for the respective heirs only so long as the inheritance
fertilizer business, it did not obligate itself to or estate is not distributed or, at least,
contribute any fixed sum as capital or to defray at its partitioned, but the moment their respective
own expense the cost of securing the necessary know shares are used as part of the common
credit. assets of the heirs to be used in making profits,
it is but proper that the income of such shares
should be considered as part of the taxable
income of an unregistered partnership.
OA VS. COMMSSIONER OF INTERNAL REVENUE For purposes of the tax on corporations, the
National Internal Revenue Code, includes
Facts: Lorenzo Oa and his five children are the partnerships with the exception only of duly
surviving heirs of Julia Buales. Lorenzo, the registered general co-partnerships within the
surviving spouse was appointed administrator of purview of the term corporation.
Julias estate. He submitted the project of partition
which was approved by the court and since 3 of the 5
children were still minors, he was appointed by the LYONS VS. ROSENSTOCK
court as guardian of said minors. Despite the
approval of the project of partition, no attempt was Facts: During his lifetime, Henry Elser got engaged
made to divide the properties therein listed and in the real estate business. Petitioner Lyons, on the
remained under the management of Lorenzo who other hand, joined Elser in some of his ventures and
used said properties in business by leasing or selling they equally divided profits gained from these. In
them and investing the income derived therefrom 1919, Lyons needed to go back to the United States
and proceeds form the sales thereof in real for a year and a half and by reason of which he
properties and securities. Respondent CIR decided executed a general power of attorney in favor of
that petitioners formed an unregistered partnership Elser, empowering the latter to manage and dispose
and therefore subject to corporate tax pursuant to the properties owned by them.
Sec. 24 of the Tax Code. Accordingly he assessed
against the petitioners the amounts of P8,092.00 and In 1920, Elser was drawn to a piece of land,
P13.899.00 as corporate income taxes for 1955 and the San Juan Estate, and he perceived an opportunity
1956 respectively. Petitioners protested against the to develop it into a suburban community. The Estate
assessment and asked for reconsideration which was was offered by its owners for P570,000 with an initial
denied. payment of P150,000. In May 1920, Elser wrote a
letter to Lyons inducing the latter to join him in this
Petitioners Argument: Petitioners are considered venture and to likewise supply the means necessary
as co owners of the properties inherited by them for the fulfillment of this project. In the meantime,
from the deceased Julia Buales and the profits Elser raised P120,000 from his own funds and loaned
derived from transactions involving the same, they P50,000 from Uy Siolong to pay for the initial
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
payment. However in order to obtain the loan he had De la Rosa, on the other hand, admits that
to give a personal note signed by himself, by his he desired to form a partnership with the plaintiff but
other associates and by the Fidelity and Surety denies that any agreement was ever consummated.
Company. Then again, in order to obtain the Moreover, he denied receiving any money furnished
signature of the Fidelity and Surety Company Elser by plaintiff for casco No. 1515, but claims that he
had to execute a mortgage on one of the properties merely borrowed the P300 on his individual account
owned by him and Lyons on Carriedo Street. from the bakery business in which plaintiff was a co-
partner. And as for the P825 furnished by the
Lyons replied to the letter of Elser only in plaintiff, the defendant claims that it was actually for
July 1920 and he expressed in it his unwillingness to casco No. 1515 and not for casco No. 2089. He also
join the latter in this venture. Because of this Elser added that the repairs made on the two cascoes
relieved the Carriedo property of the encumbrance were exclusively borne by him, and that he returned
which he had placed upon it and requested the a sum of P1,125 to plaintiff with an express
Fidelity and Surety Company to allow him to reservation on his part of all his rights as a partner.
substitute another property for it. However the
release of the old mortgage and the recording of the Issue: a) W/N a partnership existed between the
new were never registered because in September parties. Yes.
1920, when Lyons returned to Manila, he allowed the b) W/N the partnership was terminated when the
mortgage to remain on the Carriedo property. But in defendant returned the P1,125 to plaintiff. No.
January 1921, Elser was able to pay the note
executed by him to Uy Siolong which enabled the Held: a) The essential points upon which the minds
release of the Carriedo Property. of the parties must meet in a contract of partnership
are 1) mutual contribution and 2) joint interest in the
Issue: W/N Lyons, as half owner of the Carriedo profits.
property, involuntarily became the owner or a co-
partner of an undivided interest in the San Juan The fact that the defendant received money
Estate, which was acquired partly by the money furnished by the plaintiff for the purpose of using it to
obtained through an encumbrance placed on the purchase the cascoes establishes the first element of
Carriedo property. No. the partnership, mutual contribution to a common
stock. For the second element, the fact that the
Held: Under our law, a trust does not necessarily formation of partnership had been a subject of
attach with respect to property acquired by a person negotiation between them, even before the purchase
who uses money belonging to another. In the case at of the first casco, and that both parties intended to
bar, there was clearly no general relation of purchase the cascoes in common satisfies the
partnership between Lyons and Elser and the most requirement that there should be an intention on the
that can be said is that they had been co-participants part of both parties to share the profits. With these, a
in various transactions involving real estate. It is complete and perfect contract of partnership was
clear the Elser, in buying the San Juan Estate, was entered into by the parties.
not acting for any partnership composed for himself
and Lyons, especially that the latter expressly It must be noted however that this
communicated his desire not to participate in this partnership was subject to a suspensive condition
venture. Lastly, it should be noted that no money which is the execution of a written agreement
belonging to Lyons or any partnership composed by regarding the distribution of profits, character of
Lyons and Elser was in fact used by the latter in the partnership, etc. But since the defendant actually
purchase of the San Juan Estate. purchased the cascoes, it would seem that the
partnership already existed. And as furthermore
provided by the Civil Code, a written agreement was
not necessary in order to give efficacy to the verbal
FERNANDEZ VS. DE LA ROSA agreement of the partnership because the
contributions of the partners to the partnership were
Facts: On the part of plaintiff Fernandez, he claims not in the form of immovables.
that he entered into a verbal agreement with
defendant De la Rosa to form a partnership for the b) During trial, the court was able to prove that
purchase of cascoes with the undertaking that the plaintiff actually furnished some amount for the
defendant will buy the cascoes and that each partner repair of the cascoes and that it was presumed that a
will furnish such amount as he could, while the profits profit has been obtained by the defendant prior to
will be divided proportionately. Plaintiff furnished the return of the money. With these, the return of the
P300 for casco No. 1515 and P825 for casco No. P1,125 fell short of the amount which the plaintiff has
2089, both of which were placed under the name of actually contributed to the partnership. For these
the defendant only. In April 1900, the parties reasons, the acceptance by the plaintiff of the
undertook to draw up articles of their partnership for amount returned by the defendant did not have the
the purpose of embodying it in an authentic effect of terminating the legal existence of the
document. The agreement however did not partnership by converting it into a societas leonina.
materialize because defendant proposed articles
which were materially different from their verbal The court also proved that there was no
agreement, and he was also unwilling to include intention on the part of the plaintiff, in accepting the
casco No. 2089 in the partnership. Because the money, to relinquish his rights as a partner. On the
cascoes were under the management of the contrary he notified defendant that he waived none
defendant, the plaintiff demanded an accounting of his rights in the partnership. Also the lack of
over it to which the defendant refused claiming that recognition on the part of the defendant of the
no partnership existed between them. plaintiffs right in the partnership property and in the
profits does not give the former the right to force a
dissolution upon the later upon the terms which the
Issue: a) W/N plaintiff falsely represented that he had Subsequently, R entered into a management
an exclusive franchise to bottle Mission beverages. contract with CMS Estate Inc. M wrote him re: his
Yes. b) W/N this false representation amounts to contribution to the capital investments as well as his
fraud and may annul the agreement to form a duties as logging superintendent. R replied that he
partnership will not be able to comply with both. M then told R
that the latters share will just be 20% of the net
Held: a) As found by the SC, Exhibit J was used by profits. Such was the sharing from 1957 to 1959
plaintiff as an instrument with which to bargain with without complaint or dispute. R took funds from the
the defendant and to close a deal with him, because partnership more than his contribution. M notified R
if plaintiff claimed that all he had was an option to that he dissolved the partnership. R filed an action
exclusively bottle and distribute Mission soft drinks in
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
against M for the recovery of properties and Agreement re: the liquidation of the shares of any
accounting of the partnership and damages. retiring or withdrawing partner.
CFI: the partnership of M and R is after P retired is SEC: reversed the decision ruling that the withdrawal
one of de facto and at will; the sharing of profits and had in fact dissolved the partnership of BML as a
losses is on the basis of actual contributions; there is partnership at will, the law firm can be dissolved by
no evidence these properties were acquired by the any partner at anytime by his withdrawal regardless
partnership funds thus it should not belong to it; of good faith or bad faith. Remanded the case to the
neither is entitled to damages; the letter of M in HO to determine rights and obligations of parties.
effect dissolved the partnership; sale of forest
concession is valid and binding and should be CA: affirmed in toto the SEC decision and that there
considered as Ms contribution; R must pay or turn is no need for the appointment of a receiver as no
over to the partnership the profits he received from sufficient proof had been shown to indicate that the
CMS and pay his personal account to the partnership; partnership assets were in any such danger of being
M must be paid 85k which he shouldve received but lost, removed or materially impaired.
was not paid to him and must be considered as his
contribution. ISSUES: whether it was a partnership at will;
whether Ms withdrawal dissolved the partnership;
ISSUE: what is the nature of the partnership and whether such withdrawal was made in bad faith.
legal relationship of M-R after P retired from the
second partnership? May M unilaterally dissolve the SC: It was a partnership at will as it had not fixed a
partnership? specified period for its undertaking.
SC: There was no intention to dissolve the first It may be dissolved at will by any of the partners but
partnership upon the constitution of the second as if it was done in bad faith, such partner shall be liable
everything else was the same except for the fact that for damages. Upon dissolution, the partnership
they took in an industrial partner: they pursued the continues and its legal personality is retained until
same purposes, the capital contributions call for the the complete winding up of its business culminating
same amounts, all subsequent renewals of Timber in its termination. The liquidation of assets is
License were secured in favor of the first partnership, governed by the CC but an agreement between
all businesses were carried out under the registered parties is binding upon them.
articles.
It was not done out of bad faith as it was spurred by
M and R agreed to purchase the interest, share and an interpersonal conflict among the partners.
participation of P and after, they became owners of
the equipment contributed by P. Both considered
themselves as partners as per their letters. It is not a
partnership de facto or at will as it was existing and
ANGELES VS SEC of JUSTICE
duly registered. The letter of M dissolving the
partnership is in effect a notice of withdrawal and
Facts: Angeles spouses filed a criminal complaint of
may be done by expressly withdrawing even before
estafa against Mercado as they claim that M
expiration of the period with or without justifiable
convinced them to enter into a contract of antichresis
cause. As to the liquidation of the partnership it shall
covering 8 parcels of land. Said contract was to last
be divided share and share alike after an
for 5 years with PHP210k as consideration. It was
accounting has been made.
agreed that M was to administer the lands and
complete the paperwork. After 3 years, the A spouses
R is not entitled to any profits as he failed to give the
asked for an accounting. M explained that the land
amount he had undertaken to contribute thus, had
earned PHP46k + in 1993, trees bore no fruit in 1994
become a debtor of the partnership.
and had not given and accounting in 1995. Only after
this demand had they discovered that M had put the
M cannot be liable for damages as R abandoned the contract of antichresis over the land under his and
partnership thru his acts and also took funds in an his spouses names.
amount more than his contribution.
M insists that there exists an industrial partnership
between him and his spouse as industrial partners
and the A spouses as financiers. This had existed
ORTEGA VS CA since 1991 before the contract of antichresis over the
land. M used his earnings as part of the business
FACTS: The law firm of R,L,S and C was duly capital which he entered into, under his name, in
registered in the Mercantile Registry and behalf of the A spouses. M attached bank receipts
reconstituted with the SEC. There were several showing deposits in behalf of E. Angeles and
amendments to its articles of partnership. contracts under his name for the A spouses. O.
Respondent-Appellees senior and junior partners Angeles stated that there was a written industrial
associated themselves together. Ortega informed partnership agreement wherein capital would come
them through a letter that he is retiring from the firm from A spouses while profit would be divided evenly
of Bito, Misa and Lozada regarding the liquidation of between M and the A spouses.
his participation in it. He later on filed with the SICD a
petition for dissolution and liquidation of partnership. PROVINCIAL PROSECUTION: dismissed estafa
complaint
Hearing Officer: said withdrawal of O did not
dissolve the law partnership and both parties to the On appeal to the SOJ, the A spouses insist that the
case are enjoined to abide by the provisions of the document evidencing the contract of antichresis was
executed in the name of the M spouses instead of the
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
A spouses. This document alone proves Ms case. The trial court dismissed the case, but the
misappropriation of their PHP210k. same, on appeal, was remanded for further
proceedings.
SOJ: Dismissed appeal. A spouses failed to show
sufficient proof that M deliberately deceived them in CA: Petitioners and Respondents had formed a
the antichresis transaction. The document alone in partnership for the subdivision devt. They must bear
the name of the M spouses failed to convince the SOJ the loss suffered by the partnership in the same
that there was deceit of false representation on the proportion as their share in the profits stipulated in
part of M to induce the A spouses to part with their the contract (Art. 1797). In the absence of stipulation
money. [A partnership truly existed and it is clear the share of each partner in profits and losses shall
from the fact that they contributed money to a be in proportion to what he may have contributed
common fund and divided the profits among BUT the industrial partner shall not be liable for
themselves. M was able to make deposits for the losses. As for profits, the industrial partner shall
account of A spouses, these represented their share receive such share as may be just and equitable. If
in the profits of their business venture. During the besides his services he contributed capital, he shall
barangay conciliation A spouses acknowledged their also receive a share in the profits proportionate to his
joint business ventures with M.] There is no estafa capital.
when money is delivered by a partner to his co-
partner on the representation that such shall be Petitioners: JVA and partnership is void under
applied to the business of their partnership. Art 1773, because the parties didnt make, sign or
attach to the public instrument and inventory of the
ISSUES: whether a partnership existed even without real property. JVA is void under Art 1422 because
documentary proof; whether there was a it is the direct result of an earlier illegal contract
misappropriation by M of the proceeds; whether a which was for the sale of the land without valid
filing information of estafa should be ordered. consideration. Respondent is liable for failure to
implement the project.
SC: The A spouses contributed money to the
partnership and not to the land. Mere failure to ISSUE: Should the partnership be declared void?
register the contract of partnership with SEC does
not invalidate it as long as it has the essential SC: Petition Denied. CA Affirmed.
requisites of a contract. Registration is mere notice to
third parties. A spouses admit to facts that prove The Agreement indubitably shows the existence of a
existence of a partnership: a contract showing an partnership pursuant to Art. 1767. Petitioners would
industrial partnership, contribution of money and contribute land, respondents would provide the
industry to a common fund, and division of profits industry and expenses and the income would be
between A spouses and M. divided.
M satisfactorily explained that the documents were in Contracts bind the parties to the stipulations and
his name as the A spouses do not want to be necessary consequences. Courts are not authorized
revealed as financiers. A spouses were not able to the extricate parties from the consequences of their
prove that there was deceit or false representation acts should the stipulations turn out to be financially
on his part for them to part with their money. disadvantageous.
Accounting of proceeds not proper subject in this Art 1773 was intended primarily to protect 3rd
case. SOJ did not abuse his discretion in dismissing persons who may be defrauded when contracting
the appeal of the A spouses. with the partnership. The case at bar does not
involve 3rd parties who may be prejudiced.
CA: Pioneer reinsured its risk of liability under the ISSUE: Whether by their acts, Lim Chua and Yao
surety bond in favor of JDA and collected proceeds of could be deemed to have entered into a partnership
such reinsurance. Pioneer is no longer real party in
interest to institute action as it does not stand to be SC: Petition denied. CA affirmed.
benefited.
There existed a partnership between Chua, Yao and
ISSUES: IS Pioneer a real party in interest? Lim pursuant to Art 1767 based on factual findings of
the lower courts which established that they had
Was there a de facto partnership created among decided to engage in a fishing business for which
Cervantes, Maglana and Lim as a result of their they bought boats worth P3.35M financed by a loan
failure to incorporate? from Jesus Lim, Lims brother. In the Compromise
Agreement, they were to pay the loan with the
SC: Petitioner is not the real party in interest and has proceeds of the sales of the boats and losses or
no cause of action against respondents. Pioneer, excess were to be divided equally. The boats,
having foreclosed the chattel mortgage on the planes purchase and repair financed by borrowed money fell
and spare parts no longer has any further action under common fund. Contribution to such fund
against defendants as indemnitors to recover any need not be cash or fixed assetsit could be an
unpaid balance of the price. intangible like credit or industry. The
partnership extended not only to purchase of the
Persons who attempt but fail to form a corporation boat but also to the nets and floats.
and who carry on business under the corporate name
occupy the position of partners inter se. HOWEVER, The Compomise Agreement was not the sole basis of
such relation does not necessarily exist, for the partnership. It was but an embodiment of the
ordinarily, persons cannot be made to assume the relationship extant among the parties prior to
relation of partners as between themselves when execution. Petitioner was a partner and not merely a
their purpose is that no partnership shall exist. In the lessor as he entered into a business agreement with
instant case, it is clear that Lim never intended to Chua and Yao in which debts were undertaken to
form a corporation with respondents despite his finance the acquisition and upgrading of vessels to
representations to them, giving credence to the be used in their fishing business. The boat, F/B
cross-claims of respondents saying that they were Lourdes, though registered in Lims name was an
induced and lured to make contributions to a asset of the of the partnership.
proposed corporation which was never formed
because petitioner reneged on their agreement. Petitioner benefited from the use of the nets found
inside the boat. Those acting on behalf of a
No de facto partnership was created among the corporation and those benefited by it, knowing it to
parties which would entitle the petitioner to a be without valid existence are held liable as general
reimbursement of the supposed losses of the partners. Technically, Lim did not act on behalf of a
proposed corporation. Petitioner was acting on his corporation. However, having reaped the benefits of
own and not in behalf of his other would be the contract entered into by persons whom he
incorporators in transacting the sale of aircrafts and previously had an existing relationship, he is
spare parts. deemed part of the association and covered by the
scope of the doctrine of corporation by estoppel.
Therefore, it having been proven that the partnership 1. He is not the real party in interest but A.C.
Campos Rueda & Co. failed for more than 30 days to Aguila & Sons, Co.;
pay its obligations to the herein respondents, the 2. The judgment in the ejectment case is a bar
partnership have the right to a judicial decree to the filing of the complaint for declaration
declaring the involuntary insolvency of said of nullity of a deed of sale in this case; and
partnership. 3. The contract between the parties is a pacto
de retro sale and not an equitable
mortgage.
EVANGELISTA & CO. VS. ABAD SANTOS (Note Art. 1818 [par.1]: Every partner is an agent
of the partnership for the purpose of its business,
Facts: A co - partnership was formed under the and the act of every partner, including the execution
name of Evangelista & Co. Its articles of co- in the partnership name of any instrument, for
partnership was later on amended to include Estrella apparently carrying on in the usual way the business
Abad Santos (a judge in a City Court in Manila) as an of the partnership of which he is a member binds the
industrial partner. She subsequently filed a suit partnership, unless the partner so acting has in fact
against the partnership to pay her the share of the no authority to act for the partnership in the
profits owing to her. She alleged that the partnership particular matter, and the person with whom he is
is paying dividends to the partners except her. The dealing has knowledge of the fact that he has no
partners denied that Abad Santos was an industrial such authority.)
partner and that the articles of co partnership do
not express the true agreement of the parties and
that Abad Santos was a mere profit sharer, not a
partner.
GOQUIOLAY, ET. AL. VS. SYCIP, ET. AL.
Issue: W/N Abad Santos is a partner.
Facts: Tan Sin An and Antonio Goquiolay entered
into a general commercial partnership which was to
Held: Yes, Abad Santos is a partner. last for 10 years for the purpose of dealing in real
estate. The agreement lodged upon Tan Sin An the
The partners are estopped from denying the sole management of the partnership affairs and his
articles of partnership because they admitted its co partner, Goquiolay, has no voice or participation
genuiness and due execution. Even if it were in the management of the affairs of the co
erroneous, they failed to assail it for 8 years. Such partnership. They further agreed upon that in the
failure shows their assent to the said articles. event of the death of any of the partners at any time
before the expiration of the term, the co
In addition, the partners alleged that being partnership shall not be dissolved but will have to be
a judge, she cannot be an industrial partner since continued and the deceased partner shall be
industrial partners are not allowed to engage in represented by his heirs or assigns in the said co
another business or profession. The SC held that partnership. A general power of attorney (GPA) was
such allegation has no merit because Abad Santos executed by Goquiolay in favor of Tan Sin An which
complied with her obligation to the partnership. The included buy, sell, alienate and convey properties of
partners also failed to exercise their right of the partnership as well as obtain loans as he may
exclusion for 9 years. This shows that the argument deem advisable for the best interest of the co
of engaging in another profession is a mere partnership. With the authority of the GPA, the
afterthought and that the partnership actually partnership through Tan Sin An purchased 3 parcels
allowed Abad Santos to exercise her profession. of land which was mortgaged to La Urbana Sociedad
and another 46 parcels of land which which were
(Please take note of Art. 1789 of Civil Code: An purchased by Tan Sin An in his individual capacity,
industrial partner cannot engage in business for and assumed mortgaged debt thereon. The
himself, unless the partnership expressly permits him downpayment for the 46 parcels of land was
to do so; and if he should do so, the capitalist advanced by Yutivo and Co. The two separate
partners may either exclude him from the firm or obligations were consolidated in an instrument
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
executed by the partnership and Tan Sin An, whereby 3. Strangers dealing with a partnership have the
the entire 49 lots were mortgaged in favor of the right to assume, in the absence of restrictive clauses
Banco Hipotecario de Filipinas (as successor to La in the co partnership agreement, that every general
Urbana). When Tan Sin An died, his wife Kong Chia partner has the power to bind the partnership and
Pin was appointed administratix of the intestate has the requisite authority from his co partners.
estate of her deceased husband. Repeated demands
for payment were made by Banco Hipotecario on the
partnership and on Tan Sin An which was initially paid
by Yutivo and Co. and Sing Yee Cuan and Co. (at the IDOS VS. CA
request of Yutivo and Co.) The mortgage was
eventually cancelled. Now Yutivo and Sing Yee Cuan
Facts:
Company filed their claims in the intestate
proceedings of Tan Sin An. Kong Chai Pin filed a
Irma Idos, petitioner, formed a short-lived
petition with the probate court for authority to sell all
partnership with Eddie Alarilla, respondent, for a
the 49 parcels of land to Washington Sycip and Betty
leather tanning business. Upon the business
Lee for the purpose primarily of settling the aforesaid
liquidation, it had receivables and stocks worth
debts of her husband and the partnership. The court
P1,800,000. For the share of Alarilla, Idos issued four
ordered the execution of deed of sale in favor of
post-dated checks of which only three out of four
Sycip and Lee in consideration of P37,000.00 and
checks were encashed. This impelled Alarilla to file
assuming payment of the claims filed by Yutivo & Co.
for a BP 22 case against Idos when the latter refused
and Sing Yee Co. Later, Sycip and Lee executed in
to pay the value of the check after the former has
favor of the Insular Devt. Co. a deed of transfer
demanded for it.
covering said 49 parcels of land.
On her defense, Idos claimed that the check
Upon learning the sale, the surviving
served only as an assurance of Alarillas share in
partner Goquiolay filed a petition to set aside the
the partnership and that it was not supposed to be
decision of the probate court and annul the sale of
deposited until the stocks have been sold. This was
the parcels of land by Kong Chai Pin in favor of Sycip
refuted by Alarilla and subsequently Idos was
and Lee and their subsequent conveyance in favor of
convicted by the trial court of the offense charged.
Insular Devt. Co. in so far as the 3 lots owned by the
The CA affirmed the decision of the trial court.
partnership is concerned. Kong Chai Pin averred the
validity of the sale as successor partner, in lieu of the
late Tan Sin An. The complaint was dismissed by the
lower court and appeal was directly taken to the SC
by Goquiolay. Issue: W/N Idos violated BP 22? No
Issue: 1. W/N Kong Chai Pin acquired the managerial Held: One of the elements of the offense penalized
rights of her late husband Tan Sin An NO. under BP 22 is the making, drawing and issuance of
2. W/N there was a valid sale of property to Sycip and any check to apply for any account or for value. In
Lee YES. this case Idos showed enough evidence that the
3. W/N the consent of the other partner was check was to be funded from receivables to be
necessary to perfect the sale of the partnership collected and goods to be sold by the partnership.
properties to Sycip and Betty NO. First, only one of the fours check were not encashed
and second, even Alarilla himself admitted that there
Held: 1. The right of exclusive management was no consideration for the issuance of the check.
conferred upon Tan Sin An, being premised upon Hence the check in question was not issued for any
trust and confidence, was a mere personal right that debt of or any account due and payable by the
terminated upon Tans demise. The provision in the petitioner.
articles of partnership stating that the deceased
partner shall be represented by his heirs could not Moreover, Idos and Alarilla were still in the
have referred to the managerial rights given to Tan winding up of the affairs of the partnership hen the
Sin An but it more appropriately relates to the check was issued as evidenced by the fact that they
succession in the propriety interest of each partner still had to sell the goods on hand and collect the
(heir becomes limited partner only). receivables from debtors. As provided by the Civil
Code: winding-up is the process of settling business
2. However, consonant with the articles of co affairs after dissolution, i.e. collecting of assets
partnership providing for the continuation of the firm previously demandable; termination is the point in
notwithstanding the death of one of the partners, the time after all the partnership affairs have been
heir of the deceased, by never repudiating or wound up. Thus, since that partnership has not been
refusing to be bound under said provision, became terminated, the petitioner and private complainant
individual partner with Goquiolay upon Tans demise. remained as co-partners. The check was thus issued
By allowing Kong Chai Pin to retain control of the by the petitioner to complainant as would a partner
partnership properties from 1942 to 1949, Goquiolay to another and not as payment from a debtor to a
is estopped from denying her legal representation of creditor. Idos did not violate BP 22.
the partnership, with the power to bind it with proper
contracts. By authorizing the widow of the managing
partner to manage partnership property (which a
limited partner could not be authorized to do), the VILLAREAL VS. RAMIREZ
other general partner recognized her as a general
partner, and is now in estoppel to deny her position Facts:
as a general partner, with authority to administer
and alienate partnership property. In 1984, Villareal, Carmelito Jose and Jesus
Jose formed a partnership with a capital of P750,000
Issue: W/N petitioners are liable to respondents for SINGSONG v ISABELLA SAWMILL
the latters share in the partnership? Nope.
Facts: Defendants Garibay, Margarita Saldajeno and
Held: Respondents have no right to demand from Tubungbanua entered into a contract of partnership
petitioner the return of their equity share. As found under the firm name Isabela Sawmill. Said
by the court petitioners did not personally hold its partnership owed unpaid balances to plaintiffs.
equity or assets. The partnership has a juridical
personality separate and distinct from that of each of A civil case for the dissolution was filed by the
the partners. Since the capital was contributed to spouses Saldajeno against Isabela Sawmill, Garibay
the partnership, not to petitioners, it is the and Tubungbanua. Later on said parties entered into
partnership that must refund the equity of the a memorandum agreement wherein Garibay and
retiring partners. However, before the partners can Tubungbanua have bound themselves to answer for
be paid their shares, the creditors of the partnership any and all obligations of the defunct partnership to
must first be compensated. Therefore, the exact its creditors and third persons. Defendants Garibay
amount of refund equivalent to respondents one- and Tubungbanua did not divide the assets and
third share in the partnership cannot be determined properties of the Isabella Sawmill between them,
until all the partnership assets will have been but they continued the business of said partnership
liquidated and all partnership creditors have been under the same firm name.
paid.
The remaining partners executed an Assignment of
CAs computation of the amount to be Rights with Chattel Mortgage in favor of Saldajeno
refunded to respondents as their share was thus in order to secure the performance of their
erroneous. obligations. However, since they defaulted in their
payment a judgment was rendered in favor of
Saldejano which caused the foreclosure of the CM.
The Provincial Sheriff published notices that he would
CLAUDIO VS. ZANDUETA sell at a public auction certain properties (of the
partnership) mortgaged by Garibay and
Facts: Petitioners Claudio, Goyena and Flores Tubungbanua in favor of Saldejano and later on
organized the Cotabato & Cagayan Mining executed a sale in the latters favor, selling for 38K
Association (Association) together with the the assets of the partnership. Saldejano in turn sold
respondents Neuffer, Meyer, Skiles, Araneta and to Pan Oriental lumber company for 45K part of the
Cowper. The respondents in this case filed in CFI a said properties she had bought at the public auction.
civil case no. 51510 for the dissolution of the
Association. One of their prayers was for the court to The plaintiffs, in a civil action, sought to restrain the
appoint a receiver to take charge of the properties of Sheriff from proceeding with the sales and to have
Partnership & Agency | 2B 2008-2009
PARTNERSHIP Digests Atty. Cochingyan
the chattel mortgage declared null and void in fraud funds from abroad. Yu managed the operations and
of creditors. Defendant M. Saldajeno claims that all finances of the business, had overall supervision of
the plaintiffs save for Oppan are creditors of Garibay the workers at the marble quarry and took charge of
and Tubungbanua and not of the defunct partnership the preparation of papers relation to the exportation
and that said creditors had knowledge and notice of the firms products.
that the former partnership had been dissolved.
Without knowledge of Yu, the general partners
The trial court ruled in favor of the plaintiffs thus, the transferred their interests while some of the limited
herein defendants appealed. The court ruled that partners sold and transferred their interests in the
there was no CM over the properties as such were partnership to respondents Co and Zapanta.
owned by the partnership and that the plaintiffs have Respondents continued to use the old firm name but
a preferred right over it as against Saldejano. As moved the firms main office. A supplement to the
such, the latter must pay the plaintiffs the respective memorandum agreement relating to the operation of
amounts for which the partnership is indebted to the marble quarry was entered into with the Cruz
them. Garibay and Tubungbanua are also liable to spouses. The actual operations of the business
pay to the plaintiffs whatever amount that they may continued as before. All the employees continued
not collect from Saldajeno. The defendants appealed working in the business. Yu, however, was informed
to the CA but the latter transferred the records of the by Co that he had bought the business from the
case to the SC. original partners and that it was up to him to decide
whether or not he was responsible for the obligations
SC: The remaining partners did not terminate the of the old partnership including Yus salary. Yu was no
business of the partnership. It is expressly stipulated longer allowed to work for the business and his
in the memorandum agreement that the remaining salary remained unpaid.
partners had constituted themselves as the
partnership entity, the Isabella Sawmill. There was Yu filed a complaint for illegal dismissal and recovery
no liquidation of the assets of the partnership. The of unpaid salary against the partnership, Co and
remaining partners continued doing business of the other partners. Defendants contended that the new
partnership in the name of Isabella Sawmill. They partnership never hired Yu as an employee. The labor
used the properties of the partnership. The arbiter found in favor of Yu and decreed his
properties mortgaged to M. Saldajeno by the reinstatement and payment of unpaid salaries as well
remaining partners belonged to the partnership. It as backwages. The NLRC reversed the decision,
does not appear that the withdrawal of M. Saldajeno ruling that the new partnership had not retained Yu in
was published in the newspapers. The appellees and his original position and there was no law requiring
the public in general had a right to expect that the new partnership to absorb the employees of the
whatever credit they extended to the remaining old partnership. The claim for unpaid wages must be
partners doing business in the name of Isabela asserted against the old partners but they have not
sawmill could be enforced against the properties of been served with summons.
said partnership. The judicial foreclosure executed in
favor of Saldajeno did not relieve her from liability to Issues: Whether the old partnership had been
the creditors of the partnership. Technically speaking extinguished and replaced by a new partnership. If a
the partnership was dissolved by the withdrawal of new partnership was created could Yu assert his
Saldajeno but not terminated and it continued doing rights under his employment contract as against it?
business through the two remaining partners.
SC: The acquisition by the new partners of 82% of
The plaintiffs were prejudiced in their rights by the the partnership interest was enough to constitute a
execution of the chattel mortgage over the new partnership. However, dissolution does not
properties of the partnership in favor of Saldajeno by automatically result in the termination of the legal
the remaining partners and they had a right to file personality of the old partnership. The legal
the action to nullify the chattel mortgage in question. personality of the expiring partnership persists for
The spouses Saldejano have a right to be reimbursed the limited purpose of winding up and closing of the
whatever amounts they shall pay the appellees by affairs of the partnership. The new partnership
their Garibay and Tubungbanua as in the simply took over the business enterprise owned by
memorandum agreement, they undertook to release the preceding partnership and continued using the
Saldejano from any obligation of the partnership to old name without winding up the business affairs of
third persons. the latter, paying off its debts, liquidating and
distributing its assets and the re-assembling the
assets and opening a new business enterprise.
Therefore, not only the retiring partners but also the
YU VS. NLRC new partnership itself which continued the business
of the old, dissolved one are liable for the debts of
Facts: Yu was formerly the Assistant General the preceding partnership. The creditors of the old
Manager of a registered partnership, Jade Mountain. partnership are also the creditors of the new. Yu is
The partnership was originally composed of Bendal entitled to enforce his claim for unpaid salaries, as
siblings as general partners and others who were well as other claims relating to his employment with
limited partners. The partnership business consisted the previous partnership, against the new one.
of exploiting marble deposit found on the land of the
Cruz spouses by virtue of a memorandum The non-retention of Yu did not constitute unlawful or
agreement. Yu was hired by virtue of a Partnership unjust termination as the new partnership is entitled
Resolution as Assistant General Manager with a to hire new managers. The new partnership had Co
monthly salary. He, however, only received half of his as its own new manager and the basis for Yus
monthly salary since he had accepted the promise of termination was redundancy.
the partners that the balance would be paid when
the firm shall have secured additional operating Yu is entitled to his unpaid wages and separation pay.