LOZANO V.

DEPAKAKIBO 107 PHIL 728, April 27, 1960

FACTS: Lozana and Depakakibo established a partnership for the purpose of

maintaining, operating, and distributing electric light and power in the Municipality of
Dumangas. The partnership is capitalized at the sum of P30, 000.00 where Lozana agreed
to furnish 60% while Depakakibo, 40%. However, the franchise for venture in favor of
Buenaflor was cancelled and revoked by the Public Service Commission. Lozana
thereafter sold Generator Buda [Lozana’s contribution to the partnership; no liquidation
made] to Decologon. When the decision was appealed, a temporary certificate of public
convenience was issued in the name of Decolongon. Depakakibo sold one Crossly Diesel
Engine [Depakakibo’s contribution to the partnership] to Spouses Jimenea and Harder.
Lozana brought action against Depakakibo alleging the latter wrongfully detained the
Generator Buda and wooden posts to which he is entitled to the possession of. Lozano
prayed the properties be delivered back to him.

ISSUES: W/N disposal of contribution of parties is allowed.

RULING: An equipment which was contributed by one of the partners to the partnership
becomes the property of the partnership and as such cannot be disposed of by the party
contributing the same without the consent of the partnership or the other partner.
 MAXIMILIANO SANCHO, plaintiff-appellant,
vs.
SEVERIANO LIZARRAGA, defendant-appellee.

Jose Perez Cardenas and Jose M. Casal for appellant.

Celso B. Jamora and Antonio Gonzalez for appellee.

G.R. No. L-33580, February 6, 1931

FACTS: The plaintiff brought an action for the rescission of the partnership contract
between himself and the defendant and the reimbursement of his investment worth
50,000php with interest at 12 per cent per annum form October 15, 1920, with costs, and
any other just and equitable remedy against said defendant. The defendant denies
generally and specifically all the allegations of the complaint and asked for the
dissolution of the partnership, and the payment to him as its manager and administrator
P500 monthly from October 15, 1920 until the final dissolution with interest.

The CFI found that the defendant had not contributed all the capital he had bound himself
to invest hence it demanded that the defendant liquidate the partnership, declared it
dissolved on account of the expiration of the period for which it was constituted, and
ordered the defendant, as managing partner, to proceed without delay to liquidate it,
submitting to the court the result of the liquidation together with the accounts and
vouchers within the period of thirty days from receipt of notice of said judgment. The
plaintiff appealed from said decision praying for the rescission of the partnership contract
between him and the defendant in accordance with Art. 1124.

ISSUE:

WON plaintiff acquired the right to demand rescission of the partnership contract
according to article 1124 of the Civil Code.

HELD:

The SC ruled that owing to the defendant’s failure to pay to the partnership the whole
amount which he bound himself to pay, he became indebted to the partnership for the
remainder, with interest and any damages occasioned thereby, but the plaintiff did not
thereby acquire the right to demand rescission of the partnership contract according to
article 1124 of the Code. Article 1124 cannot be applied to the case in question, because
it refers to the resolution of obligations in general, whereas articles 1681 and 1682
specifically refer to the contract of partnership in particular. And it is a well known
principle that special provisions prevail over general provisions. Hence, SC dismissed the
appeal left the decision appealed from in full force.
 MORA ELECTRIC CO. vs. MATIC
G.R. No. L-45441, June 26, 1939

FACTS: Matic obtained from Manila City a concession to provide the lighting system of
Manila cemeteries on All Souls’ Day of 1934. The amount was P8,773 to be guaranteed
by Luzon Surety Co. Matic then authorized Quiogue to contract with Mora Electric Co.,
Inc. for the installation materials and labor, and that both are under the duty to pay
P8,773 to the City of Manila (which Mora Electric was to take from the payment made to
it by Matic and Quiogue). When the business failed, the parties did not pay the amount
due to the City. Luzon Surety had to pay the said amount, and so it filed a suit of
recovery against Matic and Quiogue. Both respondents also filed an action against Mora
to recover P8,773 from the latter.

ISSUE: Wherein mora electric is liable to pay the city of Manila as stipulated in the
contract

RULING: The amount sought to be recovered is not claimed as a loss or profit, but as
the contribution which petitioner bound itself to make to the partnership and which it was
under a duty to pay, although it was paid instead by M and Q. The liquidation of the
partnership is not now being sought. Indeed, there is no reason for such liquidation.
While it is mentioned in the appealed decision that the business produced a relevant
amount, it doesn’t appear that the parties have made a report, as they have agreed to do,
and it is not possible to determine whether there was a profit or loss and what is the
extent thereof and the measure of the respective liability or benefit
ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and
EMETERIA BARING, petitioners,
vs.

COURT OF APPEALS and MANUEL TORRES, respondents.

Facts:
Petitioners Torres and Baring entered into a “joint venture agreement” with Respondent
Torres for the development of a parcel of land into a subdivision. They executed a Deed
of Sale covering the said parcel of land in favor of respondent Manual Torres, who then
had it registered in his name. By mortgaging the property, respondent Manuel Torres
obtained from Equitable Bank a loan of P40,000, which was supposed to be used for the
development of subdivision as per the JVA. However, the project did not push through
and the land was subsequently foreclosed by the bank.

Petitioners Antonia Torres alleged that it was due to respondent’s lack of funds/skills that
caused the project to fail, and that respondent use the loan in the furtherance of his own
company. On the otherhand, respondent Manuel Torres alleged that he used the loan to
implement the JVA – surveying and subdivision of lots, approval of the project,
advertisement, and construction of roads and the likes, and that he did all of these for a
total of P85,000.

Petitioners filed a case for estafa against respondent but failed. They then instituted a
civil case. CA held that the two parties formed a partnership for the development of
subdivision and as such, they must bear the loss suffered by the partnership in the same
proportion as their share in profits. Hence, the petition.

Issue:

1. Whether or not the transaction between petitioner and respondent was that of joint
venture/partnership.
2. Whether or not the deed of sale between the two was valid.

Held:
1. Yes. There formed a partnership between the two on the basis of joint-venture
agreement and deed of sale. A reading of the terms of agreement shows the
existence of partnership pursuant to Art 1767 of Civil Code, which states “By the
contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits
among themselves.” In the agreement, petitioners would contribute property to the
partnership in the form of land which was to be developed into a subdivision; while
respondent would give, in addition to his industry, the amount needed for general
expenses and other costs. Furthermore, the income from the said project would be
divided according to the stipulated percentage. Clearly, the contract manifested the
intention of the parties to form a partnership.
 2. No. Petitioners were wrong in contending that the JVA is void under Article
1422[14] of the Civil Code, because it is the direct result of an earlier illegal
contract, which was for the sale of the land without valid consideration.

The Joint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another.

In this case, the cause of the contract of sale consisted not in the stated peso value of the
land, but in the expectation of profits from the subdivision project, for which the land was
intended to be used. As explained by the trial court, the land was in effect given to the
partnership as petitioners participation therein. There was therefore a consideration for
the sale, the petitioners acting in the expectation that, should the venture come into
fruition, they would get sixty percent of the net profits.

TORRES v. COURT OF APPEALS

G.R. No. 134559 December 9, 1999

Facts: Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a
joint venture agreement with RespondentManuel Torres for the development of a parcel
of land into a subdivision. Pursuant to the contract, they executed a Deed of Salecovering
the said parcel of land in favor of respondent, who then had it registered in his name.
By mortgaging the property,respondent obtained from Equitable Bank a loan of P40,000
which, under the Joint Venture Agreement, was to be used for thedevelopment of the
subdivision. All three of them also agreed to share the proceeds from the sale of the
subdivided lots. Theproject did not push through, and the land was subsequently
foreclosed by the bank

Issue:Whether or not there was a contract of partnership – YES

Ratio:Under the Agreement, petitioners would contribute property to the partnership in

the form of land which was to be developedinto a subdivision; while respondent would
give, in addition to his industry, the amount needed for general expenses and othercosts.
Furthermore, the income from the said project would be divided according to the
stipulated percentage. Clearly, thecontract manifested the intention of the parties to form
a partnership.Petitioners also contend that the Joint Venture Agreement is void under
Article 1422 of the Civil Code, because it is the directresult of an earlier illegal contract,
which was for the sale of the land without valid consideration. This argument is puerile.
TheJoint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivisionproject. Its first stipulation states that
 petitioners did not actually receive payment for the parcel of land sold to
respondent.Consideration, more properly denominated as cause, can take different
forms, such as the prestation or promise of a thing orservice by another.

Torres and Baring v. CA

G.R. No. 134559; December 9, 1999

FACTS:
Sisters Torres and Emeteria Baring entered into a “joint venture agreement” with Manuel
Torres for the development of a parcel of land into a subdivision. Thus, the petitioners
sold the land in favor of the respondent Torres who then registered the land in his name.
No inventory was made and attached to the public instrument. Consequently, Torres
mortgaged the property for a loan, and used the loan to develop the subdivision surveying
the land, and constructing roads, curbs, and gutters. Ultimately, the development plan
failed and the land was foreclosed. The petitioners then tried to file a civil claim to
relieve themselves of their obligations but were denied by the court for having formed a
partnership saying that they should bear the loss as a partner pursuant to Art. 1797 of the
NCC.

The petitioners however contend that no partnership was formed due to the joint venture
agreement and the execution of the deed of sale. Furthermore, they also contend that the
joint venture agreement was void pursuant to Art. 1773

ISSUES:

1. Was a partnership formed due to the Joint Venture and Deed of Sale execution of the
deed of sale?
2. Was the joint venture agreement void pursuant to Art. 1773?

HELD:
Yes. The Court held that a partnership was formed because: 1) petitioners contributed
property in the form of land to the partnership, which was to be developed into a
subdivision, and that the respondent contributed his industry and his money for other
costs; 2) the income from the said project was to be divided according to a percentage.
Furthermore, the respondent cannot be said to have made no contribution to the
partnership since a partner may not only contribute money or property, but also industry
according to Art. 1767 of the NCC. Furthermore, Art. 1773 cannot apply in this case.
According to the Court, Art. 1773 was primarily intended to protect third persons so that
the latter would not be prejudiced in case they are defrauded with the partnership in the
belief in the efficacy of the guaranty in which immovable may consist.
 MIGUEL CUENCO, Substituted by MARIETTA C.
CUYEGKENG,Petitioner, v. CONCEPCION CUENCO Vda. DE
MANGUERRA,Respondent.

G.R. NO. 149844, October 13, 2004

FACTS: Concepcion (respondent) filed the initiatory complaint herein for specific
performance against her uncle Miguel Cuenco (petitioner, later substituted by
Cuyegkeng). Concepcion’s father, the late Don Mariano Jesus Cuenco (who became
Senator) and Miguel Cuenco formed the ‘Cuenco and Cuenco Law Offices’. Cuenco and
Cuenco Law Offices served as lawyers in two (2) cases entitled ‘Valeriano Solon versus
Zoilo Solon’ and ‘Valeriano Solon versus Apolonia Solon’ involving a dispute among
relatives over ownership of lot 903 of the Banilad Estate. Records of said cases indicate
the name of the Miguel alone as counsel of record, but in truth and in fact, the real lawyer
behind the success of said cases was the influential Don Mariano Jesus Cuenco. After
winning the said cases:

 Lot 903-A: 5000 square meters (Don Mariano Jesus Cuenco’s attorney’s fees)
 Lot 903-B: 5000 square meters (Miguel Cuenco’s attorney’s fees)
 Lot 903-C: 54,000 square meters (Solon’s retention)

Mariano Cuenco entrusted Lot 903 A to Miguel.

 Miguel was able to obtain in his own name a title for Lot 903-A
 Miguel was under the obligation to hold the title in trust for his brother Mariano’s
children by first marriage

Lot 903-A was partitioned into six (6) sub-lots (Lots 903-A-1 to 903-A-6) to correspond
to the six (6) children of Mariano’s first marriage (Teresita, Manuel, Lourdes, Carmen,
Consuelo, and Concepcion)

The case of Concepcion

 Five deeds of donation were executed in favour of five children. This left out
Concepcion (who became respondent in this case).
 Concepcion occupied Lot 903-A-6 and paid taxes for it.
 When Concepcion went to the Register of Deeds to register the Lot 903-A-6,
there was an adverse claim by Miguel saying that he was the absolute owner of
said lot.

Miguel’s allegations

o He executed five deeds of donation to five children of his brother because

of the love, care and gratitude they exhibited during his long sickness.
 o Concepcion never visited him.

Miguel was able to take the witness stand but he became sick and was not able to be
present on cross-examination so his testimony was stricken off the record.

Marietta Cuyegkeng (her only daughter) substituted him in the case.

o She is the owner of the lot as he purchased it from his father.

o That she was aware of the case because her father used to commute to
Cebu to attend hearings.
o That she constructed a house on the said lot.

Lower court and appellate court:

o Concepcion has the legal right of ownership over lot 903-A-6.

o The CA ruled that the subject land "is part of the attorney’s fees of Don
Mariano Cuenco, predecessor-in-interest of Concepcion Cuenco vda. de
Manguerra and Miguel merely holds such property in trust for her.

ISSUE: Whether Concepcion is entitled to ownership of the property (Lot 903-A-6)

DECISION:

 Given as attorney’s fees was one hectare of Lot 903, of which two five-thousand
square meter portions were identified as Lot 903-A and Lot 903-B. That only
Miguel handled Civil Case No. 9040 does not mean that he alone is entitled to the
attorney’s fees in the said cases. "When a client employs the services of a law
firm, he does not employ the services of the lawyer who is assigned to
personally handle the case. Rather, he employs the entire law firm." Being a
partner in the law firm, Mariano -- like Miguel -- was likewise entitled to a
share in the attorney’s fees from the firm’s clients.

 Although Lot 903-A was titled in Miguel’s name, the circumstances surrounding
the acquisition and the subsequent partial dispositions of this property eloquently
speak of the intent that the equitable or beneficial ownership of the property
should belong to Mariano and his heirs.

o Lot 903-A was one half of the one-hectare portion of Lot 903 given as
attorney’s fees by a client of the law firm of Partners Miguel and Mariano
Cuenco. Lot 903-A was one half of the one-hectare portion of Lot 903
given as attorney’s fees by a client of the law firm of Partners Miguel and
Mariano Cuenco
 o Miguel readily surrendered his Certificate of Title and interposed no
objection to the subdivision and the allocation of the property to
Mariano’s six children, including Concepcion.
o Mariano’s children, including Concepcion, were the ones who shouldered
the expenses incurred for the subdivision of the property

o After the subdivision of the property, Mariano’s children -- including

Concepcion -- took possession of their respective portions thereof.
o The legal titles to five portions of the property were transferred via a
gratuitous deed of conveyance to Mariano’s five children, following the
allocations specified in the subdivision plan prepared for Lourdes Cuenco.
 Respondent is not barred by laches. In the present case, respondent has
persistently asserted her right to Lot 903-A-6 against petitioner

FACTS:

Concepcion (respondent) filed the initiatory complaint herein for specific performanceagainst her uncle
Miguel Cuenco (petitioner, later substituted by Cuyegkeng).

Concepcion’s father, the late Don Mariano Jesus Cuenco (who became Senator) and Miguel Cuenco
formed the ‘Cuenco and Cuenco Law Offices’

Cuenco and Cuenco Law Offices served as lawyers in two (2) cases entitled ‘Valeriano Solon versus
Zoilo Solon’ and ‘Valeriano Solon versus Apolonia Solon’ involving a dispute among relatives over
ownership of lot 903 of theBanilad Estate

Records of said cases indicate the name of the Miguel alone as counsel of record, but intruth and in fact,
the real lawyer behind the success of said cases was the influential DonMariano Jesus Cuenco

After winning the said cases:

Lot 903-A: 5000 square meters ( Don Mariano Jesus Cuenco’s attorney’s fees )

Lot 903-B: 5000 square meters ( Miguel Cuenco’s attorney’s fees )

Lot 903-C: 54,000 square meters (Solon’s retention)

Mariano Cuenco entrusted Lot 903 A to Miguel.

Miguel was able to obtain in his own name a title for Lot 903-A

Miguel was under the obligation to hold the title in trust for his brother
Mariano’s children by first marriage

Lot 903-A was partitioned into six (6) sub-lots (Lots 903-A-1 to 903-A-6) to correspond to the six (6)
children of Mariano’s first marriage (Teresita, Manuel, Lourdes, Carmen, Consuelo, and
Concepcion)

The case of Concepcion

Five deeds of donation were executed in favour of five children. This left out Concepcion (who became
respondent in this case).

Concepcion occupied Lot 903-A-6 and paid taxes for it.

When Concepcion went to the Register of Deeds to register the Lot 903-A-6,there was an adverse claim
by Miguel saying that he was the absolute owner of said lot

Miguel’s allegations

He executed five deeds of donation to five children of his brother because of the love, care and gratitude
they exhibited during his long sickness.

Concepcion never visited him.

Miguel was able to take the witness stand but he became sick and was not able to bepresent on cross-
examination so his testimony was stricken off the record.

Marietta Cuyegkeng (her only daughter) substituted him in the case. She is the owner of the lot as he
purchased it from his father. That she was aware of the case because her father used to commute to Cebu
toattend hearings. That she constructed a house on the said lot.

Lower court and appellate court:

Concepcion has the legal right of ownership over lot 903-A-6. The CA ruled that the subject l

and "is part of the attorney’s fees of Don Mariano Cuenco, predecessor-in-interest of Concepcion Cuenco
vda. de Manguerra andMiguel merely holds such property in trust for her.

ISSUE:

Whether Concepcion is entitled to ownership of the property (Lot 903-A-6)

DECISION:
Given as attorney’s fees was one hectare of Lot 903, of which two five -thousand squaremeter portions
were identified as Lot 903-A and Lot 903-B. That only Miguel handled Civil Case No. 9040 does not
mean that he alone is entitled to the attorney’s fees in thesaid cases.

"When a client employs the services of a law firm, he does not employ theservices of the lawyer
who is assigned to personally handle the case. Rather, heemploys the entire law firm." Being a
partner in the law firm, Mariano -- like Miguel-- was likewise entitled to a share in the
attorney’s fees from the firm’s clients.

Although Lot 903- A was titled in Miguel’s name, the circumstances surrounding theacquisition and the
subsequent partial dispositions of this property eloquently speak of the intent that the equitable or
beneficial ownership of the property should belong toMariano and his heirs.

Lot 903-A was one half of the one-hectare portion of Lot 903 given as attorney’s fees by a client of the
law firm of Partners Miguel and Mariano Cuenco. Lot 903-A was one half of the one-hectare portion of
Lot 903 given as attorney’s fees by a client of the law firm of Partners Miguel and Mariano Cuenco.
Miguel readily surrendered his Certificate of Title and interposed no objectionto the subdivision and the
allocation of the property to Mariano’s six children, including Concepcion.. Mariano’s children, including
Concepcion, were the ones who shouldered the expenses incurred for the subdivision of the property.
After the subdivision of the property, Mariano’s children -- includingConcepcion -- took possession
of their respective portions thereof.. The legal titles to five portions of the property were transferred via a
gratuitous deed of conveyance to Mariano’s five children, following the allocations specified in the
subdivision plan prepared for Lourdes Cuenco. Respondent is not barred by laches. In the present case,
respondent has persistentlyasserted her right to Lot 903-A-6 against petitioner.
 Tai Tong v Insurance

G.R. No. L-5539, February 29, 1988

FACTS:
Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of
P100,000.00. To secure the payment of the loan, a mortgage was executed over the land
and the building in favor of Tai Tong Chuache & Co. Arsenio Chua, representative of
Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity
Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the
contents thereof) Pedro Palomo secured a Fire Insurance Policy covering the building for
P50,000.00 with respondent Zenith Insurance Corporation. On July 16, 1975, another
Fire Insurance was procured from respondent Philippine British Assurance Company,
covering the same building for P50,000.00 and the contents thereof for P70,000.00.
The building and the contents were totally razed by fire. Based on the computation of the
loss, including the Travellers Multi- Indemnity, respondents, Zenith Insurance, Phil.
British Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding
shares of the loss. Complainants were paid the following: P41,546.79 by Philippine
British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by
S.S.S. Group of Accredited Insurers Demand was made from respondent Travellers
Multi-Indemnity for its share in the loss but the same was refused. Hence, complainants
demanded from the other three (3) respondents the balance of each share in the loss in the
amount of P30,894.31 (P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and
P2,866.90, SSS Accredited) but the same was refused, hence, this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation
denied liability on the ground that the claim of the complainants had already been
waived, extinguished or paid. Both companies set up counterclaim in the total amount of
P 91,546.79. SSS Accredited Group of Insurers informed the Commission that the claim
of complainants for the balance had been paid in the amount in full.
Travellers Insurance, on its part, admitted the issuance of a Policy and alleged
defenses that Fire Policy, covering the furniture and building of complainants was
secured by a certain Arsenio Chua and that the premium due on the fire policy was paid
by Arsenio Chua.
Tai Tong Chuache & Co. also filed a complaint in intervention claiming the
proceeds of the fire Insurance Policy issued by respondent Travellers Multi-Indemnity.
As adverted to above respondent Insurance Commission dismissed spouses Palomos'
complaint on the ground that the insurance policy subject of the complaint was taken out
by Tai Tong Chuache & Company, for its own interest only as mortgagee of the insured
property and thus complainant as mortgagors of the insured property have no right of
action against the respondent. It likewise dismissed petitioner's complaint in intervention
in the following words:
From the above decision, only intervenor Tai Tong Chuache filed a motion for
reconsideration but it was likewise denied hence, the present petition.

ISSUE: Wherein Tai Tong had insurable interest

DECISION:
Yes. Petition granted. Respondent advanced an affirmative defense of lack of
insurable interest on the part of the petitioner that before the occurrence of the peril
insured against, the Palomos had already paid their credit due the petitioner. However,
they were never able to prove that Tai had a lack of insurable interest. Hence, the
decision must be adverse against them.
However respondent Insurance Commission absolved respondent insurance
company from liability on the basis of the certification issued by the then Court of First
Instance of Davao, Branch II, that in a certain civil action against the Palomos, Arsenio
Lopez Chua stands as the complainant and not Tai Tong Chuache.
From said evidence respondent commission inferred that the credit extended by petitioner
to the Palomos secured by the insured property must have been paid. These findings was
based upon a mere inference.
The record of the case shows that the petitioner to support its claim for the
insurance proceeds offered as evidence the contract of mortgage which has not been
cancelled nor released. It has been held in a long line of cases that when the creditor is in
possession of the document of credit, he need not prove non-payment for it is presumed.
The validity of the insurance policy taken by petitioner was not assailed by private
respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not
yet been paid was corroborated by Azucena Palomo who testified that they are still
indebted to herein petitioner.
Public respondent argues however, that if the civil case really stemmed from the
loan granted to Azucena Palomo by petitioner the same should have been brought by Tai
Tong Chuache or by its representative in its own behalf. From the above premise,
respondent concluded that the obligation secured by the insured property must have been
paid. However, it should be borne in mind that petitioner being a partnership may sue and
be sued in its name or by its duly authorized representative. Petitioner's declaration that
Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated by
respondent insurance company. Thus Chua as the managing partner of the partnership
may execute all acts of administration including the right to sue debtors of the partnership
in case of their failure to pay their obligations when it became due and demandable.
Public respondent's allegation that the civil case flied by Arsenio Chua was in his
capacity as personal creditor of spouses Palomo has no basis. The policy, then had legal
force and effect.
 G.R. No. L-45624, April 25, 1939

GEORGE LITTON, petitioner-appellant,

vs.

HILL & CERON, ET AL., respondents-appellees

FACTS: The plaintiff sold and delivered to Carlos Ceron, who is one of the managing
partners of Hill & Ceron, a certain number of mining claims. Both partners have the
management of the business of the partnership, and that either may contract and sign for
the partnership with the consent of the other. Ceron did not obtain Hill’s consent for the
purchase of the mining claims. Litton was unable to collect the balance from Hill &
Ceron or from its surety. The trial court held Ceron personally liable for the unpaid
amount. The partnership Hill & Ceron, Robert Hill (the partner of Ceron), and the surety
were absolved. CA affirmed, saying that Ceron did not intend to represent and did not act
for the partnership Hill & Ceron.

ISSUE:

1. Who should prove that the consent of the other partner is needed when entering into
a contract with third persons?
2. Is the partnership liable?

HELD:

Yes. Under article 226 of the Code of Commerce, the dissolution of a commercial
association shall not cause any prejudice to third parties until it has been recorded in the
commercial registry. (See also Cardell vs. Mañeru, 14 Phil., 368.) The Supreme Court of
Spain held that the dissolution of a partnership by the will of the partners which is not
registered in the commercial registry, does not prejudice third persons.Third persons, like
the plaintiff, are not bound in entering into a contract with any of the two partners, to
ascertain whether or not this partner with whom the transaction is made has the consent
of the other partner. The public need not make inquiries as to the agreements had between
the partners. Its knowledge is enough that it is contracting with the partnership which
isrepresented by one of the managing partners.There is a general presumption that each
individual partner is an authorized agent for the firm and that he has authority to bind the
firm in carrying on the partnership transactions. (Mills vs. Riggle, 112 Pac., 617.)The
presumption is sufficient to permit third persons to hold the firm liable on transactions
entered into by one of members of the firm acting apparently in its behalf and within the
scope of his authority. (Le Roy vs.Johnson, 7 U. S. [Law. ed.], 391.)The kind of business
in which the partnership Hill & Ceron is to engage being thus determined, none of the
two partners, under article 130 of the Code of Commerce, may legally engage in
thebusiness of brokerage in general as stock brokers, security brokers and other activities
pertaining to the business of the partnership. Ceron, therefore, could not have entered into
the contract of sale of shares with Litton as a private individual, but as a managing
partner of Hill & Ceron.Even if Ceron had not obtained the consent of Hill for the said
transaction, it is not enough ground to annul the contract entered by Ceron and
Litton.Under the Article 130 of the Code of Commerce, when, not only without the
consent but against the will of any of the managing partners, a contract is entered into
with a third person who acts in good faith, and the transaction is of the kind of business in
which the partnership is engaged, as in the present case, said contract shall not be
annulled, without prejudice to the liability of theguilty partner.

FACTS: Litton sold and delivered to Ceron, one of the managing partners of Hill &
Ceron, a certain number of mining claims. By virtue of said transaction, Ceron delivered
to plaintiff a document (receipt) acknowledging that he received from Litton certain share
certificates of Big Wedge Mining Company totalingP1870.Ceron paid to Litton P1, 150
leaving a balance of P720. Litton was unable to collect the unpaid balance from Hill &
Ceron or from its surety. Litton filed a complaint against the defendants for the recovery
of the balance. The court ordered Ceron to personally pay the amount claimed and
absolved the partnership, Hill and the surety.CA affirmed the decision of the court.

ISSUE: Did the transaction bind the partnership or Ceron only?

HELD:

While the transaction was entered into by Ceron, it bound the partnership. Robert Hill
had the same power to buy and sell; that in said partnership Hillas well as Ceron made
the transaction as partners in equal parts; that on the date of the transaction, February 14,
1934, the partnership between Hill and Ceron was in existence. After this date, or on
February 19th, Hill &Ceron sold shares of the Big Wedge; and when the transaction was
entered into with Litton, it was neither published in the newspapers nor stated in the
commercial registry that the partnership Hill & Ceron had been dissolved. The SC
dissented from the view of the CA that for one of the partner’s tobind the partnership the
consent of the other is necessary. Third persons, like the plaintiff, are not bound in
entering into a contract with any of the two partners, to ascertain whether or not this
partner with whom the transaction is made has the consent of the other partner. The
public need not make inquires as to the agreements had between the partners. Its
knowledge is enough that it is contracting with the partnership which is represented by
one of the managing partners. The second paragraph of the articles of partnership of Hill
& Ceron reads inpart: Second: That the purpose or object for which this co-partnership is
organized is to engage in the business of brokerage in general, such as stock and bond
brokers, real brokers, investment security brokers, shipping brokers, and other activities
pertaining to the business of brokers in general. The kind of business in which the
partnership Hill & Ceron is to engage being thus determined, none of the two partners,
under article 130 of the Code of Commerce, may legally engage in the business of
brokerage in general as stock brokers, security brokers and other activities pertaining to
the business of the partnership. Ceron, therefore, could not have entered into the contract
of sale of shares with Litton as a private individual, but as a managing partner of Hill &
Ceron The stipulation in the articles of partnership that any of the two managing partners
may contract and sign in the name of the partnership with the consent of the other,
undoubtedly creates an obligation between the two partners, which consists in asking the
other's consent before contracting for the partnership. This obligation of course is not
imposed upon a third person who contracts with the partnership. Neither is it necessary
for the third person to ascertain if the managing partner with whom he contracts has
previously obtained the consent of the other. A third person may and has a right to
presume that the partner with whom he contracts has, in the ordinary and natural course
of business, the consent of his co-partner; for otherwise he would not enter into the
contract. The third person would naturally not presume that the partner with whom he
enters into the transaction is violating the articles of partnership but, on the contrary, is
By Joy Co.

Acting in accordance therewith. And this finds support in the legal presumption
that the ordinary course of business has been followed. If we are to interpret the articles
of partnership in question by holding that it is the obligation of the third person to inquire
whether the managing co-partner of the one with whom he contracts has given his
consent to said contract, which is practically casting upon him the obligation to get such
consent, this interpretation would, in similar cases, operate to hinder effectively the
transactions, a thing not desirable and contrary to the nature of business which requires
promptness and dispatch one the basis of good faith and honesty which are always
presumed.
 E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.

G.R. No. L-11624, January 21, 1918

FACTS: Nicolas Segundo, Antonio Adiarte, Ignacio Flores and Modesto Serrano
(defendants) formed a civil partnership called “La Protectora” for the purpose of
engaging in the business of transporting passengers and freight at Laoag, Ilocos Norte.
Marcelo Barba, acting as manager, negotiated for the purchase of 2 automobile trucks
from E. M. Bachrach for P16,500. Barba paid P3,000 in cash and for the balance
executed promissory notes. One of these promissory notes was signed in the following
manner:

“P.P La Protectora, By Marcelo Barba Marcelo Barba”

The other 2 notes were signed in the same way but the word “by” was omitted. It was
obvious that in signing the notes, Barba intended to bind both the partnership and
himself.

The defendants executed a document in which they declared that they were members of
La Protectora and that they had granted to its president full authority to contract for the
purchase of the 2 automobiles. The document was delivered by Barba to Bachrach at the
time the vehicles were purchased.

Barba incurred a debt amounting to P2,617.57 and Bachrach foreclosed a chattel

mortgage on the trucks but there was still balance. To recover the balance, action was
instituted against the defendants. Judgment was rendered against the defendants.

ISSUE:

1. Whether or not the defendants are liable for the firm debts.

2. Whether or not Barba had authority to incur expenses for the partnership (relevant
issue)

DECISION:

1. Yes. Promissory notes constitute the obligation exclusively of La Protectora and

Barba. They do not constitute an obligation directly binding the defendants. Their
liability is based on the principles of partnership liability. A member is not liable in
solidum with his fellows for the entire indebtedness but is liable with them or his aliquot
part.
SC obiter: the document was intended merely as an authority to enable Barba to bind the
partnership and that the parties to the instrument did not intend to confer upon Barba an
authority to bind them personally.

2. Yes. Under Art 1804, every partner may associate another person with him in his
share. All partners are considered agents of the partnership. Barba must be held to have
authority to incur these expenses. He is shown to have been in fact the president/manager,
and there can be no doubt that he had actual authority to incur obligation.
 PEDRO MARTINEZ, Plaintiff-Appellee, vs. ONG PONG CO and ONG
LAY, defendants.
ONG PONG CO., Appellant.

G.R. No. L-5236, January 10, 1910

FACTS:

 Martinez delivered P1,500 to Ong Pong Co and Ong Lay to invest in a store.
They agreed that the profits and losses would be equally shared by all of them.
Martinez was demanding for the two Ongs to render an accounting or to refund
him the P1,500. Ong Pong Co alleged that Ong Lay, now deceased, was the one
who managed the business, and the capita of P1,500 resulted in a loss so that he
should not be made liable.

ISSUE:

1. Wherein Ong Pong Co is liable? –YES

2. What is the extent of his liability? –joint

DECISION:

The 2 partners (Ongs) were the administrators/managers and are obliged to render
accounting. Since neither of them rendered an account, nor proved the alleged losses,
they are obliged to return the capital to Martinez.

Where two partners receive from another a sum of money for the establishment of a
business, and agree to share with the latter the profits or losses that may result therefrom,
the said two persons, as the apparent administrators of the partnership, acted as agents for
the capitalist partner, and by virtue thereof are bound to fulfill the contract which implies
the management of the business.

Article 1796 is not applicable because no other money than that contributed as capital
was involved. The liability of the partners is joint. Ong Pong Co shall only pay P750 to
Martinez.

FACTS: Pedro Martinez (plaintiff) delivered Php.1,500.00 to Ong Pong Co and Ong Lay
(defendants). Said amount was reflected in a private instrument where the plaintiff and
defendants agreed that “they are to invest the amount in a store, the profits or losses of
which we are to divide with the former, in equal shares.” The store business was a failure
and the plaintiff demanded from the defendants either to render an accounting of the
partnership as agreed to, or to refund him the Php.1,500.00. Ong Pong Co alleged in his
defense that his co-defendant Ong Lay, now deceased, was the one who managed the
business. He also alleged that nothing had resulted from the business venture save the
loss of the capital of Php.1,500.00, to which the plaintiff agreed.

ISSUE:
1. Upto what extent are partners liable?

DECISION:
The partners are liable jointly. The defendants acted as administrators and as such, they
were obliged to render an accounting of the business. Since both failed in this aspect,
they are obliged to return the capital. Article 1688 of the Civil Code (Article 1796 of the
New Civil Code) which provides “that the partnership is liable to every partner for the
amounts he may have disbursed on account of the same and for the proper interest” does
not apply to the case at bar since no other money than the one contributed by the plaintiff
was involved. The court ruled that Ong Pong Co should pay Pedro Martinez the sum of
Php.750.00 with the legal interest thereon, being liable jointly.
 JOSE GARCIA RON, plaintiff-appellee,

vs.

LA COMPAÑIA DE MINAS DE BATAN, defendant-appellant.

G.R. No. 4597, November 23, 1908

FACTS: This was an action brought by the plaintiff to recover from the defendant the sum
of 9,558 1/3 Spanish pesetas for services rendered. He was employed as foreman or
capataz by Genaro Ansuategui, the local manager of certain mines of the defendant
company, situated on the Islands of Bataan. The Trial Judge found further that while the
plaintiff failed to establish satisfactorily his claim that the salary promised him by the
company’s manager was 1,000 pesestas per month, nevertheless he is entitled to
reasonable compensation for the services rendered. Counsel for the defendant company
insists that granting that the plaintiff did in fact work in the mines of the defendant
company and was employed by its local manager, nevertheless, defendant is not indebted
to the plaintiff for this service because the local manager at the mines was not authorized
to enter into the alleged contract of employment, such authority not having been granted
to him under his letter of instructions.

ISSUE: Whether Ansuategui, the local manager, has the authority to enter into the
contract of employment?

DECISION:

Yes. It is not necessary for us to discuss the question of the liability of the defendant
company to the plaintiff for the value of the services rendered, if it in fact appeared that
the manager at the mines was not expressly authorized to employ the plaintiff and to
contract for his services, because we are of opinion that the authority to contract for the
employment of the plaintiff was clearly conferred upon Ansuategui by the terms of this
letter of instructions. Other provisions of the letter of instructions expressly authorized
Ansuategui, as the local manager of the defendant company at the mines, to discharge
employees who did not prove satisfactory, and leave no room for doubt that he was duly
authorized to represent the company at the mines so far as this was necessary for their
proper local management. Taking into consideration the fact that the mines of the
defendant company are located upon an island some two days' distance by steamer from
the office of the company at Manila, that the only communication therewith was by mail
a few times per month, and that in the very nature of the enterprise, it was necessary, in
order that the local manager might successfully perform his duties, to confer upon him
wide scope in the employment and discharge of labor, we think that there can be no doubt
that Genaro Ansuategui was fully and expressly authorized by the terms of this letter of
instructions to enter into the alleged contract of employment with the plaintiff on behalf
of the defendant company; and the evidence of record establishing the fact that he did so,
and that the plaintiff worked for the company for the period set out in the findings of the
trial court, we are of opinion that the trial court properly rendered judgment in favor of
the plaintiff and against the defendant for the value of the services rendered.
 SI-BOCO, Plaintiff-Appellee, v. YAP TENG, Defendant-Appellant.
Marcelo Caringal, for Appellant
Thos. L. McGirr, for Appellee

G.R. No. L-3025, November 23, 1906

FACTS: For a period of three years, more or less, the plaintiff had been furnishing to the defendant native
cloth for the latter's store in the city of Manila. The goods were at first furnished on credit, but the business
relations of the parties caused entirely in 1904. The defendant had a partner by the name of Yapsuan, who
was the manager of the business. The defendant introduced him to the plaintiff as such manager, and told
him that Yapsuan had authority from him to receive the cloth, and that the value thereof should be charged
to his, the defendant's account, and in fact the cloth was, as a rule, received by Yapsuan from the plaintiff.
It became necessary for Yapsuan to return to China in 1902 on account of ill health and a liquidation of the
accounts between the plaintiff and the defendant was made in December of the said year, showing a
balance of P1,444.95 in favor of the plaintiff, which the defendant expressly undertook to pay. After the
liquidation was made the defendant continued to buy the goods from the plaintiff for cash until the year
1904, when, as already stated, the business relations between the parties ceased.

The defendant has failed to show that he had paid the aforesaid balance of P1,444.95 or any part thereof.

ISSUE:

1. Whether or not this action should have been brought against the partnership itself, or against the
defendant only

DECISION:

Defendant only. The appellant contends that the goods having been furnished to and received by the
partnership between himself and Yapsuan, and the accounts of the same not having been liquidated, this
action should have been brought against the partnership itself, or against the partners jointly, and not
against the defendant only. However that may be, the fact remains that the defendant in this case was the
only one who contradicted with the plaintiff in his own name, as appears from the latter's testimony. When
the defendant told the plaintiff that he had authorized Yapsuan to receive the goods, he instructed the
plaintiff to charge them to him (the defendant) personally. The defendant, moreover, undertook personally
to pay the balance due the plaintiff, after the liquidation made in December, 1902, such as being the sum
sought to be recovered in this case, as appears from the testimony of the plaintiff and that of the two
witnesses who took part in the said liquidation. Consequently the court below properly allowed the plaintiff
to maintain this action against the defendant.
 THE GREAT COUNCIL OF THE UNITED STATES OF THE IMPROVED
ORDER OF RED MEN, Plaintiff-Appellee, v. THE VETERAN ARMY OF THE
PHILIPPINES, Defendant-Appellant.
Hartigan, Rohde, & Gutierrez, for Appellant
W. A. Kincaid, for Appellee
G.R. No. L-3186. March 7, 1907

FACTS: This case involves the Veteran Army of the Philippines. Their Constitution
provides for the organization of posts. Among the posts thus organized is the General
Henry W. Lawton Post, No. 1. March 1, 1903: a contract of lease of parts of a certain
buildings in the city of Manila was signed by Lewis, Stovall, and Hayes (as trustees of
the Apache Tribe, No. 1, Improved Order of Red Men) as lessors, and McCabe (citing for
and on behalf of Lawton Post, Veteran Army of the Philippines) as lessee. The lease was
for the term of two years commencing February 1, 903, and ending February 28, 1905.
The Lawton Post occupied the premises in controversy for thirteen months, and paid the
rent for that time. Thereafter, it abandoned the premises. Council Red Men then filed an
action to recover the rent for the unexpired term of the lease. Judgment was rendered in
the court below on favor of the defendant McCabe, acquitting him of the complaint.
Judgment was rendered also against the Veteran Army of the Philippines for P1,738.50,
and the costs. It is claimed by the Veterans Army that the action cannot be maintained by
the Council Red Men as this organization did not make the contract of lease. It is also
claimed that the action cannot be maintained against the Veteran Army of the Philippines
because it never contradicted, either with the Council Red Men or with Apach Tribe, No.
1, and never authorized anyone to so contract in its name.

ISSUE:

1. Whether or not Article 1695 of the Civil Code is applicable to the Veteran Army of the
Philippines.

DECISION:

NO. Council Red Men must show that the contract of lease was authorized by the
Veterans Army The view most favorable to the appellee (Council Red Men) is the one
that makes the appellant (Veterans Army) a civil partnership. Assuming that is such, and
is covered by the provisions of title 8, book 4 of the Civil Code, it is necessary for the
appellee (Council Red Men) to prove that the contract in question was executed by some
authorized to so by the Veteran Army of the Philippines. Article 1695 of the Civil Code
is not applicable in this case Article 1695 of the Civil Code provides as follows: "Should
no agreement have been made with regard to the form of management, the following
rules shall be observed: 1. All the partners shall be considered as agents, and whatever
any one of them may do by himself shall bind the partnership; but each one may oppose
the act of the others before they may have produced any legal effect." One partner,
therefore, is empowered to contract in the name of the partnership only when the articles
of partnership make no provision for the management of the partnership business. The
constitution of the Veteran Army of the Philippines makes provision for the management
of its affairs, so that article 1695 of the Civil Code, making each member an agent of the
partnership in the absence of such provision, is not applicable to that organization. In the
case at bar we think that the articles of the Veteran Army of the Philippines do so
provide. It is true that an express disposition to that effect is not found therein, but we
think one may be fairly deduced from the contents of those articles. They declare what
the duties of the several officers are. In these various provisions there is nothing said
about the power of making contracts, and that faculty is not expressly given to any
officer. We think that it was, therefore, reserved to the department as a whole; that is, that
in any case not covered expressly by the rules prescribing the duties of the officers, the
department were present. It is hardly conceivable that the members who formed this
organization should have had the intention of giving to any one of the sixteen or more
persons who composed the department the power to make any contract relating to the
society which that particular officer saw fit to make, or that a contract when so made
without consultation with, or knowledge of the other members of the department should
bind it. The contract of lease is not binding on the Veterans Army absent showing that it
was authorized in a meeting of the department We therefore, hold, that no contract, such
as the one in question, is binding on the Veteran Army of the Philippines unless it was
authorized at a meeting of the department. No evidence was offered to show that the
department had never taken any such action. In fact, the proof shows that the transaction
in question was entirely between Apache Tribe, No. 1, and the Lawton Post, and there is
nothing to show that any member of the department ever knew anything about it, or had
anything to do with it. Judgment against the appellant is reversed, and the Veteran Army
of the Philippines is acquitted of the complaint. No costs will be allowed to either party in
this court. NOTE: Whether a fraternal society, such as the Veteran Army of the
Philippines, is a civil partnership is not decided.