PARTNERSHIP
WEEK 5&6
VII. Rights of a partner
A. To associate another in his share – 1804
Article 1804. Every partner may associate another person with him in
his share, but the associate shall not be admitted into the partnership
without the consent of all the other partners, even if the partner having
an associate should be a manager. (1696)
B. To access, inspect and copy partnership books - 1805
Article 1805. The partnership books shall be kept, subject to any
agreement between the partners, at the principal place of business of
the partnership, and every partner shall at any reasonable hour have
access to and may inspect and copy any of them. (n)
C. To have a formal account - 1809,1842
Article 1809. Any partner shall have the right to a formal account as to
partnership affairs:
(1) If he is wrongfully excluded from the partnership business or
possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstances render it just and reasonable. (n)
Article 1842. The right to an account of his interest shall accrue to any
partner, or his legal representative as against the winding up partners or
the surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence of any agreement to
the contrary. (n)
D. Property rights - 1810
Article 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management (n)
1. To possess specific partnership property - 1811
Article 1811. A partner is co-owner with his partners of specific
partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement
between the partners, has an equal right with his partners to possess
specific partnership property for partnership purposes; but he has no
right to possess such property for any other purpose without the consent
of his partners;
(2) A partner's right in specific partnership property is not assignable
except in connection with the assignment of rights of all the partners in
the same property;
(3) A partner's right in specific partnership property is not subject to
attachment or execution, except on a claim against the partnership.
When partnership property is attached for a partnership debt the
partners, or any of them, or the representatives of a deceased partner,
cannot claim any right under the homestead or exemption laws;
(4) A partner's right in specific partnership property is not subject to
legal support under article 291. (n)
2. To convey partnership interest - 1812, 1813
Article 1812. A partner's interest in the partnership is his share of the
profits and surplus. (n)
Article 1813. A conveyance by a partner of his whole interest in the
partnership does not of itself dissolve the partnership, or, as against the
other partners in the absence of agreement, entitle the assignee, during
the continuance of the partnership, to interfere in the management or
administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to receive in
accordance with his contract the profits to which the assigning partner
would otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail himself of the
usual remedies.
In case of a dissolution of the partnership, the assignee is entitled to
receive his assignor's interest and may require an account from the date
only of the last account agreed to by all the partners. (n)
E. To ask for dissolution - 1830 (2), 1831
Article 1830. Dissolution is caused:
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular undertaking
specified in the agreement;
(b) By the express will of any partner, who must act in good faith, when On the application of the purchaser of a partner's interest under article
no definite term or particular is specified; 1813 or 1814:
(c) By the express will of all the partners who have not assigned their (1) After the termination of the specified term or particular undertaking;
interests or suffered them to be charged for their separate debts, either (2) At any time if the partnership was a partnership at will when the
before or after the termination of any specified term or particular interest was assigned or when the charging order was issued. (n)
undertaking;
(d) By the expulsion of any partner from the business bona fide in Dan Fue Leung v. IAC, 169 SCRA 746
accordance with such a power conferred by the agreement between the
FACTS:
partners;
Dan Fue Leung. The Sun Wah Panciteria was registered as a single
(2) In contravention of the agreement between the partners, where the
proprietorship and its licenses and permits were issued to and in favor of
circumstances do not permit a dissolution under any other provision of
petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu
this article, by the express will of any partner at any time;
adduced evidence during the trial of the case to show that Sun Wah Panciteria
(3) By any event which makes it unlawful for the business of the
was actually a partnership and that he was one of the partners having
partnership to be carried on or for the members to carry it on in
contributed P4,000.00 to its initial establishment. Lower court ruled in favor of
partnership;
the private respondent. Petitioner appealed the trial court's amended decision.
(4) When a specific thing which a partner had promised to contribute to
However, the questioned decision was further modified and affirmed by the
the partnership, perishes before the delivery; in any case by the loss of
appellate court.
the thing, when the partner who contributed it having reserved the
ownership thereof, has only transferred to the partnership the use or
Both the trial court and the appellate court declared that the private petitioner is
enjoyment of the same; but the partnership shall not be dissolved by the
a partner and is entitled to a share of the annual profits of the restaurant. Hence,
loss of the thing when it occurs after the partnership has acquired the
an appeal to the SC. The petitioner argues that private respondent extended
ownership thereof;
'financial assistance' to herein petitioner at the time of the establishment of the
(5) By the death of any partner;
Sun Wah Panciteria, in return of which private respondent allegedly will receive
(6) By the insolvency of any partner or of the partnership;
a share in the profits of the restaurant. It was, therefore, error for the Appellate
(7) By the civil interdiction of any partner;
Court to interpretor construe 'financial assistance' to mean the contribution of
(8) By decree of court under the following article. (1700a and 1701a)
capital by a partner to a partnership.
Article 1831. On application by or for a partner the court shall decree a
ISSUE:
dissolution whenever:
WON the private respondent is a partner of the petitioner in the establishment
(1) A partner has been declared insane in any judicial proceeding or is
of Sun Wah Panciteria.
shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part
HELD:
of the partnership contract;
In essence, the private respondent alleged that when Sun Wah Panciteria was
(3) A partner has been guilty of such conduct as tends to affect
established, he gave P4,000.00 to the petitioner with the understanding that he
prejudicially the carrying on of the business;
would be entitled to twenty-two percent (22%) of the annual profit derived from
(4) A partner wilfully or persistently commits a breach of the partnership
the operation of the said panciteria. These allegations, which were proved, make
agreement, or otherwise so conducts himself in matters relating to the
the private respondent and the petitioner partners in the establishment of Sun
partnership business that it is not reasonably practicable to carry on the
Wah Panciteria because Article 1767 of the Civil Code provides that "By the
business in partnership with him;
contract of partnership two or more persons bind themselves to contribute
(5) The business of the partnership can only be carried on at a loss;
money, property or industry to a common fund, with the intention of dividing the
(6) Other circumstances render a dissolution equitable.
profits among themselves". Therefore, the lower courts did not err in construing
the complaint as one wherein the private respondent asserted his rights as
partner of the petitioner in the establishment of the Sun Wah Panciteria,
notwithstanding the use of the term financial assistance therein. SC affirmed
appellate court's decision and ordered the dissolution of the partnership.
US v. Clarin, supra Emnace v. CA, 370 S 431
FACTS
Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in
company with Eusebio Clarin and Carlos de Guzman, might buy and
sell mangoes, and, believing that he could make some money in this
business, the said Larin made an agreement with the three men by
which the profits were to be divided equally between him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade
in mangoes and obtained P203 from the business, but did not comply
with the terms of the contract by delivering to Larin his half of the
profits; neither did they render him any account of the capital.
Larin charged them with the crime of estafa, but the provincial fiscal
filed an information only against Eusebio Clarin in which he accused
him of appropriating to himself not only the P172 but also the share of
the profits that belonged to Larin, amounting to P15.50. Pedro Tarug
and Carlos de Guzman appeared in the case as witnesses and
assumed that the facts presented concerned the defendant and
themselves together.
The trial court, that of First Instance of Pampanga, sentenced the
defendant, Eusebio Clarin, to six months' arresto mayor, to suffer the
accessory penalties, and to return to Pedro Larin P172, besides
P30.50 as his share of the profits, or to subsidiary imprisonment in
case of insolvency, and to pay the costs. The defendant appealed,
and in deciding his appeal we arrive at the following conclusions:
When 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, a contract is formed which
is called partnership. (Art. 1665, Civil Code.)
When Larin put the P172 into the partnership which he formed with
Tarug, Clarin, and Guzman, he invested his capital in the risks or
benefits of the business of the purchase and sale of mangoes,
and, even though he had reserved the capital and conveyed only the
usufruct of his money, it would not devolve upon one of his three
partners to return his capital to him, but upon the partnership of which
he himself formed part, or if it were to be done by one of the three
specifically, it would be Tarug, who, according to the evidence, was
the person who received the money directly from Larin.
The P172 having been received by the partnership, the business
commenced and profits accrued, the action that lies with the partner
who furnished the capital for the recovery of his money is not a criminal
action for estafa, but a civil one arising from the partnership contract
for a liquidation of the partnership and a levy on its assets if there
should be any.
No. 5 of article 535 of the Penal Code, according to which those are
guilty of estafa "who, to the prejudice of another, shall appropriate or
misapply any money, goods, or any kind of personal property which
they may have received as a deposit on commission for
administration or in any other character producing the obligation to
deliver or return the same," (as, for example,
in commodatum, precarium, and other unilateral contracts which
require the return of the same thing received) does not include money
received for a partnership; otherwise the result would be that, if the
partnership, instead of obtaining profits, suffered losses, as it could
not be held liable civilly for the share of the capitalist partner who
reserved the ownership of the money brought in by him, it would have
to answer to the charge of estafa, for which it would be sufficient to
argue that the partnership had received the money under obligation
to return it
We therefore freely acquit Eusebio Clarin, with the costs de
oficio. The complaint for estafa is dismissed without prejudice to the
institution of a civil action.
Emnace vs CA
FACTS:
ISSUE: Finally, petitioner contends that the trial court should have dismissed the
complaint on the ground of prescription, arguing that respondents’ action
prescribed four (4) years after it accrued in 1986. The trial court and the Court of
Appeals gave scant consideration to petitioner’s hollow arguments, and rightly so.
HELD:
Contrary to petitioner’s protestations that respondents’ right to inquire into the
business affairs of the partnership accrued in 1986, prescribing four (4) years
thereafter, prescription had not even begun to run in the absence of a final
accounting. Article 1842 of the Civil Code provides: chanrob1es
The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the
person or partnership continuing the business, at the date of dissolution, in the
absence of any agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to
account, the above-cited provision states that the right to demand an accounting
accrues at the date of dissolution in the absence of any agreement to the contrary.
When a final accounting is made, it is only then that prescription begins to run. In
the case at bar, no final accounting has been made, and that is precisely what
respondents are seeking in their action before the trial court, since petitioner has
failed or refused to render an accounting of the partnership’s business and assets.
Hence, the said action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied
petitioner’s motions to dismiss. Likewise, the Court of Appeals did not commit
reversible error in upholding the trial court’s orders. Precious time has been lost
just to settle this preliminary issue, with petitioner resurrecting the very same
arguments from the trial court all the way up to the Supreme Court. The litigation
of the merits and substantial issues of this controversy is now long overdue and
must proceed without further delay. chanrob1es virtua1 1aw 1i brary
VIII. Partnership's obligations to the partners
A. To reimburse; to answer for obligations contracted - 1796
Article 1796. The partnership shall be responsible to every partner for
the amounts he may have disbursed on behalf of the partnership and for
the corresponding interest, from the time the expense are made; it shall
also answer to each partner for the obligations he may have contracted
in good faith in the interest of the partnership business, and for risks in
consequence of its management. (1688a)
Martinez v. Ong Pong, 14 Phil 726
Facts:
On the 12th of December, 1900, the plaintiff herein delivered P1,500 to
the defendants who, in a private document, acknowledged that they had
received the same with the agreement, as stated by them, "that we are to invest
the amount in a store, the profits or losses of which we are to divide with the
former, in equal shares."
virtual 1aw library
The plaintiff filed a complaint on April 25, 1907, in order to compel the
defendants to render him an accounting of the partnership as agreed to, or else
to refund him the Pl,500 that he had given them for the said purpose. Ong Pong
Co alone appeared to answer the complaint; he admitted the fact of the
agreement and the delivery to him and to Ong Lay of the P1,500 for the purpose
aforesaid, but he alleged that Ong Lay, who was then deceased, was the one
who had managed the business, and that nothing had resulted therefrom save
the loss of the capital of P1,500, to which loss the plaintiff had agreed.
The judge of the Court of First Instance of the city of Manila who tried the case
ordered Ong Pong Co to return to the plaintiff one-half of the said capital of
Pl,500 which, together with Ong Lay, he had received from the plaintiff, to wit,
P750, plus P90 as one-half of the profits, calculated at the rate of 12 per
cent per annum for the six months that the store was supposed to have been
open, both sums in Philippine currency, making a total of P840, with legal
interest thereon at the rate of 6 per cent per annum, from the 12th of June, 1901,
when the business terminated and on which date he ought to have returned the
said amount to the plaintiff, until the full payment thereof with costs.
From this judgment Ong Pong Co appealed to this court, and assigned the
following errors:
1. For not having taken into consideration the fact that the reason for the closing
of the store was the ejectment from the premises occupied by it.
2. For not having considered the fact that there were losses.
3. For holding that there should have been profits.
4. For having applied article 1138 of the Civil Code
5. and 6. For holding that the capital ought to have yielded profits, and that the
latter should be calculated at 12 per cent per annum; and
7. The findings of the judgment.
As to the first assignment of error, the fact that the store was closed by virtue
of ejectment proceedings is of no importance for the effects of the suit. The
whole action is based upon the fact that the defendants received certain capital
from the plaintiff for the purpose of organizing a company; they, according to
the agreement, were to handle the said money and invest it in a store which
was the object of the association; they, in the absence of a special agreement
vesting in one sole person the management of the business, were the actual
administrators thereof; as such administrators they were the agents of the
company and incurred the liabilities peculiar to every agent, among which
is that of rendering account to the principal of their transactions, and paying
him everything they may have received by virtue of the mandatum. (Arts, 1695
and 1720, Civil Code.) Neither of them has rendered such account nor proven
the losses referred to by Ong Pong Co; they are therefore obliged to refund the
money that they received for the purpose of establishing the said store - the
object of the association. This was the principal pronouncement of the
judgment.
With regard to the second and third assignments of error, this court, like the
court below, finds no evidence that the entire capital or any part thereof
was lost. It is no evidence of such loss to aver, without proof, that the effects of
the store were ejected. Even though this were proven, it could not be inferred
therefrom that the ejectment was due to the fact that no rents were paid, and
that the rent was not paid on account of the loss of the capital belonging to the
enterprise.
With regard to the possible profits, the findings of the court below are based on
the statements of the defendant Ong Pong Co, to the effect that "there were
some profits, but not large ones." This court, however, does not find that the
amount thereof has been proven, nor deem it possible to estimate them to be
a certain sum, and for a given period of time; hence, it cannot admit the estimate,
made in the judgment, of 12 percent per annum for the period of six months.
Inasmuch as in this case nothing appears other than the failure to fulfill an
obligation on the part of a partner who acted as agent in receiving money for a
given purpose, for which he has rendered no accounting, such agent is
responsible only for the losses which, by a violation of the provisions of the law,
he incurred. This being an obligation to pay in cash, there are no other losses
than the legal interest, which interest is not due except from the time of the
judicial demand, or, in the present case, from the filing of the complaint. (Arts.
1108 and 1100, Civil Code.) We do not consider that article 1688 is applicable
in this case, in so far as it 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," for the reason that no other money than that contributed as
capital is involved.
As in the partnership there were two administrators or. agents liable for the
above-named amount, article 1138 of the Civil Code has been properly
applied, and article 1698 might also have been invoked; this latter deals with
debts of a partnership where the obligation is not a joint one, as is
likewise provided by article 1723 of said code with respect to the liability of two
or more agents with respect to the return of the money that they receive from
their principal. Therefore, the other errors assigned have not been committed.
In view of the foregoing, the judgment appealed from is hereby affirmed,
provided, however, that the defendant Ong Pong Co shall only pay the plaintiff
the sum of P750 with the legal interest thereon at the rate of 6 per cent per
annum from the time of the filing of the complaint, and the costs, without special
ruling as to the costs of this instance. So ordered.
FACTS: (Shorter)
Pedro Martinez (plaintiff) delivered Php1,500.00 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 Php1,500.00. 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 Php1,500.00, to which the plaintiff agreed.
ISSUE:
Up to what extent are partners liable?
HELD:
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.
Agustin v. Inocencio, Phil 134
The parties to this controversy, who had been conducting a partnership as
industrial partners without capital, contributed from its profits the sum of P807.28
as a fund toward the construction of a casco for use in their business, to which
they added P3,500, borrowed from Maria del Kosario, the wife of the defendant,
Bartolome Inocencio, he being the managing partner. It is admitted that this total,
a little over P4,300, was the estimated cost of the casco, but in the progress of
the work the defendant found that it called for additional funds, which he
advanced to the amount of P2,024.49. It satisfactorily appears from the evidence
that this, amount was necessary in order to complete the work undertaken.
Although it would seem1 that he failed to notify his partners of the various items
from time to time going to make up this sum, it is shown that the books where at
all times open to their inspection, and that, being asked to examine them, they
omitted to do so, and that the plaintiff Juan Agustin, representing all the partners,
was also present at the construction of the casco, in charge of the practical work
and cognizant of its needs and its progress.
The work done on the casco having been within the scope of the association
and necessary to carry out its express object, the borrowing of the money
required to carry it on, with the acquiescence if not with the affirmative consent
of his associates, was not outside the powers of the managing partner and
constitutes a debt for which all the associates are liable.
The note passed into the hands of the defendant by reason of the successive
deaths of his wife and of their only child, each without debts, and for the amount
thereof he became a creditor, subject, however, to the deduction therefrom of
his proportionate part of the indebtedness.
The trial court treated his claim on this note, as well as the sum of P2,024.49
furnished by him, as an addition to his capital in the firm, rather than as a loan,
and this constitutes one of the grounds of error stated by the appellant. We do
not deem it necessary to pass upon this objection, for the reason that,
considered as a loan, this sum would place the defendant as a creditor in a
stronger position as against his associates than if regarded as a mere
contribution to capital. The error, if it be an error, is not, therefore, prejudicial to
the plaintiff, but is rather beneficial to him. The respondent did not except to it.
Various small sums have been paid out of the profits to some of the partners
and these were properly allowed in the judgment.
On the theory on which the action was disposed of, the trial court committed no
error in the computation of the various shares.
Of the four parties plaintiff, but one, Victor del Rosario, is interested in this
appeal, which has been dismissed as to the others, and as to him the judgment
of the trial court must be affirmed, with costs of this instance. So ordered.
X. Rights of assignees
A. To receive the interest - 1813
Article 1813. A conveyance by a partner of his whole interest in the
partnership does not of itself dissolve the partnership, or, as against the
other partners in the absence of agreement, entitle the assignee, during
the continuance of the partnership, to interfere in the management or
administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to receive in
accordance with his contract the profits to which the assigning partner
would otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail himself of the
usual remedies.
In case of a dissolution of the partnership, the assignee is entitled to
receive his assignor's interest and may require an account from the date
only of the last account agreed to by all the partners. (n)
B. To require an account - 1813
C. To ask for dissolution - 1831
Article 1831. On application by or for a partner the court shall decree a
dissolution whenever:
(1) A partner has been declared insane in any judicial proceeding or is
shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part
of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
(4) A partner wilfully or persistently commits a breach of the partnership
agreement, or otherwise so conducts himself in matters relating to the
partnership business that it is not reasonably practicable to carry on the
business in partnership with him;
(5) The business of the partnership can only be carried on at a loss;
(6) Other circumstances render a dissolution equitable.
On the application of the purchaser of a partner's interest under article
1813 or 1814:
(1) After the termination of the specified term or particular undertaking;
(2) At any time if the partnership was a partnership at will when the
interest was assigned or when the charging order was issued. (n)

XI. Dissolution & Winding Up
A. Dissolution; winding up; termination - 1828,1829
Article 1828. The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be associated
in the carrying on as distinguished from the winding up of the business.
(n)
Article 1829. On dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs is completed. (n)
B. Causes of dissolution
1. Without violating the agreement - 1830(1)
Article 1830. Dissolution is caused:
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular
undertaking specified in the agreement;
(b) By the express will of any partner, who must act in good faith,
when no definite term or particular is specified;
(c) By the express will of all the partners who have not assigned
their interests or suffered them to be charged for their separate
debts, either before or after the termination of any specified term
or particular undertaking;
(d) By the expulsion of any partner from the business bona fide
in accordance with such a power conferred by the agreement
between the partners;
3. In contravention of the agreement - 1830(2)
Article 1830. Dissolution is caused:
(1) xxx xxx
(2) In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of
this article, by the express will of any partner at any time;
Xxx xxx
4. By operation of law - 1830(30) -(7)
Art. 1830. Dissolution is caused:
(7) By the civil interdiction of any partner;
5. By court decree -1830(8), 1831
Art. 1830. Dissolution is caused:
(8) By decree of court under the following article. (1700a and 1701a)
C. Effects of dissolution
1. Termination of mutual agency; exceptions - 1832,1833, 1834
Art. 1832. Except so far as may be necessary to wind up partnership
affairs or to complete transactions begun but not then finished, dissolution
terminates all authority of any partner to act for the partnership:
(1) With respect to the partners:
(a) When the dissolution is not by the act, insolvency or
death of a partner; or
(b) When the dissolution is by such act, insolvency or death
of a partner, in cases where article 1833 so requires;
(2) With respect to persons not partners, as declared in article
1834. (n)
Art. 1833. Where the dissolution is caused by the act, death or insolvency
of a partner, each partner is liable to his co-partners for his share of any
liability created by any partner acting for the partnership as if the
partnership had not been dissolved unless:
(1) The dissolution being by act of any partner, the partner acting
for the partnership had knowledge of the dissolution; or
(2) The dissolution being by the death or insolvency of a partner,
the partner acting for the partnership had knowledge or notice of the
death or insolvency.
Art. 1834. After dissolution, a partner can bind the partnership, except as
provided in the third paragraph of this article:
(1) By any act appropriate for winding up partnership affairs or
completing transactions unfinished at dissolution;
(2) By any transaction which would bind the partnership if
dissolution had not taken place, provided the other party to the
transaction:
(a) Had extended credit to the partnership prior to
dissolution and had no knowledge or notice of the
dissolution; or
(b) Though he had not so extended credit, had nevertheless
known of the partnership prior to dissolution, and, having no
knowledge or notice of dissolution, the fact of dissolution
had not been advertised in a newspaper of general
circulation in the place (or in each place if more than one) at
which the partnership business was regularly carried on.
The liability of a partner under the first paragraph, No. 2, shall be satisfied
out of partnership assets alone when such partner had been prior to
dissolution:
(1) Unknown as a partner to the person with whom the contract is
made; and
(2) So far unknown and inactive in partnership affairs that the
business reputation of the partnership could not be said to have
been in any degree due to his connection with it.
The partnership is in no case bound by any act of a partner after
dissolution:
(1) Where the partnership is dissolved because it is unlawful
to carry on the business, unless the act is appropriate for winding
up partnership affairs; or
(2) Where the partner has become insolvent; or
(3) Where the partner has no authority to wind up
partnership affairs; except by a transaction with one who:
(a) Had extended credit to the partnership prior to
dissolution and had no knowledge or notice of his want of
authority; or
(b) Had not extended credit to the partnership prior
to dissolution, and, having no knowledge or notice of his
want of authority, the fact of his want of authority has not
been advertised in the manner provided for advertising the
fact of dissolution in the first paragraph, No. 2 (b).
Nothing in this article shall affect the liability under Article 1825 of any
person who, after dissolution, represents himself or consents to another
representing him as a partner in a partnership engaged in carrying
business. (n)
D. Right to wind up - 1836
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully
dissolved the partnership or the legal representative of the last surviving
partner, not insolvent, has the right to wind up the partnership affairs,
provided, however, that any partner, his legal representative or his
assignee, upon cause shown, may obtain winding up by the court. (n)
E. Settling of accounts/application of properties/sharing of profits &
losses 1797,1798,1799,1827,1837,1838
Art. 1797. The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been agreed
upon, the share of each in the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the profits
and losses shall be in proportion to what he may have contributed, but the
industrial partner shall not be liable for the losses. As for the profits, the
industrial partner shall receive such share as may be just and equitable
under the circumstances. If besides his services he has contributed capital,
he shall also receive a share in the profits in proportion to his capital.
(1689a)
Art. 1798. If the partners have agreed to intrust to a third person the
designation of the share of each one in the profits and losses, such
designation may be impugned only when it is manifestly inequitable. In no
case may a partner who has begun to execute the decision of the third
person, or who has not impugned the same within a period of three months
from the time he had knowledge thereof, complain of such decision.
The designation of losses and profits cannot be intrusted to one of the
partners. (1690)
Art. 1799. A stipulation which excludes one or more partners from any
share in the profits or losses is void. (1691)
Art. 1827. The creditors of the partnership shall be preferred to those of
each partner as regards the partnership property. Without prejudice to this
right, the private creditors of each partner may ask the attachment and
public sale of the share of the latter in the partnership assets. (n)
Art. 1837. When dissolution is caused in any way, except in contravention
of the partnership agreement, each partner, as against his co-partners and
all persons claiming through them in respect of their interests in the
partnership, unless otherwise agreed, may have the partnership property
applied to discharge its liabilities, and the surplus applied to pay in cash the
net amount owing to the respective partners. But if dissolution is caused by
expulsion of a partner, bona fide under the partnership agreement and if
the expelled partner is discharged from all partnership liabilities, either by
payment or agreement under the second paragraph of Article 1835, he
shall receive in cash only the net amount due him from the partnership.
When dissolution is caused in contravention of the partnership
agreement the rights of the partners shall be as follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
(a) All the rights specified in the first paragraph of this article, and
(b) The right, as against each partner who has caused the
dissolution wrongfully, to damages breach of the agreement.
(2) The partners who have not caused the dissolution wrongfully, if they all
desire to continue the business in the same name either by themselves or
jointly with others, may do so, during the agreed term for the partnership
and for that purpose may possess the partnership property, provided they
secure the payment by bond approved by the court, or pay any partner who
has caused the dissolution wrongfully, the value of his interest in the
partnership at the dissolution, less any damages recoverable under the
second paragraph, No. 1 (b) of this article, and in like manner indemnify
him against all present or future partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(a) If the business is not continued under the provisions of the
second paragraph, No. 2, all the rights of a partner under the first
paragraph, subject to liability for damages in the second paragraph, No. 1
(b), of this article.
(b) If the business is continued under the second paragraph, No. 2,
of this article, the right as against his co-partners and all claiming through
them in respect of their interests in the partnership, to have the value of his
interest in the partnership, less any damage caused to his co-partners by
the dissolution, ascertained and paid to him in cash, or the payment
secured by a bond approved by the court, and to be released from all
existing liabilities of the partnership; but in ascertaining the value of the
partner's interest the value of the good-will of the business shall not be
considered. (n)
Art. 1838. Where a partnership contract is rescinded on the ground of the
fraud or misrepresentation of one of the parties thereto, the party entitled to
rescind is, without prejudice to any other right, entitled:
(1) To a lien on, or right of retention of, the surplus of the
partnership property after satisfying the partnership liabilities to third
persons for any sum of money paid by him for the purchase of an
interest in the partnership and for any capital or advances
contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied,
in the place of the creditors of the partnership for any payments
made by him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership. (n)
F. Effects of rescission - 1838,1839
Art. 1838. Where a partnership contract is rescinded on the ground of the
fraud or misrepresentation of one of the parties thereto, the party entitled to
rescind is, without prejudice to any other right, entitled:
(1) To a lien on, or right of retention of, the surplus of the
partnership property after satisfying the partnership liabilities to third
persons for any sum of money paid by him for the purchase of an
interest in the partnership and for any capital or advances
contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied,
in the place of the creditors of the partnership for any payments
made by him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership. (n)
G. Effects of continuation of the business - 1840,1841
Art. 1840. In the following cases creditors of the dissolved partnership are
also creditors of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when
any partner retires and assigns (or the representative of the deceased
partner assigns) his rights in partnership property to two or more of the
partners, or to one or more of the partners and one or more third persons, if
the business is continued without liquidation of the partnership affairs;
(2) When all but one partner retire and assign (or the representative of a
deceased partner assigns) their rights in partnership property to the
remaining partner, who continues the business without liquidation of
partnership affairs, either alone or with others;
(3) When any partner retires or dies and the business of the dissolved
partnership is continued as set forth in Nos. 1 and 2 of this article, with the
consent of the retired partners or the representative of the deceased
partner, but without any assignment of his right in partnership property;
(4) When all the partners or their representatives assign their rights in
partnership property to one or more third persons who promise to pay the
debts and who continue the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and the remaining
partners continue the business under the provisions of article 1837, second
paragraph, No. 2, either alone or with others, and without liquidation of the
partnership affairs;
(6) When a partner is expelled and the remaining partners continue the
business either alone or with others without liquidation of the partnership
affairs.
The liability of a third person becoming a partner in the partnership
continuing the business, under this article, to the creditors of the dissolved
partnership shall be satisfied out of the partnership property only, unless
there is a stipulation to the contrary.
When the business of a partnership after dissolution is continued under any
conditions set forth in this article the creditors of the dissolved partnership,
as against the separate creditors of the retiring or deceased partner or the
representative of the deceased partner, have a prior right to any claim of
the retired partner or the representative of the deceased partner against
the person or partnership continuing the business, on account of the retired
or deceased partner's interest in the dissolved partnership or on account of
any consideration promised for such interest or for his right in partnership
property.
Nothing in this article shall be held to modify any right of creditors to set
aside any assignment on the ground of fraud.
The use by the person or partnership continuing the business of the
partnership name, or the name of a deceased partner as part thereof, shall
not of itself make the individual property of the deceased partner liable for
any debts contracted by such person or partnership. (n)
Art. 1841. When any partner retires or dies, and the business is continued
under any of the conditions set forth in the preceding article, or in Article
1837, second paragraph, No. 2, without any settlement of accounts as
between him or his estate and the person or partnership continuing the
business, unless otherwise agreed, he or his legal representative as
against such person or partnership may have the value of his interest at the
date of dissolution ascertained, and shall receive as an ordinary creditor an
amount equal to the value of his interest in the dissolved partnership with
interest, or, at his option or at the option of his legal representative, in lieu
of interest, the profits attributable to the use of his right in the property of
the dissolved partnership; provided that the creditors of the dissolved
partnership as against the separate creditors, or the representative of the
retired or deceased partner, shall have priority on any claim arising under
this article, as provided Article 1840, third paragraph. (n)
H. Prescription of action - 1153,1144
Art. 1154. The period during which the obligee was prevented by a
fortuitous event from enforcing his right is not reckoned against him. (n)
Art. 1114. Creditors and all other persons interested in making the
prescription effective may avail themselves thereof notwithstanding the
express or tacit renunciation by the debtor or proprietor. (1937)
Idos v. CA, 296 S 194 (1998)
Facts:
petitioner herein, Irma L. Idos... businesswoman engaged in leather tanning...
complainant below, Eddie Alarilla... supplier and business partner, the
complainant below, Eddie Alarilla
Eddie Alarilla supplied chemicals... manufacturing leather... formed with her a
partnership... parties agreed to terminate their partnership
Upon liquidation of the business the partnership had as of May 1986
receivables and stocks worth P1,800,000.00.
complainant's share of the assets was P900,000.00... issued the following
postdated checks, all drawn against Metrobank... complainant was able to
encash the first, second, and fourth checks... third check (Exh. A) which is the
subject of this case, was dishonored... accused-appellant denied liability...
check had been given upon demand of complainant in May 1986 only as
'assurance' of his share in the assets of the partnership and that it was not
supposed to be deposited until the stocks had been sold
Complainant then filed his complaint... for violation of BP Blg. 22... accused-
appellant insisted that the complainant had known that the checks were to be
funded from the... proceeds of the sale of the stocks and the collection of
receivables... private complainant's judicial admission that there was no
consideration for the check.
they still had to sell the goods on hand and collect the receivables
, they were still in the process of "winding up" the affairs of the partnership...
petitioner issued the check merely to evidence the proportionate share of
complainant in the partnership assets upon its dissolution. Payment of that
share in the partnership was conditioned on the subsequent realization of
profits from... the unsold goods and collection of the receivables of the firm.
This condition must be satisfied or complied with before the complainant can
actually "encash" the check
Issues:
Whether respondent court erred in holding that the subject check was issued
by petitioner to apply on account or for value, that is, as part of the
consideration of a "buy-out" of said complainant's interest in the partnership,
and not merely as a commitment on petitioner's... part to return the investment
share of complainant, along with any profit pertaining to said share, in the
partnership.
Whether the respondent court erred in concluding that petitioner issued the
subject check knowing at the time of issue that she did not have sufficient
funds in or credit with the drawee bank and without communicating this fact of
insufficiency of funds to the... complainant
Ruling:
trial court rendered judgment finding the accused-appellant guilty... evidence
on record would show that the subject check was to be funded from
receivables to be collected and goods to be sold by the partnership, and only
when such collection and sale were realized.[15]
Thus, there is sufficient basis for the assertion that the petitioner issued the
subject check (Metrobank Check No. 103115490 dated October 30, 1986, in
the amount of P135,828.87) to evidence only complainant's share or interest in
the partnership, or at best, to show her... commitment that when receivables
are collected and goods are sold, she would give to private complainant the
net amount due him representing his interest in the partnership.
Firstly, three of four checks were properly encashed by complainant; only one
(the third) was not. But eventually even this one was redeemed by petitioner.
Secondly, even private complainant admitted that there was no consideration
whatsoever for the... issuance of the check, whose funding was dependent on
future sales of goods and receipts of payment of account receivables
Since the partnership has not been terminated, the petitioner and... private
complainant remained as co-partners. The check was thus issued by the
petitioner to complainant, as would a partner to another, and not as payment
from a debtor to a creditor.
Thus, we are persuaded that the check was not intended to apply on account
or for value; rather it should be deemed as having been drawn without
consideration at the time of issue.
Absent the first element of the offense penalized under B.P. 22, which is "the
making, drawing and issuance of any check to apply on account or for value",
petitioner's issuance of the subject check was not an act contemplated in nor
made punishable by said statute.
uncertain at the time of issuance of the checks whether the... unsold goods
would have been sold, or whether the receivables would have been collected
by the time the checks would be encashed.
Since petitioner issued these four checks without actual knowledge of the
insufficiency of funds, she could not be held liable under B.P. 22 when one
was not honored right away.
no proof that notice of dishonor was actually... sent by the complainant or by
the drawee bank to the petitioner
Principles:
(1) the making, drawing and issuance of any check to apply to account or for
value; (2) the knowledge of the maker, drawer or issuer that at the time of
issue he does not have... sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its presentment; and (3) subsequent
dishonor of the check by the drawee bank for insufficiency of funds or credit or
dishonor for the same reason had not the drawer, without any valid... cause,
ordered the bank to stop payment.'
"Because no notice of dishonor was actually sent to and received by the
petitioner, the prima facie presumption that she knew about the insufficiency of
funds cannot apply. Section 2 of B.P. 22 clearly provides that this presumption
arises not from the mere fact... of drawing, making and issuing a bum check;
there must also be a showing that, within five banking days from receipt of the
notice of dishonor, such maker or drawer failed to pay the holder of the check
the amount due thereon or to make arrangement for its payment in full by the...
drawee of such check."
The absence of a notice of dishonor necessarily deprives an accused an
opportunity to preclude a criminal prosecution. Accordingly, procedural due
process clearly enjoins that a notice of dishonor be actually served on
petitioner. Petitioner has a right to demand - and the... basic postulates of
fairness require - that the notice of dishonor be actually sent to and received by
her to afford her the opportunity to avert prosecution under B.P. 22."
Ortega v. CA, 245 SCRA 529
FACTS:
On December 19, 1980, respondent Misa associated himself together, as senior
partner with petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners.
On Feb. 17, 1988, respondent Misa wrote a letter stating that he is withdrawing
and retiring from the firm and asking for a meeting with the petitioners to discuss
the mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to
the Commision's Securities Investigation and Clearing Department for the formal
dissolution and liquidation of the partnership. On March 31, 1989, the hearing
officer rendered a decision ruling that the withdrawal of the petitioner has not
dissolved the partnership. On appeal, the SEC en banc reversed the decision
and was affirmed by the Court of Appeals. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals has erred in holding that the partnership is
a partnership at will and whether or not the Court of Appeals has erred in holding
that the withdrawal of private respondent dissolved the partnership regardless
of his good or bad faith
HELD:
No. The SC upheld the ruling of the CA regarding the nature of the partnership.
The SC further stated that a partnership that does not fix its term is a partnership
at will. The birth and life of a partnership at will is predicated on the mutual desire
and consent of the partners. The right to choose with whom a person wishes to
associate himself is the very foundation and essence of that partnership. Its
continued existence is, in turn, dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the absence of a
cause for dissolution provided by the law itself. Verily, any one of the partners
may, at his sole pleasure, dictate a dissolution of the partnership at will. He must,
however, act in good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership but that it can result in a liability for damages.
Rojas v. Maglana, 192 SCRA 110
In Jan 1955, Maglana & Rojas executed their Articles of Co-Partnership called
Eastcoast Development Enterprises (EDE) with only the two of them as
partners. The partnership EDE which was registered with SEC had an
indefinite term of existence. One of the purposes of the partnership was to
apply/secure timber/minor forest products licenses and concession over public
or private forest lands and to operate, develop, and promote such forests rights
and concessions. A duly registered article of co-partnership was filed together
with an application for timber concession covering certain areas in Davao with
the Bureau of Forestry. It was then approved and a timber license was issued.
Under their article of co-partnership, appellee Maglana was tasked to manage,
market, handle cash, and be the authorized signatory for the partnership.
Appellant Rojas, on the other hand, is the logging superintended tasked to
manage logging operations of the partnership. It also stated in the articles that
all profits & losses shall be divided share and share alike between partners.
During Jan 14 1955 – Apr 30 1956, there was no operation of the said
partnership. Due to difficulties, Rojas and Maglana decided to avail the
services of Pahamatong as industrial partner. On March 1956, the 3 executed
their articles of co-partnership under the firm name EDE. Everything was the
same except for the purpose which was to hold and secure renewal of timber
license and the term was fixed for 30 years.
The new partnership was able to ship logs and acquire profits and was able to
get a proceed of 643,633.07. On Oct 23, 1956, The 3 executed a document,
“Conditional Sale of interest in the partnership EDE” agreeing among
themselves that Maglana and Rojas shall purchase the interest, share,
participation in the partnership of pahamoting in the assessed value of
31,501.12. It was also agreed that after payment of the sum to Pahamotang
including the loan secured by the latter in favor of the partnership, the two
original partners shall become owners of all equipment contributed by
Pahamatong and that the name of the second partnership be dissolved upon
fulfillment of the condition. After the withdrawal of Pahamotang, the partnership
was continued by the original partners without any written agreement or
reconstitution of their written articles of partnership.
 Problem arose when Rojas abandoned the partnership due to joining with
another logging enterprise, and withdrew his equipment from the partnership.
Maglana reminded Rojas of his obligation in their partnership but Rojas said he
wouldn’t comply. He then took funds from the partnership more than his
contribution. Thus, Maglana notified Rojas that he dissolved the partnership.
Rojas then filed for recovery of properties, accounting, receivership, and
damages against Maglana.
Issue:
1. WON the nature of partnership of Maglana and Rojas after dissolution of the
second partnership is de facto and at will.
2. WON the sharing of partnership profits should be on the basis of contribution
or ratio/proportion of their respective contributions.
Held:
1. No. Under the circumstances, the relationship of Rojas and Maglana after
the withdrawal of Pahamotang can neither be considered as a De Facto
Partnership, nor a Partnership At Will, for as stressed, there is an existing
partnership, duly registered. The dissolution of the second partnership does
not affect the first partnership which continued to exist. The fact that Maglana
wrote Rojas for the fulfillment of his obligation in the partnership and Rojas
subsequent reply further stressed that both considered themselves governed
by the articles of the duly registered partnership. Hence, as there are only two
parties when Maglana notified Rojas that he dissolved the partnership, it is in
effect a notice of withdrawal.
Under Article 1830, par. 2 of the Civil Code, even if there is a specified
term, one partner can cause its dissolution by expressly withdrawing
even before the expiration of the period, with or without justifiable cause.
Of course, if the cause is not justified or no cause was given, the
withdrawing partner is liable for damages but in no case can he be
compelled to remain in the firm. With his withdrawal, the number of
members is decreased, hence, the dissolution. And in whatever way he
may view the situation, the conclusion is inevitable that Rojas and
Maglana shall be guided in the liquidation of the partnership by the
provisions of its duly registered Articles of Co-Partnership; that is, all
profits and losses of the partnership shall be divided "share and share
alike" between the partners.
2. YES. On the basis of the Commissioners' Report, the corresponding
contribution of the partners from 19561961 are as follows: Eufracio Rojas who
should have contributed P158,158.00, contributed only P18,750.00 while
Maglana who should have contributed P160,984.00, contributed P267,541.44
(Decision, R.A. p. 976). It is a settled rule that when a partner who has
undertaken to contribute a sum of money fails to do so, he becomes a debtor
of the partnership for whatever he may have promised to contribute (Article
1786, Civil Code) and for interests and damages from the time he should have
complied with his obligation (Article 1788, Civil Code) (Moran, Jr. v. Court of
Appeals, 133 SCRA 94 [1984]). Being a contract of partnership, each partner
must share in the profits and losses of the venture. That is the essence of a
partnership (Ibid., p. 95).
Lichauco v. Lichauco, 33 Phil 350
FACTS: F a u s ti n o L i c h a u c o wa s th e m a n a g i n g partner of a firm for the
carrying on of a rice-cleaning business. Because the enterprise
wasunprofitable, same was discontinued and therice machinery was
dismantled. When sued foran accounting he refused on the ground
thatunder the terms of the partnership contract,dissolution could be
done only by a vote of 2/3o f t h e m e m b e rs , a n d s u c h v o te h a d n o t
y e t taken place.
Issue: Is his contention correct?
HELD: His contentio n is wrong , fo r when theenterprise was
abandoned, and the machinessold, undoubtedly the firm was
dissolved byprovision of the law; and therefore he has theduty to liquidate
and account to all and to eachof his associates
Bearneza v. Dequilla, 43 Phil 237
Facts:
In the year 1903, Balbino Dequilla, the herein defendeant, and Perpetua
Bearneza formed a partnership for the purpose of exploiting a fish pond with
Perpetua obligating herself to contribute to the payment of the expenses of the
business, which obligation she made good, and both agreeing to divide the
profits between themselves, which they had been doing until the death of the
said Perpetua in the year 1912.
The deceased left a will in one of the clauses of which she appointed Domingo
Bearnez, the herein plaintiff, as her heir to succeed to all her rights and interests
in the fish pond in question.
Domingo then instituted an action to recover a part of the fish pond belonging to
the decedent, including ½ of the profits received by the defendant from the years
1913-1919.
The defendant alleges that the formation of the supposed partnership between
the plaintiff and the defendant for the exploitation of the aforesaid fish pond was
not carried into effect, on account of the plaintiff having refused to defray the
expenses of reconstruction and exploitation of said fish pond.” And futher
averred that the right of the plaintiff had already prescribed.
Judgment was then rendered declaring the plaintiff owner of one-half of the fish
pond but without may awarding him any damages. From this judgment the
defendant appeals
Issue:
Whether or not the plaintiff has any right to maintain an action for recovery of
the said one-half of the fish pond
Held:
None. The partnership formed was a particular partnership, it having had for its
subject-matter a specified thing, the exploitation of the aforementioned fish
pond.
Although, as the trial court says in its decision, the defendant, in his letters to
Perpetua or her husband, makes reference to the fish pond, calling it “our” or
“your fish pond,” this reference cannot be held to include the land on which said
fishpond was built.
- It has not been proven that Bearneza participated in the ownership of
the said land
o Therefore, the land on which the fish pond was constructed did
not constitute part of the subject-matter of the partnership
- This partnership was dissolved by the death of Perpetua Bearneza
o Neither can it be maintained that the partnership continued to
exist after the death of Perpetua, inasmuch as it does not
appear that any stipulation to that effect has ever been made
by her and the defendant
- The partnership having been dissolved by the death of Perpetua
Bearneza, its subsequent legal status was that of a partnership in
liquidation, and the only rights inherited by her testamentary heir, the
herein plaintiff, were those resulting from the said liquidation in favor of
the deceased partner, and nothing more
- Before this liquidation is made, which up to the present has not been
effected, it is impossible to determine what rights or interests, if any,
the deceased had, the partnership bond having been dissolved
- There is no sufficient ground for holding that a community of property
existed between the plaintiff and the defendant, it not being known
whether the deceased still had any interest in the partnership property
which could have been transmitted by will to the plaintiff
- Furthermore, it cannot be said that the partnership continued between
the plaintiff and the defendant. It is true that the latter's act in requiring
the heirs of Perpetua to contribute to the payment of the expenses of
exploitation of the aforesaid fishing industry was an attempt to continue
the partnership, but it is also true that neither the said heirs collectively,
nor the plaintiff individually, took any action in response to that
requirement, nor made any promise to that effect, and therefore no
new contract of partnership existed
- The decision is hereby REVERSED
Singson v. Isabela Sawmill, 88 SCRA 623
Facts: In 1951, defendants entered into a contract of partnership under the firm
name “Isabela Sawmill”. In 1956 the plaintiff sold to the partnership a motor truck
and two tractors. The partnership was not able to pay their whole balance even
after demand was made. One of the partners withdrew from the partnership but
instead of terminating the said partnership it was continued by the two remaining
partners under the same firm name. Plaintiffs also seek the annulment of the
assignment of right with chattel mortgage entered into by the withdrawing
partner and the remaining partners. The appellants contend that the chattel
mortgage may no longer be nullified because it had been judicially approved and
said chattel mortgage had been judicially foreclosed.
Issue: Whether the withdrawal of one of the partners dissolved the partnership.
Ruling:
It does not appear that the withdrawal of the partner was not published in the
newspapers. The appellees and the public in general had a right to expect that
whatever, credit they extended to the remaining partners could be enforced
against the properties of the partnership. The withdrawing partner cannot be
relieved from her liability to the creditor of the partnership due to her own fault
by not insisting on the liquidation of the partnership. Though she had acted in
good faith, the appellees also acted in good faith in extending credit to the
partnership. Where one of two innocent persons must suffer, that person who
gave occasion for the damages to be caused must bear the consequences.
Technically, the partnership was dissolved by the withdrawal of one of the
partners. Through her acts of entering into a memorandum with the remaining
partners misled the creditors that they were doing business with the partnership.
Hence, from the order of the lower court ordering the withdrawing partner to pay
the plaintiffs, she is thus entitled for reimbursement from the remaining partners.
Bonnevie v. Hernandez, 95 Phil 175
Facts:
 Plaintiffs with other associates formed a syndicate or secret partnership for
the purpose of acquiring the plants, franchises and other properties of the
Manila Electric Co. — hereinafter called the Meralco.
 No formal articles were drawn for it was the purpose of the members to
incorporate once the deal had been consummated.
 Negotiation for the purchase was commenced, but as it made no headway,
defendant was taken in as a member of the partnership so that he could
push the deal through, and to that end he was given the necessary power
of attorney.
 Using partnership funds, defendant was able to buy the Meralco
properties.
 Although defendant was the one named vendee in the deed of sale, there
is no question that the transaction was in penalty made for the partnership
so that the latter assumed control of the business the day following the
sale
 About the latter half of the following month the members of the partnership
proceeded with the formation of the proposed corporation, apportioning
among themselves its shares of stock in proportion to their respective
contributions to the capital of the partnership and their individual efforts in
bringing about the acquisition of the Meralco properties.
 But before the incorporation, judge Reyes and the plaintiffs withdrew from
the partnership for the reason that the business was not going well, and, as
admitted by both parties, the partnership was then dissolved. In
accordance with the terms of the resolution, the withdrawing partners
 Following the dissolution of the partnership, the members who preferred to
remain in the business went ahead with the formation of the corporation,
taking in new associates as stockholders.
 And defendant, on his part, in fulfillment of his trust, made a formal
assignment of the Meralco properties to the treasurer of the corporation,
giving them a book value of P365,000, in return for which the corporation
issued, to the various subscribers to its capital stock, shares of stock of the
total face value of P225,000 and assumed the obligation of paying what
was still due the Meralco on the purchase price.
 Two years from their withdrawal from the partnership, when the corporate
business was already in a prosperous condition, plaintiffs brought the
present suit against Jaime Hernandez, claiming a share in the profit the
latter is supposed to have made from the assignment of the Meralco
properties to the corporation, estimated by plaintiffs to be P225,000 and
their share of it to be P115,312.50.
 Defendant's answer denies that he has made any profit out of the
assignment in question and alleges that in any event plaintiffs, after their
withdrawal from the partnership, ceased to have any further interest in the
subsequent transactions of the remaining members.
Issues:
1. WON the partnership had realized profit out of the Meralco properties
made by the defendant to the corporation. – No.
2. If there was indeed a profit, WON the plaintiffs are entitled for their share
out of such profit. – No.
Held:
1. No. the profit alleged to have been realized from the assignment of the
Meralco properties to the new corporation, the Bicol Electric Company, is
more apparent than real. It is true that the value set for those properties in
the deed of assignment was P365,000 when the acquisition price was only
P122,000. But one should not jump to the conclusion that a profit,
consisting of the difference between the two sums was really made out of
the transaction, for the assignment was not made for cash but in payment
for subscriptions to shares of stock in the assignee, and while those shares
had a total face value of P225,000, this is not necessarily their real worth.
2. No. Assuming that the assignment actually brought profit to the
partnership, it is hard to see how defendant could be made to answer for
plaintiffs' alleged share thereof.
In the case at bar, the defendant did not receive the consideration for the
assignment for, as already stated, the assignment was made in payment
for subscriptions of various persons to the capital stock of the new
corporation.
Plaintiffs, in order to give color of legality to their claim against defendant,
maintain that the latter should be held liable for damages caused to them,
consisting of the loss of their share of the profits, due to defendant's failure
properly to perform his duty as a liquidator of the dissolved partnership,
this on the theory that as managing partner of the partnership, it was
defendant's duty to liquidate its affairs upon its dissolutions.
However, it does not appear that plaintiffs have ever asked for a
liquidation, and as will presently be explained no liquidation was called for
because when plaintiffs withdrew from the partnership the understanding
 was that after they had been reimbursed their investment, they were no
longer to have any further interest in the partnership or its assets and
liabilities.
As a general rule, when a partner retires from the firm, he is entitled to the
payment of what may be due him after a liquidation. But certainly no
liquidation is necessary where there is already a settlement or an
agreement as to what the retiring partner shall receive.
In the instant case, it appears that a settlement was agreed upon on the
very day the partnership was dissolved. For when plaintiffs and Judge
Jaime Reyes withdrew from the partnership on that day they did so as
agreed to by all the partners, subject to the only condition that they were to
be repaid their contributions or investments within three days from said
date. And this condition was fulfilled when on the following day they were
reimbursed the respective amounts due them pursuant to the agreement.
The SC therefore, found that, the acceptance by the withdrawing partners,
including the plaintiffs, of their investment in the instant case was
understood and intended by all the parties as a final settlement of whatever
rights or claim the withdrawing partners might have in the dissolved
partnership. Such being the case they are now precluded from claiming
any share in the alleged profits, should there be any, at the time of the
dissolution.
Yu v. NLRC. 224 SCRA 75 Sunga-Chan v. CA, 555 SCRA 275
FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain
Products Company Limited primarily responsible for the overall operations of
marble quarrying and export business of said partnership. He was hired by a
virtue of a Partnership Resolution in 1985 with a monthly salary of P4,000.00.
Initially he received only half of his stipulated monthly salary and was promised
by the partners that the balance would be paid upon securing additional
operating funds from abroad. However, in 1988 without his knowledge the
general partners as well as one of the limited partners sold and transferred their
interest to Willy Co and Emmanuel Zapanta. Thus the new major partners
decided to transfer the firm’s main office but opted to continue the operation of
the old partnership under its old firm name and with all its employees and
workers except for the petitioner. Upon knowing of the changes in the
partnership, petitioner went to the new main office to meet the new partners and
demand the payment of his unpaid salaries, but the latter refused to pay him and
instead informed him that since he bought the business from the original
partners, it was for him to decide whether or not he was responsible for the
obligations of the old partnership including petitioners unpaid salaries. Hence,
petitioner was dismissed from said partnership.
ISSUES:1. Whether the partnership which had hired the petitioner as Asst.
General Manager had been extinguished and replaced by a new partnership
composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment
contract as against the new partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the
partnership was the dissolution of the old partnership which had hired the
petitioner in 1984 and the emergence of the new firm composed of Willy Co and
Emmanuel Zapanta in 1988. This is based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on as a
distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when
no definite term or particular undertaking is specified.
2. in contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision
of this article, by the express will of any partner at any time;
However, the legal consequence of dissolution of a partnership do not
automatically result in the termination of the legal personality of the old
partnership as according to Art. 1829, “ on dissolution of the partnership is not
terminated, but continues until the winding up of the partnership affairs is
completed. The new partnership simply continued the operations of the old
partnership under its old firm name without winding up the business affairs of
the old partnership.
2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of
the new partnership which continued the business of former without liquidation
of the partnership affairs. Thus, creditor of the old Jade Mountain, such as the
petitioner is entitled to enforce his claim for unpaid salaries, as well as other
claims relating to his employment with the old partnership against the new Jade
Mountain.
Primelink Properties v. Lazatin-Magat, 493 SCRA 444
Facts:
Primelink Properties and Development Corporation (Primelink for brevity) is a
domestic corporation engaged in real estate development. Rafaelito W. Lopez
is its President and Chief Executive Officer
Lazatin-Magat and her brothers,... are co-owners of two (2) adjoining parcels
of land, with a combined area of 30,000 square meters, located in Tagaytay
City and covered by
Transfer Certificate of Title (TCT)... the Lazatins and Primelink, represented by
Lopez, in his capacity as President, entered into a Joint Venture Agreement
(JVA) for the development of the aforementioned property into a residential
subdivision to be known as
"Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged
themselves to contribute the two parcels of land as their share in the joint
venture.
For its part, Primelink undertook to contribute money, labor, personnel,
machineries, equipment,... contractor's pool, marketing activities, managerial
expertise and other needed resources to develop the property and construct
therein the units for sale to the public. Specifically, Primelink bound itself to
accomplish the following, upon the execution of the deed:...
a.) Survey the land, and prepare the projects master plans,
engineering designs, structural and architectural plans, site development
plans, and such other need plans in accordance with existing laws and the
rules and regulations of appropriate government institutions, firms or...
agencies;
... b.) Secure and pay for all the licenses, permits and clearances needed
for the projects;
... c.) Furnish all materials, equipment, labor and services for the
development of the land in preparation for the construction and sale of the
different types of units (single-detached, duplex/twin, cluster and row house);
... d.) Guarantee completion of the land development work if not prevented
by force majeure or fortuitous event or by competent authority, or other
unavoidable circumstances beyond the DEVELOPER'S control, not to exceed
three years from the date of the signing of this
Joint Venture Agreement, except the installation of the electrical facilities which
is solely MERALCO'S responsibility;
... e.) Provide necessary manpower resources, like executive and
managerial officers, support personnel and marketing staff, to handle all
services related to land and housing development (administrative and
construction) and marketing (sales, advertising and promotions)
The Lazatins and Primelink covenanted that they shall be entitled to draw
allowances/advances as follows:
During the first two years of the Project, the DEVELOPER and the
LANDOWNER can draw allowances or make advances not exceeding a total
of twenty percent (20%) of the net revenue for that period, on the basis of sixty
percent (60%) for the DEVELOPER and forty percent (40%) for... the
LANDOWNERS.
The drawing allowances/advances are limited to twenty percent (20%) of the
net revenue for the first two years, in order to have sufficient reserves or funds
to protect and/or guarantee the construction and completion of the different
types of units mentioned above.
After two years, the DEVELOPER and the LANDOWNERS shall be entitled to
drawing allowances and/or advances equivalent to sixty percent (60%) and
forty percent (40%), respectively, of the total net revenue or income of the sale
of the units.
They also agreed to share in the profits from the joint venture, thus:
The DEVELOPER shall be entitled to sixty percent (60%) of the net revenue or
income of the Joint Venture project, after deducting all expenses incurred in
connection with the land development (such as administrative management
and construction expenses), and marketing (such... as sales, advertising and
promotions), and
The LANDOWNERS shall be entitled to forty percent (40%) of the net revenue
or income of the Joint Venture project, after deducting all the above-mentioned
expenses.
The parties agreed that any unsettled or unresolved misunderstanding or
conflicting opinions between the parties relative to the interpretation, scope
and reach, and the enforcement/implementation of any provision of the
agreement shall be referred to Voluntary Arbitration in... accordance with the
Arbitration Law
The Lazatins agreed to subject the title over the subject property to an escrow
agreement. Conformably with the escrow agreement, the owner's duplicate of
the title was deposited with the China Banking Corporation
However, Primelink failed... to immediately secure a Development Permit from
Tagaytay City,... On October 12, 1995, the City issued a Development Permit
to Primelink
Lazatins, through counsel, demanded that Primelink comply with its obligations
under the JVA, otherwise the appropriate action would be filed against it to
protect their rights and interests.
In another Letter[14] dated October 22, 1997, the Lazatins informed Primelink
that they had decided to rescind the JVA effective upon its... receipt of the said
letter. The Lazatins demanded that Primelink cease and desist from further
developing the property.
Subsequently, on January 19, 1998, the Lazatins filed, with the Regional Trial
Court (RTC) of Tagaytay City, Branch 18, a complaint for rescission
accounting and damages, with prayer for temporary restraining order and/or
preliminary injunction against Primelink and Lopez.
Plaintiffs alleged, among others, that, despite the lapse of almost four (4) years
from the execution of the JVA and the delivery of the title and possession of
the land to defendants, the land development aspect of... the project had not
yet been completed, and the construction of the housing units had not yet
made any headway,... (a) of the 50 housing units programmed for Phase I,
only the following types of houses appear on the site in these condition:
(aa) single detached, one completed and two units uncompleted; (bb) cluster
houses, one unit nearing completion; (cc) duplex, two units completed and two
units unfinished; and (dd) row houses, two units, completed; (b) in Phase II
thereof, all that was done by the defendants was... to grade the area; the units
so far constructed had been the object of numerous complaints by their
owners/purchasers for poor workmanship and the use of sub-standard
materials in their construction, thus, undermining the project's marketability.
Plaintiffs also claimed that in a sales-income-costs projection prepared and
submitted by defendants, they (plaintiffs) stood to receive the amount of
P70,218,296.00 as their net share in the joint venture project; to date,
however, after almost four (4) years and despite the... undertaking in the JVA
that plaintiffs shall initially get 20% of the agreed net revenue during the first
two (2) years (on the basis of the 60%-40% sharing) and their full 40% share
thereafter, defendants had yet to deliver these shares to plaintiffs which by
conservative... estimates would amount to no less than P40,000,000.00.
Defendants opposed plaintiffs' plea for a writ of preliminary injunction on the
ground that plaintiffs' complaint was premature, due to their failure to refer their
complaint to a Voluntary Arbitrator pursuant to the JVA in relation to Section 2
of Republic Act No. 876 before... filing their complaint in the RTC.
Defendants thereafter interposed an appeal to the CA assailing the Order
declaring them in default, as well as the Order denying their motion to set
aside the order of default, alleging that these were contrary to facts of the
case, the law and jurisprudence
In the meantime, plaintiffs adduced ex parte their testimonial and documentary
evidence. On April 17, 2000, the RTC rendered a Decision
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants as follows:
Ordering the rescission of the Joint Venture Agreement as of the date of filing
of this complaint;
The trial court anchored its decision on the following findings:... this court has
observed, and is thus convinced, that a pattern of what appears... to be a
scheme or plot to reduce and eventually blot out the net income
generated from sales of housing units by defendants, has been established.
the joint venture project earned a net income of about
P2,603,810.64. This amount, however, was drastically reduced in a
subsequent financial report submitted by the defendants to P1,954,216.39.
Shortly thereafter, and to the dismay of the plaintiffs, the defendants submitted
an income statement and a balance sheet
Of the reported net income of P2,603,810.64... the plaintiffs should have
received the sum of P1,041,524.26 representing their 40% share under
paragraph II and V of the JVA. But this was not to be so. Even before the
plaintiffs could get hold of their share as... indicated above, the defendants
closed the chance altogether by declaring a net loss.
The court perceives this to be one calculated coup-de-grace that would put to
thin air plaintiffs' hope of getting their share in the profit under the JVA.
Defendants appealed the decision to the CA... the appellate court rendered a
decision affirming, with modification, the appealed decision.
Petitioners maintain that the aforesaid portion of the decision which
unconditionally awards to respondents "all improvements" on the project
without requiring them to pay the value thereof or to reimburse Primelink for all
expenses incurred therefore is inherently and... essentially illegal and
confiscatory, oppressive and unconscionable
At the time respondents contributed the two parcels of land, consisting of
30,000 square meters to the joint venture project when the JVA was signed on
March 10, 1994, the said properties were worth not more than P500.00 per
square meter, the "price tag" agreed upon the parties for the purpose of the
JVA. Moreover, before respondents rescinded... the JVA sometime in
October/November 1997, the property had already been substantially
developed as improvements had already been introduced thereon; petitioners
had likewise incurred administrative and marketing expenses, among others,
amounting to more or less
P40,000,000.00
All parties must be... restored to their original positions as nearly as possible
upon the rescission of a contract. In the event that restoration to the status
quo is impossible, rescission may be granted if the Court can balance the
equities and fashion an appropriate remedy that... would be equitable to both
parties and afford complete relief.
On the other hand, the CA ruled that although respondents therein (plaintiffs
below) did not specifically pray for their takeover of the property and for the
possession of the improvements on the parcels of land, nevertheless,
respondents were entitled to said relief as a... necessary consequence of the
ruling of the trial court ordering the rescission of the JVA. The appellate court
cited the ruling of this Court in the Aurbach case and Article 1838 of the New
Civil Code, to wit:
As a general rule, the relation of the parties in joint ventures is governed by
their agreement. When the agreement is silent on any particular issue, the
general principles of partnership may be resorted to.
They insist that petitioners are not entitled to rescission for the improvements
because, as found by the RTC and the CA, it was petitioner Primelink that
enriched itself at the expense of respondents.
Issues:
(1) whether respondents are entitled to the possession of the parcels of land
covered by the JVA and the improvements thereon introduced by petitioners
as their contribution to the JVA; (2) whether petitioners are entitled to
reimbursement... for the value of the improvements on the parcels of land.
Ruling:
The petition has no merit.
On the first issue, we agree with petitioners that respondents did not
specifically pray in their complaint below that possession of the improvements
on the parcels of land which they contributed to the JVA be transferred to them
However, the trial court was not precluded from... awarding possession of the
improvements on the parcels of land to respondents in its decision. Section
2(c), Rule 7 of the Rules of Court provides that a pleading shall specify the
relief sought but it may add as general prayer for such further or other relief as
may be... deemed just and equitable.
Even without the prayer for a specific remedy, proper relief may be granted by
the court if the facts alleged in the complaint and the evidence introduced so
warrant.
The trial court was not proscribed from placing respondents in possession of
the parcels of land and the improvements on the said parcels of land. It bears
stressing that the parcels of land, as well as the improvements made thereon,
were contributed by the parties to the... joint venture under the JVA, hence,
formed part of the assets of the joint venture
When the RTC rescinded the JVA on complaint of respondents based on the
evidence on record that petitioners willfully and persistently committed a
breach of the JVA, the court thereby dissolved/cancelled the partnership.
With the rescission of the
JVA on account of petitioners' fraudulent acts, all authority of any partner to act
for the partnership is terminated except so far as may be necessary to wind up
the partnership affairs or to complete transactions begun but not yet finished
The transfer of the possession of the parcels of land and the improvements
thereon to respondents was only for a specific purpose: the winding up of
partnership affairs, and the partition and distribution of the net partnership
assets as provided by law
After all, Article 1836 of the New Civil Code provides that unless otherwise
agreed by the parties in their JVA, respondents have the right to wind up the
partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully
dissolved the partnership or the legal representative of the last surviving
partner, not insolvent, has the right to wind up the partnership affairs, provided,
however, that any partner,... his legal representative or his assignee, upon
cause shown, may obtain winding up by the court.
It must be stressed, too, that although respondents acquired possession of the
lands and the improvements thereon, the said lands and improvements
remained partnership property, subject to the rights and obligations of the
parties, inter se, of the creditors and of... third parties under Articles 1837 and
1838 of the New Civil Code, and subject to the outcome of the settlement of
the accounts between the parties as provided in Article 1839 of the New Civil
Code, absent any agreement of the parties in their JVA to the contrary
It was thus premature for petitioner Primelink to be demanding that it be
indemnified for the value of the improvements on the parcels of land owned by
the joint venture/partnership. Notably, the JVA of the parties does not contain
any provision designating any party to... wind up the affairs of the partnership.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed
Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 69200 are
AFFIRMED insofar as they conform to this Decision of the Court.

Costs against petitioners.