G.R. No.

143340       August 15, 2001

FACTS
Lamberto T. Chua, respondent, filed a complaint against Lilibeth Sunga Chan and
Cecilia Sunga, daughter and wife, respectively of the deceased Jacinto L. Sunga, for
"Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and
Damages with Writ of Preliminary Attachment" with the RTC of Zamboanga del Norte.

Respondent alleged that he verbally entered into a partnership with Jacinto in the
distribution of Shellane Liquefied Petroleum Gas in Manila. For business convenience,
respondent and Jacinto allegedly agreed to register the business name of their
partnership under the name of Jacinto as a sole proprietorship. Respondent allegedly
delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn
produced P100,000.00 as his counterpart contribution, with the intention that the profits
would be equally divided between them. Its business operation went quite and was
profitable. Respondent claimed that he could attest to success of their business because of
the volume of orders and deliveries. Respondent however suspected that the amount
indicated in these documents were understated and undervalued by Jacinto and Josephine
for their own selfish reasons and for tax avoidance.

Upon Jacinto's death his surviving wife, petitioner Cecilia and particularly his
daughter, petitioner Lilibeth, took over the operations, control, custody, disposition and
management of Shellite without respondent's consent. Despite respondent's repeated
demands upon petitioners for accounting, inventory, appraisal, winding up and restitution
of his net shares in the partnership, petitioners failed to comply. Petitioner Lilibeth
allegedly continued the operations of Shellite, converting to her own use and advantage its
properties.

Respondent claimed that after petitioner Lilibeth ran out the alibis and reasons to
evade respondent's demands, she disbursed out of the partnership funds the amount of
P200,000.00 and partially paid the same to respondent. Petitioner Lilibeth allegedly
informed respondent that the amount represented partial payment of the latter's share in
the partnership, with a promise that the former would make the complete inventory and
winding up of the properties of the business establishment. Despite such commitment,
petitioners allegedly failed to comply with their duty to account, and continued to benefit
from the assets and income of Shellite to the damage and prejudice of respondent.

ISSUE
1.       Whether a partnership existed between respondent and Jacinto from 1977 until
Jacinto's death
2.       Whether the partnership is invalid on the ground that it was not registered to SEC

RULING
1.       Yes. A partnership may be constituted in any form, except where immovable property
of real rights are contributed thereto, in which case a public instrument shall
necessary. Hence, based on the intention of the parties, a verbal contract of partnership
may arise. The essential profits that must be proven to that a partnership was agreed upon
are (1) mutual contribution to a common stock, and (2) a joint interest in the
profits. Understandably so, in view of the absence of the written contract of partnership
between respondent and Jacinto, respondent resorted to the introduction of documentary
and testimonial evidence to prove said partnership. The "Dead Man's Statute" was applied
by the petitioner to this case so as to render inadmissible respondent's testimony and that
of his witness, Josephine. However, petitioners' reliance alone on such cannot prevail over
the factual findings of the trial court and the Court of Appeals that a partnership was
established between respondent and Jacinto.

Considering that the death of a partner results in the dissolution of the partnership,
in this case, it was Jacinto's death that respondent as the surviving partner had the right to
an account of his interest as against petitioners. It bears stressing that while Jacinto's death
dissolved the partnership, the dissolution did not immediately terminate the partnership.
The Civil Code expressly provides that upon dissolution, the partnership continues and its
legal personality is retained until the complete winding up of its business, culminating in its
termination.

2.       It is valid. Petitioners maintain that said partnership that had initial capital of
P200,000.00 should have been registered with the Securities and Exchange Commission
(SEC) since registration is mandated by the Civil Code, True, Article 1772 of the Civil Code
requires that partnerships with a capital of P3,000.00 or more must register with the SEC,
however, this registration requirement is not mandatory. Article 1768 of the Civil
Code explicitly provides that the partnership retains its juridical personality even if it fails
to register. The failure to register the contract of partnership does not invalidate the same
as among the partners, so long as the contract has the essential requisites, because the
main purpose of registration is to give notice to third parties, and it can be assumed that
the members themselves knew of the contents of their contract. In the case at bar, non-
compliance with this directory provision of the law will not invalidate the partnership
considering that the totality of the evidence proves that respondent and Jacinto indeed
forged the partnership in question.

FACTS: Feb 7 1990: On behalf of "Ocean Quest Fishing Corp.", Antonio Chua and Peter Yao
entered into a purchase of fishing nets of various sizes from Phil. Fishing Gear Industries
Inc. (PFGI) claiming they were engaged in venture with Lim Tong Lim (NOT a signatory)
Buyers failed to pay PFGI filed a suit against Chua, Yao and Lim w/ writ of preliminary
attachment Chua: Admitted liability and requested resonable time and turned over nets in
his possession Yao: Failre to appear in subsequent hearings Lim: Counterclaim and
Crossclaim to life writ of Attachment CA affirmed RTC: Writ of Attachment & Chua, Yao and
Lim as general partners Chua, Yao and Lim had decided to engage in business w/ Lim's
brother Jesus Lim as financer of a loan = common fund Compromise Agreement: pay loan
w/ the proceeds of boats sale and to divide equally among them the excess or loss
ISSUE: W/N Doctrine of Estoppel can apply to Lim

HELD: YES. CA affirmed. Although petitioner did not directly act on behalf of the corp.,
having reaped the benefits of the contract entered into by persons w/ whom he previously
had an existing rel., he is deemed to be part of said assoc. and covered by the doctrine of
estoppel

HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000 FACTS:

After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and
industry together, entered into a partnership engaged in the business of selling lumber and
hardware and construction supplies. They named their enterprise "Benguet Lumber"
which they jointly managed until Tan EngKee's death. Petitioners herein averred that the
business prospered due to the hard work and thrift of the alleged partners. However, they
claimed that in 1981, Tan Eng Lay and his children caused the conversion of the
partnership "Benguet Lumber" into a corporation called "Benguet Lumber Company." The
incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their rightful
participation in the profits of the business. Petitioners prayed for accounting of the
partnership assets, and the dissolution, winding up and liquidation thereof, and the equal
division of the net assets of Benguet Lumber. The RTC ruled in favor of petitioners,
declaring that Benguet Lumber is a joint venture which is akin to a particular partnership.
The Court of Appeals rendered the assailed decision reversing the judgment of the trial
court.

ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or
partners in a business venture and/or particular partnership called Benguet Lumber and as
such should share in the profits and/or losses of the business venture or particular
partnership

RULING: There was no partnership whatsoever. Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the duration of the partnership.
There was even no attempt to submit an accounting corresponding to the period after the
war until Kee's death in 1984. It had no business book, no written account nor any
memorandum for that matter and no license mentioning the existence of a partnership.
Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership is
distinguished from a joint adventure, to wit:(a) A joint adventure (an American concept
similar to our joint accounts) is a sort of informal partnership, with no firm name and no
legal personality. In a joint account, the participating merchants can transact business
under their own name, and can be individually liable therefor. (b) Usually, but not
necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business
of pursuing to a successful termination maycontinue for a number of years; a partnership
generally relates to a continuing business of various transactions of a certain kind. A joint
venture "presupposes generally a parity of standing between the joint co-ventures or
partners, in which each party has an equal proprietary interest in the capital or property
contributed, and where each party exercises equal rights in the conduct of the business.
The evidence presented by petitioners falls short of the quantum of proof required to
establish a partnership. In the absence of evidence, we cannot accept as an established fact
that Tan EngKee allegedly contributed his resources to a common fund for the purpose of
establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the forty
years the partnership was allegedly in existence, Tan EngKee never asked for an
accounting. The essence of a partnership is that the partners share in the profits and
losses .Each has the right to demand an accounting as long as the partnership exists. A
demand for periodic accounting is evidence of a partnership. During his lifetime, Tan
EngKee appeared never to have made any such demand for accounting from his brother,
Tang Eng Lay. We conclude that Tan EngKee was only an employee, not a partner since
they did not present and offer evidence that would show that Tan EngKee received
amounts of money allegedly representing his share in the profits of the enterprise. There
being no partnership, it follows that there is no dissolution, winding up or liquidation to
speak of.

Idos v. CA G.R. NO. 110782, September 25, 1998,

Quisumbing, J.

Facts: In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to
terminate after a year. To pay Alarilla’s share of the asset, Idos issued 4 post dated checks.
Alarilla was able to encash the first, second and fourth checks but the third was dishonored
for insufficiency of funds. He demanded payment but Idos failed to pay. She claimed that
the checks were issued as assurance of Alarilla’s share in the assets of the partnership and
that it was supposed to be deposited until the stocks were sold. He filed an information for
violation of BP blg. 22 against Idos in which she was found guilty by the trial court.

Issue: Did the court confused and merged into one the legal concepts of dissolution,
liquidation and termination of a partnership?

Ruling: The partners agreement to terminate the partnership did not automatically
dissolved the partnership. They were in the process of winding-up when the check in
question was issued. The best evidenceof the existence of the partnership, which was not
yet terminated were the unsold goods and uncollected receivables which were presented
to the trial court. Article 1829 of the Civil Code provides that “on dissolution the
partnership is not terminated but continues until the winding-up of partnership affairs is
completed. Since the partnership has not been terminated, Idos and Alarilla remained co-
partners. The check was issued by petitioner to respondent as would a partner to another
and not as a payment by debtor to creditor. Thus, absent the first element of the
complained offense, the act is not punishable by the statute.

VILLAREAL V. RAMIREZ

Facts: In 1984, Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital
of P750,000for the operation of a restaurant and catering business. Respondent Ramirez
joined as a partner in the business with the capital contribution of P250,000. In 1987, Jesus
Jose withdrew from the partnership and within the same time, Villareal and Carmelito Jose,
petitioners closed the business without prior knowledge of respondents In March 1987,
respondents wrote a letter to petitioners stating that they were no longer interested in
continuing the partnership and that they were accepting the latter’s offer to return their
capital contribution. This was left unheeded by the petitioners, and by reason of which
respondents filed a complaint in the RTC.RTC ruled that the parties had voluntarily entered
into a partnership, which could be dissolved at any time, and this dissolution was showed
by the fact that petitioners stopped operating the restaurant. On appeal, CA upheld RTC’s
decision that the partnership was dissolved and it added that respondents had no right to
demand the return of their capital contribution. However since petitioners did not give the
proper accounting for the liquidation of the partnership, the CA took it upon itself to
compute their liabilities and the amount that is proper to the respondent. The computation
of which was:(capital of the partnership – outstanding obligation) / remaining partners
=amount due to private respondent

Issue: W/N petitioners are liable to respondents for the latter’s share in the partnership?

Ruling: No. Respondents have no right to demand from petitioner the return of their equity
share. As found by the court petitioners did not personally hold its equity or assets. “The
partnership has a juridical personality separate and distinct from that of each of the
partners.” Since the capital was contributed to the partnership, not to petitioners, it is the
partnership that must refund the equity of the retiring partners. However, before the
partners can be paid their shares, the creditors of the partnership must first be
compensated. Therefore, the exact amount of refund equivalent to respondents’ one-third
share in the partnership cannot be determined until all the partnership assets will have
been liquidated and all partnership creditors have been paid. CA’s computation of the
amount to be refunded to respondents as their share was thus erroneous.

G.R. No. 97212 June 30, 1993

FACTS

Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership originally organized
with Lea Bendal and Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu
and Yu Chang, all citizens of the Republic of China (Taiwan), as limited partners. The
partnership business consisted of exploiting a marble deposit found on land situated in
Bulacan Province. Benjamin Yu was hired by virtue of a Partnership Resolution.

According to petitioner Yu, however, he actually received only half of his stipulated
monthly salary, since he had accepted the promise of the partners that the balance would
be paid when the firm shall have secured additional operating funds from abroad.
Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal
and Rhodora Bendal sold and transferred their interests in the partnership to private
respondent Willy Co and to one Emmanuel Zapanta. The partnership now constituted
solely by Willy Co and Emmanuel Zapanta continued to use the old firm name of Jade
Mountain. The actual operations of the business enterprise continued as before. All the
employees of the partnership continued working in the business, all, save petitioner
Benjamin Yu as it turned out.

Having learned of the transfer of the firm's main office from Makati to Mandaluyong,
petitioner Benjamin Yu reported to the Mandaluyong office for work and there met private
respondent Willy Co for the first time. Petitioner was informed by Willy Co that the latter
had bought the business from the original partners and that it was for him to decide
whether or not he was responsible for the obligations of the old partnership, including
petitioner's unpaid salaries. Petitioner was in fact not allowed to work anymore in the Jade
Mountain business enterprise. His unpaid salaries remained unpaid.

Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries  against
Jade Mountain, Mr. Willy Co and the other private respondents. The partnership and Willy
Co denied petitioner's charges, contending in the main that Benjamin Yu was never hired as
an employee by the present or new partnership.

ISSUES

1.       Whether the partnership which had hired petitioner Yu as Assistant General Manager
had been extinguished and replaced by a new partnership composed of Willy Co and
Emmanuel Zapanta

2.       If indeed a new partnership had come into existence, whether petitioner Yu could
nonetheless assert his rights under his employment contract as against the new
partnership.
RULING

1.       Yes. The legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired petitioner and the emergence of a new
firm composed of Willy Co and Emmanuel Zapanta. Article 1828 of the Civil Code “the
dissolution of a partnership is the change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on as distinguished from the winding up of
the business.”

2.       Yes. The occurrences of events which precipitate the legal consequence of dissolution
of a partnership do not automatically result in the termination of the legal personality of
the old partnership. Article 1829 of the Civil Code states that on dissolution the partnership
is not terminated, but continues until the winding up of partnership affairs is completed. In
the ordinary course of events, the legal personality of the expiring partnership persists for
the limited purpose of winding up and closing of the affairs of the partnership. In the case
at bar, the new partnership simply took over the business enterprise owned by the
preceding partnership, and continued using the old name of Jade Mountain Products
Company Limited, without winding up the business affairs of the old partnership, paying
off its debts, liquidating and distributing its net assets, and then re-assembling the said
assets or most of them and opening a new business enterprise.

Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the new
Jade Mountain which continued the business of the old one without liquidation of the
partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner Benjamin Yu
in respect of his claim for unpaid wages, is entitled to priority vis-a-visany claim of any
retired or previous partner insofar as such retired partner's interest in the dissolved
partnership is concerned. It is, however, clear to the Court that under Article 1840 above,
Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other claims
relating to his employment with the previous partnership, against the new Jade Mountain.

G.R. No. 144214             July 14, 2003

FACTS

Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of
P750,000 for the operation of a restaurant and catering.  Villareal was appointed general
manager and Carmelito Jose, operations manager. Respondent Donaldo Efren C. Ramirez
joined as a partner in the business with capital contribution of P250,000 paid by his
parents, Respondents Cesar and Carmelita Ramirez. After Jesus Jose withdrew from the
partnership, his capital contribution of P250,000 was refunded to him in cash by
agreement of the partners. In the same time, without prior knowledge of respondents,
petitioners closed down the restaurant, allegedly because of increased rental. The
restaurant furniture and equipment were deposited in the respondents' house for storage.

Respondent spouses wrote petitioners, saying that they were no longer interested in
continuing their partnership or in reopening the restaurant, and that they were accepting
the latter's offer to return their capital contribution.  They repeated the oral and written
requests, however, it was left unheeded. Respondents subsequently filed a
Complaint before the RTC, for the collection of a sum of money from petitioners.

In their Answer, petitioners contended that respondents had expressed a desire to

withdraw from the partnership and had called for its dissolution; that respondents had
been paid, upon the turnover to them of furniture and equipment worth over P400,000;
and that the latter had no right to demand a return of their equity because their share,
together with the rest of the capital of the partnership, had been spent as a result of
irreversible business losses. Respondents alleged that they did not know of any loan
encumbrance on the restaurant. According to them, if such allegation were true, then the
loans incurred by petitioners should be regarded as purely personal and, as such, not
chargeable to the partnership.

After trial, the RTC ruled that the parties had voluntarily entered into a partnership, which
could be dissolved at any time. Petitioners clearly intended to dissolve it when they
stopped operating the restaurant. Hence, the trial court rendered in favor of respondents
and ordering the petitioners to pay jointly and severally. The CA however held that,
although respondents had no right to demand the return of their capital contribution, the
partnership was nonetheless dissolved when petitioners lost interest in continuing the
restaurant business with them. Petitioners never gave a proper accounting of the
partnership accounts for liquidation purposes and no sufficient evidence was presented to
show financial losses.

ISSUE

1.       Whether petitioners are liable to respondents for the latter's share in the partnership

2.       Whether the CA's computation of P253,114 as respondents' share is correct

RULING

1.       No. Both the trial and the appellate courts found that a partnership had indeed
existed, and that it was dissolved. They found that the dissolution took place when
respondents informed petitioners of the intention to discontinue it because of the former's
dissatisfaction with, and loss of trust in, the latter's management of the partnership affairs.
These findings were amply supported by the evidence on record. Respondents
consequently demanded from petitioners the return of their one-third equity in the
partnership.

The SC holds that respondents have no right to demand from petitioners the return of their
equity share. Except as managers of the partnership, petitioners did not personally hold its
equity or assets. "The partnership has a juridical personality separate and distinct from
that of each of the partners." Since the capital was contributed to the partnership, not to
petitioners, it is the partnership that must refund the equity of the retiring partners.

2.       No. Since it is the partnership, as a separate and distinct entity, that must refund the
shares of the partners, the amount to be refunded is necessarily limited to its total
resources. In other words, it can only pay out what it has in its coffers, which consists of all
its assets. However, before the partners can be paid their shares, the creditors of the
partnership must first be compensated. After all the creditors have been paid, whatever is
left of the partnership assets becomes available for the payment of the partners' shares.

             Evidently, in the present case, the exact amount of refund equivalent to respondents'
one-third share in the partnership cannot be determined until all the partnership assets
will have been liquidated — in other words, sold and converted to cash — and all
partnership creditors, if any, paid. The CA's computation of the amount to be refunded to
respondents as their share was thus erroneous.

G.R. No. 109248 July 3, 1995

FACTS
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the
Mercantile Registry and reconstituted with the Securities and Exchange Commission. The
SEC records show that there were several subsequent amendments to the articles of
partnership. Petitioner-appellant wrote the respondents-appellees a letter stating his
withdrawal and retirement from the firm and another subsequent letter pertaining to the
mechanics of liquidation. A few months later, petitioner filed with this Commission's
Securities Investigation and Clearing Department a petition for dissolution and liquidation
of partnership but respondents-appellees filed their opposition to the petition.

On 31 March 1989, the hearing officer rendered a decision ruling that petitioner's
withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law
partnership. On appeal, the SEC en banc reversed the decision of the Hearing Officer and
held that the withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of "Bito,
Misa & Lozada." The Commission ruled that, being a partnership at will, the law firm could
be dissolved by any partner at anytime, such as by his withdrawal therefrom, regardless of
good faith or bad faith, since no partner can be forced to continue in the partnership
against his will. The parties sought a reconsideration of the above decision. Attorney Misa,
in addition, asked for an appointment of a receiver to take over the assets of the dissolved
partnership and to take charge of the winding up of its affairs. However, respondent SEC
issued an order denying reconsideration, as well as rejecting the petition for receivership,
and reiterating the remand of the case to the Hearing Officer.

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and
Attorney Mariano Lozada both died. The death of the two partners, as well as the admission
of new partners, in the law firm prompted Attorney Misa to renew his application for
receivership. He expressed concern over the need to preserve and care for the partnership
assets. The Court of Appeals, finding no reversible error on the part of respondent
Commission, AFFIRMED in toto the SEC decision and order appealed from.

ISSUE

1.       Whether the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo)
is a partnership at will.

2.       Whether the withdrawal of private respondent dissolved the partnership regardless
of his good or bad faith.
RULING

1.       Yes. A partnership that does not fix its term is a partnership at will. That the law firm
"Bito, Misa & Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a
partnership need not be unduly belabored. The 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 dissolution of the partnership at will.

2.        Yes. The dissolution of a partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the carrying on, as might be distinguished
from the winding up of, the business.   Upon its dissolution, the partnership continues and
its legal personality is retained until the complete winding up of its business culminating in
its termination. The liquidation of the assets of the partnership following its dissolution is
governed by various provisions of the Civil Code; however, an agreement of the partners,
like any other contract, is binding among them and normally takes precedence to the extent
applicable over the Code's general provisions. Paragraph 8 of the "Amendment to Articles
of Partnership" reading thusly, “... In the event of the death or retirement of any partner, his
interest in the partnership shall be liquidated and paid in accordance with the existing
agreements and his partnership participation shall revert to the Senior Partners for
allocation as the Senior Partners may determine.” The term "retirement" must have been
used in the articles, as we so hold, in a generic sense to mean the dissociation by a partner,
inclusive of resignation or withdrawal, from the partnership.

FACTS:

          Back in November 1964, the Lims, borrowed from petitioner Santiago Syjuco, Inc., the
sum of P800,000.00. The loan was given on the security of a first mortgage on property
registered in the names of said borrowers as owners in common under Transfer
Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of Manila.
Thereafter additional loans on the same security were obtained by the Lims from Syjuco, so
that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of
interest, and the security had been augmented by bringing into the mortgage other
property, also registered as owned pro indiviso by the Lims under two titles: TCT Nos.
75416 and 75418 of the Manila Registry.

       On November 8, 1967, the Lims failed to pay it despite demands therefore; that Syjuco
consequently caused extra-judicial proceedings for the foreclosure of the mortgage to be
commenced by the Sheriff of Manila; and that the latter scheduled the auction sale of the
mortgaged property on December 27, 1968.

The attempt to foreclose triggered off a legal battle that has dragged on for more than
twenty years now, fought through five (5) cases in the trial courts,  two (2) in the Court of
Appeals,  and three (3) more in the Supreme Court.

        One of the complaints filed by the Lims was filed not in their individual names, but in
the name of a partnership of which they themselves were the only partners: "Heirs of Hugo
Lim." The complaint advocated the theory that the mortgage which they, together with
their mother, had individually constituted (and thereafter amended during the period from
1964 to 1967) over lands standing in their names in the Property Registry as owners pro
indiviso, in fact no longer belonged to them at that time, having been earlier deeded over by
them to the partnership, "Heirs of Hugo Lim," more precisely, on March 30, 1959, hence,
said mortgage was void because executed by them without authority from the partnership.

 ISSUE:

          Whether the mortgage executed by the Lims be attributable to their partnership

HELD:

          Yes, the mortgage executed by the Lims is attributable to their partnership.

The Supreme Court held that the legal fiction of a separate juridical personality and
existence will not shield it from the conclusion of having such knowledge which naturally
and irresistibly flows from the undenied facts. It would violate all precepts of reason,
ordinary experience and common sense to propose that a partnership, as such, cannot be
held accountable with knowledge of matters commonly known to all the partners or of acts
in which all of the latter, without exception, have taken part, where such matters or acts
affect property claimed as its own by said partnership.

The silence and failure of the partnership to impugn said mortgage within a reasonable
time, let alone a space of more than seventeen years, brought into play the doctrine of
estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized.

There is no reason to distinguish between the Lims, as individuals, and the partnership
itself, since the former constituted the entire membership of the latter. In other words,
despite the concealment of the existence of the partnership, for all intents and purposes
and consistently with the Lims' own theory, it was that partnership which was the real
party in interest in all the actions; it was actually represented in said actions by all the
individual members thereof, and consequently, those members' acts, declarations and
omissions cannot be deemed to be simply the individual acts of said members, but in fact
and in law, those of the partnership.

FACTS: 

The defendant company, a general partnership duly registered under the laws of the
Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for
this purpose executed a promissory note for P9,440.00, payable in twelve equal monthly
installments of P786.63, the first installment payable on or before May 22, 1961 and the
subsequent installments on the 22nd day of every month thereafter, until fully paid, with
the condition that failure to pay any of said installments as they fall due would render the
whole unpaid balance immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, the plaintiff sued the
defendant company for the unpaid balance amounting to P7,119.07. Benjamin C. Daco,
Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as
co-defendants in their capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default.

Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the
defendant Romulo B. Lumauig is concerned.

When the case was called for hearing, the defendants and their counsels failed to appear.
Consequently, the trial court authorized the plaintiff to present its evidence ex-parte.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision
claiming that since there are five general partners, the joint and subsidiary liability of each
partner should not exceed one-fifth ( 1/ 5 ) of the obligations of the defendant company.

The trial court denied the said motion notwithstanding the conformity of the plaintiff to
limit the liability of the defendants Daco and Sim to only one-fifth ( 1/ 5 ) of the obligations
of the defendant company.

ISSUE: 

Is the dismissal of the complaint to favor one of the general partners of a partnership
increases the joint and subsidiary liability of each of the remaining partners for the
obligations of the partnership.

RULING:  

Condonation   by creditor or share in partnership debt  of one partner does not increase pro-
rata liability of other partner.

In the instant case, there were five general partners when the promissory note in question
was executed for and in behalf of the partnership. Since the liability of the partners is pro
rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth ( 1/ 5 )
of the obligations of the defendant company. The fact that the complaint against the
defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not
unmake the said Lumauig as a general partner in the defendant company. In so moving to
dismiss the complaint, the plaintiff merely condoned Lumauig’s individual liability to the
plaintiff.

The appealed decision as thus clarified was AFFIRMED.

Facts:

 Ornum submitted a statement of accounts to respondents, his copartner. Instead

ofobjecting to said statement, respondent Lasala promised to sign the same as soon as
hereceived his shares as shown in said statement. After said shares had been paid by
Ornumand accepted by respondents without reservation, the latter refused to sign the
statement.Lasala demanded a new liquidation, claiming that he was entitled to more than
what thestatement of account shows.

Issue:

 Is the respondent entitled to a further liquidation?

Held:
 No. After accepting his shares without any reservation, respondent virtuallyconfirmed his
approval of the statement of accounts, and its signing thereby became amere formality to
be complied with by Lasala exclusively. His refusal to sign, afterreceiving the shares,
amounted to a waiver of that formality in favor of Ornum who hadalready performed his
obligation. This approval precludes any right on the part ofrespondent to a further
liquidation, unless he can show there was fraud or mistake in saidapproval.

UY v. PUZON

Plaintiffs: William Uy

Defendant: Bartolome Puzon (during the pendency of the appeal before

this Court, the said Bartolome Puzon died, and was substituted by

Franco Puzon)

Ponente: Concepcion Jr.

CASE: Bartolome Puzon had two construction projects with the

Government where is the primary contractor. He established a

partnership with William Uy to help finance these projects, and thus

U.P. Construction Company was established and hired as subcontractor.

Puzon and Uy were supposed to contribute P50,000 each as capital, but

Puzon was waiting on his loan from PNB (P150K) which was to be

approved upon Puzon’s clearing his collaterals of their encumbrances.

Uy gave a total of P40,000 which he allowed Puzon to use to clear his

obligations so as to get the loan from PNB. This was supposed to be

reimbursed by Puzon. PNB released the loan, and Puzon gave P60,000

to the partnership (40k as Uy’s reimbursement, 20k as his contribution).

Also, Puzon secured his loan by a Deed of Assignment whereby all the

payments to be made in connection with the projects were to be

applied to his loan with PNB. Due to financial difficulties, Uy demanded

that Puzon contribute the rest of his capital, but Puzon failed. Puzon,
acting as primary contractor, terminated the contract with U.P.

Construction Company on the ground that it has failed to prosecute

work effectively. Uy filed for dissolution of the partnership on the

ground that Puzon breached their agreements.

The Supreme Court Ruled that (1) contrary to Puzon’s claim, the

P40,000 given by Uy was as contribution to the partnership and not as a

personal loan to Puzon, (2) Puzon’s assignment in favor of PNB was

prejudicial to the partnership because it took away money that was

supposed to be earnings of the partnership, (3) Uy is entitled to

reimbursement of the total amount of money he has spent in the

partnership, and (4) Uy is entitled to compensatory damages for Puzon’s

breach of contract.

DOCTRINE: (In connection with Article 1809(1)) A partner is entitled to

accounting of the partnership and therefore the profits earned by it

when he is wrongfully excluded from the business by his partners.