Contract of Partnership
the operations of the SM Megamall and SM Southmall stores but
PASCUAL v. CIR
FACTS:
Petitioners bought two (2) parcels of land and a year after, they bought
another three (3) parcels of land. Petitioners subsequently sold the
said lots in 1968 and 1970, and realized net profits. The corresponding
capital gains taxes were paid by petitioners in 1973 and 1974 by
availing of the tax amnesties granted in the said years. However, the
Acting BIR Commissioner assessed and required Petitioners to pay a
total amount of P107,101.70 as alleged deficiency corporate income
taxes for the years 1968 and 1970. Petitioners protested the said
assessment asserting that they had availed of tax amnesties way back
in 1974. In a reply, respondent Commissioner informed petitioners that
in the years 1968 and 1970, petitioners as co-owners in the real estate
transactions formed an unregistered partnership or joint venture
taxable as a corporation under Section 20(b) and its income was
subject to the taxes prescribed under Section 24, both of the National
Internal Revenue Code that the unregistered partnership was subject
to corporate income tax as distinguished from profits derived from the
partnership by them which is subject to individual income tax; and that
the availment of tax amnesty under P.D. No. 23, as amended, by
petitioners relieved petitioners of their individual income tax liabilities
but did not relieve them from the tax liability of the unregistered
partnership. Hence, the petitioners were required to pay the deficiency
income tax assessed.
ISSUE:
Whether the Petitioners should be treated as an unregistered
partnership or a co-ownership for the purposes of income tax.
RULING:
The Petitioners are simply under the regime of co-ownership and not
under unregistered partnership.
By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves (Art. 1767, Civil
Code of the Philippines). In the present case, there is no evidence that
petitioners entered into an agreement to contribute money, property or
industry to a common fund, and that they intended to divide the profits
among themselves. The sharing of returns does not in itself establish a
partnership whether or not the persons sharing therein have a joint or
common right or interest in the property. There must be a clear intent
to form a partnership, the existence of a juridical personality different
from the individual partners, and the freedom of each party to transfer
or assign the whole property. Hence, there is no adequate basis to
support the proposition that they thereby formed an unregistered
partnership. The two isolated transactions whereby they purchased
properties and sold the same a few years thereafter did not thereby
make them partners. They shared in the gross profits as co- owners
and paid their capital gains taxes on their net profits and availed of the
tax amnesty thereby. Under the circumstances, they cannot be
considered to have formed an unregistered partnership which is
thereby liable for corporate income tax, as the respondent
commissioner proposes.
ANTON v. OLIVA
FACTS:
Spouses ERNEST & CORAZON OLIVAs entered into 3 MOAs with
their daughter GLADYS MIRIAM and their son-in-law JOSE MIGUEL,
Spouses ANTONS, for the setting up of a business partnership
covering 3 fast food stores, known as “Pinoy Toppings” that were to be
established at SM Megamall, SM Cubao, and SM Southmall.
Under the MOAs, the Olivas were entitled to 30% share of the net
profits of the SM Megamall store and 20% in the cases of SM Cubao
and SM Southmall stores. The Antons gave the Olivas a total of
P2,547,000 representing their monthly shares of the net profits from
shares of the net profits from the store at SM Cubao were never given.
In November 1997, the Antons all together stopped giving the Olivas all
their share in the net profits of the 3 stores. Thus, the Olivas filed an
action for accounting and specific performance + damages against
petitioner Antons before the QC RTC. The Olivas demanded an
accounting of the partnership funds, but in response, JOSE MIGUEL
terminated the agreement.
It is to be noted that GLADYS filed a separation case with JOSE
MIGUEL.
The Antons alleged that there was no partnership and they only
borrowed money from the Olivas to finance the opening of the stores.
The wife, Gladys, managed the operations of the business and
remitted to the Olivas the amounts due to them even after the loans
had been paid. Moreover, the Antons paid Olivas their share in the
profits of the business.
The RTC held that there was no partnership, but the Antons had an
obligation to render accounting and pay the share of Olivas. The
Antons appealed but CA affirmed the decision ut modified it by deleting
the order to get an independent accountant. It further ordered to pay
Olivas the shares with interest.
ISSUES
- W/N relationship between Antons and Olivas is a
creditor-debtor relationship [​YES​]
- W/N Antons have an obligation to pay the Olivas their shares
of the net profits of the 3 stores + legal interest on the shares
[​YES​]
RULING
1. ALTHOUGH THE MOA DENOMINATED THE OLIVAS AS
“PARTNERS,” THE AMOUNTS THEY GAVE DID NOT
APPEAR TO BE CAPITAL CONTRIBUTIONS TO THE
ESTABLISHMENT OF THE STORES (THE STORES HAD
TO PAY THE AMOUNTS BACK WITH INTERESTS);
MOREOVER THE MOAS FORBADE THE OLIVAS FROM
INTERFERING WITH THE RUNNING OF THE STORES
(At any rate, none of the parties has made an issue of the common
finding of the courts below respecting the nature of their relationship.)
2. ALTHO THE OLIVAS WERE MERE CREDITORS, THE
ANTONS AGREED TO COMPENSATE THEM FOR THE
RISKS THEY HAD TAKEN.
The Olivas gave the loans with no security and they were to be paid
such loans only if the stores made profits. Had the business suffered
losses and could not pay what it owed, the Olivas would have
ultimately assumed those losses just by themselves. (There is nothing
illegal/immoral with this compensation scheme thus valid and
enforceable)
It did not matter that the Antons had already paid for two of the loans
and their interests. The obligation to share net profits was not
extinguished by such payment. Only after Jose Miguel’s marital relation
with Gladys turned sour did he cease to pay the Olivas their shares of
the profits.
Although the Olivas had no right to demand that the Antons make an
accounting of the money loaned out to them since they weren’t
partners, they were still entitled to know how much net profits the 3
stores were making annually since the Olivas were entitled to certain
percentages of those profits. (3rd and 2nd MOA even directed the
Antons to provide them with copies of the monthly sales reports from
the operations of the stores to enable them to know how much were
due them)
RE INTEREST IN CASE MA’AM ASKS:
Interest awarded by CA to Olivas re 3rd loan covering SM Southmall
referred to interest that their unpaid shares of the net profits of the 3
stores should earn on account of Jose Miguel’s unjustified refusal to
pay, not to interest on the loan given.
Formal Requirements of Partnerships
LITONJUA JR. v. LITONJUA SR.
G.R. No. 166299-300, December 13, 2005
FACTS​:
Petitioner Aurelio and Respondent Eduardo are brothers. In 1973,
Aurelio alleged that Eduardo entered into a contract of partnership
with him. Aurelio showed as evidence a letter sent to him by Eduardo
that the latter is allowing Aurelio to manage their family business (if
Eduardo’s away) and in exchange thereof he will be giving Aurelio P1
million or 10% equity, whichever is higher. A memorandum was
subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange of Aurelio, who just got
married, retaining his share in the family business (movie theatres,
shipping and land development) and some other immovable properties,
he will be given P1 Million or 10% equity in all these businesses and
those to be subsequently acquired by them whichever is greater.
In 1992 however, the relationship between the brothers went sour. And
so Aurelio demanded an accounting and the liquidation of his share in
the partnership. Eduardo did not heed and so Aurelio sued Eduardo.
ISSUE​: Whether or not there exists a partnership. [​NO​]
RULING​:
The partnership is void and produces no effect whatsoever. The
documentary evidence presented by Aurelio, i.e. the letter from
Eduardo and the Memorandum, did not prove
Partnership because of the failure to comply with the essential
formalities of a valid contract.
The 1973 letter from Eduardo on its face, contains typewritten entries,
personal in tone, but is unsigned and undated. As an unsigned
document, there can be no quibbling that said letter does not meet the
public instrumentation requirements exacted under Article 1771 (how
partnership is constituted) of the Civil Code. Moreover, being unsigned
and doubtless referring to a partnership involving more than P3,000.00
in money or property, said letter cannot be presented for notarization,
let alone registered with the Securities and Exchange Commission
(SEC), as called for under the Article 1772 (capitalization of a
partnership) of the Code. And inasmuch as the inventory requirement
under the succeeding Article 1773 goes into the matter of validity when
immovable property is contributed to the partnership, the next logical
point of inquiry turns on the nature of Aurelio’s contribution, if any, to
the supposed partnership.
The Memorandum is also not a proof of the partnership for the same is
not a public instrument and again, no inventory was made of the
immovable property and no inventory was attached to the
Memorandum. Article 1773 of the Civil Code requires that if immovable
property is contributed to the partnership, an inventory to be signed by
the parties and attached to the public instrument is ​indispensable to the
validity ​of the partnership..
Even assuming ​in gratia argumenti that MOA was a perfected
innominate contract, would still be void since still covered by Statute of
Frauds and thus unenforceable for non-compliance because an
agreement that by its terms is not to be performed within a year from
the making thereof shall be unenforceable by action, unless the same,
or some note or memorandum thereof, be in writing and subscribed by
the party charged.
ROJAS v. MAGLANA
G.R. No. L-30616,December 10, 1990
FACTS
CONSTANCIO MAGLANA and EUFRACIO ROJAS executed their
Articles of Co-Partnership called Eastcoast Development Enterprises
with only 2 of them as partners with an indefinite term of existence and
was duly registered with the SEC. Under the said Articles, Maglana
shall manage the business affairs of the partnership while Rojas shall
be the logging superintendent and shall manage the logging operations
of the partnership. It also provided in the articles that all profits and
losses of the partnership shall be divided and shared between them.
There was no operation for a year and, because of this difficulty, Rojas
and Magalona decided to avail of the services of AGUSTIN
PAHAMOTANG as industrial partner. The 3 of them executed their
Articles of Co-Partnership with the slight that the purpose of the 2nd
partnership is to hold and secure renewal of timber license instead of
the secure the licenses as in the 1st partnership; + the term of the 2nd
partnership was fixed to 30 years. The partnership started and was
able to ship logs and realize profits.
The 3 executed a document entitled “Conditional Sale of Interest in the
Partnership, Eastcoast Development Enterprise” agreeing among
themselves that Maglana and Rojas shall purchase the interest, share,
and participation in the Partnership of Pahamotang. It was also agreed
that the 2 shall become owners of all equipment contributed by
Pahamotang and EDE, name given to the 2nd partnership to be
dissolved. After withdrawal of Pahamotang, the partnership continued
by Maglana and Rojas without the benefit of any written agreement or
reconstitution of their written Articles of Partnership.
Rojas entered into a management contract with another logging
enterprise,. CMS Estate, Inc, leaving and abandoning the partnership.
He withdrew his equipment from the partnership for use in the newly
acquired area. The equipment were his supposed contribution to the
1st partnership and was transformed to CMS Estate by Chattel
Mortgage.
Maglana wrote Rojas reminding him of his obligation to contribute to
the capital investments of the partnership and also to perform his
obligation as logging superintendent. 2 weeks after, Rojas told
Maglana that he will not contribute and work as logging superintendent.
So, Maglana told him that his share will just be 20% of the net profits.
However, Rojas took funds from the partnership more than his
contribution; thus, in a letter, Maglana notified Rojas that he dissolved
the partnership.
Rojas’ defense: that EDE evidenced by 1st articles of co-partnership
was not novated, superseded, nor dissolved by the unregistered 2nd
articles and, as such, should govern their relation + that the letter of
Maglana did not legally dissolve the registered partnership between
them. Thus Rojas entitled to sharing profits as stipulated in the
registered Articles.
ISSUE
- The nature of partnership and legal relationship of Maglana
and Rojas after Pahamotang retired [​REGISTERED
PARTNERSHIP​]
- W/N Maglana can unilaterally dissolve the partnership [​YES​]
RULING
1. 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 THERE IS AN EXISTING PARTNERSHIP DULY
REGISTERED.
It was not the intention of the partners to dissolve the 1st partnership,
upon the constitution of the 2nd one, which they unmistakably called
“Additional Agreement.” They adopted the same name, purpose, and
capital contributions of Rojas and Maglana for the same amount (only
difference is the additional industrial partner who got equal share in
profits + the fixed term). The timber license renewals were secured in
favor of the 1st partnership.
There is no dispute that the 2nd partnership was dissolved by common
consent. Said dissolution did not affect the 1st partnership which
continued to exist. By Maglana’s act of reminding Rojas of his
contribution and Rojas’ act of replying that he will not be able to
comply, both considered themselves governed by the articles of the
duly registered partnership.
2. AS THERE ARE ONLY TWO PARTIES, WHEN MAGLANA
NOTIFIED ROJAS THAT HE DISSOLVED THE
PARTNERSHIP, IT IS IN EFFECT A NOTICE OF
WITHDRAWAL
Under Art. 1830 par 2, 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 the duly registered Articles of Co-Partnership; that is, all
profits and losses of the partnership shall be “shared and shared alike”
between the partners
TORRES v. CA
G.R. No. 134559, December 9, 1999
FACTS
Sisters ANTONIA TORRES and EMETERIA BARING (petitioenrs)
entered into a “Joint Venture Agreement” with respondent MANUEL
TORRES for the development of a parcel of land into a subdivision.
They executed a Deed of Sale covering the said parcel of land in favor
of Manuel, who then had it registered in his name and obtained from
Equitable Bank a loan of P40,000 which, under the JVA, was to be
used for the development of the subdivision through mortgage of said
property.
All 3 of them also agreed to share the proceeds from the sale of the
subdivided lots.
The project did not push through and the property was foreclosed.
Petitioner alleged that it was due to Manuel’s lack of funds or means
and skills; and also alleged that the latter misappropriated the amount
loaned to his own company.
Respondent, on the other hand, alleged that he used the loan to
implement the Agreement, which incurred P85,000 expenses; and
further avers that failure of project was due to petitioners and their
relatives had separately caused the annotations of adverse claims on
the title to the land, which eventually scared away prospective buyers,
forcing him to give up on the project.
Subsequently, petitioners filed a criminal case of estafa against
respondent and his wife, but were acquitted. They filed a civil case, but
was dismissed by trial court and affirmed by CA, which held that they
formed a partnership and thus bear the loss suffered by the partnership
in the same proportion as their share in the profits stipulated.. Hence
appeal.
ISSUE
- W/N petitioners have formed partnership with the respondent
[​YES​]
- If they do, W/N it was void [​NO​]
- W/N respondent liable for failure of project [​NO​]
RULING
1. PETITIONERS CONTRIBUTED PROPERTY IN THE FORM
OF LAND TO THE PARTNERSHIP, WHICH WAS TO BE
DEVELOPED INTO A SUBDIVISION, AND RESPONDENT
CONTRIBUTED HIS INDUSTRY AND MONEY FOR
OTHER COSTS; THE INCOME WAS TO BE DIVIDED
ACCORDING TO A PERCENTAGE
2. JVA CLEARLY STATES THAT THE CONSIDERATION FOR
THE SALE WAS THE EXPECTATION OF PROFITS FROM
THE SUBDIVISION PROJECT.
Petitioner contend that JVA was void under Article 1422(14) of the CC
because it is the direct result of an earlier illegal contract (sale of land
without valid consideration). HOWEVER, consideration, more properly
denominated as cause, can take different forms, such as the prestation
or promise of a thing or service by another.
In this case, the cause of the contract of sale consisted not in the
stated peso value of the land but in the expectation of profits from the
subdivision project, for which the land was intended to be used.
3. PETITIONERS FAILED TO GIVE ANY REASON WHY WE
SHOULD DISREGARD THE FACTUAL FINDINGS OF THE
APPELLATE COURT RELIEVING HIM OF FAULT
Wasn’t petitioners’ fault, but wasn’t respondent’s fault either basically
ANGELES v. SECRETARY OF JUSTICE
G.R. No. 142612, July 29, 2005
FACTS
The ANGELES SPOUSES filed a criminal complaint for estafa against
MERCADO, the brother-in-law of the Angeles spouses, being married
to EMERITA ANGELES’ sister LAURA.
Angeles spouses claimed that Mercado convinced them to entered into
a contract of antichresis, colloquially known as “​Sanglaang-perde”
covering 8 parcels of land planted with fruit-bearing lanzones trees
located in Nagcarlan, Laguna and owned by JUANA SUAZO. The
contract of antichresis was to last for 5 years w/ P210,000 as
consideration. As the Angeles spouses stayed in Manila during the
weekdays and go to Laguna on the weekends, the parties agreed that
Mercado would administer the lands and complete the necessary
paperwork. After 3 years, the Angeles spouses asked for the
accounting from Mercado who explained that the subject land earned
P46,210 in 1993, which he used to buy more lanzones trees. He also
reported that the trees bore no fruit in 1994. No accounting for 1995.
Spouses claim that only after this demand for an accounting did they
discover that Mercado had put the contract of ​sanglaang-perde over
the subject land under Mercado and his spouse’s names.
On the other hand, Mercado claimed that there exists an industrial
partnership, colloquially known as ​“Sosyo industrial” between him and
his spouse as industrial partners and the Angeles spouses as the
financiers. The industrial partnership had existed since 1991, before
the contract of antichresis over the subject land. As the years passed,
Mercado used his and his spouse’s earnings as part of the capital in
the business transactions which he entered into in behalf of the
Angeles spouses. It was their practice to enter into business
transactions with other people under the name of Mercado because
the spouses did not want to be identified as their financiers.
ISSUE
- W/N partnership existed [​YES​]
- W/N there was misappropriation by Mercado [​NO​]
RULING
1. ANGELES SPOUSES ADMIT TO FACTS THAT PROVE
EXISTENCE OF PARTNERSHIP: contract showing ​sosyo
industrial​, contribution of money and industry to a common
fund, and division of profits between spouses and Mercado
- Angeles spouses contributed money to the partnership, not
immovable property [:. Public instrument not needed]
- Mere failure to register the contract of partnership with the SEC does
not invalidate a contract that has the essential requisites of a
partnership
The purpose of registration of contract of partnership is to give notice
to 3rd parties. Failure to register the contract of partnership does not
affect the liability of the partnership and of the partners to 3rd persons.
Neither does such failure to register affect the partnership’s judicial
personality. A partnership may exist even if the partners do not use the
words “partner” or “partnership”
2. DOCUMENT ALONE, IN THE NAME OF MERCADO AND
HIS SPOUSE, FAILED TO PROVE DECEIT OR FALSE
REPRESENTATION ON THE PART OF MERCADO THAT
INDUCED THE ANGELES SPOUSES TO PART WITH
THEIR MONEY
It was practice to have all the contracts of antichresis of their
partnership secured in Mercado’s name as the Angeles spouses were
apprehensive that, if they come out into the open as financiers of said
contracts, they might be kidnapped by the NPA or their business deals
be questioned by the BIR or worse, their assets and unexplained
income be sequestered, as Oscar Angeles was then working with the
government.
Furthermore, accounting of proceeds is not a proper subject of present
case.
Rights, Power, Authority, Duty and Obligation of Partners
GOQUIOLAY et al. v. SYCIP et al.
G.R. No. L-11840, July 26, 1960
FACTS:
Tan Sin An and Goquiolay entered into a general commercial
partnership under the partnership name “Tan Sin An and Antonio
Goquiolay” for the purpose of dealing in real estate. The agreement
lodged upon Tan Sin An the sole management of the partnership
affairs. The lifetime of the partnership was fixed at ten years and the
Articles of Co-partnership stipulated that in the event of death of any of
the partners before the expiration of the term, the partnership will not
be dissolved but will be continued by the heirs or assigns of the
deceased partner. But the partnership could be dissolved upon mutual
agreement in writing of the partners. Goquiolay executed a GPA in
favor of Tan Sin An. The plaintiff partnership purchased 3 parcels of
land which was mortgaged to “La Urbana” as payment of P25,000.
Another 46 parcels of land were purchased by Tan Sin An in his
individual capacity which he assumed payment of a mortgage debt for
P35K. A downpayment and the amortization were advanced by Yutivo
and Co. The two obligations were consolidated in an instrument
executed by the partnership and Tan Sin An, whereby the entire 49 lots
were mortgaged in favor of “Banco Hipotecario” Tan Sin An died
leaving his widow, Kong Chai Pin and four minor children. The widow
subsequently became the administratrix of the estate. Repeated
demands were made by Banco Hipotecario on the partnership and on
Tan Sin An. Defendant Sing Yee, upon request of defendant Yutivo
Sons , paid the remaining balance of the mortgage debt, the mortgage
was cancelled Yutivo Sons and Sing Yee filed their claim in the
intestate proceedings of Tan Sin An for advances, interest and taxes
paid in amortizing and discharging their obligations to “La Urbana” and
“Banco Hipotecario.” Kong Chai Pin filed a petition with the probate
court for authority to sell all the 49 parcels of land. She then sold it to
Sycip and Lee in consideration of P37K and of the vendees assuming
payment of the claims filed by Yutivo Sons and Sing Yee. Later, Sycip
and Lee executed in favor of Insular Development a deed of transfer
covering the 49 parcels of land. When Goquiolay learned about the
sale to Sycip and Lee, he filed a petition in the intestate proceedings to
set aside the order of the probate court approving the sale in so far as
his interest over the parcels of land sold was concerned. Probate court
annulled the sale executed by the administratrix w/ respect to the 60%
interest of Goquiolay over the properties Administratrix appealed. The
decision of probate court was set aside for failure to include the
indispensable parties. New pleadings were filed. The second amended
complaint prays for the annulment of the sale in favor of Sycip and Lee
and their subsequent conveyance to Insular Development. The
complaint was dismissed by the lower court hence this appeal.
ISSUE/S: ​Whether or not a widow or substitute become also a general
partner or only a limited partner.
Whether or not the lower court err in holding that the widow succeeded
her husband Tan Sin An in the sole management of the partnership
upon Tan’s death
Whether or not the consent of the other partners was necessary to
perfect the sale of the partnership properties to Sycip and Lee?
RULING:
ISSUE 1: Kong Chai Pin became a mere general partner. By seeking
authority to manage partnership property, Tan Sin An’s widow showed
that she desired to be considered a general partner. By authorizing the
widow to manage partnership property (which a limited partner could
not be authorized to do), Goqulay recognized her as such partner, and
is now in estoppel to deny her position as a general partner, with
authority to administer and alienate partnership property. The articles
did not provide that the heirs of the deceased would be merely limited
partners; on the contrary, they expressly stipulated that in case of
death of either partner, “the co partnership will have to be continued”
with the heirs or assignees. It certainly could not be continued if it were
to be converted from a general partnership into a limited partnership
since the difference between the two kinds of associations is
fundamental, and specially because the conversion into a limited
association would leave the heirs of the deceased partner without a
share in the management. Hence, the contractual stipulation actually
contemplated that the heirs would become general partners rather than
limited ones.
ISSUE 2: YES. ​Tan Sin An, in the sole management of the partnership,
upon the latter’s death. While, as we previously stated in our narration
of facts, the Articles of Co-Partnership and the power of attorney
executed by Antonio Goquiolay conferred upon Tan Sin An the
exclusive management of the business, such power, premised as it is
upon trust and confidence, was a mere personal right that terminated
upon Tan’s demise. The provision in the articles stating that "in the
event of death of any one of the partners within the 10-year term of the
partnership, the deceased partner shall be represented by his heirs",
could not have referred to the managerial right given to Tan Sin An;
more appropriately, it related to the succession in the proprietary
interest of each partner
ISSUE3: NO. ​Strangers dealing with a partnership have the right to
assume, in the absence of restrictive clauses in the co-partnership
agreement, that every general partner has power to bind the
partnership, specially those partners acting with ostensible authority.
Article 129 of the Code of Commerce provides
"If the management of the general partnership has not been limited by
special agreement to any of the members, all shall have the power to
take part in the direction and management of the common business,
and the members present shall come to an agreement for all contracts
or obligations which may concern the association."
but this obligation is one imposed by law on the partners among
themselves, that does not necessarily affect the validity of the acts of a
partner, while acting within the scope of the ordinary course of
business of the partnership, as regards third persons without notice.
The latter may rightfully assume that the contracting partner was duly
authorized to contract for and in behalf of the firm and that,
furthermore, he would not ordinarily act to the prejudice of his co-
partners. The regular course of business procedure does not require
that each time a third person contracts with one of the managing
partners, he should inquire as to the latter’s authority to do so, or that
he should first ascertain whether or not the other partners had given
their consent thereto. In fact, Article 130 of the same Code of
Commerce provides that even if a new obligation was contracted
against the express will of one of the managing partners, "it shall not
be annulled for such reason, and it shall produce its effects without
prejudice to the responsibility of the member or members who
contracted it, for the damages they may have caused to the common
fund."cralaw virtua1aw library
*IF MA’AM ASKS HOW THIS WAS SEEN IN THE CASE* THE SALE
WAS NOT AT ALL QUESTIONED BY THE OTHER PARTNER
WHEN HE WAS GIVEN THE OPPORTUNITY TO DO SO
EVANGELISTA & CO. v. ABAD SANTOS
G.R. No. L-31684, June 28, 1973
FACTS
On October 9, 1954 a co-partnership was formed under the name of
"Evangelista & Co." On June 7, 1955 the Articles of Co-partnership
were amended so as to include herein respondent, Estrella Abad
Santos, as industrial partner, with herein petitioners Domingo C.
Evangelista, Jr., Leonarda Atienza Abad Santos and Conchita P.
Navarro, the original capitalist partners, remaining in that capacity, with
a contribution of P17,500 each
On December 17, 1963 herein respondent filed suit against
the three other partners, alleging that the partnership, which was also
made a party-defendant, had been paying dividends to the partners
except to her; and that notwithstanding her demands the defendants
had refused and continued to refuse to let her examine the partnership
books or to give her information regarding the partnership affairs or to
pay her any share in the dividends declared by the partnership
The defendants, in their answer, denied ever having
declared dividends or distributed profits of the partnership; denied
likewise that the plaintiff ever demanded that she be allowed to
examine the partnership books; and by way of affirmative defense
alleged that the amended Articles of Co-partnership did not express
the true agreement of the parties, which was that the plaintiff was not
an industrial partner; that she did not in fact contribute industry to the
partnership.
ISSUE
Whether Abad Santos is an industrial partner?
Whether Abad Santos is entitled to see the partnership books because
she is an industrial partner in the partnership?
RULING
ISSUE 1: YES. ​Evidenced by the agreement that Abad Santos will get
30% of the net profits.
ISSUE 2: ​Yes, Abad Santos is entitled to see the partnership books.
The Supreme Court ruled that according to
ART. 1299. 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."
In the case at hand, the company is estopped from denying Abad
Santos as an industrial partner because it has been 8 years and the
company never corrected their agreement in order to show their true
intentions. The company never bothered to correct those up until Abad
Santos filed a complaint.
RAMNANI v. CA
G.R. Nos. 85494 & 85496, May 7, 1991
FIshwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are
brothers of the full blood. Ishwar and his spouse Sonya had their main
business based in New York. Realizing the difficulty of managing their
investments in the Philippines they executed a general power of
attorney on January 24, 1966 appointing Navalrai and Choithram as
attorneys-in-fact, empowering them to manage and conduct their
business concern in the Philippines
On February 1, 1966 and on May 16, 1966, Choithram entered into two
agreements for the purchase of two parcels of land located in Barrio
Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership. A
building was constructed thereon by Choithram in 1966. Three other
buildings were built thereon by Choithram through a loan of
P100,000.00 obtained from the Merchants Bank as well as the income
derived from the first building.
Sometime in 1970 Ishwar asked Choithram to account for the income
and expenses relative to these properties during the period 1967 to
1970. Choithram failed and refused to render such accounting.
Thereafter, Ishwar revoked the general power of attorney. Choithram
and Ortigas were duly notified of such revocation on April 1, 1971 and
May 24, 1971, respectively. Said notice was also registered with the
Securities and Exchange Commission on March 29, 1971 and was
published in the April 2, 1971 issue of ​The Manila Times for the
information of the general public.
Nevertheless, Choithram, transferred all rights and interests of Ishwar
and Sonya in favor of his daughter-in-law, Nirmla Ramnani, on
February 19, 1973.
On October 6, 1982, Ishwar and Sonya filed a complaint against
Choitram and/or spouses Nirmla and Moti and Ortigas for
reconveyance of said properties or payment of its value and damages.
ISSUE:
Whether Ishram can recover the entire properties subject in
the ligitation
HELD:
No, Ishram cannot recover the entire properties subject.
The Supreme Court held that despite the fact that
Choithram, et al., have committed acts which demonstrate their bad
faith and scheme to defraud spouses Ishwar and Sonya of their rightful
share in the properties in litigation, the Court cannot ignore the fact that
Choithram must have been motivated by a strong conviction that as the
industrial partner in the acquisition of said assets he has as much claim
to said properties as Ishwar, the capitalist partner in the joint venture.
Choithram in turn decided to invest in the real estate business. He
bought the two (2) parcels of land in question from Ortigas as
attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he paid
in installments and used the balance of the capital entrusted to him,
plus a loan, to build two buildings. Although the buildings were burned
later, Choithram was able to build two other buildings on the property.
He rented them out and collected the rentals. Through the industry and
genius of Choithram, Ishwar's property was developed and improved
into what it is now.
Justice and equity dictate that the two share equally the fruit of
their joint investment and efforts. Perhaps this Solomonic solution may
pave the way towards their reconciliation. Both would stand to gain. No
one would end up the loser. After all, blood is thicker than water.

GUY v. GACOTT
G.R. No. 206147, January 13, 2016
FACTS
Atty. Glenn Gacott (Gacott)from Palawan purchased two (2) brand new
transreceivers from Quantech Systems Corporation(QSC) in Manila
through its employee Rey Medestomas(Medestomas), amounting to a
total of P18,000.00. Due to major defects, Gacott personally returned
the transreceivers to QSC and requested that they be replaced.
Medestomas received the returned transreceivers and promised to
send him the replacement units within two (2) weeks from May 10,
1997.
Time passed and Gacott did not receive the replacement units as
promised. QSC informed him that there were no
available units and that it could not refund the purchased price. Despite
several demands, both oral and written,
Gacott was never given a replacement or a refund.
Thus, Gacott filed a complaint for damages. Summons was served
upon QSC and Medestomas, afterwhich they filed
their Answer, verified by Medestomas himself and a certain Elton Ong
(Ong)
. QSC and Medestomas did not present
any evidence during the trial
In a Decision dated March 16, 2007, the RTC found that the two (2)
transreceivers were defective and that QSC and Medestomas failed to
replace the same or return Gacott's money. The decision became final
as QSC and Medestomas did not interpose an appeal. Gacott then
secured a Writ of Execution dated September 26, 2007.
During the execution stage, Gacott learned that QSC was not a
corporation, but was in fact a general partnership
registered with the Securities and Exchange Commission
(SEC)In the articles of partnership Guy was appointed as
General Manager of QSC. Upon learning that Guy had vehicles
registered in his name, Gacott instructed the sheriff to proceed with the
attachment of one of the motor vehicles of Guy based on the
certification issued by the DOTC-LTO On March 3, 2009, Sheriff
Felizarte attached Guy’s vehicle by virtue of the Notice of
Attachment/Levy upon Personally served upon the record custodian of
the DOTC-LTO of Mandaluyong City. A similar notice was served to
Guy through his housemaid at his residence.
Thereafter, Guy filed his Motion to Lift Attachment Upon Personalty,
arguing that he was not a judgment debtor
and, therefore, his vehicle could not be attached
with Gacott.
RULING
NO.
Here, Guy was never made a party to the case. He did not have any
participation in the entire proceeding until his vehicle was levied upon
and he suddenly became QSC's "co-defendant debtor" during the
judgment execution stage. It is a basic principle of law that money
judgments are enforceable only against the property incontrovertibly
belonging to the judgment debtor.​35 Indeed, the power of the court in
executing judgments extends only to properties unquestionably
belonging to the judgment debtor alone. An execution can be issued
only against a party and not against one who did not have his day in
court. The duty of the sheriff is to levy the property of the judgment
debtor not that of a third person. For, as the saying goes, one man's
goods shall not be sold for another man's debts.​36
In the spirit of fair play, it is a better rule that a partner must first be
impleaded before he could be prejudiced by the judgment against the
partnership. As will be discussed later, a partner may raise several
defenses during the trial to avoid or mitigate his obligation to the
partnership liability. Necessarily, before he could present evidence
during the trial, he must first be impleaded and informed of the case
against him. It would be the height of injustice to rob an innocent
partner of his hard-earned personal belongings without giving him an
opportunity to be heard. Without any showing that Guy himself acted
maliciously on behalf of the company, causing damage or injury to the
complainant, then he and his personal properties cannot be made
directly and solely accountable for the liability of QSC, the judgment
debtor, because he was not a party to the case.
**NOTICE TO A PARTNER IS NOTICE TO THE PARTNERSHIP BUT
NOTICE TO THE PARTNERSHIP IS NOT NOTICE TO THE
PARTNER**
**ART 1816 IMPLIES ONLY JOINT AND SUBSISIDARY LIABILITY
OF THE PARTNERS**

Gacott filed an opposition to the motion.

RTC: WHEREFORE, with the ample discussion of the matter, this

Court finds and so holds that the property of movant Michael Guy may
be validly attached in satisfaction of the liabilities adjudged by this
Court against Quantech Co., the latter being an ostensible Corporation
and the movant being considered by this Court as a general partner
therein in accordance with the order of this court impressed in its
decision to this case imposing joint and several liability to the
defendants. The Motion to Lift Attachment Upon Personalty submitted
by the movant is therefore
DENIED for lack of merit.

CA: The CA stressed that Guy, being a partner in QSC, was bound by
the summons served upon QSC based on Article 1821 of the Civil
Code. The CA further opined that the law did not require a partner to
be actually involved in a suit in order for him to be made liable. He
remained “solidarily liable whether he participated or not, whether he
ratified
it or not, or whether he had knowledge of the act or omission.

ISSUE
Whether or not Guy is solidarily liable with the partnership for damages
arising from the breach of contract of sale