AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 1 of 17

Sunga-Chan vs. Chua, G.R. No. 143340, Aug. 15, 2001

Doctrine: Partnership retains its juridical personality even if it fails to register because registration merely gives notice to
third parties.

FACTS: Respondent Lamberto Chua alleged that in 1977, he verbally entered into a partnership with Jacinto in the
distribution of Shellane Liquefied Petroleum Gas (LPG). Respondent and Jacinto allegedly agreed to register the business
name of their partnership, Shellite Gas Appliance Center, under the name of Jacinto as a sole proprietorship. Respondent
delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn produced P100,000.00, with the
intention that the profits would be equally divided between them.

Upon Jacinto’s death in 1989, his wife Cecilia and his daughter Lilibeth Sunga, 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, petitioners failed to comply. Subsequently,
Lilibeth gave P200,000.00 to the respondent representing the latter’s share in the partnership. Still, petitioners failed to
comply with their duty to account, and continued to benefit from Shellite.

On June 22, 1992, respondent filed a complaint against Lilibeth Sunga Chan and Cecilia Sunga for “Winding Up of
Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment” with
the Regional Trial Court.

The trial court rendered its Decision ruling for respondent. The court direct the petitioners to render an accounting, submit
an inventory, and appraisal; order them to return and restitute to the partnership and the plaintiff; order them to wind up the
affairs of the partnership and terminate its business activities pursuant to law; finding them especially Lilibeth Sunga-Chan
guilty of breach of trust and in bad faith, and hold them liable for moral and exemplary damages, attorney’s fees and litigation
expenses. However, the Court of Appeals dismissed the appeal. The decision is AFFIRMED in all respects.

ISSUE: Whether or not the non-registration of the contract of partnership invalidate the partnership.

RULING: Petitioners maintain that said partnership had an 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, noncompliance 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.

G.R. No. 159333 July 31, 2006, ARSENIO T. MENDIOLA, petitioner,

vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS.,
INC. and/or CELLMARK AB, respondents.

DECISION

PUNO, J.:

On appeal are the Decision1 and Resolution2 of the Court of Appeals, dated January 30, 2003 and July 30, 2003,
respectively, in CA-G.R. SP No. 71028, affirming the ruling3 of the National Labor Relations Commission (NLRC), which in
turn set aside the July 30, 2001 Decision4 of the labor arbiter. The labor arbiter declared illegal the dismissal of petitioner
from employment and awarded separation pay, moral and exemplary damages, and attorney's fees.

The facts are as follows:

 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 2 of 17
Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of
California, USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of
Sweden, with principal office in Gothenburg, Sweden.

Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources
(Phils.), Inc."5 with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already
approved by the Securities and Exchange Commission [SEC] on the said date." 6 The Side Agreement outlines the business
relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a Pacfor
representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its President. Petitioner's
base salary and the overhead expenditures of the company shall be borne by the representative office and funded by
Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM and Pacfor-usa.

On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to transact business in the
Philippines under the name of Pacfor or Pacfor Phils.7 In its application, private respondent Pacfor proposed to establish its
representative office in the Philippines with the purpose of monitoring and coordinating the market activities for paper
products. It also designated petitioner as its resident agent in the Philippines, authorized to accept summons and processes
in all legal proceedings, and all notices affecting the corporation. 8

In March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the
Representative Office Known as Pacific Forest Resources (Philippines)," 9 where the salary of petitioner was increased to
$78,000 per annum. Both agreements show that the operational expenses will be borne by the representative office and
funded by all parties "as equal partners," while the profits and commissions will be shared among them.

In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of
Pacfor Phils.10 Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-owner
of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from
Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50."11 Petitioner presumably
knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the setting up of a
representative office, and "not a branch office" in the Philippines to save on taxes. 12

Petitioner claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would have
been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp.13 Had he
known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his own company,
ATM Marketing Corp.14 Petitioner raised other issues, such as the rentals of office furniture, salary of the employees,
company car, as well as commissions allegedly due him. The issues were not resolved, hence, in October 2000, petitioner
wrote Pacfor-USA demanding payment of unpaid commissions and office furniture and equipment rentals, amounting to
more than one million dollars.15

On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over to it all papers,
documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or
Pacfor Phils.16 On December 18, 2000, private respondent Pacfor also required petitioner to remit more than three hundred
thousand-peso Christmas giveaway fund for clients of Pacfor Phils.17 Lastly, private respondent Pacfor withdrew all its offers
of settlement and ordered petitioner to transfer title and turn over to it possession of the service car. 18

Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Pacfor Phils.
In its letter to Intercontinental Paper Industries, Inc., dated November 21, 2000, private respondent Pacfor stated:

Until further notice, please course all inquiries and communications for Pacific Forest Resources (Philippines) to:

Pacific Forest Resources

200 Tamal Plaza, Suite 200
Corte Madera, CA, USA 94925
(415) 927 1700 phone
(415) 381 4358 fax

Please do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the offices of ATM Marketing
Corporation at Room 504, Concorde Building, Legaspi Village, Makati City, Philippines. 19
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 3 of 17
In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December 2000, private respondent
directed said client "to please communicate directly with us on any further questions associated with these payments or any
future business. Do not communicate with [Pacfor] and/or [ATM]." 20

Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the
termination of his employment as resident manager of Pacfor Phils. 21 In a memorandum to the employees of Pacfor Phils.,
dated January 29, 2001, he stated:

I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all records to them effective
December 19, 2000. The company records were turned over only on January 26, 2001. This means our jobs with
Pacific Forest were terminated effective December 19, 2000. I am concerned about your welfare. I would like to
help you by offering you to work with ATM Marketing Corporation.

Please let me know if you are interested.22

On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that
he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also
reiterated his demand for unpaid commissions, and proposed to offset these with the remaining Christmas giveaway fund
in his possession.23 Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the lessor of the office
premises of Pacfor Phils., wherein he was the signatory to the lease agreement.24

On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and ordered him to show cause
why no disciplinary action should be taken against him. Private respondent Pacfor charged petitioner with willful
disobedience and serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he
applied to his alleged unpaid commissions. Private respondent also alleged loss of confidence and gross neglect of duty on
the part of petitioner for allegedly allowing another corporation owned by petitioner's relatives, High End Products, Inc.
(HEPI), to use the same telephone and facsimile numbers of Pacfor, to possibly steal and divert the sales and business of
private respondent for HEPI's principal, International Forest Products, a competitor of private respondent. 25

Petitioner denied the charges. He reiterated that he considered the import of Pacfor President William Gleason's letters as
a "cessation of his position and of the existence of Pacfor Phils." He likewise informed private respondent Pacfor that ATM
Marketing Corp. now occupies Pacfor Phils.' office premises, 26 and demanded payment of his separation pay.27 On
February 15, 2001, petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of attorney's
fees with the NLRC.28

In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a memorandum dated March 5,
2001, private respondent directed petitioner to explain why he should not be disciplined for serious misconduct and conflict
of interest. Private respondent charged petitioner anew with serious misconduct for the latter's alleged act of fraud and
misrepresentation in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed upon
by the parties. Private respondent also accused petitioner of disloyalty and representation of conflicting interests for having
continued using the Pacfor Phils.' office for operations of HEPI. In addition, petitioner allegedly solicited business for HEPI
from a competitor company of private respondent Pacfor.29

Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn
over all office records and materials, regardless of whether he may have retained copies, private respondent Pacfor virtually
deprived petitioner of his job by the gradual diminution of his authority as resident manager. Petitioner's position as resident
manager whose duty, among others, was to maintain the security of its business transactions and communications was
rendered meaningless. The dispositive portion of the decision of the Labor Arbiter reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering herein respondents Cellmark AB and
Pacific Forest Resources, Inc., jointly and severally to compensate complainant Arsenio T. Mendiola separation
pay equivalent to at least one month for every year of service, whichever is higher (sic), as reinstatement is no
longer feasible by reason of the strained relations of the parties equivalent to five (5) months in the amount of
$32,000.00 plus the sum of P250,000.00; pay complainant the sum of P500,000.00 as moral and exemplary
damages and ten percent (10%) of the amounts awarded as and for attorney's fees.

All other claims are dismissed for lack of basis.

 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 4 of 17
SO ORDERED.30

Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001, the NLRC set aside the
July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack of merit. 31 It held there was no employer-employee
relationship between the parties. Based on the two agreements between the parties, it concluded that petitioner is not an
employee of private respondent Pacfor, but a full co-owner (50/50 equity).

The NLRC denied petitioner's Motion for Reconsideration.32

Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld the ruling of the NLRC.

Petitioner's Motion for Reconsideration33 of the decision of the Court of Appeals was denied.

Hence, this appeal.34

Petitioner assigns the following errors:

A. The Respondent Court of Appeals committed reversible error and abused its discretion in rendering judgment
against petitioner since jurisdiction has been acquired over the subject matter of the case as there exists employer-
employee relationship between the parties.

B. The Respondent Court of Appeals committed reversible error and abused its discretion in ruling that jurisdiction
over the subject matter cannot be waived and may be alleged even for the first time on appeal or considered by the
court motu prop[r]io.35

The first issue is whether an employer-employee relationship exists between petitioner and private respondent Pacfor.

Petitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an
employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the
partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating
and Profit Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal basis of the
complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence, the Labor
Code cannot apply.

We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists between
the parties.

In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be
acquired thereby and through the efforts of the members.36 The property or stock of the partnership forms a community of
goods, a common fund, in which each party has a proprietary interest. 37 In fact, the New Civil Code regards a partner as a
co-owner of specific partnership property.38 Each partner possesses a joint interest in the whole of partnership property. If
the relation does not have this feature, it is not one of partnership. 39 This essential element, the community of interest, or
co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent
Pacfor. Petitioner is not a part-owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established
this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He
stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private respondent
Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Thus, the
parties in this case, merely shared profits. This alone does not make a partnership. 40

Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or
charter.41 This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby
the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers,
would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively;
and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated
by the stockholders when they originally invested in the corporation. 42 No such authorization has been proved in the case
at bar.
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 5 of 17
Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship is present in the case at
bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's
conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.43

In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor which selected and
engaged the services of petitioner as its resident agent in the Philippines. Second, as stipulated in their Side Agreement,
private respondent Pacfor pays petitioner his salary amounting to $65,000 per annum which was later increased to $78,000.
Third, private respondent Pacfor holds the power of dismissal, as may be gleaned through the various memoranda it issued
against petitioner, placing the latter on preventive suspension while charging him with various offenses, including willful
disobedience, serious misconduct, and gross neglect of duty, and ordering him to show cause why no disciplinary action
should be taken against him.

Lastly and most important, private respondent Pacfor has the power of control over the means and method of petitioner in
accomplishing his work.

The power of control refers merely to the existence of the power, and not to the actual exercise thereof. The principal
consideration is whether the employer has the right to control the manner of doing the work, and it is not the actual exercise
of the right by interfering with the work, but the right to control, which constitutes the test of the existence of an employer-
employee relationship.44 In the case at bar, private respondent Pacfor, as employer, clearly possesses such right of control.
Petitioner, as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only an agent of the corporation,
a representative of Pacfor, who transacts business, and accepts service on its behalf.

This right of control was exercised by private respondent Pacfor during the period of November to December 2000, when it
directed petitioner to turn over to it all records of Pacfor Phils.; when it ordered petitioner to remit the Christmas giveaway
fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered petitioner to transfer
title and turn over to it the possession of the service car. It was also during this period when private respondent Pacfor sent
letters to its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, advising them not to
deal with petitioner and/or Pacfor Phils. In its letter to DAVCOR, private respondent Pacfor replied to the client's request for
an invoice payment extension, and formulated a revised payment program for DAVCOR. This is one unmistakable proof
that private respondent Pacfor exercises control over the petitioner.

Next, we shall determine if petitioner was constructively dismissed from employment.

The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would not quit however, private
respondent Pacfor began to systematically deprive petitioner of his duties and benefits to make him feel that his presence
in the company was no longer wanted. First, private respondent Pacfor directed petitioner to turn over to it all records of
Pacfor Phils. This would certainly make the work of petitioner very difficult, if not impossible. Second, private respondent
Pacfor ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils. Then it ordered petitioner
to transfer title and turn over to it the possession of the service car. It also advised its clients in the Philippines, particularly
Intercontinental Paper Industries, Inc. and DAVCOR, not to deal with petitioner and/or Pacfor Phils. Lastly, private
respondent Pacfor appointed a new resident agent for Pacfor Phils. 45

Although there is no reduction of the salary of petitioner, constructive dismissal is still present because continued
employment of petitioner is rendered, at the very least, unreasonable. 46 There is an act of clear discrimination, insensibility
or disdain by the employer that continued employment may become so unbearable on the part of the employee so as to
foreclose any choice on his part except to resign from such employment. 47

The harassing acts of the private respondent are unjustified. They were undertaken when petitioner sought clarification from
the private respondent about his supposed 50% equity on Pacfor Phils. Private respondent Pacfor invokes its rights as an
owner. Allegedly, its issuance of the foregoing directives against petitioner was a valid exercise of management prerogative.
We remind private respondent Pacfor that the exercise of management prerogative is not absolute. "By its very nature,
encompassing as it could be, management prerogative must be exercised in good faith and with due regard to the rights of
labor – verily, with the principles of fair play at heart and justice in mind." The exercise of management prerogative cannot
be utilized as an implement to circumvent our laws and oppress employees. 48
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 6 of 17
As resident agent of private respondent corporation, petitioner occupied a position involving trust and confidence. In the
light of the strained relations between the parties, the full restoration of an employment relationship based on trust and
confidence is no longer possible. He should be awarded separation pay, in lieu of reinstatement.

IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision in CA-G.R. SP No. 71028
and July 30, 2003 Resolution, affirming the December 20, 2001 Decision of the National Labor Relations Commission,
are ANNULED and SET ASIDE. The July 30, 2001 Decision of the Labor Arbiter is REINSTATED with
the MODIFICATION that the amount of P250,000.00 representing an alleged increase in petitioner's salary shall be
deducted from the grant of separation pay for lack of evidence.

SO ORDERED.

Sandoval-Gutierrez, Corona, Azcuna, Garcia, J.J., concur.

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.

Tocao vs. Court of Appeals, G.R. No. 127405, October 4, 2000

Ponente: J. Ynares-Santiago
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 7 of 17

FACTS: Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra
Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who
conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares

Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the
marketing department and later, vice-president for sales

The parties agreed that Belo's name should not appear in any documents relating to their transactions with West Bend
Company. Anay having secured the distributorship of cookware products from the West Bend Company and organized the
administrative staff and the sales force, the cookware business took off successfully. They operated under the name of
Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name.

The parties agreed further that Anay would be entitled to:

(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belo's
assurances that he was sincere, dependable and honest when it came to financial commitments.

On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect
that she was no longer the vice-president of Geminesse Enterprise.

Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8,
1988 to February 5, 1988 and the audit of the company to determine her share in the net profits.

Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did
not receive the same commission although the company netted a gross sales of P 13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against Marjorie
D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140

The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the defendants. The
Court of Appeals affirmed the lower court’s decision.

ISSUE: Whether the parties formed a partnership

HELD: Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these requisites:

(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and

(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form; a public
instrument is necessary only where immovable property or real rights are contributed thereto.

This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one.

In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay as head of the
marketing department and later, vice-president for sales. Furthermore, Anay was entitled to a percentage of the net profits
of the business.

Therefore, the parties formed a partnership.

Pascual vs. CIR, L-78133, October 18, 1988

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
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 8 of 17
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.

WolfangAurbach vs. Sanitary Wares, G.R. No. 75875, December 19, 1989

FACTS: Saniwares (domestic corporation) and ASI (foreign corporation) entered into an agreement to engage primarily in
the business of manufacturing in the Philippines and selling here and abroad vitreous china and sanitary wares.They also
agreed that the business operations in the Philippines shall be carried on by an incorporated enterprise and that the name
of the corporation shall initially be “Sanitary Wares Manufacturing Corp.”

Unfortunately, with the business successes came the deterioration of the initially harmonious relationship between the two.
The disagreement was allegedly due to Saniwares desire to expand the export operations which was objected by ASI as it
apparently had other subsidiaries of joint venture groups in countries contemplated by Saniwares.

Several incidents in the annual stockholders’ meeting triggered the filing of separate petitions by the parties, both parties
claiming to be the legitimate directors of the corporation.

According to Aurbach, the actual intention of the parties should be viewed from the agreement wherein it is clearly stated
that the parties’ intention was to form a corporation and not a joint venture. No other evidence should be admitted on the
ground that it contravenes the parol evidence rule under sec. 7, Rule 130, Revised Rules of Court. Saniwares on the other
hand alleged that the agreement failed to express the true intent of the parties.

ISSUE: Whether or not the business established by the parties was a joint venture or a corporation.

RULING: It was a joint venture. The rule is that whether the parties to a particular contract have thereby established among
themselves a joint venture or some other relation depends upon their actual intention which is determined in accordance
with the rules governing the interpretation and construction of contracts. In the instant cases, our examination of important
provisions of the Agreement as well as the testimonial evidence presented by the Lagdameo and Young Group shows that
the parties agreed to establish a joint venture and not a corporation. The history of the organization of Saniwares and the
unusual arrangements which govern its policy making body are all consistent with a joint venture and not with an ordinary
corporation.
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 9 of 17
According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement with ASI in behalf of the
Philippine nationals. He testified that ASI agreed to accept the role of minority vis-a-vis the Philippine National group of
investors, on the condition that the Agreement should contain provisions to protect ASI as the minority.

The legal concept of a joint venture is of common law origin. It has no precise legal definition but it has been generally
understood to mean an organization formed for some temporary purpose. It is in fact hardly distinguishable from the
partnership, since their elements are similar community of interest in the business, sharing of profits and losses, and a
mutual right of control. The main distinction cited by most opinions in common law jurisdictions is that the partnership
contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a
single transaction, and is thus of a temporary nature.

This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or
universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code).

It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by
the law of partnerships. The Supreme Court has however recognized a distinction between these two business forms, and
has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with
others.

Benjamin Yu vs. NLRC, G.R. No. 97212, June 30, 1993

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.
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 10 of 17
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.

Rojas vs. Maglana, G.R. No. 30616, December 10, 1990

FACTS: Maglana and Rojas executed their Articles of Co-Partnership with only the two of them as partners and registered
the same with the SEC. One of the purposes of the duly-registered partnership was to “apply or secure timber and/or minor
forests products licenses and concessions over public and/or private forest lands and to operate, develop and promote such
forests rights and concessions.”

Under the said Articles of Co-Partnership, 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 is also provided in the said
articles of co-partnership that all profits and losses of the partnership shall be divided share and share alike between the
partners and there is no definite term of the existence of the partnership.

For some time, there was no operation of said partnership. Because of the difficulties encountered, Rojas and Maglana
decided to avail of the services of Pahamotang as industrial partner. Maglana, Rojas and Agustin Pahamotang executed
their Articles of Co-Partnership and did not register the same before the SEC. The second partnership realized profits.

Later, Pahamotang, Maglana and Rojas executed a document 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 two (Maglana
and Rojas) shall become the owners of all equipment contributed by Pahamotang and the second partnership, be dissolved.

After the withdrawal of Pahamotang, the partnership was continued by Maglana and Rojas without the benefit of any written
agreement or reconstitution of their written Articles of Partnership.

Subsequently, Rojas entered into a management contract with another logging enterprise. He left and abandoned the
partnership. He withdrew his equipment from the partnership for use in the newly acquired area. The equipment withdrawn
were his supposed contributions to the first partnership.

Maglana then wrote Rojas reminding the latter of his obligation to contribute, either in cash or in equipment, to the capital
investments of the partnership as well as his obligation to perform his duties as logging superintendent. Rojas then told
Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent.
Maglana then told Rojas that the latter’s share will just be 20% of the net profits. Meanwhile, Rojas took funds from the
partnership more than his contribution. Maglana notified Rojas that he dissolved the partnership.

Rojas filed an action against Maglana for the recovery of properties, accounting, receivership and damages.
The trial court, rendered judgment against Rojas. Rojas interposed the instant appeal.

ISSUES:

(1) What is the nature of the partnership and legal relationship of the Maglana-Rojas after Pahamotang retired from the
second partnership.
(2) Whether or not Maglana can unilaterally dissolve the partnership.
(3) Whether Maglana can be held liable for damages.

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 as stressed, there is an existing partnership, duly
registered.

After a careful study of the records as against the conflicting claims of Rojas and Maglana, it appears evident that it was not
the intention of the partners to dissolve the first partnership, upon the constitution of the second one, which they
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 11 of 17
unmistakably called an “Additional Agreement”. To all intents and purposes therefore, the First Articles of Partnership were
only amended, in the form of Supplementary Articles of Co-Partnership which was never registered. Otherwise stated, even
during the existence of the second partnership, all business transactions were carried out under the duly registered articles.
As found by the trial court, it is an admitted fact that even up to now, there are still subsisting obligations and contracts of
the latter. No rights and obligations accrued in the name of the second partnership except in favor of Pahamotang which
was fully paid by the duly registered partnership.

(2) YES, Maglana can unilaterally dissolve the partnership.

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.

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) Being a contract of partnership, each
partner must share in the profits and losses of the venture. That is the essence of a partnership.

(3) NO, Maglana is not liable for damages for his withdrawal.

It will be recalled that after the withdrawal of Pahamotang, Rojas entered into a management contract with another logging
enterprise, the CMS Estate, Inc., a company engaged in the same business as the partnership. He withdrew his equipment,
refused to contribute either in cash or in equipment to the capital investment and to perform his duties as logging
superintendent, as stipulated in their partnership agreement. The records also show that Rojas not only abandoned the
partnership but also took funds in an amount more than his contribution. In the given situation Maglana cannot be said to
be in bad faith nor can he be liable for damages.

CIR vs. Suter, 27 SCRA 152 (1969)

Summary:

The case involves the Commissioner of Internal Revenue theorizing that the marriage of a general partner and limited
partner, and their subsequent acquisition of the interests of the remaining partner in the partnership dissolved the limited
partnership and consequently, the income tax return of respondent should include his and his wife’s individual incomes and
that of the limited partnership.

Doctrine:

A husband and a wife may not enter into a contract of general copartnership, because under the Civil Code, which applies
in the absence of express provision in the Code of Commerce, persons prohibited from making donations to each other are
prohibited from entering into universal partnerships. (2 Echaverri 196) It follows that the marriage of partners necessarily
brings about the dissolution of a pre-existing partnership.
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own, distinct
and separate from that of its partners

Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed by herein respondent William J. Suter as the
general partner, and Julia Spirig and Gustav Carlson, as the limited partner and was registered with SEC. The partners
contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. The firm engaged, among other
activities, in the importation, marketing, distribution and operation of automatic phonographs, radios, television sets and
amusement machines, their parts and accessories

In 1948, however, general partner Suter and limited partner Spirig got married and, thereafter, on 18 December 1948, limited
partner Carlson sold his share in the partnership to Suter and his wife.
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 12 of 17
In 1959, Commissioner of Internal Revenue consolidated the income of the firm and the individual incomes of the partners-
spouses Suter and Spirig resulting in a determination of a deficiency income tax against respondent Suter.

The Court of Tax Appeals reversed the decision of the CIR.

Hence, the petition.

Issues Ratio:
Whether or not the marriage of Suter and Spirig and their subsequent ac quisition of the interests of remaining partner
Carlson in the partnership dissolved the limited partnership

NO. William J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular one since the contributions of the
partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one of them
was an industrial partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were
forbidden to enter by Article 1677 of the Civil Code of 1889.
Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of the causes provided
for that purpose either by the Spanish Civil Code or the Code of Commerce

Whether or not the income of the limited partnership be included In the individual tax return of respondent

NO. Although section 24 of the Internal Revenue Code merges registered general co-partnerships (compañias colectivas)
with the personality of the individual partners for income tax purposes, the limited partnership's separate individuality makes
it impossible to equate its income with that of the component members.
The code taxes the latter on its income, but not the former, because it is in the case of compañias colectivas that the
members, and not the firm, are taxable in their individual capacities for any dividend or share of the profit derived from the
duly registered general partnership

Dispositive:
FOR THE FOREGOING REASONS, the decision under review is hereby affirmed. No costs.

Other Notes:
DEFINITION OF UNIVERSAL PARTNERSHIP:

As appears from Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was the law in force when the subject
firm was organized in 1947), a universal partnership requires either that the object of the association be all the present
property of the partners, as contributed by them to the common fund, or else "all that the partners may acquire by their
industry or work during the existence of the partnership".

Tai Tong Chuache vs. Insurance Commission, L-55397, February 29, 1988

Facts: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the payment
of the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. Arsenio Chua,
representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity Corporation for
P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof)

Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent Zenith Insurance
Corporation. On July 16, 1975, another Fire Insurance was procured from respondent Philippine British Assurance
Company, covering the same building for P50,000.00 and the contents thereof for P70,000.00.

The building and the contents were totally razed by fire.

Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding shares of the loss. Complainants were paid
the following: P41,546.79 by Philippine British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57
by S.S.S. Group of Accredited Insurers Demand was made from respondent Travellers Multi-Indemnity for its share in the
loss but the same was refused. Hence, complainants demanded from the other three (3) respondents the balance of each
share in the loss in the amount of P30,894.31 (P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and P2,866.90, SSS
Accredited) but the same was refused, hence, this action.
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 13 of 17
In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on the ground that the claim
of the complainants had already been waived, extinguished or paid. Both companies set up counterclaim in the total amount
of P 91,546.79.

SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the balance had been paid
in the amount in full.

Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire Policy, covering the
furniture and building of complainants was secured by a certain Arsenio Chua and that the premium due on the fire policy
was paid by Arsenio Chua.

Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire Insurance Policy issued by
respondent Travellers Multi-Indemnity.

As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the ground that the
insurance policy subject of the complaint was taken out by Tai Tong Chuache & Company, for its own interest only as
mortgagee of the insured property and thus complainant as mortgagors of the insured property have no right of action
against the respondent. It likewise dismissed petitioner's complaint in intervention in the following words:

From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was likewise denied
hence, the present petition.

ISSUE: Is the petitioner allowed to recover indemnity?

RULING: Yes, it is.

Art. 1800. The partner who has been appointed manager in the articles of partnership may execute all acts of administration
despite the opposition of his partners, unless he should act in bad faith; and his power is irrevocable without just or lawful
cause. The vote of the partners representing the controlling interest shall be necessary for such revocation of power.

A power granted after the partnership has been constituted may be revoked at any time.

It should be borne in mind that petitioner being a partnership may sue and be sued in its name or by its duly authorized
representative.

The fact that Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner’s declaration that Arsenio
Lopez Chua acts as the managing partner of the partnership was corroborated by respondent insurance company. Thus
Chua as the managing partner of the partnership may execute all acts of administration including the right to sue debtors of
the partnership in case of their failure to pay their obligations when it became due and demandable. Or at the very least,
Chua being a partner of petitioner Tai Tong Chuache& Company is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm.

Information Technology vs. COMELEC, G.R. No. 159139, January 13, 2004

FACTS: Petitioners were participating bidders questioning the identity and eligibility of the awarded contractor Mega Pacific
Consortium (MPC) where the competing bidder is Mega Pacific eSolutions, Inc. (MPEI) as signed by Mr. Willy Yu of the
latter. Private respondent claims that MPEI is the lead partner tied up with other companies like SK C&C, WeSolv,
Election.com and ePLDT. Respondent COMELEC obtained copies of Memorandum of Agreements and Teaming
Agreements.

ISSUE: Whether or not there was an existence of a consortium.

RULING: NO. There was no documentary or other basis for Comelec to conclude that a consortium had actually been
formed amongst MPEI, SK C&C and WeSolv, along with Election.com and ePLDT. The president of MPEI signing for
allegedly in behalf of MPC without any further proof, did not by itself prove the existence of the consortium. It did not show
that MPEI or its president have been duly pre-authorized by the other members of the putative consortium to represent
them, to bid on their collective behalf and, more important, to commit them jointly and severally to the bid undertakings. The
letter is purely self-serving and uncorroborated.
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 14 of 17
Mobil Oil vs. CFI of Rizal, G.R. No. 40457, May 8, 1992

FACTS: Petitioner filed a complaint in the Court of First Instance of Rizal against the partnership La Mallorca and its general
partners, which included private respondents, for collection of a sum of money arising from gasoline purchased on credit
but not paid.

Petitioner, with leave of court, filed an Amended Complaint impleading the heirs of the deceased partners as defendants. A
decision was rendered in favor of the petitioner and against defendants which was moved by private respondents for
modification and/or motion of reconsideration on the ground that Miguel Enriquez, not being a general partner, could not
bind the partnership in the Sales Agreement he signed with plaintiff and defendant Geminiano Yabut who already withdrew
as partner and president of La Mallorca be liable.

ISSUE: Whether or not the petition for modification of decision proper.

RULING: We do not find the grounds relied upon in private respondents’ Petition to Modify Decision to be meritorious.

Mr. Miguel Enriquez automatically became a general partner of the partnership La Mallorca being one of the heirs of the
deceased partner Mariano Enriquez. Article IV of the uncontested Articles of Co-Partnership of La Mallorca provides:

IV. Partners. –– The parties above-named, with their civil status, citizenship and residences set forth after their respective
names, shall be members comprising this partnership, all of whom shall be general partners.

If during the existence of this co-partnership, any of the herein partners should die, the co-partnership shall continue to exist
amongst the surviving partners and the heir or heirs of the deceased partner or partners; Provided, However, that if the heir
or heirs of the deceased partner or partners elect not to continue in the co-partnership, the surviving partners shall have the
right to acquire the interests of the deceased partner or partners at their book value based upon the last balance sheet of
the co-partnership, and in proportion to their respective capital contributions; And, Provided Further, that should a partner
or partners desire to withdraw from the co-partnership and the remaining partners are not willing to acquire his or their
shares or interest in the co-partnership in accordance with the foregoing provisions, the co-partnership shall not thereby be
dissolved, but such retiring partner or partners shall only be entitled to his or their shares in the assets of the co-partnership
according to the latest balance sheet which have been drawn prior to the date of his or their withdrawal. In such event, the
co-partnership shall continue amongst the remaining partners.

As to respondent Geminiano Yabut’s claim that he cannot be liable as a partner, he having withdrawn as such, does not
convince us. The debt was incurred long before his withdrawal as partner and his resignation as President of La Mallorca
on September 14, 1972.

Respondent Geminiano Yabut could not just withdraw unilaterally from the partnership to avoid his liability as a general
partner to third persons like the petitioner in the instant case.

Lim Tong Lim vs. Phil. Fishing Gear, G.R. No. 136448, November 3, 1999

FACTS: On behalf of “Ocean Quest Fishing Corporation,” Antonio Chua and Peter Yao entered into a Contract dated
February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (herein
respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was
not a signatory to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces of floats worth
P68,000 were also sold to the Corporation.

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent filed a collection suit against
Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the
three in their capacities as general partners, on the allegation that “Ocean Quest Fishing Corporation” was a nonexistent
corporation as shown by a Certification from the Securities and Exchange Commission

Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay. He also turned over
to respondent some of the nets which were in his possession. The Trial Court ordered the sale of the fishing nets at a public
auction. Philippine Fishing Gear Industries won the bidding and deposited with the said court the sales proceeds of
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 15 of 17
P900,000. On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was
entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay Respondent.

The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses
presented and (2) on a Compromise Agreement executed by the three 9 in Civil Case No. 1492-MN which Chua and Yao
had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity of commercial documents; (b) a
reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e) damages.

The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that joint liability
could be presumed from the equal distribution of the profit and loss. 12

Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.

ISSUE: Whether a partnership agreement existed.

RULING: Yes. Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth
P3.35 million, financed by a loan secured from Jesus Lim who was petitioner’s brother. In their Compromise Agreement,
they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally
among them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed money,
fell under the term “common fund” under Article 1767. The contribution to such fund need not be cash or fixed assets; it
could be an intangible like credit or industry. That the parties agreed that any loss or profit from the sale and operation of
the boats would be divided equally among them also shows that they had indeed formed a partnership.

Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the nets and the
floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business. It
would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the
aforesaid equipment, without which the business could not have proceeded.

Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in the fishing
business. They purchased the boats, which constituted the main assets of the partnership, and they agreed that the
proceeds from the sales and operations thereof would be divided among them.

A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the
profits or losses that may arise therefrom, even if it is shown that they have not contributed any capital of their own to a
“common fund.” Their contribution may be in the form of credit or industry, not necessarily cash or fixed assets. Being
partners, they are all liable for debts incurred by or on behalf of the partnership. The liability for a contract entered into on
behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted
on its behalf, but reaped benefits from that contract.

Ortega vs. Court of Appeals, G.R. No. 109248, July 3, 1995

Facts: The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on
4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show
that there were several subsequent amendments to the articles of partnership to change the firm name. On 19 December
1980, Joaquin L. Misa, Jesus B. Bito, and Mariano M. Lozada associated themselves together, as senior partners with
Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. On February 17, 1988, petitioner-
appellant wrote the respondents-appellees a letter stating his withdrawal and retirement from the firm of Bito, Misa and
Lozada and requested to make proper liquidation including his interest to the two floors of the building.

The petitioner led with this Commission's Securities Investigation and Clearing Department (SICD) a petition for dissolution
and liquidation of partnership which resulted to respondents-appellees filing their opposition. The Hearing Officer held that
the withdrawal of Atty. Misa had dissolved the partnership of Bito, Misa and Lozada. A Motion for Reconsideration was
sought but during the pendency of the case in the CA, Bito and Lozada died which prompted Misa to renew his application
for receivership.

Issues: Whether or not CA has erred in holding that the partnership of Bito, Misa & Lozada is a partnership at will;
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 16 of 17
Whether or not CA has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of
his good or bad faith; and

Whether or not CA has erred in holding that private respondent's demand for the dissolution of the partnership so that he
can get a physical partition of partnership was not made in bad faith.

Held: 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. Any one of the partners may, at his sole pleasure, dictate
a dissolution of the partnership at will.

Neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation
prevent the dissolution of any partnership by an act or will of a partner. Among partners, mutual agency arises and the
doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership.

The Court we accord to the CA and the respondent Commission on their common factual finding, that Attorney Misa did not
act in bad faith. Public respondents viewed his withdrawal to have been spurred by "interpersonal conflict" among the
partners. It would not be right to let any of the partners remain in the partnership under such an atmosphere of animosity;
certainly, not against their will. For as long as the reason for withdrawal of a partner is not contrary to the dictates of justice
and fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to
characterize the act.

Dan Fue Leung vs. IAC, G.R. No. 70926, January 31, 1989

FACTS: Petitioner prays that the court reverses the ruling of the trial court and the IAC that ordered it to pay the private
respondent 22% of his annual earnings as same was his partner in the panciteria. He maintains that he was the sole
proprietor of the business, as evidenced by his licenses and documents that bear only his name.

Private respondent avers that he gave P4,000 to petitioner as financial aid to establish the business in exchange for the
right to 22% of its annual earnings. As such he is merely demanding what is rightfully his.

Petitioner counters that 22 years have past since the alleged receipt of such financial aid, hence the action has already
prescribed.

ISSUE: Was the private respondent entitled to such earnings?

RULING: Yes, as he was petitioner’s partner.

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. We agree with the appellate court’s observation to the effect that “… given its ordinary meaning, financial assistance
is the giving out of money to another without the expectation of any returns therefrom’. It connotes an ex gratia dole out in
favor of someone driven into a state of destitution.

But this circumstance under which the P4,000.00 was given to the petitioner does not obtain in this case.’ (p. 99, Rollo) The
complaint explicitly stated that “as a return for such financial assistance, plaintiff (private respondent) would be entitled to
twenty-two percentum (22%) of the annual profit derived from the operation of the said panciteria.

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are — 1)
two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2) intention on the
part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil.
110)-have been established.

As stated by the respondent, a partner shares not only in profits but also in the losses of the firm. If excellent relations exist
among the partners at the start of business and all the partners are more interested in seeing the firm grow rather than get
 AGENCY, TRUSTS AND PARTNERSHIP | Case Digest |Page 17 of 17
immediate returns, a deferment of sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner
does not assert his rights anytime within ten years from the start of operations, such rights are irretrievably lost. The private
respondent’s cause of action is premised upon the failure of the petitioner to give him the agreed profits in the operation of
Sun Wah Panciteria. In effect the private respondent was asking for an accounting of his interests in the partnership.

Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806, 1807, and
1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run only
upon the dissolution of the partnership when the final accounting is done.

Emnace vs. Court of Appeals, G.R. No. 126334, November 23, 2001

FACTS: Petitioners Emnace, Tabanao and Divigranacia were partners in a business known as Ma. Nelma Fishing Industry.
Sometime in January 1986, they decided to dissolve their partnership and executed an agreement of partition and
distribution. Throughout the existence of the partnership, and even after Tabanao’s death, petitioner failed to submit to
Tabanao’s heirs any financial statements. Petitioner also reneged on his promise to turn over the 1/3 share in the total
assets of the partnership to the heirs. Private respondents filed an action for accounting, payment of shares, division of
assets and damages. Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction
and lack of capacity of the estate of Tabanao to sue. The trial court denied the motion to dismiss. The trial court held that
the heirs of Tabanao had a right to sue in their own names, in view of the provision of Art. 777 of the CC.

ISSUE: Whether the private respondents have the legal capacity to sue.

HELD: YES. petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to sue since she was
never appointed as administratrix or executrix of his estate. Petitioner’s objection in this regard is misplaced. The surviving
spouse does not need to be appointed as executrix or administratrix of the estate before she can file the action. She and
her children are complainants in their own right as successors of Vicente Tabanao. From the very moment of Vicente
Tabanao’s death, his rights insofar as the partnership was concerned were transmitted to his heirs, for rights to the
succession are transmitted from the moment of death of the decedent. Whatever claims and rights Vicente Tabanao had
against the partnership and petitioner were transmitted to respondents by operation of law, more particularly by succession,
which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the
inheritance of a person are transmitted. Moreover, respondents became owners of their respective hereditary shares from
the moment Vicente Tabanao died. A prior settlement of the estate, or even the appointment of Salvacion Tabanao as
executrix or administratrix, is not necessary for any of the heirs to acquire legal capacity to sue. As successors who stepped
into the shoes of their decedent upon his death, they can commence any action originally pertaining to the decedent. From
the moment of his death, his rights as a partner and to demand fulfillment of petitioner’s obligations as outlined in their
dissolution agreement were transmitted to respondents. They, therefore, had the capacity to sue and seek the court’s
intervention to compel petitioner to fulfill his obligations.