that it was dissolved when respondents informed petitioners of the intention to
Villareal v. Ramirez
G.R. No. 144214, 14 July 2003
FACTS:
Petitioners formed a partnership for the operation of a restaurant and catering business.
Respondent joined as a partner in the business. Subsequently, one of the partners
withdrew from the partnership, and his capital contribution of 1/4 was refunded to him
in cash by agreement of the partners.
Meanwhile, without prior knowledge of respondents, petitioners closed down the
restaurant, allegedly because of increased rental. Respondent informed petitioners that
they were no longer interested in continuing their partnership or in reopening the
restaurant, and that they were accepting the latters offer to return their capital
contribution consisting of 1/3 share. However, all their written requests left unheeded.
Respondents subsequently filed a Complaint for the collection of a sum of money from
petitioners.
Petitioners contended that respondents had no right to demand a return of their equity
because their share, together with the rest of the capital of the partnership, had been
spent as a result of irreversible business losses. On the other hand, Respondents alleged
that they did not know of any loan encumbrance on the restaurant. According to them,
the loans incurred by petitioners should be regarded as purely personal and, as such, not
chargeable to the partnership. Respondents further averred that they had not received
any regular report or accounting from the latter, who had solely managed the business.
Hence, this Petition.
ISSUE:
Whether petitioners are liable to respondents for the latters share in the partnership.
RULING:
NO. We hold that respondents have no right to demand from petitioners the return of
their equity share.
Both the trial and the appellate courts found that a partnership had indeed existed, and
discontinue it because of the formers dissatisfaction with, and loss of trust in, the latters
management of the partnership affairs. Except as managers of the partnership,
petitioners did not personally hold its equity or assets. The partnership has a juridical
personality separate and distinct from that of each of the partners. Since the capital was
contributed to the partnership, not to petitioners, it is the partnership that must refund
the equity of the retiring partners, the amount to be refunded is necessarily limited to its
total resources. In other words, it can only pay out what it has in its coffers, which
consists of all its assets. However, before the partners can be paid their shares, the
creditors of the partnership must first be compensated. After all the creditors have been
paid, whatever is left of the partnership assets becomes available for the payment of the
partners shares.
The records show that the partnership capital was actually reduced. When petitioners
and respondents ventured into business together, they should have prepared for the fact
that their investment would either grow or shrink. In the present case, the investment of
respondents substantially dwindled. The original amount of P250,000 which they had
invested could no longer be returned to them, because one third of the partnership
properties at the time of dissolution did not amount to that much.
It is a long established doctrine that the law does not relieve parties from the effects of
unwise, foolish or disastrous contracts they have entered into with all the required
formalities and with full awareness of what they were doing. Courts have no power to
relieve them from obligations they have voluntarily assumed, simply because their
contracts turn out to be disastrous deals or unwise investments.
Santos v. Spouses Reyes
G.R. No. 135813, 25 October 2001
FACTS:
Sometime in June, 1986, Petitioner Fernando Santos and Respondent Nieves Reyes
were introduced to each other by one Meliton Zabat regarding a lending business
venture proposed by Nieves. It was verbally agreed that petitioner would act as
financier while Nieves and Zabat would take charge of solicitation of members and
collection of loan payments. The venture was launched on June 13, 1986, with the
understanding that petitioner would receive 70% of the profits while Nieves and Zabat
would earn 15% each.
In July, 1986, Nieves introduced Cesar Gragera to petitioner. Gragera, as chairman of
the Monte Maria Development Corporation Monte Maria, for brevity, sought short-term
loans for members of the corporation. Petitioner and Gragera executed an agreement
providing funds for Monte Maria’s members.
On August 6, 1986, petitioner Nieves and Zabat executed the ‘Article of Agreement’
which formalized their earlier verbal arrangement. Petitioner and Nieves later
discovered that their partner Zabat engaged in the same lending business in competition
with their partnership. Zabat was thereby expelled from the partnership. The operations
with Monte Maria continued.
On June 5, 1987, petitioner filed a complaint for recovery of sum of money and
damages. Petitioner charged [respondents], allegedly in their capacities as employees of
[petitioner], with having misappropriated funds intended for Gragera for the period July
8, 1986 up to March 31, 1987. Nieves allegedly failed to account for the amount. In
their answer, [respondents] asserted that they were partners and not mere employees of
[petitioner]. The complaint, they alleged, was filed to preempt and prevent them from
claiming their rightful share to the profits of the partnership.
For her part, Nieves claimed that she participated in the business as a partner, as the
lending activity with Monte Maria originated from her initiative. Petitioner on the other
hand insisted that [respondents] were his mere employees and not partners with respect
to the agreement with Gragera. He claimed that after he discovered Zabat’s activities, he
ceased infusing funds, thereby causing the extinguishment of the partnership. The
agreement with Gragera was a distinct partnership [from] that of [respondent] and
Zabat. [Petitioner] asserted that [respondents] were hired as salaried employees with
respect to the partnership between [petitioner] and Gragera. RTC held that respondents
were partners, not mere employees, of petitioner.
ISSUE:
Whether there was a partnership established.
RULING:
Yes. Respondents were industrial partners of petitioner. Nieves herself provided the
initiative in the lending activities with Monte Maria. In consonance with the agreement
between appellant, Nieves and Zabat (later replaced by Arsenio), [respondents]
contributed industry to the common fund with the intention of sharing in the profits of
the partnership. [Respondents] provided services without which the partnership would
not have [had] the wherewithal to carry on the purpose for which it was organized and
as such [were] considered industrial partners.
While concededly, the partnership between [petitioner,] Nieves and Zabat was
technically dissolved by the expulsion of Zabat therefrom, the remaining partners
simply continued the business of the partnership without undergoing the procedure
relative to dissolution. Instead, they invited Arsenio to participate as a partner in their
operations. There was therefore, no intent to dissolve the earlier partnership. The
partnership between petitioner, Nieves and Arsenio simply took over and continued the
business of the former partnership with Zabat, one of the incidents of which was the
lending operations with Monte Maria.
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. The “Articles of Agreement” stipulated that the signatories shall
share the profits of the business in a 70-15-15 manner, with petitioner getting the lion’s
share. This stipulation clearly proved the establishment of a partnership.
Tocao v. Court of Appeals The payment of commissions did not preclude the existence of the partnership inasmuch
as such practice is often resorted to in business circles as an impetus to bigger sales
G.R. No. 127405, 4 October 2000
volume.
The right to choose with whom a person wishes to associate himself is the very
FACTS: foundation and essence of that partnership. Its continued existence is, in turn, dependent
Petitioner seek to reverse the decision ordering them to pay the private respondent on the constancy of that mutual resolve, along with each partner’s capability to give it,
damages, commissions, and to render an accounting of the partnership’s affairs. and the absence of cause for dissolution provided by the law itself. Verily, any one of
the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He
She alleges that private respondent was a mere agent of the company, as there was no must, however, act in good faith, not that the attendance of bad faith can prevent the
contract of partnership, and as evidenced by her receiving commissions, such being the dissolution of the partnership but that it can result in a liability for damages.
case she is not entitled to ask for any audit of the partnership’s affairs.
In this case, petitioner Tocao’s unilateral exclusion of private respondent from the
partnership is shown by her memo to the Cubao office plainly stating that private
ISSUE: respondent was, as of October 9, 1987, no longer the vice-president for sales of
Geminesse Enterprise.43 By that memo, petitioner Tocao effected her own withdrawal
Were the petitioner’s allegations possessed of merit? from the partnership and considered herself as having ceased to be associated with the
partnership in the carrying on of the business. Nevertheless, the partnership was not
terminated thereby; it continues until the winding up of the business.
RULING:
The winding up of partnership affairs has not yet been undertaken by the partnership.
No, they were void of any merit.
This is manifest in petitioners’ claim for stocks that had been entrusted to private
To be considered a juridical personality, a partnership must fulfill these requisites: respondent in the pursuit of the partnership business. The determination of the amount
(1) two or more persons bind themselves to contribute money, property or industry to a of damages commensurate with the factual findings upon which it is based is primarily
common fund; and the task of the trial court.
(2) intention on the part of the partners to divide the profits among themselves.15 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.
Petitioners admit that private respondent had the expertise to engage in the business of
distributorship of cookware.
Private respondent contributed such expertise to the partnership and hence, under the
law, she was the industrial or managing partner. It was through her reputation with the
West Bend Company that the partnership was able to open the business of
distributorship of that company’s cookware products; it was through the same efforts
that the business was propelled to financial success.
Petitioner Tocao herself admitted private respondent’s indispensable role in putting up
the business. By the set-up of the business, third persons were made to believe that a
partnership had indeed been forged between petitioners and private respondents.
Aurbach v. Sanitary Wares Manufacturing Corporation
G.R. No. 75875, 15 December 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.
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.
Evangelista, et al. v. CIR, GR No. L-9996, October 15, 1957
Facts:
            Herein petitioners seek a review of CTA’s decision holding them liable for
income tax, real estate dealer’s tax and residence tax. As stipulated, petitioners
borrowed from their father a certain sum for the purpose of buying real properties.
Within February 1943 to April 1994, they have bought parcels of land from different
persons, the management of said properties was charged to their brother Simeon
evidenced by a document. These properties were then leased or rented to various
tenants.
            On September 1954, CIR demanded the payment of income tax on corporations,
real estate dealer’s fixed tax, and corporation residence tax to which the petitioners seek
to be absolved from such payment.
 
Issue: Whether petitioners are subject to the tax on corporations.
 
Ruling:
            The Court ruled that with respect to the tax on corporations, the issue hinges on
the meaning of the terms “corporation” and “partnership” as used in Section 24
(provides that a tax shall be levied on every corporation no matter how created or
organized except general co-partnerships) and 84 (provides that the term corporation
includes among others, partnership) of the NIRC. Pursuant to Article 1767, NCC
(provides for the concept of partnership), its essential elements are: (a) an agreement to
contribute money, property or industry to a common fund; and (b) intent to divide the
profits among the contracting parties.
It is of the opinion of the Court that the first element is undoubtedly present for
petitioners have agreed to, and did, contribute money and property to a common fund.
As to the second element, the Court fully satisfied that their purpose was to engage in
real estate transactions for monetary gain and then divide the same among themselves as
indicated by the following circumstances:
1.       The common fund was not something they found already in existence nor
a property inherited by them pro indiviso. It was created purposely, jointly borrowing a
substantial portion thereof in order to establish said common fund;
2.       They invested the same not merely in one transaction, but in a series of
transactions. The number of lots acquired and transactions undertake is strongly
indicative of a pattern or common design that was not limited to the
conservation and preservation of the aforementioned common fund or even of
the property acquired. In other words, one cannot but perceive a character of
habitually peculiar to business transactions engaged in the purpose of gain;
3.       Said properties were not devoted to residential purposes, or to other
personal uses, of petitioners but were leased separately to several persons;
4.       They were under the management of one person where the affairs relative
to said properties have been handled as if the same belonged to a corporation or
business and enterprise operated for profit;
5.       Existed for more than ten years, or, to be exact, over fifteen years, since
the first property was acquired, and over twelve years, since Simeon Evangelista
became the manager;
6.       Petitioners have not testified or introduced any evidence, either on their
purpose in creating the set up already adverted to, or on the causes for its
continued existence.
The collective effect of these circumstances is such as to leave no room for doubt on the
existence of said intent in petitioners herein.
            Also, petitioners’ argument that their being mere co-owners did not create a
separate legal entity was rejected because, according to the Court, the tax in question is
one imposed upon "corporations", which, strictly speaking, are distinct and different
from "partnerships". When the NIRC includes "partnerships" among the entities subject
to the tax on "corporations", said Code must allude, therefore, to organizations which
are not necessarily "partnerships", in the technical sense of the term. The qualifying
expression found in Section 24 and 84(b) clearly indicates that a joint venture need not
be undertaken in any of the standard forms, or in conformity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted
for purposes of the tax on corporations. Accordingly, the lawmaker could not have
regarded that personality as a condition essential to the existence of the partnerships
therein referred to. For purposes of the tax on corporations, NIRC includes these
partnerships - with the exception only of duly registered general co partnerships - within
the purview of the term "corporation." It is, therefore, clear that petitioners herein
constitute a partnership, insofar as said Code is concerned and are subject to the income
tax for corporations.
As regards the residence of tax for corporations (Section 2 of CA No. 465), it is
analogous to that of section 24 and 84 (b) of the NIRC. It is apparent that the terms
"corporation" and "partnership" are used in both statutes with substantially the same
meaning. Consequently, petitioners are subject, also, to the residence tax for
corporations.
Finally, on the issues of being liable for real estate dealer’s tax, they are also
liable for the same because the records show that they have habitually engaged in
leasing said properties whose yearly gross rentals exceeds P3,000.00 a year.

Pascual and Dragon v. CIR, G.R. No. 78133, October 18, 1988

25 Mar
[GANCAYCO, J.] 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
FACTS: 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
Petitioners bought two (2) parcels of land and a year after, they bought another three (3) support the proposition that they thereby formed an unregistered partnership. The two
parcels of land. Petitioners subsequently sold the said lots in 1968 and 1970, and isolated transactions whereby they purchased properties and sold the same a few years
realized net profits. The corresponding capital gains taxes were paid by petitioners in thereafter did not thereby make them partners. They shared in the gross profits as co-
1973 and 1974 by availing of the tax amnesties granted in the said years. However, the owners and paid their capital gains taxes on their net profits and availed of the tax
Acting BIR Commissioner assessed and required Petitioners to pay a total amount of amnesty thereby. Under the circumstances, they cannot be considered to have formed an
P107,101.70 as alleged deficiency corporate income taxes for the years 1968 and 1970. unregistered partnership which is thereby liable for corporate income tax, as the
Petitioners protested the said assessment asserting that they had availed of tax amnesties respondent commissioner proposes.
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
Sunga-Chan v. Lamberto Chua
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, G.R. No. 143340, 15 August 2001
Doctrine: Whether or not the non-registration of the contract of partnership invalidate the
Partnership retains its juridical personality even if it fails to register because registration partnership.
merely gives notice to third parties.

RULING:
FACTS: Petitioners maintain that said partnership had an initial capital of P200,000.00 should
Respondent Lamberto Chua alleged that in 1977, he verbally entered into a partnership have been registered with the Securities and Exchange Commission (SEC) since
with Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG). Respondent registration is mandated by the Civil Code.
and Jacinto allegedly agreed to register the business name of their partnership, Shellite True, Article 1772 of the Civil Code requires that partnerships with a capital of
Gas Appliance Center, under the name of Jacinto as a sole proprietorship. Respondent P3,000.00 or more must register with the SEC, however, this registration requirement is
delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn not mandatory. Article 1768 of the Civil Code explicitly provides that the partnership
produced P100,000.00, with the intention that the profits would be equally divided retains its juridical personality even if it fails to register. The failure to register the
between them. contract of partnership does not invalidate the same as among the partners, so long as
Upon Jacinto’s death in 1989, his wife Cecilia and his daughter Lilibeth Sunga, took the contract has the essential requisites, because the main purpose of registration is to
over the operations, control, custody, disposition and management of Shellite without give notice to third parties, and it can be assumed that the members themselves knew of
respondent’s consent. Despite respondent’s repeated demands upon petitioners for the contents of their contract. In the case at bar, noncompliance with this directory
accounting, inventory, appraisal, winding up and restitution, petitioners failed to provision of the law will not invalidate the partnership considering that the totality of
comply. Subsequently, Lilibeth gave P200,000.00 to the respondent representing the the evidence proves that respondent and Jacinto indeed forged the partnership in
latter’s share in the partnership. Still, petitioners failed to comply with their duty to question.
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:
Torres v. Court of Appeals
G.R. No. 134559, 9 December 1999
Doctrine:
A partner may contribute not only money or property, but also industry.
A contract of partnership is void, whenever immovable property is contributed thereto,
if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.
FACTS:
Sisters Antonia Torres and Emeteria Baring, herein petitioners, 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 Joint Venture Agreement, was to be used for the development of the
subdivision through mortgage of said property. All three of them also agreed to share
the proceeds from the sale of the subdivided lots.
The project failed 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
misappropriate the amount loaned to his own company.
On the other hand, respondent 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 for estafa against respondent and his
wife, but were acquitted. They filed a civil case, but was dismissed by trial court and
affirmed by Court of Appeals.
Hence, this petition.
ISSUE:
Whether or not the petitioners have formed partnership with the respondent and if they
do, whether or not it was void.
RULING:
A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides: “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.”
Under the Agreement, petitioners would contribute property to the partnership in the
form of land which was to be developed into a subdivision; while respondent would
give, in addition to his industry, the amount needed for general expenses and other
costs. Furthermore, the income from the said project would be divided according to the
stipulated percentage. There is manifestation of intent to form partnership.
It should be stressed that the parties implemented the contract. Thus, petitioners
transferred the title to the land to facilitate its use in the name of the respondent. On the
other hand, respondent caused the subject land to be mortgaged, the proceeds of which
were used for the survey and the subdivision of the land. As noted earlier, he developed
the roads, the curbs and the gutters of the subdivision and entered into a contract to
construct low-cost housing units on the property.
Respondent’s actions clearly belie petitioners’ contention that he made no contribution
to the partnership. Under Article 1767 of the Civil Code, a partner may contribute not
only money or property, but also industry.
Further, under Art. 1773, a contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said property is not made, signed by
the parties, and attached to the public instrument. This was intended primarily to protect
third person’s interest. The execution of a public instrument would be useless if there is
no inventory of the property contributed, because without its designation and
description, they cannot be subject to inscription in the Registry of Property, and their
contribution cannot prejudice third persons. This will result in fraud to those who
contract with the partnership in the belief [in] the efficacy of the guaranty in which the
immovables may consist. Thus, the contract is declared void by the law when no such
inventory is made.” The case at bar does not involve third parties who may be
prejudiced.
HONGKONG BANK V. JURADO AND CO.
G.R. NO. L-414 NOVEMBER 9, 1903
FACTS:
An order was issued by the court including Don Ricardo Jurado Regidor in the
bankruptcy of Jurado & Co. being a general partner thereof. However, the entire
proceeding was dismissed. Senor Regidor filed a motion to be made as a co-defendant
in which he claimed that he was not properly included in the bankruptcy of Jurado &
Co.
Also, a motion was filed for the court to re-schedule the day of the hearing due to the
death of the liquidator of the defendant firm.
ISSUE: WON Don Regidor, as a general partner of Jurado and Co., should be made a
co-defendant in the case.
RULING: No. It appears from the records of the court that, during the hearing, Senor
Regidor as one of such partners, in open court, appointed an attorney to argue for the
firm. As a partner of Jurado and Co., he is represented by the firm and has no right to
appear as an individual separate from the firm. If he has this right, then every partner
would have the same right. We see nothing in the case to indicate that his rights will not
be protected by the lawyers whom the firm may see fit to employ. Thus, his motion to
be made a co-defendant was denied.
Tai Tong Chuache & Co. v. Insurance Commission
G.R. No. L-55397, 29 February 1988
FACTS:
Petitioner seeks to recover from private respondent, its insurer, indemnity as the
property subject of the same was lost due to an insurable risk as per their policy.
Respondent counters that the the petitioner has no legal standing to claim the same as
the policy was executed between it and a certain Arsenio Chua in his own name and not
the petitioner.
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.
HUNG-MAN YOC V. KIENG CHIONG-SENG
G.R. NO. 2888 OCTOBER 23, 1906
FACTS:
Private respondents came into an agreement to engage in the importation of
goods for sale at a profit under the firm name of Kieng-Chiong-Seng. The private
respondents were as follow as follows:
 Chua Che Co
 Yu Tec Pin – Manager
 Ang Chu Keng
 Kiong Tiao Eng – Manager
The problem arose when Yu Tec Pin and Kiong Tiao Eng contracted the
obligations in favor of the petitioner. When the respondents failed to comply with the
alleged obligation, the petitioner instituted an action for its enforceability. The lower
court entered judgment against each and all respondents for the sum of 7,372.75 pesos
with 6% interest per annum. It further ruled that the respondents were partners under the
firm name of Kieng Chiong Seng.
Aggrieved by the decision, Chua Che Co appealed the decision contending that
there was no partnership that existed and that they only formed an association. In fact,
such organization was was never registered and is not evidence by any public document.
Also, he never contracted with the petitioner.
The petitioner contended that there is no doubt that the partnership of Kieng
Chiong Seng was a mercantile partnership organized for the purpose of engaging in
commercial pursuits, although such organization was not evidenced by any public
document as required by Article 119 of the Code of Commerce, nor was it registered as
required by Article 17 of the said code.
ISSUES: 1. What kind of partnership existed?
2. WON all the respondents can be held liable to the petitioners
RULING:
1. The partnership in dispute was a de facto partnership. Although it had no legal
standing, since it contracted obligations in favor of the plaintiff, the liability
arising from such obligations must be enforceable against some one.
The partnership in question not being included in any of the classes of
partnership defined by the Code of Commerce there should be applied to it the general
provisions applicable to all partnerships contained in Article 120 of the Code of
Commerce, which reads as follows:
“The persons in charge of the management of the association who do not comply
with the provisions of the foregoing article (Art. 119, which requires that the articles of
partnership be recorded in the Mercantile Register) shall be responsible together with
the persons not members of the association with whom they may have transacted
business in the same name.”
It has not been proven that Kieng Chiong Sen was the firm name, but rather the
designation of the partnership.
It cannot be the firm name of general partnership because this should contain the
names of all the partner, or some of them, or at least one of them to be, followed in the
two latter cases by the words “and company”, whereas in this case none of the four
names of those who it is alleged were members of the firm appear in the firm name of
the partnership.
Neither can it be considered as the firm name of a limited partnership for the
reason that this should contain the same requisites as the firm name of general
partnership, and in addition thereto the word “limited”. The firm name in question has
absolutely none of these requisites.
2. No. Not all respondents can be held liable. The defendant, Chua Che Co,
was not in charge of the management of the association, nor did he make
any contract at all with the plaintiff, as clearly appear from the testimony
of the various witnesses, the agent of the partnership, Yu Yec Pin, being
the person who made all the contracts for the partnership, also Kieng
Tiao Eng according to two of the witnesses. It is evident, therefore, that
he has incurred no liability and that he cannot be held individually
responsible for the payment of the plaintiff's claims, as the court below
found.
 the vehicles to MacDonald being void, the sale to Gonzales is also void since a buyer
MACDONALD vs. NATIONAL CITY BANK OF NEW YORK [G.R. No. L-7991. cannot have a better right than the seller. As was held in Behn Meyer & Co. vs.
May 21, 1956.] Rosatzin, where a partnership not duly organized has been recognized as such in its
  dealings with certain persons, it shall be considered as “partnership by estoppel” and the
  persons dealing with it are estopped from denying its partnership existence. If the law
  recognizes a defectively organized partnership as de facto as far as third persons are
Facts: concerned, for purposes of its de facto existence it should have such attribute of a
  partnership as domicile.
Stasikinocey is a partnership formed by da Costa, Gorcey, Kusik and Gavino. It was
denied registration by the SEC due to a confusion between the partnership and Cardinal
Rattan. Cardinal Rattan is the business name or style used by Stasikinocey. Da Costa
and Gorcey are the general partners of Cardinal Rattan. Moreover, Da Costa is the
managing partner of Cardinal Rattan. Stasikinocey had an overdaft account with
Nationa City Bank, which was later converted into an ordinary loan due the
partnership’s failure in paying its obligation. The ordinary loan was secured by a chattel
mortgage over 3 vehicles. During the subsistence of the loan, the vehicles were sold to
MacDonald and later on, MacDonald sold 2 of the 3 vehicles to Gonzales. The bank
brought an action for recovery of its credit and foreclosure of the chattel mortgage upon
learning of these transactions. Held: While an unregistered commercial partnership has
no juridical personality, nevertheless, where two or more persons attempt to create a
partnership failing to comply with all the legal formalities, the law considers them as
partners and the association is a partnership in so far as it is a favorable to third persons,
by reason of the equitable principle of estoppel. Where a partnership not duly organized
has been recognized as such in its dealings with certain persons, it shall be considered
as “partnership by estoppel” and the persons dealing with it are estopped from denying
its partnership existence.
 
Issue: WON the partnership, Stasikinocey is estopped from asserting that it does not
have juridical personality since it is an unregistered commercial partnership
 
Ratio: [YES] While an unregistered commercial partnership has no juridical
personality, nevertheless, where two or more persons attempt to create a partnership
failing to comply with all the legal formalities, the law considers them as partners and
the association is a partnership in so far as it is a favorable to third persons, by reason of
the equitable principle of estoppel. Da Costa and Gorcey cannot deny that they are
partners of the partnership Stasikinocey, because in all their transactions with the
National City Bank they represented themselves as such. McDonald cannot disclaim
knowledge of the partnership Stasikinocey because he dealt with said entity in
purchasing two of the vehicles in question through Gorcey and Da Costa. The sale of
Pioneer Insurance & Security Corp. v. Court of Appeals
G.R. Nos. 84197, 28 July 1989
FACTS:
Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air
Lines (SAL) a single proprietorship. Japan Domestic Airlines (JDA) and Lim entered
into and executed a sales contract for the sale and purchase of two (aircrafts and one set
of necessary spare parts.
It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco),
Francisco and Modesto Cervantes (Cervanteses) and ConstancioMaglana contributed
some funds used in the purchase of the above aircrafts and spare parts. The funds were
supposed to be their contributions to a new corporation proposed by Lim to expand his
airline business.
Lim doing business under the name and style of SAL executed in favor of Pioneer a
deed of chattel mortgage as security for the latter’s suretyship in favor of the former. It
was stipulated therein that Lim transfer and convey to the surety the two aircrafts. The
deed was duly registered with the Office of the Register of Deeds of the City of Manila
and with the Civil Aeronautics Administration.
Lim defaulted on his subsequent installment payments prompting JDA to request
payments from the surety. Pioneer then filed a petition for the extrajudicial foreclosure
of the said chattel mortgage. The Cervanteses and Maglana, however, filed a third-party
claim alleging that they are co-owners of the aircrafts.
corporation within the statute, they become in legal effect partners inter se, and their
rights as members of the company to the property acquired by the company will be
recognized.
However, such a relation does not necessarily exist, for ordinarily persons cannot be
made to assume the relation of partners, as between themselves, when their purpose is
that no partnership shall exist, and it should be implied only when necessary to do
justice between the parties; thus, one who takes no part except to subscribe for stock in
a proposed corporation which is never legally formed does not become a partner with
other subscribers who engage in business under the name of the pretended corporation,
so as to be liable as such in an action for settlement of the alleged partnership and
contribution. A partnership relation between certain stockholders and other
stockholders, who were also directors, will not be implied in the absence of an
agreement, to make the former liable to contribute for payment of debts illegally
contracted by the latter.
Applying therefore the principles of law earlier cited, no de facto partnership was
created among the parties which would entitle the petitioner to a reimbursement of the
supposed losses of the proposed corporation. The record shows that the petitioner was
acting on his own and not in behalf of his other would-be incorporators in transacting
the sale of the airplanes and spare parts.

ISSUE:
What legal rules govern the relationship among co-investors whose agreement was to
do business through the corporate vehicle but who failed to incorporate the entity in
which they had chosen to invest?

RULING:
It has been held that persons who attempt, but fail, to form a corporation and who carry
on business under the corporate name occupy the position of partners inter se. Thus,
where persons associate themselves together under articles to purchase property to carry
on a business, and their organization is so defective as to come short of creating a

LOZANO V. DEPAKAKIBO
G.R. NO. L-13680 APRIL 27, 1960
FACTS:
Lozano and Depakakibo established a partnership for the purpose of mainting,
operating and distributing electric light and power in the Municaplity of Dumagas. The
partnership is capitalized at the sum of P30,000 where Lozzano agreed to furnish 60%
while Depakakibo, 40%. However, the franchise for venture in favor of Buenaflor was
cancelled and revoked by the Public Service Commission. Lozano thereafter sold
Generator Buda to Decologon. When the decision was appealed, a temporary certificate
of public convenience was issued in the name of Decolongon. Depakakibo sold one
Crossly Diesel Engine to spouses Jimenea and Harder. Lozano brought action against
Depakakibo alleging the latter wrongfully detained the generator Buda and wooden
posts to which he is entitled to the possession of. Lozano prayed the properties be
delivered back to him.
ISSUES: WON disposal of contribution of parties is allowed
RULING: An equipment which was contributed by one of the partners to the
partnership becomes the property of the partnership and as such cannot be disposed of
by the party contributing the same without the consent of the partnership or the other
partner.
Moran v. Court of Appeals
G.R. No. L-59956, 31 October 1984
FACTS:
Petitioner was ordered by CA to issue the private respondent, based on their contract of
partnership, his investment in the venture, what he could have earned as commissions,
and what he could have earned as profits from their business venture.
Hence this petition.
ISSUE:
Is the petitioner obligated to pay his partner regardless of the business’ outcome?
RULING:
No, he is not.
Article 1797 of the Civil Code provides:
The losses and profits shall be distributed in conformity with the agreement. If only the
share of each partner in the profits has been agreed upon, the share of each in the losses
shall be in the same proportion.
Being a contract of partnership, each partner must share in the profits and losses of the
venture. That is the essence of a partnership. And even with an assurance made by one
of the partners that they would earn a huge amount of profits, in the absence of fraud,
the other partner cannot claim a right to recover the highly speculative profits.
There are risks in any business venture and the failure of the undertaking cannot entirely
be blamed on the managing partner alone, especially if the latter exercised his best
business judgment.