1. WOLRGANG AURBACH Et., Al. Vs.

SANITARY WARES MANUFACTURING

CORPORATOIN Et., Al. (G.R. No. 75875, December 15, 1989)

FACTS
ISSUE
HELD : A JOINT VENTURE
While certain provisions of the Agreement would make it appear that the parties thereto disclaim
being partners or joint venturers such disclaimer is directed at third parties and is not inconsistent
with, and does not preclude, the existence of two distinct groups of stockholders in Saniwares one of
which shall constitute the majority (the Philippine Investors) , and the other shall constitute the
minority stockholder (ASI ).

In any event, the evident intention of the Philippine Investors and ASI in entering into the Agreement
is to enter into a joint venture enterprise, and if some words in the Agreement appear to be contrary
to the evident intention of the parties, the latter shall prevail over the former (Art. 1370, New Civil
Code).
The various stipulations of a contract shall be interpreted together attributing to the doubtful ones
that sense which may result from all of them taken jointly (Art. 1374, New Civil Code).

Moreover, in order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.

In the instant cases, the 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. The contemporaneous and subsequent acts of the parties clearly
shows their intention to make a joint venture not a corporation
2. HEIRS OF TAN ENG KEE Vs. COURT OF APPEALS Et., Al. (G.R. No. 126881, October
3, 2000)

HEIRS OF TAN ENG KEE, filed suit against the decedent's brother TAN ENG LAY and
BENGUET LUMBER COMPANY, as represented by Tan Eng Lay regarding the accounting,
liquidation and winding up of the alleged partnership formed after World War II between Tan
Eng Kee and Tan Eng Lay. The complaint principally alleged that after the second World
War, Tan Eng Kee 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 which they named "Benguet Lumber" and jointly managed until Tan Eng Kee'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 Eng Kee and his heirs of their
rightful participation in the profits of the business. The RTC decided in favor of petitioners.
Private respondent sought relief before the Court of Appeals which, decision reversed the
judgment of the trial court. As a side-bar to the proceedings, Heirs of Tan Ebg Kee filed
Criminal Case against Tan Eng Lay et al gor the use of allegedly falsified documents in a
judicial proceeding.

Petitioners complained that Exhibits consisting of payrolls indicating that Tan Eng Kee was
a mere employee of Benguet Lumber, were fake, based on the discrepancy in the
signatures of Tan Eng Kee. The Trial Court rendered judgment dismissing the criminal
cases for insufficiency of evidence.

Issue:
Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.

Held:
No. Undoubtedly, the New Civil Code was not yet in effect when the partnership was
allegedly formed sometime in 1945, although the contrary may well be argued that nothing
prevented the parties from complying with the provisions of the New Civil Code when it took
effect on August 30, 1950. The best evidence would have been the contract of partnership
itself, or the articles of partnership but there is none. Further, despite the forty years the
partnership was allegedly in existence, Tan Eng Kee 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.
The alleged partnership, though, was never formally organized. In addition, petitioners point
out that. The net effect, however, is that we are asked to determine whether a partnership
existed based purely on circumstantial evidence.

A review of the record persuades us that the Court of Appeals correctly reversed the
decision of the trial court. The evidence presented by petitioners falls short of the quantum
of proof required to establish a partnership.

A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan Eng
Kee appeared never to have made any such demand for accounting from his brother, Tang
Eng Lay.

Article 1769 of the Civil Code provides that in determining whether a partnership exists, the
rule that applies is that the receipt by a person of a share of the profits of a business is a
prima facie evidence that he is a partner in the business, but no such inference shall be
drawn if such profits were received in payment.

In light of this, Tan Eng Kee was only an employee, not a partner. Even if the payrolls as
evidence were discarded, petitioners would still be back to square one, so to speak, since
they did not present and offer evidence that would show that Tan Eng Kee received
amounts of money allegedly representing his share in the profits of the enterprise.
Petitioners failed to show how much their father, Tan Eng Kee, received, if any, as his share
in the profits of Benguet Lumber Company for any particular period. Hence, they failed to
prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the business
between themselves, which is one of the essential features of a partnership.

3. OSCAR ANGELES And EMERITA ANGELES Vs. THE HON. SECRETARY OF

JUSTICE Et., Al. (G.R. No. 142612. July 29, 2005)

FACTS :

the Angeles spouses filed a criminal complaint for estafa under Article 315 of the Revised Penal
Code against Mercado before the Provincial Prosecution Office. Mercado is the brother-in-law of the
Angeles spouses, being married to Emerita Angeles’ sister Laura.

In their affidavits, the Angeles spouses claimed that in November 1992, Mercado convinced them to
enter into a contract of antichresis, colloquially known as sanglaang-perde, covering eight parcels of
land ("subject land") planted with fruit-bearing lanzones trees located in Nagcarlan, Laguna and
owned by Juana Suazo. The contract of antichresis was to last for five years with ₱210,000 as
consideration. As the Angeles spouses stay in Manila during weekdays and go to Laguna only on
weekends, the parties agreed that Mercado would administer the lands and complete the necessary
6
paperwork.
After three years, the Angeles spouses asked for an accounting from Mercado. Mercado explained
that the subject land earned ₱46,210 in 1993, which he used to buy more lanzones trees. Mercado
also reported that the trees bore no fruit in 1994. Mercado gave no accounting for 1995. The
Angeles spouses claim that only after this demand for an accounting did they discover that Mercado
had put the contract of sanglaang-perde over the subject land under Mercado and his spouse’s
names

In his counter-affidavit, Mercado denied the Angeles spouses’ allegations. Mercado claimed that
there exists an industrial partnership, colloquially known as sosyo industrial, between him and his
spouse as industrial partners and the Angeles spouses as the financiers. This industrial partnership
had existed since 1991, before the contract of antichresis over the subject land. As the years
passed, Mercado used his and his spouse’s earnings as part of the capital in the business
transactions which he entered into in behalf of the Angeles spouses. It was their practice to enter
into business transactions with other people under the name of Mercado because the Angeles
spouses did not want to be identified as the financiers.

Mercado attached bank receipts showing deposits in behalf of Emerita Angeles and contracts under
his name for the Angeles spouses. Mercado also attached the minutes of the barangay conciliation
proceedings held on 7 September 1996. During the barangay conciliation proceedings, Oscar
Angeles stated that there was a written sosyo industrial agreement: capital would come from the
Angeles spouses while the profit would be divided evenly between Mercado and the Angeles
spouses

the Provincial Prosecution Office issued a resolution recommending the filing of criminal information
for estafa against Mercado.
The The Secretary of Justice Reveres the Findings of the Provincial Prosecutor Stating that we are
convinced that a partnership truly existed between the [Angeles spouses] and [Mercado]. The
formation of a partnership was clear from the fact that they contributed money to a common fund
and divided the profits among themselves. Records would show that [Mercado] was able to make
deposits for the account of the [Angeles spouses]. These deposits represented their share in the
profits of their business venture. Although the [Angeles spouses] deny the existence of a
partnership, they, however, never disputed that the deposits made by [Mercado] were indeed for
their account.

The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado] during the
hearing of their barangay conciliation case reveals that the [Angeles spouses] acknowledged their
joint business ventures with [Mercado] although they assailed the manner by which [Mercado]
conducted the business and handled and distributed the funds. The veracity of this transcript was
not raised in issued [sic] by [the Angeles spouses]. Although the legal formalities for the formation of
a partnership were not adhered to, the partnership relationship of the [Angeles spouses] and
[Mercado] is evident in this case.

ISSUE Whether a partnership existed between the Angeles spouses and Mercado even without any
documentary proof to sustain its existence;
HELD YES The Angeles spouses’ position that there is no partnership because of the lack of a
public instrument indicating the same and a lack of registration with the Securities and Exchange
Commission ("SEC") holds no water. First, the Angeles spouses contributed money to the
partnership and not immovable property. Second, mere failure to register the contract of partnership
with the SEC does not invalidate a contract that has the essential requisites of a partnership. The
purpose of registration of the contract of partnership is to give notice to third parties. Failure to
register the contract of partnership does not affect the liability of the partnership and of the partners
to third persons. Neither does such failure to register affect the partnership’s juridical personality. A
partnership may exist even if the partners do not use the words "partner" or "partnership."

As stated by the Provincial prosecutor, The formation of a partnership was clear from the fact that
they contributed money to a common fund and divided the profits among themselves. Records
would show that [Mercado] was able to make deposits for the account of the [Angeles spouses].
These deposits represented their share in the profits of their business venture.

The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado] during the
hearing of their barangay conciliation case reveals that the [Angeles spouses] acknowledged their
joint business ventures with [Mercado] although they assailed the manner by which [Mercado]
conducted the business and handled and distributed the funds. The veracity of this transcript was
not raised in issued [sic] by [the Angeles spouses]. Although the legal formalities for the formation of
a partnership were not adhered to, the partnership relationship of the [Angeles spouses] and
[Mercado] is evident in this case.

Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract
showing a sosyo industrial or industrial partnership, contribution of money and industry to a common
fund, and division of profits between the Angeles spouses and Mercado.

4. ANTONIA TORRES Vs. COURT OF APPEALS Et., Al (G.R. No. 134559 December 9,
1999)

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. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land
in favor of respondent, who then had it registered in his name.

By mortgaging the property, respondent 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. All three
of them also agreed to share the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank.

According to petitioners, the project failed because of "respondent's lack of funds or means and
skills." They add that respondent used the loan not for the development of the subdivision, but in
furtherance of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With the
said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu
Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He
also caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with
an engineering firm for the building of sixty low-cost housing units and actually even set up a model
house on one of the subdivision lots. He did all of these for a total expense of P85,000.

Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project.

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were
however acquitted. Thereafter, they filed the present civil case in which the RTC issued its assailed
Decision finding the existence of partnership , which was affirmed by the CA.

Issue Whether or not Partnership between the parties exist

HELD Yes
Art. 1767. 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 above-quoted 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. Clearly, the contract
manifested the intention of the parties to form a 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.

5. CHOITHRAM JETHMAL RAMNANI Et., Al. Vs. COURT OF APPEALS Et., Al. (G.R. No.
85494, May 7, 1991)

FACTS

Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood.
Ishwar and his spouse Sonya had their main business based in New York. Ishwar testified that
during the latter part of 1965, he sent the amount of US $150,000.00 to Choithram for the purpose of
investing the same in real estate in the Philippines. They executed a general power of attorney on
January 24, 1966 appointing Navalrai and Choithram as attorneys-in-fact, empowering them to
manage and conduct their business concern in the Philippines which stipulates :

No. 14. To acquire, purchase for us, real estates and improvements for the purpose of real
estate business anywhere in the Philippines and to develop, subdivide, improve and to resell
to buying public (individual, firm or corporation); to enter in any contract of sale in oar behalf
and to enter mortgages between the vendees and the herein grantors that may be needed to
finance the real estate business being undertaken.

On February 1, 1966 and on May 16, 1966, Choithram, in his capacity as aforesaid attorney-in-fact
of Ishwar, entered into two agreements for the purchase of two parcels of land located in Barrio
Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership (Ortigas for short) with a total area of
approximately 10,048 square meters Per agreement, Choithram paid the down payment and
installments on the lot with his personal checks. A building was constructed thereon by Choithram in
1966 and this was occupied and rented by Jethmal Industries and a wardrobe shop called Eppie's
Creation. Three other buildings were built thereon by Choithram through a loan of P100,000.00
obtained from the Merchants Bank as well as the income derived from the first building. The
buildings were leased out by Choithram as attorney-in-fact of Ishwar. He managed the business and
collected the rentals.

Due to their relationship of confidence it was only in 1970 Ishwar asked Choithram to account for
the income and expenses relative to these properties during the period 1967 to 1970. Choithram
failed and refused to render such accounting. As a consequence, on February 4, 1971, Ishwar
revoked the general power of attorney. Choithram and Ortigas were duly notified of such revocation
on April 1, 1971 and May 24, 1971, respectively. Said notice was also registered with the Securities
and Exchange Commission on March 29, 1971 and was published in the April 2, 1971 issue of The
Manila Times for the information of the general public.

When Ishwar asked for an accounting in 1970 and revoked the general power of attorney in 1971,
Choithram had a total change of heart. He decided to claim the property as his.

Despite the notice of revocation of General Power of Attorney, Choithram as such attorney-in-fact of
Ishwar, transferred all rights and interests of Ishwar and Sonya in favor of his daughter-in-law,
Nirmla Ramnani, on February 19, 1973. Her husband is Moti, son of Choithram. Upon complete
payment of the lots, Ortigas executed the corresponding deeds of sale in favor of Nirmla.

Thus, on October 6, 1982, spouses Ishwar Filed a complaint for reconveyance of said properties or
payment of its value and damages against Choithram and spouses Nirmla and Moti and Ortigas and
Company Limited Partnership

Worse still, on September 27, 1990 spouses Ishwar filed an urgent motion for the issuance of a writ
of preliminary attachment and to require Choithram, et al. to submit certain documents, inviting the
attention of this Court to the following:
 a) Donation by Choithram of his 2,500 shares of stock in General Garments Corporation in
favor of his children on December 29, 1989;

b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex (Phils.), Inc., in favor of
his children; and

c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact, Choithram, of the
properties subject of this litigation, for the amount of $3 Million in favor of Overseas Holding,
Co. Ltd., (Overseas for brevity), a corporation which appears to be organized and existing
under and by virtue of the laws of Cayman Islands, with a capital of only $100.00 divided into
100 shares of $1.00 each, and with address at P.O. Box 1790, Grand Cayman, Cayman
Islands.

In the original complaint, the spouses Ishwar asked for a reconveyance of the properties and/or
payment of its present value and damages. In the amended complaint they asked, among others, for
actual damages of not less than the present value of the real properties in litigation, moral and
exemplary damages. The amended complaint contain the following positive allegations:

7. Defendant Choithram Ramnani, in evident bad faith and despite due notice of the
revocation of the General Power of Attorney, caused the transfer of the rights over the said
parcels of land to his daughter-in-law, defendant Nirmla Ramnani in connivance with
defendant Ortigas & Co., the latter having agreed to the said transfer despite receiving a
letter from plaintiffs' lawyer informing them of the said revocation;

8. Defendant Nirmla Ramnani having acquired the aforesaid property by fraud is, by force of
law, considered a trustee of an implied trust for the benefit of plaintiff and is obliged to return
the same to the latter:

9. Several efforts were made to settle the matter within the family but defendants (Choithram
Ramnani, Nirmla Ramnani and Moti Ramnani) refused and up to now fail and still refuse to
cooperate and respond to the same; thus, the present case;

10. In addition to having been deprived of their rights over the properties by reason of
defendants' fraudulent act, suffered actual damages by way of lost rental on the property
which defendants Choithram Ramnani, Nirmla Ramnani and Moti Ramnani have collected
for themselves;

Decision was rendered by the trial court dismissing the complaint and counterclaim.

The Court of Appeals reversed the findings of the Trial Court.

ISSUE Whether or not the rules on joint venture should be applied in this case

HELD We concur.

under the peculiar circumstances of this case and despite the fact that Choithram, et al., have
committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya
of their rightful share in the properties in litigation, the Court cannot ignore the fact that Choithram
must have been motivated by a strong conviction that as the industrial partner in the acquisition of
said assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint
venture.

We have a situation where two brothers engaged in a business venture. One furnished the capital,
the other contributed his industry and talent. Justice and equity dictate that the two share equally
the fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way
towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood
is thicker than water.

However, the Court cannot just close its eyes to the devious machinations and schemes that
Choithram employed in attempting to dispose of, if not dissipate, the properties to deprive spouses
Ishwar of any possible means to recover any award the Court may grant in their favor. Since
Choithram, et al. acted with evident bad faith and malice, they should pay moral and exemplary
damages as well as attorney's fees to spouses Ishwar.

6. ELMO MUÑASQUE Vs. COURT OF APPEALS Et., Al. (G.R. No. L-39780 November 11,
1985)

FACTS
Petitioner Elmo Muñasque filed a complaint for payment of sum of money and damages against
respondents Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging
that the petitioner entered into a contract with respondent Tropical through its Cebu Branch Manager
Pons for remodelling a portion of its building without exchanging or expecting any consideration from
Galan although the latter was casually named as partner in the contract; that by virtue of his having
introduced the petitioner to the employing company (Tropical). Galan would receive some kind of
compensation in the form of some percentages or commission; that Tropical, under the terms of the
contract, agreed to give petitioner the amount of P7,000.00 soon after the construction began and
thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total
sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00
not to the plaintiff but to a stranger to the contract, Galan, who succeeded in getting petitioner's
indorsement on the same check persuading the latter that the same be deposited in a joint account;
that on January 26, 1967 when the second check for P6,000.00 was due, petitioner refused to
indorse said cheek presented to him by Galan but through later manipulations, respondent Pons
succeeded in changing the payee's name from Elmo Muñasque to Galan and Associates, thus
enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial
Bank (PCIB) placing the petitioner in great financial difficulty in his construction business and
subjecting him to demands of creditors to pay' for construction materials, the payment of which
should have been made from the P13,000.00 received by Galan; that petitioner undertook the
construction at his own expense completing it prior to the March 16, 1967 deadline; that because of
the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to
Galan petitioner demanded that said amount be paid to him by respondents under the terms of the
written contract between the petitioner and respondent company.

The RTC rendered a judgment ordering plaintiff Muñasque and defendant Galan to pay jointly and
severally.
On appeal, the Court of Appeals affirmed the judgment of the trial court with the sole modification
that the liability imposed in the dispositive part of the decision on the credit of Cebu Southern
Hardware and Blue Diamond Glass Palace was changed from "jointly and severally" to "jointly

ISSUE
Whether or not there existed a partnership between Celestino Galan and Elmo Muñasque

HELD YES

The records will show that the petitioner entered into a con-tract with Tropical for the renovation of
the latter's building on behalf of the partnership of "Galan and Muñasque." This is readily seen in the
first paragraph of the contract where it states:

This agreement made this 20th day of December in the year 1966 by Galan and Muñasque
hereinafter called the Contractor, and Tropical Commercial Co., Inc., hereinafter called the
owner do hereby for and in consideration agree on the following: ... .

There is nothing in the records to indicate that the partner-ship organized by the two men was not a
genuine one. If there was a falling out or misunderstanding between the partners, such does not
convert the partnership into a sham organization.

Likewise, when Muñasque received the first payment of Tropical in the amount of P7,000.00 with a
check made out in his name, he indorsed the check in favor of Galan. Respondent Tropical
therefore, had every right to presume that the petitioner and Galan were true partners. If they were
not partners as petitioner claims, then he has only himself to blame for making the relationship
appear otherwise, not only to Tropical but to their other creditors as well.

7. SANTIAGO SYJUCO, INC., Vs. HON. JOSE P. CASTRO (G.R. No. 70403, July 7, 1989)

G.R. No. 70403 July 7, 1989

SANTIAGO SYJUCO, INC., petitioner,

vs.

HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF THE
NATIONAL CAPITAL JUDICIAL REGION, BRANCH LXXXV, QUEZON CITY, THE CITY SHERIFF
OF THE CITY OF MANILA, THE CITY REGISTER OF DEEDS OF THE CITY OF MANILA,
EUGENIO LIM, ARAMIS LIM, MARIO LIM, PAULINO LIM, LORENZO LIM, NILA LIM and/ or THE
PARTNERSHIP OF THE HEIRS OF HUGO LIM and ATTORNEY PATERNO P. CANLAS,
respondents.

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

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

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

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

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

HELD:

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

The Supreme Court held that the legal fiction of a separate juridical personality and existence
will not shield it from the conclusion of having such knowledge which naturally and irresistibly
flows from the undenied facts. It would violate all precepts of reason, ordinary experience and
common sense to propose that a partnership, as such, cannot be held accountable with
knowledge of matters commonly known to all the partners or of acts in which all of the latter,
without exception, have taken part, where such matters or acts affect property claimed as its
own by said partnership.
 The silence and failure of the partnership to impugn said mortgage within a reasonable time, let
alone a space of more than seventeen years, brought into play the doctrine of estoppel to
preclude any attempt to avoid the mortgage as allegedly unauthorized.

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

8. MICHAEL C. GUY Vs. ATTY. GLENN C. GACOTT (G.R. No. 206147, January 13, 2016)

FACTS: Atty. Gacott from Palawan purchased two (2) brand new transreceivers from Quantech
Systems Corporation (QSC) in Manila through its employee Rey Medestomas. After some time, he
returned it due to major defects. But time passed, he was not able to get the replacement units and he
was informed that there were no available units and he cannot refund the purchase price. He filed a
complaint for damages. But during execution, he learned that QSC was not a corporation but, a
general partnership with Mr. Guy as a partner and its general manager. Because of that, Gacott
instructed the sheriff to proceed with the attachment of one of the motor vehicles of Guy. After that,
Guy filed a Motion to lift Attachment Upon Personalty arguing that he was not a judgment debtor
and, therefore, his vehicle could not be attached but it has been denied by the RTC and CA stating
that he is solidarily liable to the liability of the partnership since he is the general manager.

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

RULING: NO. Partners’ liability is subsidiary and generally joint; immediate levy upon the property of a
partner cannot be made. A partner must be separately and distinctly impleaded before he can be bound
by a judgment

Granting that Guy was properly impleaded in the complaint, the execution of judgment would be
improper. Article 1816 of the Civil Code governs the liability of the partners to third persons, which
states that:
 Article 1816. All partners, including industrial ones, shall be liable pro rata with all their
property and after all the partnership assets have been exhausted, for the contracts
which may be entered into in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership. However, any partner may
enter into a separate obligation to perform a partnership contract.

This provision clearly states that,

first, the partners’ obligation with respect to the partnership liabilities is subsidiary in nature. It
provides that the partners shall only be liable with their property after all the partnership assets have
been exhausted. To say that one’s liability is subsidiary means that it merely becomes secondary
and only arises if the one primarily liable fails to sufficiently satisfy the obligation. Resort to the
properties of a partner may be made only after efforts in exhausting partnership assets have failed or
that such partnership assets are insufficient to cover the entire obligation. The subsidiary nature of
the partners’ liability with the partnership is one of the valid defenses against a premature execution
of judgment directed to a partner. In this case, had he been properly impleaded, Guy’s liability would
only arise after the properties of QSC would have been exhausted.

Second, Article 1816 provides that the partners’ obligation to third persons with respect to the
partnership liability is pro rata or joint. Liability is joint when a debtor is liable only for the payment of
1âwphi1

only a proportionate part of the debt. In contrast, a solidary liability makes a debtor liable for the
payment of the entire debt. In the same vein, Article 1207 does not presume solidary liability unless:

1) the obligation expressly so states; or

2) the law or nature requires solidarity.

With regard to partnerships, ordinarily, the liability of the partners is not solidary.The joint liability of
the partners is a defense that can be raised by a partner impleaded in a complaint against the
partnership.

In other words, only in exceptional circumstances shall the partners’ liability be solidary in nature.
Articles 1822, 1823 and 1824 of the Civil Code provide for these exceptional conditions, to wit:

Article 1822. Where, by any wrongful act or omission of any partner acting in the ordinary
course of the business of the partnership or with the authority of his co-partners, loss or
injury is caused to any person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same extent as the partner so acting or
omitting to act.

Article 1823. The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it; and

(2) Where the partnership in the course of its business receives money or property of
a third person and the money or property so received is misapplied by any partner
while it is in the custody of the partnership.
 Article 1824. All partners are liable solidarily with the partnership for everything chargeable
to the partnership under Articles 1822 and 1823.

[Emphases Supplied]

In essence, these provisions articulate that it is the act of a partner which caused loss or injury to a
third person that makes all other partners solidarily liable with the partnership because of the words
"any wrongful act or omission of any partner acting in the ordinary course of the business," "one
partner acting within the scope of his apparent authority" and "misapplied by any partner while it is
in the custody of the partnership." The obligation is solidary because the law protects the third
person, who in good faith relied upon the authority of a partner, whether such authority is real or
apparent.

In the case at bench, it was not shown that Guy or the other partners did a wrongful act or
misapplied the money or property he or the partnership received from Gacott. A third person who
transacted with said partnership can hold the partners solidarily liable for the whole obligation if the
case of the third person falls under Articles 1822 or 1823. Gacott’s claim stemmed from the
alleged defective transreceivers he bought from QSC, through the latter's employee, Medestomas. It
was for a breach of warranty in a contractual obligation entered into in the name and for the account
of QSC, not due to the acts of any of the partners. For said reason, it is the general rule under Article
1816 that governs the joint liability of such breach, and not the exceptions under Articles 1822 to
1824. Thus, it was improper to hold Guy solidarily liable for the obligation of the partnership.

(For soft copy purposes only ) Although a partnership is based on delectus personae or mutual agency, whereby any partner can
generally represent the partnership in its business affairs, it is non sequitur that a suit against the partnership is necessarily a suit
impleading each and every partner. It must be remembered that a partnership is a juridical entity that has a distinct and separate
personality from the persons composing it.

Here, Guy was never made a party to the case. He did not have any participation in the entire proceeding until his vehicle was
levied upon and he suddenly became QSC’s “co-defendant debtor” during the judgment execution stage. It is a basic principle of
35
law that money judgments are enforceable only against the property incontrovertibly belonging to the judgment debtor. Indeed,
the power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor alone.
An execution can be issued only against a party and not against one who did not have his day in court. The duty of the sheriff is to
levy the property of the judgment debtor not that of a third person. For, as the saying goes, one man's goods shall not be sold for
another man's debts.

In the spirit of fair play, it is a better rule that a partner must first be impleaded before he could be prejudiced by the
judgment against the partnership. As will be discussed later, a partner may raise several defenses during the trial to avoid or
mitigate his obligation to the partnership liability. Necessarily, before he could present evidence during the trial, he must first
be impleaded and informed of the case against him. It would be the height of injustice to rob an innocent partner of his hard-
earned personal belongings without giving him an opportunity to be heard. Without any showing that Guy himself acted
maliciously on behalf of the company, causing damage or injury to the complainant, then he and his personal properties
cannot be made directly and solely accountable for the liability of QSC, the judgment debtor, because he was not a party to
the case.

Further, Article 1821 of the Civil Code does not state that there is no need to implead a partner in order to be bound by
the partnership liability. It provides that:

Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting
in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other
partner who reasonably could and should have communicated it to the acting partner, operate as notice to or
 knowledge of the partnership, except in the case of fraud on the partnership, committed by or with the consent
of that partner.

A careful reading of the provision shows that notice to any partner, under certain circumstances, operates as notice to or
knowledge to the partnership only. Evidently, it does not provide for the reverse situation, or that notice to the
partnership is notice to the partners. Unless there is an unequivocal law which states that a partner is automatically
charged in a complaint against the partnership, the constitutional right to due process takes precedence and a partner must
first be impleaded before he can be considered as a judgment debtor. To rule otherwise would be a dangerous precedent,
harping in favor of the deprivation of property without ample notice and hearing, which the Court certainly cannot
countenance.

9. GREGORIO F. ORTEGA Vs. HON. COURT OF APPEALS, (G.R. No. 109248 July 3,
1995)
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO,
petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L.
MISA, respondents.

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. on 7 June 1977 it was renamed to BITO, MISA & LOZADA; The
SEC records show that there were several subsequent amendments to the articles of partnership on
18 September 1958. Appellees Jesus B. Bito and Mariano M. Lozada associated themselves
together, as senior partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo,
Jr., and Benjamin Bacorro, as junior partners.

On February 17, 1988, petitioner-appellant wrote he is withdrawing and retiring from the firm of Bito,
Misa and Lozada, effective at the end of this month and instructed to make the proper liquidation of
my participation in the firm and his interest in the the partnership building. The withdrawal was
because partnership has ceased to be mutually satisfactory because of the working conditions of our
employees including the assistant attorneys.

On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing
Department (SICD) a petition for dissolution and liquidation of partnership.

On 31 March 1989, the hearing officer rendered a decision ruling that:

"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law
partnership. Accordingly, the petitioner and respondents are hereby enjoined to abide by the
provisions of the Agreement relative to the matter governing the liquidation of the shares of
any retiring or withdrawing partner in the partnership interest.

"On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the
withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The
Commission ruled that, being a partnership at will, the law firm could be dissolved by any partner at
anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner
can be forced to continue in the partnership against his will.

The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED
in toto the SEC decision and order appealed from. In fine, the appellate court held, per its decision of
26 February 1993, (a) that Atty. Misa's withdrawal from the partnership had changed the relation of
the parties and inevitably caused the dissolution of the partnership; (b) that such withdrawal was not
in bad faith; (c) that the liquidation should be to the extent of Attorney Misa's interest or participation
in the partnership which could be computed and paid in the manner stipulated in the partnership
agreement; (d) that the case should be remanded to the SEC Hearing Officer for the corresponding
determination of the value of Attorney Misa's share in the partnership assets; and (e) that the
appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate that
the partnership assets were in any such danger of being lost, removed or materially impaired.

ISSUE

1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa &
Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will;

2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad faith; and

3. Whether or not the Court of Appeals 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

1. No. A partnership that does not fix its term is a partnership at will. That the law firm "Bito,
Misa & Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership
need not be unduly belabored. We quote, with approval, like did the appellate court, the
findings and disquisition of respondent SEC on this matter; viz:

The partnership agreement (amended articles of 19 August 1948) does not provide for a specified
period or undertaking. The "DURATION" clause simply states:

"5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the
death or legal incapacity of one of the partners, shall be continued by the surviving partners."

The hearing officer however opined that the partnership is one for a specific undertaking and hence
not a partnership at will, citing paragraph 2 of the Amended Articles of Partnership (19 August 1948):

"2. Purpose. The purpose for which the partnership is formed, is to act as legal adviser and
representative of any individual, firm and corporation engaged in commercial, industrial or
other lawful businesses and occupations; to counsel and advise such persons and entities
with respect to their legal and other affairs; and to appear for and represent their principals
and client in all courts of justice and government departments and offices in the Philippines,
and elsewhere when legally authorized to do so."
The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all
partnerships, which necessarily must have a purpose, would all be considered as partnerships for a
definite undertaking. There would therefore be no need to provide for articles on partnership at will
as none would so exist. Apparently what the law contemplates, is a specific undertaking or "project"
which has a definite or definable period of completion.

2. No. The birth and life of a partnership at will is predicated on the mutual desire and consent
of the partners. The right to choose with whom a person wishes to associate himself is the
very foundation and essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with each partner's capability to
give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one
of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He
must, however, act in good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership but that it can result in a liability for damages.

In passing, 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. An unjustified
dissolution by the partner can subject him to a possible action for damages.

3. No. On the third and final issue, we accord due respect to the appellate court and
respondent Commission on their common factual finding, i.e., 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, we agree, to let any of the
partners remain in the partnership under such an atmosphere of animosity; certainly, not
against their will. Indeed, 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. Bad faith, in
the context here used, is no different from its normal concept of a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity.

10. LUZVIMINDA J. VILLAREAL Et., Al. Vs. DONALDO EFREN C. RAMIREZ (G.R. No.
144214, July 14, 2003)

G.R. No. 144214 July 14, 2003

LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE, petitioners,

vs.

DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA C.
RAMIREZ, respondents.
PANGANIBAN, J.:

DOCTRINE : A share in a partnership can be returned only after the completion of the latter's
dissolution, liquidation and winding up of the business.

FACTS

On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with
a capital of P750,000 for the operation of a restaurant and catering business under the name
"Aquarius Food House and Catering Services." Villareal was appointed general manager and
Carmelito Jose, operations manager.

Respondent Donaldo Efren C. Ramirez joined as a partner in the business on September 5, 1984.
His capital contribution of P250,000 was paid by his parents, Respondents Cesar and Carmelita
Ramirez.

After Jesus Jose withdrew from the partnership in January 1987, his capital contribution of P250,000
was refunded to him in cash by agreement of the partners.

In the same month, without prior knowledge of respondents, petitioners closed down the restaurant,
allegedly because of increased rental. The restaurant furniture and equipment were deposited in the
respondents' house for storage.

On March 1, 1987, respondent spouses wrote petitioners, saying that they were no longer interested
in continuing their partnership or in reopening the restaurant, and that they were accepting the
latter's offer to return their capital contribution.

On October 13, 1987, Carmelita Ramirez wrote another letter informing petitioners of the
deterioration of the restaurant furniture and equipment stored in their house. She also reiterated the
request for the return of their one-third share in the equity of the partnership. The repeated oral and
written requests were, however, left unheeded.

Before the Regional Trial Court (RTC) of Makati, Branch 59, respondents subsequently filed a
Complaint dated November 10, 1987, for the collection of a sum of money from petitioners.

In their Answer, petitioners contended that respondents had expressed a desire to withdraw from the
partnership and had called for its dissolution under Articles 1830 and 1831 of the Civil Code; that
respondents had been paid, upon the turnover to them of furniture and equipment worth over
P400,000; and that the latter had no right to demand a return of their equity because their share,
together with the rest of the capital of the partnership, had been spent as a result of irreversible
business losses.

Petitioners further argue that respondents acted negligently by permitting the partnership assets in
their custody to deteriorate to the point of being almost worthless. Supposedly, the latter should have
liquidated these sole tangible assets of the partnership and considered the proceeds as payment of
their net capital. Hence, petitioners argue that the turnover of the remaining partnership assets
to respondents was precisely the manner of liquidating the partnership and fully settling the
latter's share in the partnership.
After RTC ruled that the parties had voluntarily entered into a partnership, which could be dissolved
at any time. Petitioners clearly intended to dissolve it when they stopped operating the restaurant.
Judgment was rendered in favor of [respondents] and ordering the [petitioners] to pay jointly and
severally the following:

(a) Actual damages in the amount of P250,000.00

(b) Attorney's fee in the amount of P30,000.00

(c) Costs of suit."

The CA set aside and nullified the RTC Decision holding that, although respondents had no right to
demand the return of their capital contribution, the partnership was nonetheless dissolved when
petitioners lost interest in continuing the restaurant business with them. The CA ordered the
petitioners solidarily to pay and reimburse to the respondents the amount of Php 253, 114.00 which
was the 1/3rd share of the remaining capital of the partnership amounting to Php 759,342

ISSUE

1. Whether petitioners are liable to respondents for the latter’s share in the partnership;
2. Whether the Honorable Court of Appeals' decision ordering the petitioners to jointly and
severally pay and reimburse the amount of [P]253,114.00 is proper

HELD

1. no

Both the trial and the appellate courts found that a partnership had indeed existed, and that it was
dissolved on March 1, 1987. They found that the dissolution took place when respondents informed
petitioners of the intention to discontinue it because of the former's dissatisfaction with, and loss of
trust in, the latter's management of the partnership affairs. These findings were amply supported by
the evidence on record. Respondents consequently demanded from petitioners the return of their
one-third equity in the partnership.

We hold that respondents have no right to demand from petitioners the return of their equity share.
Except as managers of the partnership, petitioners did not personally hold its equity or assets. "The
23
partnership has a juridical personality separate and distinct from that of each of the partners."
Since the capital was contributed to the partnership, not to petitioners, it is the partnership that must
refund the equity of the retiring partners

2. No. Since it is the partnership, as a separate and distinct entity, that must refund the shares
of the partners, the amount to be refunded is necessarily limited to its total resources. In
other words, it can only pay out what it has in its coffers, which consists of all its assets.
However, before the partners can be paid their shares, the creditors of the partnership must
25
first be compensated. After all the creditors have been paid, whatever is left of the
partnership assets becomes available for the payment of the partners' shares.
Evidently, in the present case, the exact amount of refund equivalent to respondents' one-third share
in the partnership cannot be determined until all the partnership assets will have been liquidated —
in other words, sold and converted to cash — and all partnership creditors, if any, paid. The CA's
computation of the amount to be refunded to respondents as their share was thus erroneous.

it seems that the appellate court was under the misapprehension that the total capital contribution
was equivalent to the gross assets to be distributed to the partners at the time of the dissolution of
the partnership. We cannot sustain the underlying idea that the capital contribution at the beginning
of the partnership remains intact, unimpaired and available for distribution or return to the partners.
Such idea is speculative, conjectural and totally without factual or legal support.

Generally, in the pursuit of a partnership business, its capital is either increased by profits earned or
decreased by losses sustained. It does not remain static and unaffected by the changing fortunes of
the business. In the present case, the financial statements presented before the trial court showed
that the business had made meager profits

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.

11. EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Vs. EDWIN CUIZON Et., Al. (G.R.
No. 167552, April 23, 2007)

12. VICTORIAS MILLING CO., INC., Vs. COURT OF APPEALS, Et., Al (G.R. No. 117356,
June 19, 2000)

13. DOMINGA CONDE Vs. THE HONORABLE COURT OF APPEALS Et., Al. (G.R. No. L-
40242, December 15, 1982)

14. BICOL SAVINGS AND LOAN ASSOCIATION Vs. HON. COURT OF APPEALS Et., Al.
(G.R. No. 85302 March 31, 1989)

15. CENTRAL SURETY and INSURANCE COMPANY vs. C. N. HODGES Et., al. (G.R. No.
L-28633 March 30, 1971)

16. RAMON RALLOS vs. FELIX GO CHAN & SONS REALTY CORPORATION Et., Al.
(G.R. No. L-24332 January 31, 1978)
17. ANTHONY and PERCITA OCO vs. VICTOR LIMBARING (G.R. No. 161298, January
31, 2006)

18. JOSE JUAN TONG, ET AL., vs. GO TIAT KUN, ET AL., (G.R. No. 196023, April 21,
2014)

19. BENIGNA SECUYA Et., vs. GERARDA M. VDA. DE SELMA (G.R. No. 136021,
February 22, 2000)

20. CONSUELO V. PANGASINAN Et., al. vs. CRISTINA DISONGLOALMAZORA (G.R. No.
200558, July 1, 2015)